Procter & Gamble (PG) Succession Plan Won't Fill CEO Job with Strong Candidate

board room
board room

The Procter & Gamble Co. (NYSE: PG) board will set a competition among four senior executives to replace new CEO A. G. Lafley, who has been chief executive officer before and has been brought back to turn around the company. The plan has a deep flaw. Each of the candidates has been around long enough to have been involved in the debacle that got P&G in trouble in the first place. The consumer goods company needs to go outside its current management ranks to find an executive who has not been involved with past mistakes and can bring new expertise and a new perspective.

The Wall Street Journal reports on the P&G CEO succession plan:

The four sector president spots are expected to be filled by executives who are currently two levels down from the CEO. The candidates for those spots include Melanie Healey, group president of North America; David Taylor, group president of global home care; Martin Riant, group president of global baby care; Giovanni Ciserani, group president of global fabric care; and Deborah Henretta, group president of global beauty care, people familiar with the matter said.

Of course, the board has to claim it will look outside, but the inside slate of candidates means that directors believe they can find the right person internally. The previous CEO was picked through a similar, failed process. Ousted Robert McDonald was Lafley's number two, some indication of the board's myopia.

Yet another bad sign about the possible success of the CEO replacement process is that it is certainly supported by key director W. James McNerney Jr., the failed CEO of Boeing Co. (NYSE: BA). At P&G, he is current presiding director, chair of the Compensation & Leadership Development Committee and a member of the Governance & Public Responsibility Committee. McNerney has been a director since 2003 and was critical in picking McDonald.

The belief that internal candidates are the best ones speaks to a high level of arrogance. Leaving aside executives from direct rivals like Unilever PLC (NYSE: UL) and Colgate-Palmolive Co. (NYSE: CL), there have to be a handful of other executives who currently run consumer-facing product public corporations with large lines of global brands. The universe must run to at least a dozen.

If P&G does pick an internal candidate to take its top job, it will have reached into its past, instead of choosing someone with the skills to transform the company to a more promising future.

Filed under: 24/7 Wall St. Wire, Corporate Governance, Management Change Tagged: BA, CL, featured, PG, UL