Counterparties: Washing out with the Tide

By Peter Rudegeair
May 24, 2013

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A.G. Lafley is hoping that his management skills, along with a bit of Febreze, can get rid of the stench of mediocrity in Procter & Gamble’s C-suite. After a rough four years at the consumer goods conglomerate, Lafley is returning to the top spot after outgoing CEO Bob McDonald announced his resignation on Thursday night.

It’s far from assured that Lafley can bring back his magic touch. The record of CEO second acts is quite mixed, as Matthew Bishop points out: for every Steve Jobs, there’s a Paul Allaire; for every Howard Schultz, there’s a Ted Waitt.

Though the company’s share price makes the timing of switch unexpected — it’s up 20% so far this year — P&G has had a number of stumbles under McDonald’s leadership, as Fortune’s Jennifer Reingold outlined back in February: a headfirst dive into emerging markets that was too much, too soon; a dearth of product innovations; an attempt to get customers to buy more of its premium products that faltered when the recession pinched consumer spending; the archetype of a muddled corporate vision (“purpose-inspired growth”); and a convoluted org-chart that frustrated top managers and led to brain drain.

McDonald’s departure was a big score for Bill Ackman, something the activist hedge fund manager hasn’t experienced much of lately. McDonald tendered his resignation just over two weeks after Ackman blasted the ex-CEO at the Ira Sohn Conference for spending at least a quarter of his time being a director on 21 other boards. Before this coup, Ackman’s highlights over the last six month included seeing his very public Herbalife short get hammered (shares are up 95% from the lows they touched the week after he disclosed his position in December) and watching the man he hand-picked to turn around JC Penney flame out.

Despite the early optimism over Lafley’s comeback — P&G shares are up nearly 5% since yesterday, and one equity analyst raised his price target on the stock from $75 to $95 on the news of the appointment alone — the biggest test of his return will come when, eventually, he leaves again. Because he’s already demonstrated that he erred in choosing a replacement, Lafley will need to show a more rigorous approach to succession planning this time around. — Peter Rudegeair

On today’s links:

Deals
Yahoo joins the gaggle of bidders for Hulu – Reuters

Energy
The oil price-fixing scandal has landed in the US – Reuters

Right On
Fannie Mae “is regaining its swagger even as lawmakers plot its demise” – Bloomberg

EU Mess
France and Germany team up for a “New Deal” on youth unemployment – Telegraph
“It is highly possible we are at or near the bottom of the cycle” in Europe - Sober Look
IMF searches soul, blames Europe - WSJ

Politicking
Wall Street lobbyists frequently help draft financial legislation – DealBook
The politicians who hate food stamps but love agricultural subsidies – Arthur Delaney

Abenomics
The deeper agenda behind Abenomics – Reuters

Crisis Retro
Bank of America and Wells Fargo agreed to end mortgage abuses, then didn’t – Reuters

Cephalopods
In a change of policy, Goldman Sachs will pay employees to protect its reputation and win clients’ trust – Bloomberg

Ugh
“It’s Rich Kids of Instagram, concentrated in one Canadian” – Kevin Roose

Bubbly
Private equity firms and hedge funds are recruiting first-year analysts again - DealBook

Housing
New home sales are up and “will probably continue to increase for some time” - Calculated Risk

Beer
Fracking threatens to destroy the German beer industry - Gawker

And, of course, there are many more links at Counterparties.

One comment

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Because he’s already demonstrated that he erred in choosing a replacement

Realistically, in a large, diverse, mature business like P&G, is the competence of CEO (barring massive incompetence) a predictor of corporate profits?

For large, stable companies, I suspect the prime determinant of competence is being hired just before the firm’s market segment does well.

Posted by TomWest | Report as abusive