Counterparties: Washing out with the Tide
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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:
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
And, of course, there are many more links at Counterparties.