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Section 1: DEF 14A (DEF 14A)

DEF 14A
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.     )

 

Filed by the Registrant  

Filed by a Party other than the Registrant  

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

 

 

The Procter & Gamble Company

 

(Name of Registrant as Specified In Its Charter)

 

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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Table of Contents

LOGO


Table of Contents

 

 

LOGO

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

August 23, 2019

Fellow Procter & Gamble Shareholders:

It is our pleasure to invite you to this year’s annual meeting of shareholders. The meeting will take place on Tuesday, October 8, 2019, at 9:00 a.m. Eastern Daylight Time at The Procter & Gamble Company General Offices, 1 Procter & Gamble Plaza, Cincinnati, Ohio 45202. At the meeting, our shareholders will be asked to:

 

 

Elect the 12 Director nominees listed in the accompanying proxy statement;

 

Ratify the appointment of the independent registered public accounting firm;

 

Approve, on an advisory basis, the Company’s executive compensation (the “Say on Pay” vote);

 

Approve The Procter & Gamble 2019 Stock and Incentive Compensation Plan; and

 

Transact such other business as may properly come before the meeting.

Shareholders of record as of the close of business on August 9, 2019 (the “record date”) are entitled to vote at the annual meeting and any postponement or adjournment thereof. Please see pages 2-5 for additional information regarding admission to the meeting and how to vote your shares.    If you plan to attend the meeting in person, we encourage you to register for admission by Monday, October 7. If you are not able to attend the meeting in person, you may join a live webcast of the meeting on the Internet by visiting www.pginvestor.com at 9:00 a.m. Eastern Daylight Time on October 8.

Your vote is important. Please vote your proxy promptly to ensure your shares are properly represented, even if you plan to attend the annual meeting. You can vote by Internet, by telephone, or by requesting a printed copy of the proxy materials and using the enclosed proxy card.

We appreciate your continued confidence in our Company and look forward to seeing you at The Procter & Gamble Company General Offices on October 8, 2019.

 

LOGO

  LOGO

DAVID S. TAYLOR

CHAIRMAN OF THE BOARD, PRESIDENT

AND CHIEF EXECUTIVE OFFICER

 

DEBORAH P. MAJORAS

CHIEF LEGAL OFFICER AND SECRETARY

REVIEW THE PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:

 

LOGO   

VIA THE INTERNET

Visit www.proxyvote.com.

   LOGO   

BY MAIL

Sign, date, and return the enclosed proxy card or voting instruction form.

 

LOGO

  

 

BY TELEPHONE

Call the telephone number on your

proxy card, voting instruction form, or notice.

  

 

LOGO

  

 

IN PERSON

Attend the annual meeting in Cincinnati. See page 4 for additional details on how to preregister.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on October 8, 2019: This Notice of Annual Meeting, the Proxy Statement, and the 2019 Annual Report are available at www.proxyvote.com.

 


Table of Contents
            TABLE OF CONTENTS
        

 

Table of Contents

 

Proxy Summary

   i

Glossary of Terms

   1

Voting and Meeting Information

   2

Election of Directors

   6

Item  1. Election of Directors

   6

Corporate Governance

   16

Director Compensation

   28

Compensation  & Leadership Development Committee Report

   30

Compensation Discussion & Analysis

   31

Executive Compensation

   47

Summary Compensation Table

   47

Grants of Plan-Based Awards Table

   50

Outstanding Equity at Fiscal Year-End Table

   52

Option Exercises and Stock Vested Table

   55

Pension Benefits Table

   56

Nonqualified Deferred Compensation Table

   58

Payments upon Termination or Change in Control Table

   62

Pay Ratio

   64

Beneficial Ownership

   65

Delinquent Section 16(a) Reports

   69

Audit Committee Report

   70

Board Proposals

   72

Item 2. Proposal to Ratify Appointment of the Independent Registered Public Accounting Firm

   72

Item  3. Proposal for Advisory Approval of Executive Compensation

   73

Item 4. Proposal to Adopt The Procter & Gamble 2019 Stock and Incentive Compensation Plan

   74

Other Matters

   78

Exhibits

  

Exhibit A. Reconciliation of Non-GAAP Financial Measures

   A-1

Exhibit B. The Procter  & Gamble Company Audit Committee Policies

   B-1

Exhibit C. The Procter & Gamble 2019 Stock and Incentive Compensation Plan

  

C-1

 


Table of Contents
            PROXY SUMMARY
        

 

Proxy Summary

Voting Matters and Board Recommendations

 

    

Voting Matter

 

  

Vote Standard

 

  

 

Board Vote

Recommendation

 

  

See

Page

 

Item 1

 

Election of Directors

  

Majority of votes cast

  

FOR EACH NOMINEE

  

6

Item 2

 

Ratification of Independent Registered Public Accounting Firm

  

Majority of votes cast

  

FOR

  

72

Item 3

 

Advisory Approval of Executive Compensation

  

Majority of votes cast

  

FOR

  

73

Item 4

 

Approval of The Procter & Gamble 2019 Stock and Incentive Compensation Plan

  

Majority of votes cast

  

FOR

  

74

Our Board of Director Nominees

 

LOGO   

 

LOGO

 

              2019 Proxy Statement  i  
        


Table of Contents
PROXY SUMMARY            
          

 

Our Director Nominees

You are being asked to vote on the election of the 12 Directors listed below. Additional information about each nominee’s background and experience can be found beginning on page 10.

 

Name

   Position    Age   

Board

Tenure

  

Committee

Memberships

Francis S. Blake(I)

   Former Chairman of the Board and Chief Executive
Officer of The Home Depot, Inc.
   70    4 years    Audit

G&PR

Angela F. Braly(I)

   Former Chair of the Board, President and Chief
Executive Officer of WellPoint, Inc. (now known as
Anthem)
   58    9 years    Audit

G&PR (Chair)

Amy L. Chang(I)

   Senior Vice President and General Manager of the
Collaboration Technology Group at Cisco Systems, Inc.;
Founder and Former Chief Executive Officer of
Accompany, Inc.
   42    2 years    Audit

I&T

Scott D. Cook(I)

   Chairman of the Executive Committee of the Board of
Intuit Inc.
   67    19  years    None

Joseph Jimenez(I)

   Co-Founder and Managing Partner of Aditum Bio;
Former Chief Executive Officer of Novartis AG
   59    1 year    C&LD

I&T (Chair)

Terry J. Lundgren(I)

   Operating Partner of Long-Term Private Capital, a
BlackRock fund; Former Executive Chairman, Chairman
of the Board and CEO of Macy’s, Inc.
   67    6 years    C&LD (Chair)
I&T

Christine M. McCarthy(I)

   Senior Executive Vice President and Chief Financial Officer
of The Walt Disney Company
   64    —      §

W. James McNerney, Jr.(I)
(Lead Director)

   Senior Advisor at Clayton, Dubilier & Rice, LLC;
Former Chairman of the Board, President and Chief
Executive Officer of The Boeing Company
   70    16 years    C&LD

G&PR

Nelson Peltz(I)

   Chief Executive Officer and Founding Partner of Trian
Fund Management, L.P.
   77    1 year    G&PR

I&T

David S. Taylor

   Chairman of the Board, President and Chief Executive
Officer of the Company
   61    4 years    None

Margaret C. Whitman(I)

   Chief Executive Officer of Quibi; Former President
and Chief Executive Officer of Hewlett Packard
Enterprise
   63    8 years    I&T

Patricia A. Woertz(I)

   Former Chairman and Chief Executive Officer of
Archer Daniels Midland Company
   66    11 years    Audit (Chair)
G&PR

(I) Independent

Mr. Cook’s experience as the founder and former CEO of Intuit Inc., a successful consumer-facing global public technology company, and Mr. Peltz’s experience as CEO and Founding Partner of Trian Fund Management, L.P., continue to be highly valuable to the Board and the Company. The Board therefore determined that these were special circumstances that warranted exceptions to the term and age limits, respectively, set forth in the Corporate Governance Guidelines and voted to nominate Mr. Cook and Mr. Peltz for re-election. In lieu of serving on any Board Committees, Mr. Cook devotes his time to additional strategic meetings with Company management.

Not on any Committees because the Committees are all comprised of independent Directors.

§The Board will determine Committee assignments for Ms. McCarthy upon her election.

  C&LD

Compensation & Leadership Development

 
  G&PR

Governance & Public Responsibility

 
  I&T

Innovation & Technology

 

 

ii  The Procter & Gamble Company            
          


Table of Contents
            PROXY SUMMARY
        

 

Corporate Governance Highlights

BOARD STRUCTURE & COMPOSITION

 

Director Independence

 

    11 of 12 Director nominees are independent
    Four fully independent Board Committees

Board Leadership

 

    Annual assessment and determination of Board leadership structure
    Annual election of independent Lead Director if Chairman/CEO roles are combined or the Chairman is not independent
    Lead Director has strong role and significant governance duties, including chair of Executive Sessions of independent Directors

Board Refreshment & Diversity

 

    Balance of new and experienced Directors, with tenure of incumbent Directors averaging less than 8 years
    Retirement age and term limit for Directors
    6 of 12 Director nominees are women or ethnically diverse
    Average age of Director nominees is 64

Evaluation & Effectiveness

 

    Annual Board and Committee self-assessments
    One-on-one reviews with individual Directors to ensure thoughtful, candid feedback
    Annual independent Director evaluation of Chairman and CEO and continuous Director feedback

Director Engagement

 

    Incumbent Directors attended 95% of Board and Committee meetings in FY 2018-19
    Board policy limits Director membership on other public company boards

Director Access

 

    Directors have significant interaction with senior business leaders and access to other employees
    Directors have ability to hire outside experts and consultants and to conduct independent investigations
    Directors participate in focused sessions on emerging topics and visits to strategic Company operations globally
 

 

GOVERNANCE BEST PRACTICES

 

Clawback and Anti-Hedging Policies

 

    Clawback policy permits the Company to recoup certain compensation payments in the event of a significant restatement of financial results for any reason
    Insider Trading Policy prohibits Directors, senior executives and other designated employees from engaging in any pledging, short sales or hedging investments involving Company stock (as described on page 24

Share Ownership Requirements

 

    CEO, senior executives, and Directors required to hold shares at multiples of their salary or the cash portion of their annual retainer
    Any executive who has not met the requirements of the Executive Share Ownership Program is subject to the Share Holding Requirement for any net shares resulting from stock option exercises or settlement of PSUs or RSUs

Corporate Governance Principles

 

    Policies consistent with the Investor Stewardship Group’s Corporate Governance Principles
    Signatory to Commonsense Corporate Governance Principles 2.0

ESG Oversight and Reporting

 

    Board oversight and ongoing engagement with senior executives on key matters, including cybersecurity (Audit Committee), gender pay equity (C&LD Committee), and sustainability and human capital (G&PR Committee)
    Company’s Citizenship Board, comprised of senior executives, directs the Company’s environmental, social, and governance programs
    Publish annual Citizenship Report detailing Company’s Corporate Citizenship efforts across five key focus areas.
 

 

              2019 Proxy Statement  iii  
        


Table of Contents
PROXY SUMMARY            
          

 

SHAREHOLDER RIGHTS & ENGAGEMENT

 

Proxy Access

 

    Proactive adoption in 2016 of proxy access for Director nominees
    Available to a shareholder, or group of up to 20 shareholders, holding 3% of Company’s common stock for at least 3 years
    May nominate candidates for the greater of two seats or 20% of Board nominees

Special Meetings

 

    Shareholder right to call special meetings

Board Accountability

 

    Declassified Board — all Directors are elected annually
    Simple majority voting standard for all uncontested Director elections

Board Engagement

 

    Shareholder ability to contact Directors (as described on page 27
 

 

iv  The Procter & Gamble Company            
          


Table of Contents
            PROXY SUMMARY
        

 

Corporate Citizenship

P&G aims to be a force for good and a force for growth. We know that the more we integrate and build Citizenship into how we do business, the bigger the impact we can have on the people we serve, the communities where we live and work, and the broader world that surrounds us. In turn, this helps us grow and build our business. Below are some highlights of our ongoing efforts to create long-term value for our consumers, customers, communities, and shareholders.

 

 

LOGO

Ethics & Corporate

Responsibility

  

 

We believe in and have publicly committed to doing what’s right and being a good corporate citizen.

 

•  We are governed by our Purpose, Values, and Principles. Our philosophy is that a reputation of trust and integrity is built over time, earned every day and is what sets us apart.

•  P&G has a multi-functional Ethics & Compliance Office. Our employees hold themselves and one another accountable for operating with trust and integrity, stepping up as leaders and owners of the business.

•  We publish key Company policies and practices at PG.com, including our Human Rights Policy Statement and our Core Tax Principles.

 

LOGO

Community Impact

  

 

Our brands touch the lives of nearly five billion people, and we are there when our products matter more than ever.

 

•  We provide clean drinking water through our Children’s Safe Drinking Water Program (delivering more than 15 billion liters since 2004).

•  P&G partners with disaster relief agencies to provide product donations and services in response to disasters around the globe.

•  Many P&G brands support individual programs like Tide Loads of Hope’s mobile laundry units that help families impacted by disaster; more than 40 years of Dawn helping to save, protect and rehabilitate wildlife; and the Pampers “1 pack = 1 life-saving vaccine” program in partnership with UNICEF.

 

LOGO

Diversity & Inclusion

  

 

Our diversity helps us connect with the consumers we serve around the world, and we believe that while diversity is essential in all we do, inclusion changes the game.

 

•  We are using our voice to spark dialogue, call attention to bias, and motivate change through ads like “The Talk”, “Love Over Bias”, and “We Believe.”

•  P&G is a Steering Committee Member of CEO Action for Diversity & Inclusion, the largest CEO-driven business commitment to advance diversity and inclusion in the workplace.

•  P&G has been recognized among Forbes Best Employers for Diversity (U.S.), with more than 140 nationalities represented in our global workforce.

 

LOGO

Gender
Equality

  

 

We aspire to build a better world for all of us — inside and outside P&G — a world free from bias and with equal voice and equal representation for all individuals.

 

•  We partner with prominent advocates for gender equality to host #WeSeeEqual forums at P&G sites globally.

•  P&G leaders connect with local female entrepreneurs around the world, in partnership with WEConnect International, to help empower and educate women as they grow their businesses.

•  We promote brand campaigns that champion gender equality, challenge gender stereotypes, and encourage women to be fearless in pursuit of their goals.

 

LOGO

Environmental
Sustainability

  

 

Building on our legacy of environmental leadership, we set and achieve ambitious goals that seek to address some of the world’s most pressing environmental challenges.

 

•  Constantly strive to outperform our targets, launching Ambition 2030 goals in 2018 to drive responsible consumption through our brands’ supply chain, society, and our employees.

•  Founding member of the Alliance to End Plastic Waste, a cross value chain partnership committed to advancing solutions to eliminate plastic waste in the environment.

•  Invest in brand innovation that helps the Company and our consumers reduce their environmental impact.

You can find more details about our work in each of these Citizenship pillars in our 2018 Citizenship Report, available at https://www.pg.com/citizenship2018.

 

              2019 Proxy Statement  v  
        


Table of Contents
PROXY SUMMARY            
          

 

 

 

 

    Key Elements of FY 2018-19 Executive Compensation Program

 

We Received Strong Shareholder Support with 93.12% Say on Pay Support at the 2018 Annual Meeting. This vote is a positive endorsement of the Company’s executive compensation practices and decisions.

We Emphasize Pay for Performance. On average, 88% of the four key components of NEO compensation (salary, Short-Term Achievement Reward, Long-Term Incentive Program, and Performance Stock Program) was performance-based. Of this, 70% was tied to long-term performance.

Consistent with our design principles, performance-based programs pay out at 100% when target goals are achieved. Payouts below 100% occur when target goals are not achieved, and payouts above 100% are possible when target goals are exceeded.

Payouts under these programs are based on the results achieved as compared to the pre-established performance targets, highlighting the clear link between pay and performance that is the cornerstone of our compensation programs.

We Pay Competitively. The C&LD Committee structures executive compensation to be competitive with the targets for comparable positions at companies considered to be our peers, as described on page 35.

We Focus on Long-Term Success. The majority of the NEOs’ compensation is delivered through two long-term incentive programs tied to Company performance: the Performance Stock Program (“PSP”) and the Long-Term Incentive Program (“LTIP”).

NEOs must meet significant share ownership and shareholding requirements. The CEO must own shares of Company stock and/or RSUs (including granted Performance Stock Units) valued at a minimum of eight times salary. All other NEOs must own stock valued at a minimum of four or five times salary, depending on the NEO’s role.

 

 

 

    CEO Compensation Highlights

 

Salary. Mr. Taylor’s annualized base salary was $1,700,000.

STAR Annual Bonus Program. Mr. Taylor’s STAR target remained at 200% of salary. His STAR payout was $5,409,400, which is approximately 159% of target.

Long-Term Incentive Programs. The C&LD Committee approved a long-term incentive award of $12,750,000 for Mr. Taylor. One half of the total value is delivered in the PSP. The remaining half is in the LTIP grant, which the C&LD Committee determined would be delivered as stock options and RSUs.

 

 

 

    Compensation Program Improvements for FY 2018-19

 

To better align rewards to business results and Company strategy and to reflect suggestions by institutional shareholders during dialogue with investors, we implemented several changes to our key compensation programs that went into effect in 2018-19:

PSP: Modified the Organic Sales Growth metric so that it compares performance on a relative basis against our competitive peer set and added a total shareholder return modifier, also relative to our peer set. These changes ensure awards reflect performance against external competitive benchmarks.

STAR: Expanded the ranges of the Company and Business Unit Factors to include the possibility of not paying out at all based on performance. To reflect current market practice and provide a clearer focus on rewarding business unit results, the C&LD Committee modified the STAR formula to be additive rather than multiplicative and weighted the Business Unit Factor at 70% and the Company Factor at 30%. Previously, the factors were not weighted.

 

 

 

vi  The Procter & Gamble Company            
          


Table of Contents
            GLOSSARY OF TERMS
        

 

Glossary of Terms

Commonly Used Terms in This Proxy Statement

 

 C&LD

   Compensation & Leadership Development

 CEO

   Chief Executive Officer

 CFO

   Chief Financial Officer

 CHRO

   Chief Human Resources Officer

 CLO

   Chief Legal Officer

 EDCP

   Executive Deferred Compensation Plan

 EGLIP

   Executive Group Life Insurance Program

 EPS

   Earnings Per Share

 FY

   Fiscal Year

 G&PR

   Governance & Public Responsibility

 GBU

   Global Business Unit

 I&T

   Innovation & Technology

 IRA

   International Retirement Arrangement

 IRP

   International Retirement Plan

 LTIP

   Long-Term Incentive Program

 NEO

   Named Executive Officer

 NYSE

   New York Stock Exchange

 PSP

   Performance Stock Program

 PST

   Profit Sharing Trust and Employee Stock Ownership Plan

 PSU

   Performance Stock Unit

 RSU

   Restricted Stock Unit

 SEC

   Securities and Exchange Commission

 SMO

   Selling and Market Operations

 STAR

   Short-Term Achievement Reward

 TSR

   Total Shareholder Return

 

              2019 Proxy Statement  1  
        


Table of Contents
VOTING AND MEETING INFORMATION            
          

 

Voting and Meeting Information

In connection with the Company’s 2019 annual meeting of shareholders, which will take place on October 8, 2019, the Board of Directors has provided these materials to you, either over the Internet or via mail. The Notice was mailed to Company shareholders beginning August 23, 2019, and our proxy materials were posted on the website referenced in the Notice on that same date. The Company, on behalf of its Board, is soliciting your proxy to vote your shares at the 2019 annual meeting of shareholders. We solicit proxies to give shareholders of record an opportunity to vote on matters that will be presented at the annual meeting. In the proxy statement, you will find information on these matters, which is provided to assist you in voting your shares.

 

1.

Who can vote?

You can vote if, as of the close of business on August 9, 2019, you were a shareholder of record of the Company’s:

 

    Common Stock;
    Series A ESOP Convertible Class A Preferred Stock; or
    Series B ESOP Convertible Class A Preferred Stock.

Each share of Company stock gets one vote. On August 9, 2019, there were issued and outstanding:

 

    2,502,633,120 shares of Common Stock;
    34,599,491 shares of Series A ESOP Convertible Class A Preferred Stock; and
    53,260,995 shares of Series B ESOP Convertible Class A Preferred Stock.

 

 

 

2.

How do I vote by proxy?

Most shareholders can vote by proxy in three ways:

 

    By Internet — You can vote via the Internet by following the instructions in the Notice or by accessing the Internet at www.proxyvote.com and following the instructions contained on that website;
    By Telephone — In the United States and Canada, you can vote by telephone by following the instructions in the Notice or by calling (800) 690-6903 (toll-free) and following the instructions; or
    By Mail — You can vote by mail by requesting a full packet of proxy materials be sent to your home address. Upon receipt of the materials, you may fill out the enclosed proxy card and return it per the instructions on the card.

If you vote by proxy, your shares will be voted at the annual meeting as you direct. If you sign your proxy card but do not specify how you want your shares to be voted, they will be voted as the Board recommends.

If you are a participant in The Procter & Gamble Direct Stock Purchase Plan and/or The Procter & Gamble International Stock Ownership Program, you can vote the shares of common stock held for your account through any of the proxy voting options set forth above.

For participants in The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan, The Procter & Gamble Savings Plan, The Gillette Company Employee Stock Ownership Plan, The Procter & Gamble Commercial Company Employees’ Savings Plan and/or The Profit Sharing Retirement Plan of The Procter & Gamble Commercial Company (the “NA Plans”):

If you are a participant in the NA Plans, you have the right to instruct the respective plan fiduciaries how to vote the shares of stock that are allocated to your account. If your properly signed and executed voting instructions are timely received, the plan fiduciaries will vote the shares allocated to your account as you instructed. If you do not provide voting instructions or your voting instructions are not properly signed and executed or if they are not timely received, the plan fiduciaries will vote the shares allocated to your account in direct proportion to the shares of the same class for which the respective plan fiduciaries timely received properly signed and executed voting instructions. The plan fiduciaries also will vote the shares held in trust that have not been allocated to any account in the same manner as shares that are allocated to accounts but for which voting instructions are not

 

 

2  The Procter & Gamble Company            
          


Table of Contents
            VOTING AND MEETING INFORMATION
        

 

received. The plan fiduciaries will vote shares of P&G stock as described above, unless otherwise required by the Employee Retirement Income Security Act of 1974, as amended, or other applicable law.

For participants in The Procter & Gamble U.K. 1-4-1 Plan, The Procter & Gamble U.K. Share Investment Scheme and/or The Procter & Gamble Ireland Employee Stock Ownership Plan (the “UK and Ireland Plans”):

If you are a participant in the UK and Ireland Plans, you can instruct the respective plan fiduciaries how to vote the shares of stock that are allocated to your account. If you do not vote your shares, the plan fiduciaries will not submit a vote for your shares.

 

 

 

3.

Can I change or revoke my vote after I return my proxy card?

Yes. If you are the shareholder of record, you can change or revoke your proxy at any time before it is exercised at the annual meeting by Internet, telephone, or mail prior to 11:59 p.m. Eastern Daylight Time on Monday, October 7, 2019, or by attending the annual meeting and voting in person. If you are the beneficial owner of shares held in street name, you must follow the instructions provided by your broker, bank, or other nominee for changing or revoking your proxy. See question 7 for an explanation of the difference between a “shareholder of record” and a “beneficial owner.”

 

 

 

4.

Can I vote in person at the annual meeting instead of voting by proxy?

Yes, if you are the shareholder of record. If you are the beneficial owner and want to vote your shares at the annual meeting, you will need to request a legal proxy from your bank, broker, or other nominee, bring the legal proxy to the annual meeting, and submit it with your vote. We encourage you to vote your proxy by Internet, telephone, or mail prior to the meeting, even if you plan to attend in person.

5.

What are the voting procedures and what vote is required for approval of proposals?

Election of Directors—As provided in the Company’s Amended Articles of Incorporation, each of the 12 nominees for Director who receives a majority of votes cast will be elected as a member of the Board. A “majority of votes cast” means that the number of shares cast “for” a nominee must exceed the number of votes cast “against” that nominee. Abstentions and broker non-votes will have no effect. Pursuant to the By Laws of the Board of Directors, if a non-incumbent nominee for Director receives a greater number of votes cast “against” than votes cast “for,” such nominee shall not be elected as a member of the Board. Any incumbent nominee for Director who receives a greater number of votes cast “against” than votes cast “for” shall continue to serve on the Board pursuant to Ohio law, but shall immediately tender his or her resignation as a Director to the Board. Within 90 days, the Board will decide after taking into account the recommendation of the Governance & Public Responsibility Committee (in each case excluding the nominee in question), whether to accept the resignation. Absent a compelling reason for the Director to remain on the Board, the Board shall accept the resignation. The Board’s explanation of its decision shall be promptly disclosed on a Form 8-K submitted to the SEC.

The proposal to adopt The Procter & Gamble 2019 Stock and Incentive Compensation Plan and all other proposals require the affirmative vote of a majority of shares participating in the voting on each proposal for approval. Abstentions and broker non-votes will not be counted as participating in the voting and will therefore have no effect.

 

 

 

6.

Who pays for the Company’s proxy solicitation?

The Company will bear the cost of the solicitation of proxies by the Company. We have hired D.F. King & Co., Inc., a proxy solicitation firm, to assist us in soliciting proxies for a fee of $17,500, plus reasonable expenses. In addition, D.F. King and the Company’s Directors, officers, and employees

 

 

              2019 Proxy Statement  3  
        


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VOTING AND MEETING INFORMATION            
          

 

may also solicit proxies by mail, telephone, personal contact, email, or other online methods. We will reimburse their expenses for doing this.

We will also reimburse brokers, fiduciaries, and custodians for their costs in forwarding proxy materials to beneficial owners of Company stock. Other proxy solicitation expenses that we will pay include those for preparing, mailing, returning, and tabulating the proxies.

 

 

 

7.

What is the difference between a “shareholder of record” and a “beneficial shareholder” of shares held in street name?

You are the “shareholder of record” for any P&G shares that you own directly in your name in an account with P&G’s stock transfer agent, EQ Shareowner Services.

You are a “beneficial shareholder” of shares held in street name if your P&G shares are held in an account with a broker, bank, or other nominee as custodian on your behalf. The broker, bank, or other nominee is considered the shareholder of record of these shares, commonly referred to as holding the shares in “street name.” As the beneficial owner, you have the right to instruct the broker, bank, or other nominee how to vote your P&G shares.

 

 

 

8.

How do I vote my P&G shares held in street name?

If your shares are held by a bank, broker, or other holder of record, you will receive voting instructions from the holder of record. Your broker is required to vote your shares in accordance with your instructions.

 

 

 

9.

Can I attend the Annual Meeting in person?

If you plan to attend the meeting, you must be a shareholder of The Procter & Gamble Company as of August 9, 2019, the record date. In order to expedite your admission process, we encourage you to register for admission before 11:59 p.m. on Monday, October 7. You may register for admission for yourself and one guest by:

 

    Visiting www.proxyvote.com and following the instructions provided, or by calling (844)
   

318-0137. You will need the control number included on your proxy card, voter instruction form, or notice.

    At the entrance to the meeting, we will verify your registration and request to see a valid form of photo identification, such as a driver’s license or passport.

If you do not register for admission in advance of the meeting, we will request to see your photo identification at the entrance to the meeting. We will then determine if you owned common stock on the record date by:

 

    Verifying your name and stock ownership against our list of registered shareholders; or
    Asking to review evidence of your stock ownership as of August 9, 2019, such as your brokerage statement. You must bring such evidence with you in order to be admitted to the meeting. If you are acting as a proxy, we will need to review a valid written legal proxy signed by the owner of the common stock granting you the required authority to vote the owner’s shares.

 

 

 

10.

Can I listen to the Annual Meeting online?

If you are not able to attend the meeting in person, you may join a live webcast of the meeting on the Internet by visiting www.pginvestor.com at 9:00 a.m. Eastern Daylight Time on October 8, 2019.

 

 

 

11.

What is the Record Date?

August 9, 2019 is the record date for the meeting. This means that owners of Procter & Gamble stock at the close of business on that date are entitled to:

 

    receive notice of the meeting; and
    vote at the meeting and any adjournments or postponements of the meeting.

 

 

 

12.

How is P&G distributing proxy materials?

On or about August 23, 2019, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to shareholders of record as of August 9, 2019, and we posted our proxy materials

 

 

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on the website referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, shareholders may choose to access our proxy materials at www.proxyvote.com or may request a printed set of our proxy materials. In addition, the Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Those who previously requested printed proxy materials or electronic materials on an ongoing basis will receive those materials as requested.

 

 

 

13.

Why were my proxy materials included in the same envelope as other people at my address?

Shareholders of record who have the same address and last name and have not previously requested electronic delivery of proxy materials will receive a single envelope containing the Notices for all shareholders having that address. The Notice for each shareholder will include that shareholder’s unique control number needed to vote his or her shares. This procedure reduces our printing costs and postage fees. If you prefer to receive a separate copy of the proxy materials, please call us toll-free at (800) 742-6253 in the U.S., or inform us in writing at: The Procter & Gamble Company Shareholder Services, c/o EQ Shareowner Services, P.O. Box 64874, St. Paul, MN 55164-0874, or by email at www.pgshareholder.com; click Contact Us under the Email section. We will promptly deliver a separate copy of the proxy materials in response to any such request. If, in the future, you do not wish to participate in householding, you should contact us at the above phone number, address or email.

For those shareholders who have the same address and last name and who request to receive a printed copy of the proxy materials by mail, we will send only one copy of such materials to each address unless one or more of those shareholders notifies us, in the same manner described above, that they wish to receive a printed copy for each shareholder at that address.

Beneficial shareholders can request information about householding from their banks, brokers, or other holders of record.

         

 

YOUR VOTE IS IMPORTANT.

 

 

Please vote your proxy promptly so your shares can be represented, even if you plan to attend the annual meeting. You can vote by Internet, by telephone, or by requesting a printed copy of the proxy materials and using the enclosed proxy card.

 

Our proxy tabulator, Broadridge Financial Solutions, must receive any proxy that will not be delivered in person in the annual meeting by 11:59 p.m. Eastern Daylight Time on Monday, October 7, 2019.

 

         
 

 

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ELECTION OF DIRECTORS            
          

 

Election of Directors

 

ITEM 1. ELECTION OF DIRECTORS

Our Board of Directors has general oversight responsibility for the Company’s affairs pursuant to Ohio’s General Corporation Law and the Company’s Amended Articles of Incorporation, Code of Regulations, and By-Laws of the Board of Directors. In exercising its fiduciary duties, the Board represents and acts on behalf of the Company’s shareholders and is committed to strong corporate governance, as reflected through its policies and practices. The Board is deeply involved in the Company’s strategic planning process, leadership development, succession planning, and oversight of risk management.

Our Board of Directors nominated the 12 individuals listed on pages 10-15 for election at the 2019 annual meeting. All the Director nominees, except Ms. McCarthy, currently serve on the Board and were elected for a one-year term at the 2018 annual meeting. The current terms of these incumbent nominees for Director will expire at the 2019 annual meeting when their successors are elected, and the Board has nominated each of these individuals and Ms. McCarthy for a new one-year term that will expire at the 2020 annual meeting when their successors are elected.

Each of the Director nominees identified in this proxy statement has consented to being named as a nominee in our proxy materials and has accepted the nomination and agreed to serve as a Director if elected by the Company’s shareholders. If any nominee becomes unable or unwilling to serve between the date of the proxy statement and the annual meeting, the Board may designate a new nominee, and the persons named as proxies will vote on that substitute nominee.

Director Skills, Qualifications, and Diversity

As a global, diverse consumer products company, Procter & Gamble must have leaders who embrace strong governance, epitomize the Company’s Purpose, Values, and Principles, and bring to bear the practical wisdom and mature judgment that comes from significant leadership skill and experience. As the chart on pages 8-9 provides in additional detail, the Director nominees bring a variety of these skills and experiences to the Board and reflect an appropriate mix of qualifications to represent and further the long-term interests of the Company’s shareholders.

In addition, meaningful skills and experiences are just one aspect of diversity that the Board highly values. Our Governance Guidelines set forth the minimum qualifications for Board members and specify that the Board “seeks to achieve a mix of Board members that represents a diversity of background and experience, including with respect to age, gender, international background, race, and specialized experience.” Although the Board does not establish specific goals with respect to diversity, the Board’s overall diversity is a significant consideration in the Director nomination process. The Governance & Public Responsibility (“G&PR”) Committee reviews the Director nominees (including any shareholder nominees) and ascertains whether, as a whole, the group meets the Governance Guidelines in this regard.

 

 

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For this year’s election, the Board has nominated 12 individuals who bring valuable diversity to the Board. Their collective experience covers a wide range of countries, geographies, and industries. These 12 Director nominees range in age from 42 to 77. Five of

these nominees, or 41%, are women, and two are ethnically diverse. Further, our current Board has a good balance of experienced and new Directors, with tenure of the incumbent Directors averaging less than 8 years.

 

 

 

LOGO

  

 

LOGO

  

 

LOGO

   LOGO

 

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Our Director Nominees’ Combined Skills and Experience

LOGO

Consumer Industry/Retail

 

Directors with experience in dealing with consumers, particularly in the areas of marketing and selling products or services to consumers, provide valuable insights to the Company. They understand consumer needs, recognize products and marketing campaigns that might resonate with consumers, and identify potential changes in consumer trends and buying habits.

LOGO

Corporate Governance

 

Directors with experience in corporate governance, such as service on boards and board committees, or as governance executives of other large, public companies, are familiar with the dynamics and operation of a board of directors and the impact that governance policies have on the Company. This experience supports the Company’s goals of strong Board and management accountability, transparency, and protection of shareholder interests.

LOGO

Digital, Technology, and Innovation

 

Directors with digital and technology experience help the Company understand the evolution of fast-paced technology, assess and respond to potential information security challenges, and improve efficiency and productivity through oversight of the selection and implementation of new technologies to enhance business operations, marketing, and selling. Additionally, innovation is one of the Company’s core strengths and is critical in helping us translate our consumer understanding into new and successful products. Directors with an understanding of innovation help the Company focus its efforts in this important area and track progress against strategic goals and benchmarks.

LOGO

Finance

 

Directors with an understanding of accounting and financial reporting processes, particularly in large, global businesses, provide an important oversight role. The Company employs several financial targets to measure its performance, and accurate financial reporting is critical to the Company’s legal compliance and overall success. Directors with financial experience are essential for ensuring effective oversight of the Company’s financial measures and processes.

 

LOGO

Government/Regulatory

 

Directors with government experience, whether as members of the government or through extensive interactions with government and government agencies, can recognize, identify, and understand the key issues the Company faces in an economy increasingly affected by the role of governments around the world. This experience is particularly helpful during current times of increased volatility and uncertainty in global politics and economics.

 

LOGO

International

 

Directors who work in global companies have experience in markets outside of the United States and bring valuable knowledge to the Company, including exposure to different cultural perspectives and practices, and provide critical insight in light of the Company’s global scope and significant international revenues.

 

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LOGO

Leadership, Strategy, and

Risk Management

 

Directors with significant leadership experience over an extended period, including as chief executive officers, provide the Company with special insights. These individuals demonstrate a practical understanding of how large organizations operate, the importance of talent management, and the method of setting employee and executive compensation. They understand strategy, productivity, and risk management, and how these factors impact the Company’s operations and controls. Further, they possess recognized leadership qualities and can identify and develop leadership qualities in others.

LOGO

Marketing

 

Directors with experience identifying, developing, and marketing new products, as well as identifying new areas for existing products, can positively impact the Company’s operational results, including by helping the Company understand and anticipate evolving marketing practices.

 

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The Board of Directors recommends a vote FOR each of the following Director nominees to hold office until the 2020 annual meeting of shareholders and until their successors are elected.

 

LOGO

Francis S. Blake (Frank)

DIRECTOR SINCE 2015  •  AGE 70

Mr. Blake is the former Chairman of the Board and Chief Executive Officer of The Home Depot, Inc. (a national retailer). He served as the Chairman of the Board from 2007 to 2015 and as Chief Executive Officer from 2007 to 2014. He previously served as a Director of Southern Company (a super-regional energy company) from 2004 to 2009. Mr. Blake has been a Director of Delta Airlines since 2014 and was appointed non-executive Chairman of the Board in 2016. He has been a Director at Macy’s, Inc. since 2015.

Mr. Blake’s former role as Chairman and CEO of Home Depot, where he successfully rebuilt Home Depot’s retail strategy and culture during a weak housing and job market, provides him with extensive Consumer Industry/Retail and Marketing knowledge as well as Leadership, Strategy, and Risk Management skills, which Mr. Blake draws upon to give the Board better insight into the evolving marketing practices in the retail consumer industry and the actions necessary to advance the Company’s strategy and culture. In addition to the strong Corporate Governance skills that Mr. Blake developed through his experience on other public company boards, including as non-Executive Chairman of Delta Airlines’ Board and chair of its Corporate Governance Committee, he also contributes his significant Government/Regulatory experience to the Board, having previously served as General Counsel for the U.S. Environmental Protection Agency, Deputy Counsel to Vice President George H. W. Bush, and Deputy Secretary for the U.S. Department of Energy.

Member of the Audit and Governance & Public Responsibility Committees.

LOGO

Angela F. Braly

DIRECTOR SINCE 2009  •  AGE 58

Ms. Braly is the former Chair of the Board, President and Chief Executive Officer of WellPoint, Inc. (a healthcare insurance company), now known as Anthem, Inc. She served as Chair of the Board from 2010 to 2012 and as President and Chief Executive Officer from 2007 to 2012. She previously served as Executive Vice President, General Counsel, and Chief Public Affairs Officer of WellPoint from 2005 to 2007, and President and Chief Executive Officer of Blue Cross Blue Shield of Missouri from 2003 to 2005. Ms. Braly is also a co-founder of The Policy Circle, a nonprofit promoting civic engagement and public policy thought leadership among women. Ms. Braly has been a Director of Lowe’s Companies, Inc. since 2013, Brookfield Asset Management since 2015, and ExxonMobil Corporation since 2016.

Ms. Braly’s diverse Leadership, Strategy, and Risk Management experience at WellPoint enables her to provide valuable insight about risk management and governance matters, particularly as it pertains to the Consumer Industry/Retail sector, to the Board. Additionally, her role as General Counsel and Chief Public Affairs Officer for WellPoint, where she was responsible for the company’s government relations, public policy development, social responsibility, and corporate governance initiatives, her experience on other public company boards, and her ongoing engagement in public policy matters enable her to bring significant Corporate Governance expertise and Government/Regulatory skills to the Board, which is critical during current times of political and economic uncertainty.

Chair of the Governance & Public Responsibility Committee and member of the Audit Committee.

 

 

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LOGO

Amy L. Chang

DIRECTOR SINCE 2017  •  AGE 42

Ms. Chang is Senior Vice President and General Manager of the Collaboration Technology Group at Cisco Systems, Inc. (a networking technology company). She is the founder and former Chief Executive Officer of Accompany, Inc. (a relationship intelligence company), a position she held from 2013 to 2018. She previously held positions of increasing responsibility at Google, Inc. from 2005 to 2012, most recently serving as Global Head of Product, Google Ads Measurement and Reporting. Prior to joining Google, she held product management and strategy positions at eBay, Inc. and served as a consultant with McKinsey & Company, specializing in semi-conductors, software, and services. Ms. Chang was a Director of Cisco Systems, Inc. from 2016 to 2018, a Director of Informatica from 2012 to 2015, a Director of Splunk, Inc. from 2015 to 2017, and a member of Target Corporation’s Digital Advisory Council from 2013 to 2016.

Ms. Chang’s extensive Digital, Technology, and Innovation and Marketing experience, both as a digital startup founder and head of product at Google Analytics, uniquely situates her to provide important insights to the Board about digital industry trends, evolving marketing practices and data analytics. Additionally, as Senior Vice President and General Manager at Cisco, running a global team at an enterprise with a significant global footprint and supply chain, and as the founder and CEO of a digital startup company, Ms. Chang’s Leadership, Strategy, and Risk Management experience in a fast-paced environment gives her critical perspective on understanding consumers and driving innovation.

Member of the Audit and Innovation & Technology Committees.

LOGO

Scott D. Cook

DIRECTOR SINCE 2000  •  AGE 67

Mr. Cook is Chairman of the Executive Committee of the Board of Intuit Inc. (a software and web services company). He co-founded Intuit, the maker of business and financial management technology solutions, including QuickBooks, Quicken, and TurboTax, in 1983 and has served in various capacities since its founding. He served as President and Chief Executive Officer of Intuit from 1983 to 1994 and as Chairman of the Board from 1993 through 1998. Mr. Cook also served on the Board of eBay Inc. from 1998 to 2015.

Mr. Cook has been a leader in the technology industry for more than 30 years. As co-founder of a global consumer-facing technology company, he has driven innovation and significant growth. Mr. Cook was one of the first to apply techniques from consumer product marketing to software, including in-home consumer research, and has continued to guide his company into new businesses as technology, consumer needs, and business models have evolved. Mr. Cook uses his wealth of Leadership, Strategy, and Risk Management, Consumer Industry/Retail and Marketing experience to provide the Board with unique insight on the Company’s business operations and plans for strategic growth. He also brings valuable Digital, Technology, and Innovation experience, including as an early catalyst for applying lean startup methods in a larger enterprise. Mr. Cook draws upon these experiences to guide and foster innovation at the Company, in part through additional strategic meetings with Company leaders, and to provide the Board with important perspective on commercial and technology issues.

 

 

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LOGO

Joseph Jimenez

DIRECTOR SINCE 2018  •  AGE 59

Mr. Jimenez is Co-Founder and Managing Partner of Aditum Bio (a biotech venture fund that launched in July 2019). He is the former Chief Executive Officer of Novartis AG (global healthcare company), a position he held from 2010 to 2018. Prior to this role, he held several other senior positions at Novartis from April 2007 to 2010, as well as various leadership roles at H. J. Heinz Company in Europe and North America from 1999 to 2006 and at ConAgra Foods from 1993 to 1998. He was also an Advisor to the Blackstone Group L.P. from 2006 to 2007. Mr. Jimenez has been a Director of General Motors since 2015. He was a Director of Colgate-Palmolive from 2010 to 2015.

Mr. Jimenez’s demonstrated track record of International business Leadership, Strategy, and Risk Management and the Digital, Technology, and Innovation experience he gained through his role as CEO of Novartis and other roles at a range of Consumer Industry/Retail companies, such as H.J. Heinz and ConAgra, enables him to provide unique perspective to the Board on commercial, innovation, Marketing, and strategic issues. The Board also benefits from Mr. Jimenez’s extensive knowledge of the healthcare industry, particularly as the Company works to integrate Merck KGaA’s Consumer Health Business.

Chair of the Innovation & Technology Committee and member of the Compensation & Leadership Development Committee.

LOGO

Terry J. Lundgren

DIRECTOR SINCE 2013  •  AGE 67

Mr. Lundgren is an Operating Partner of Long-Term Private Capital (a BlackRock private equity fund) and the former Chairman and Chief Executive Officer of Macy’s, Inc. (a national retailer that includes Macy’s, Bloomingdale’s, and Blue Mercury, and operates one of the largest online retail businesses in the U.S.), a position he held from 2003 to 2017. Mr. Lundgren then served as Executive Chairman and Chairman of the Board of Macy’s, Inc. from 2017 to 2018. From 2003 to 2014, he also held the title of President of the company. He was a Director of Kraft Foods Group from 2012 to 2015. Earlier in his career, Mr. Lundgren was Chairman and CEO of Neiman Marcus.

Mr. Lundgren has extensive Marketing experience, including merchandising, digital and in-store execution, as well as Leadership, Strategy, and Risk Management experience, which he garnered from over 35 years working in the retail Consumer Industry, including 20 combined years as CEO of Neiman Marcus and subsequently Macy’s. During his tenure at Macy’s, Mr. Lundgren also gained significant experience in acquisitions and integration. His extensive retail career enables him to contribute his deep knowledge of the evolving consumer and retail landscape, plus his broad experience with dynamic marketing practices, including digital marketing, to the Board.

Chair of the Compensation & Leadership Development Committee and member of the Innovation & Technology Committee.

 

 

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LOGO

Christine M. McCarthy

DIRECTOR NOMINEE  •  AGE 64

Ms. McCarthy is Senior Executive Vice President and Chief Financial Officer of The Walt Disney Company (a global entertainment company), a position she has held since 2015. Prior to her appointment as CFO, she held positions of increasing responsibility at Disney, most recently serving as Executive Vice President, Corporate Real Estate, Alliances and Treasurer from 2005 to 2015. Ms. McCarthy previously served as Executive Vice President and Chief Financial Officer of Imperial Bancorp from 1997 to 1999. From 1981 to 1996, she held various positions at First Interstate Bank, rising to be Executive Vice President, Finance in 1993.

Ms. McCarthy’s more than 30 years of experience in Finance, including service as CFO of The Walt Disney Company, enable her to contribute to the Board her extensive understanding of complex financial analysis and reporting for a global, consumer-facing company. Further, Ms. McCarthy’s oversight of Disney’s worldwide finance organization, which includes corporate strategy, brand and franchise management, corporate alliances, enterprise controllership, enterprise social responsibility, enterprise technology, investor relations, risk management, tax, and treasury, provides her with extensive Leadership, Strategy, and Risk Management skills and valuable Corporate Governance experience.

LOGO

W. James McNerney, Jr. (Jim)

DIRECTOR SINCE 2003  •  AGE 70

Mr. McNerney is a Senior Advisor at Clayton, Dubilier & Rice, LLC (a private equity investment firm). He retired as Chairman of the Board of The Boeing Company (aerospace, commercial jetliners and military defense systems) in 2016. He was President of The Boeing Company from 2005 to 2013, Chief Executive Officer from 2005 to 2015, and Chairman of the Board from 2005 to 2016. From 2001 to 2005, Mr. McNerney was Chairman and CEO of 3M Company (a global technology company). Prior to his appointment as CEO of 3M Company, Mr. McNerney was employed by General Electric for nearly twenty years, where he held positions of increasing responsibility. He was a director of International Business Machines Corporation from 2009 to 2018.

Mr. McNerney brings a wealth of Leadership, Strategy, and Risk Management and Digital, Technology, and Innovation experience to the Board from his roles as CEO of Boeing and 3M, both large, International companies. In addition, Mr. McNerney’s experience revitalizing Boeing during his tenure as CEO uniquely qualifies him to advise the Board on the Company’s overall strategic direction. Additionally, Mr. McNerney contributes significant Corporate Governance experience to the Board, having served as Chairman and CEO of two public companies, as the Company’s Lead Director since 2007, and as a Director of IBM.

Lead Director, member of the Compensation & Leadership Development and Governance & Public Responsibility Committees.

 

 

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LOGO

Nelson Peltz

DIRECTOR SINCE 2018  •  AGE 77

Mr. Peltz has served as the Chief Executive Officer and Founding Partner of Trian Fund Management, L.P. (an investment management firm) since its formation in 2005. He previously served as Chairman and Chief Executive Officer of Triarc Companies, Inc., the predecessor to The Wendy’s Company, from 1993 to 2007, which owned Arby’s Restaurant Group, Inc. and the Snapple Beverage Group. He also served as Chairman and Chief Executive Officer of Triangle Industries, Inc., the parent company of American National Can Company, from 1983 to 1988. He has been a Director of Legg Mason, Inc. since 2019, having previously served as a Director from 2009 to 2014. He has also been a Director of Sysco Corporation since 2015, The Madison Square Garden Company since 2015, and The Wendy’s Company since 2007, where he serves as non-executive Chairman. He was a Director of Mondelēz International, Inc. from 2014 to 2018, MSG Networks Inc. from December 2014 to September 2015, Ingersoll-Rand from 2012 to 2014, and H. J. Heinz Company from 2006 to 2013.

Mr. Peltz’s more than 40 years of business and investment experience and over 20 years of service as the chairman and chief executive officer of public companies enables him to bring significant and diverse Consumer Industry/Retail, Marketing and Leadership, Strategy, and Risk Management experience to the Board. His service on multiple Board governance committees provides Mr. Peltz with substantial Corporate Governance experience. As a result of his role at Trian, Mr. Peltz brings extensive Finance skills and an institutional investor perspective, including strong relationships in the investment community, to the Board and uses his unique perspective to provide the Board with critical insight on the Company’s business operations and issues the Company faces.

Member of the Governance & Public Responsibility and Innovation & Technology Committees.

LOGO

David S. Taylor

DIRECTOR SINCE 2015  •  AGE 61

Mr. Taylor is Chairman of the Board, President and Chief Executive Officer of the Company. He has been President and CEO since 2015 and was elected Chairman of the Board in 2016. Mr. Taylor joined the Company in 1980 and, since that time, has held numerous positions of increasing responsibility in North America, Europe, and Asia in virtually all of the Company’s core businesses. Prior to his current role, Mr. Taylor was Group President-Global Beauty, Grooming & Health Care, Group President-Global Health & Grooming, Group President-Global Home Care, and President-Global Family Care. He also played a key role in the design of P&G’s portfolio optimization strategy and has been leading the company through a transformation since 2015. Mr. Taylor also serves as the Chairman of The Alliance to End Plastic Waste, an initiative to advance solutions to eliminate unmanaged plastic waste in the environment. Mr. Taylor has been a Director of Delta Airlines since August 2019 and served as a Director of TRW Automotive Corporation from 2010 to 2015.

Mr. Taylor is a proven leader with more than 39 years of experience across many of P&G’s core categories, functions, and markets. Mr. Taylor has uniquely broad experience, having begun his career at P&G gaining more than a decade of valuable hands-on supply chain and operations experience, including a role as plant manager of the Company’s largest manufacturing facility. His subsequent transition to and more than twenty years of experience in marketing and general management roles provided Mr. Taylor with vast Marketing, Innovation and Consumer Industry/Retail expertise, and his assignments living in Asia and Europe, along with global management across the Company’s businesses, have given him an International perspective. All of these experiences, together with his significant Leadership, Strategy, and Risk Management skills and robust knowledge of the Company, enable him to provide valuable insight to and leadership of the Board and the Company.

 

 

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LOGO

Margaret C. Whitman (Meg)

DIRECTOR SINCE 2011  •  AGE 63

Ms. Whitman is the Chief Executive Officer of Quibi (mobile media company), a position she has held since 2018. She was President and Chief Executive Officer of Hewlett Packard Enterprise (a multinational information technology enterprise) from 2015 to 2017. Prior to her role at Hewlett Packard Enterprise, she was President and Chief Executive Officer of Hewlett-Packard Company from 2011 to 2015, as well as Chairman of the Board from 2014 to 2015. She served as President and Chief Executive Officer of eBay Inc. from 1998 to 2008. She has been a Director of Dropbox since 2017. Ms. Whitman served as a Director of Hewlett Packard Enterprise from 2015 to 2018, DXC Technology in 2017, and Zipcar, Inc. from 2011 to 2013 and as Chairman of the Board of HP Inc. from 2015 to 2017. She also served as a Director of the Company from 2003 to 2008, having resigned in preparation for her 2010 California gubernatorial bid.

Ms. Whitman’s roles as CEO of Hewlett Packard Enterprise, Hewlett-Packard Company, and eBay provides her extensive Consumer Industry/Retail and Digital, Technology, and Innovation experience, enabling her to contribute valuable perspective to the Board in these areas. Ms. Whitman uses her considerable Leadership, Strategy, and Risk Management experience gained in her past management roles to provide the Board with significant insight into the Company’s priorities and strategic plans for growth.

Member of the Innovation & Technology Committee.

LOGO

Patricia A. Woertz (Pat)

DIRECTOR SINCE 2008  •  AGE 66

Ms. Woertz is the former Chairman of the Board and Chief Executive Officer of Archer Daniels Midland Company (“ADM”) (agricultural processors of oilseeds, corn, wheat, etc.), where she joined in 2006 as Chief Executive Officer and President and was named Chairman in 2007. Ms. Woertz retired as Chief Executive Officer of ADM in 2015 and as Chairman in 2016. Prior to joining ADM, Ms. Woertz was with Chevron Corp. for 29 years and retired as EVP Global Downstream. She began her career as a certified public accountant with Ernst & Ernst. Ms. Woertz has been a Director of 3M Company since 2016. She was a Director of Royal Dutch Shell plc from 2014 to 2017.

With broad executive experience at Chevron and ADM, including as CEO of ADM, and having started her career as a CPA, Ms. Woertz contributes a valuable mix of International and Marketing experience and Finance expertise, enabling her to provide critical perspective on operational and financial aspects of the Company, including accounting and corporate finance matters. Additionally, Ms. Woertz’s experience as an executive of public companies and a director on other public company boards provides her with significant Leadership, Strategy, and Risk Management skills and Corporate Governance experience from which she draws to provide a broad perspective on governance matters and issues facing public companies.

Chair of the Audit Committee and member of the Governance & Public Responsibility Committee.

 

 

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CORPORATE GOVERNANCE            
          

 

Corporate Governance

The Company’s Purpose, Values, and Principles (our PVPs) are the foundation of everything we do, including Corporate Governance. This foundation of integrity is critical to delivering long-term value for our consumers, customers, and shareholders. As a result, we take seriously the governance practices and policies that help protect the well-being of P&G and its shareholders.

 

Corporate Governance Overview

We have evaluated the Company’s governance practices against the Corporate Governance Principles published by the Investor Stewardship Group (“ISG”), a collective of some of the largest U.S.-based institutional investors and global asset managers, and

found they were highly consistent. P&G’s strong corporate governance policies and practices are disclosed throughout this proxy statement, but the following table highlights some of the key ways that P&G’s governance practices are consistent with ISG’s Corporate Governance Principles.

 

 

 

ISG Principles

  

 

P&G Practice

Principle 1

  

Boards are accountable to shareholders.

  

•  Annual Board self-assessments

•  Declassified Board – all Directors elected annually

•  Proxy access for Director nominees

•  Individual Directors tender resignation if they fail to receive majority of votes cast

•  No poison pill

•  Extensive disclosure of corporate governance and Board practices

Principle 2

  

Shareholders should be entitled to voting rights in proportion to their economic interest.

  

•  One share, one vote

•  No disparate voting rights

Principle 3

  

Boards should be responsive to shareholders and be proactive in order to understand their perspectives.

  

•  Directors available for shareholder engagement

•  Shareholder outreach process

•  Disclose key actions taken in response to shareholder feedback

Principle 4

  

Boards should have a strong, independent leadership structure.

  

•  Annual review and determination of leadership structure

•  Independent Lead Director if Chairman not independent

•  Lead Director has robust role and significant duties

Principle 5

  

Boards should adopt structures and practices that enhance their effectiveness.

  

•  11 of 12 Director nominees are Independent

•  All 4 Committees fully independent

•  95% average attendance by incumbent Directors at Board and Committee meetings in FY 2018-19

•  Specified retirement age and term limits for Directors

Principle 6

  

Boards should develop management incentive structures that are aligned with the long-term strategy of the company.

  

•  Board oversees executive compensation programs to align with long-term strategy of the Company

•  Combination of short- and long-term performance goals

•  Executive share ownership program and equity holding requirements

 

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AVAILABILITY OF CORPORATE GOVERNANCE DOCUMENTS

The Company’s corporate governance documents are available on the Company’s website at www.pg.com. Additionally, copies of the Company’s Amended Articles of Incorporation, the Company’s Code of Regulations, all Committee Charters, the Corporate Governance Guidelines (including Independence Guidelines, Confidentiality Policy, and Financial Literacy and Expertise Guidelines), the Worldwide Business Conduct Manual, the Company’s Purpose, Values, and Principles and the Related Person Transaction Policy are available in print upon request by writing to the Corporate Secretary at One Procter & Gamble Plaza, Cincinnati, OH 45202-3315.

CODE OF ETHICS

The Company has a code of ethics for its Directors, officers, and employees. The most recent version of this code of ethics is contained in the Worldwide Business Conduct Manual. The Worldwide Business Conduct Manual is reviewed each year for appropriate updates, and employees, officers, and Directors are asked to annually certify their understanding of and compliance with its requirements. Only the Board may grant a waiver of any provision for a Director or executive officer, and any such waiver, or any amendment to the manual, will be promptly disclosed as required at www.pg.com. The Worldwide Business Conduct Manual, which is firmly rooted in the Company’s long-standing Purpose, Values, and Principles, is made available to employees in 28 different languages and can be found on the Company’s website at www.pg.com.

SHAREHOLDER ENGAGEMENT

We value our relationships with all of our shareholders. Engagement with shareholders builds mutual understanding and a basis for progress, and the input we receive from them impacts and informs our corporate practices.

Senior management, our investor relations team, and subject matter experts from the Company maintain a year-round dialogue with investors to gain their perspectives on current issues and address any questions or concerns, and we make our Directors available for engagement with shareholders when appropriate. The Company’s top 100 institutional shareholders collectively own nearly 50% of the Company’s outstanding shares of common stock, and

we generally focus our proactive shareholder outreach efforts on these shareholders. We conduct meetings with institutional shareholders in person, via telephone calls, and one-on-one at conferences throughout the year. We also routinely respond to individual shareholders and other stakeholders who provide feedback about our business.

We will continue our shareholder engagement during FY 2019-20, including our normal participation at analyst meetings and conferences. We remain committed to these ongoing discussions and welcome feedback from all shareholders, who can reach our Investor Relations team by calling (513) 945-6941 or visiting www.pginvestor.com or contact our Directors or executive officers as described on page 27.

The Board’s Leadership Structure

The Company’s Board retains discretion to determine whether the same individual should serve as both Chief Executive Officer (“CEO”) and Chairman of the Board or whether the roles should be separated. This approach allows the Board to use its considerable experience and knowledge to elect the most qualified Director as Chairman of the Board, while maintaining the ability to separate the Chairman of the Board and CEO roles when appropriate, as the roles have been in previous periods.

The Board regularly considers this discretionary structure and whether to combine or separate the roles, depending on which leadership structure best serves the Company and its shareholders. The Board believes this discretion, including the flexibility to make this determination at any given point, best enables it to promote the long-term interests of the Company and its shareholders. During the Board’s annual evaluation of its leadership structure, and upon recommendation of the G&PR Committee, the non-employee Directors of the Board concluded that the current leadership structure continues to be the right leadership structure for the Company and that it is in the best interest of the shareholders to maintain the combined Chairman and CEO role currently held by Mr. Taylor. The Board believes that Mr. Taylor has served the Company well as Chairman and CEO and that this combined structure provides unified leadership and focus on the Company’s strategy, business plans, and continuing productivity efforts.

 

 

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LEAD INDEPENDENT DIRECTOR

When the Board determines that the same individual should hold the positions of CEO and Chairman of the Board or if the Chairman of the Board is not independent, the independent Directors of the Board elect for an annual term a Lead Director from among the independent Directors. The Lead Director role is significant, with responsibilities consistent with accepted best practices, including:

 

    preside at all meetings of the Board in the absence of, or upon the request of, the Chairman of the Board;
    lead regular executive sessions of the independent Directors;
    provide input to and approve agendas for the Board meetings and information sent to the Board;
    approve meeting schedules to assure sufficient time for discussion of all agenda items;
    call special meetings of the Board as necessary to address important or urgent Company issues;
    call meetings of the non-employee and/or independent Directors, with appropriate notice;
    advise the G&PR Committee and the Chairman of the Board on the membership of the various Board committees and the selection of committee chairpersons;
    advise the Chairman of the Board on the retention of advisors and consultants who report directly to the Board;
    advise the Chairman of the Board and CEO, as appropriate, on issues discussed at executive sessions of non-employee and/or independent Directors;
    review with the CEO the non-employee Directors’ annual evaluation of the CEO’s performance;
    serve as principal liaison between the non-employee and/or independent Directors, as a group, and the Chairman of the Board and CEO, as necessary;
    serve when necessary and appropriate, after consultation with the Chairman of the Board and CEO, as the liaison between the Board and the Company’s shareholders; and
    select an interim Lead Director to preside over meetings at which he or she cannot be present.

Mr. McNerney serves as the Board’s current Lead Director and has been re-elected annually to that role since 2007. Mr. McNerney is a strong, independent Lead Director, who fulfilled each of the above duties

during the past year. He has helped lead the Board through executive leadership transitions, the Company’s recent major strategic transformation, and the Company’s organizational redesign. As the former CEO and Chairman of the Board of The Boeing Company, and former CEO of 3M Company, he brings a wealth of diverse experiences and outside perspective to his Lead Director role, which allows him to serve as a trusted advisor to Mr. Taylor and ensure efficient and effective Board engagement.

In FY 2018-19, the non-employee Directors, led by Mr. McNerney, met six times in regularly scheduled executive sessions (without the presence of Mr. Taylor or other employees of the Company) to discuss various matters related to the oversight of the Company, the management of Board affairs, succession planning for the Company’s top management, and the CEO’s performance. Mr. McNerney fosters an open and constructive dialogue among the independent Directors, and after each executive session, Mr. McNerney advised Mr. Taylor on the independent Directors’ discussions, including performance feedback, and followed up on meeting outcomes and deliverables.

In conjunction with the Board’s decision to maintain the combined Chairman and CEO role, as recommended by the G&PR Committee, the non-employee Directors reappointed Mr. McNerney to serve as Lead Director for FY 2019-20. The Board is confident that Mr. Taylor, as Chairman and CEO, and Mr. McNerney, as Lead Director, will continue to work well together, and that the appropriate balance of power will be maintained. The Board will continue to periodically evaluate the Company’s leadership structure.

BOARD EVALUATION

In addition to regularly reviewing its leadership structure, the Board conducts an annual self-assessment of its overall functioning and effectiveness. In order to maximize input and facilitate useful feedback, the Company’s Chief Legal Officer conducts candid, one-on-one interviews with each Director. This feedback includes comments on overall Board performance, Board priorities, interaction with management, Board discussion topics, agendas, and processes, and how to further improve overall Board functioning. The results of these interviews are aggregated and anonymized and then shared with the full Board for review and discussion. The Board then addresses items as warranted, including, for the

 

 

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past fiscal year, changes in agenda planning to prioritize areas of concern, additional optional Board sessions to allow for deeper engagement with key topics, opportunities to visit other domestic and international sites to provide direct exposure to operating dynamics and local management, and increased visibility to more junior executives to better facilitate succession planning. Finally, if during the evaluation process, any issue with regard to an individual Director is identified, the Chairman or Lead Director will address such issue with the individual Director.

DIRECTOR INDEPENDENCE

The Board has determined that all of the Company’s Director nominees, with the exception of Mr. Taylor, are independent under NYSE’s listing standards and the Independence Guidelines. All members of the Board’s Audit, Compensation & Leadership Development, Governance & Public Responsibility, and Innovation & Technology Committees are independent under the NYSE listing standards and Independence Guidelines, and all members of the Audit Committee are also compliant with the SEC enhanced independence requirement for audit committee members. The Board of Directors has determined that Ms. Woertz meets the criteria for “Audit Committee Financial Expert” as defined by SEC rules. The Board of Directors has also determined that all Audit Committee members are financially literate.

In making these independence determinations, the Board applied the NYSE listing standards and the categorical independence standards contained in the Board of Directors’ Guidelines for Determining the Independence of its Members (the “Independence Guidelines”). Under the Independence Guidelines, certain relationships were considered immaterial and, therefore, were not considered by the Board in determining independence, but were reported to the Chair of the G&PR Committee. Applying the NYSE listing standards and the Independence Guidelines, the Board determined that there are no transactions, relationships, or arrangements that would impair the independence or judgment of any of the Director nominees deemed independent by the Board.

As part of its independence determinations, the G&PR Committee and the Board carefully reviewed the June 2019 agreement between the Company and Quibi, a mobile media company, as Ms. Whitman is both CEO of Quibi and an investor in the company. The transaction is further described on page 26. Because the transaction with Quibi was initiated before

Ms. Whitman’s investment or employment with Quibi, the Company’s spending commitment with Quibi is small, and the relationship between the Company and Quibi is managed by someone other than Ms. Whitman, the Committee concluded that Ms. Whitman is still independent under both the NYSE listing standards and the Company’s Independence Guidelines.

Mr. Taylor is Chairman of the Board, President and CEO of the Company. As an employee of the Company, he cannot be deemed independent under the NYSE listing standards or the Independence Guidelines.

SERVICE ON OTHER PUBLIC BOARDS

The Board believes that service on the boards of other public companies provides valuable governance and leadership experience that ultimately benefits the Company. The Board also recognizes that outside public board service requires a significant commitment of time and attention, and therefore, in accordance with best governance practices, limits Director participation on other public boards. Under the Corporate Governance Guidelines, Directors who are active CEOs of other public companies may sit on no more than two additional outside public boards (including his/her own company board), and other non-employee Directors may sit on no more than three additional outside public boards. The Board must approve any exception. This practice helps ensure that our Directors can give appropriate levels of time and attention to the affairs of the Company. In addition, when nominating a Director for service on the Board, the G&PR Committee considers whether the nominee will have adequate time to serve as a Director of the Company. Each Director demonstrates their strong engagement and high attendance and has adequate time to devote to the affairs of the Company.

Board Meetings and Committees of the Board

Our Directors take seriously their commitment to active oversight, meaningful engagement, and effective stewardship of the long-term interests of the Company and its shareholders. The Chairman of the Board and Lead Director set Board agendas in advance to ensure that appropriate subjects are covered with time for meaningful discussion. Committee Chairs also work closely with management to set agendas for Committee meetings, ensuring that each Committee reviews

 

 

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relevant subjects in a timely and meaningful manner. Directors receive comprehensive materials in advance of Board and Committee meetings and are expected to review these materials before each meeting. This process allows for focused, active discussions during meetings, instead of lengthy, passive presentations.

During the fiscal year ended June 30, 2019, the Board held 7 meetings, and the Committees of the Board collectively held 22 meetings, for a total of 29 meetings. Each incumbent Director attended greater than 75% of the meetings of the Board and the

Committees on which they served, with average attendance of 95% among incumbent Directors. The Board expects all Directors to attend the annual meeting of shareholders, and ten of the Directors then serving attended the October 9, 2018 annual meeting.

The table below shows the current membership of each Committee of the Board and the number of meetings each Committee held during the fiscal year ended June 30, 2019. The Board will determine Committee assignments for Ms. McCarthy upon her election.

 

 

Name

   Board    Audit   

Compensation

& Leadership
Development

  

Governance
& Public

Responsibility

  

Innovation

& Technology

Francis S. Blake

  

  

       

    

Angela F. Braly

  

  

       

Chair

    

Amy L. Chang

  

  

            

Scott D. Cook†

  

                   

Joseph Jimenez

  

       

       

Chair

Terry J. Lundgren

  

       

Chair

       

W. James McNerney, Jr.

  

Lead

       

  

    

Nelson Peltz

  

            

  

David S. Taylor

  

Chair

                   

Margaret C. Whitman

  

                 

Patricia A. Woertz

  

  

Chair

       

    

Total FY 2018-19 Meetings

  

7

  

8

  

6

  

6

  

2

†In lieu of serving on any Board Committees, Mr. Cook devotes his time to additional strategic meetings with Company management.

 

To assist the Board in discharging its duties and to facilitate deeper penetration into certain key areas of oversight, the Board has established four standing Committees. Each Committee is fully independent under the NYSE listing standards and the Independence Guidelines, which can be found at

www.pg.com. Each Committee has a charter that sets out its primary purposes, duties, and responsibilities. These charters can be found in the corporate governance section of the Company’s website at www.pg.com.

 

 

 

 

AUDIT COMMITTEE

The Audit Committee has primary responsibility for assisting the Board in oversight of:

 

    accounting, financial reporting and disclosure processes, and adequacy of systems of disclosure and internal control established by management;
    the quality and integrity of the Company’s financial statements;
    the Company’s compliance with legal and regulatory requirements;
    the Company’s overall risk management profile;
    the independent auditor’s qualifications and independence;
    the performance of the Company’s internal audit function and the independent registered public accounting firm; and
    the performance of the Company’s ethics and compliance function.

The Audit Committee also prepares the annual Report of the Audit Committee to be included in the Company’s proxy statement. At each meeting, representatives of Deloitte & Touche LLP, the Company’s independent registered public accounting firm, and finance management were present to review accounting, control, auditing, and financial reporting matters. During certain of these meetings,

 

 

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the Audit Committee also held private sessions with the Company’s CEO, CFO, CLO, Chief Ethics & Compliance Officer, chief audit executive, and representatives of Deloitte & Touche LLP.

COMPENSATION & LEADERSHIP DEVELOPMENT COMMITTEE

Under its charter, the C&LD Committee:

 

    has full authority and responsibility for the Company’s overall compensation policies, including base pay, short- and long-term pay, retirement benefits, perquisites, severance arrangements, recoupment, stock ownership requirements, and stock option holding requirements, if any, and their specific application to principal officers elected by the Board and to Directors; and
    assists the Board in the leadership development and evaluation of principal officers and also has the responsibility to periodically review organizational diversity.

The CEO makes recommendations to the C&LD Committee regarding the compensation elements of the principal officers (other than his own compensation) based on Company performance, individual performance, and input from Company management and the Committee’s independent compensation consultant. The C&LD Committee makes all final decisions regarding compensation for principal officers and makes a recommendation to the Board regarding the shareholder votes related to executive compensation. For more details regarding principal officer compensation or the C&LD Committee’s process for making decisions regarding the compensation of principal officers, please see the Compensation Discussion & Analysis section found beginning on page 31 of this proxy statement. The C&LD Committee retains an independent compensation consultant, hired directly by the Committee, to advise it regarding executive compensation matters.

GOVERNANCE & PUBLIC RESPONSIBILITY COMMITTEE

The G&PR Committee has primary responsibility for:

 

    identifying individuals qualified to become Directors;
    recommending when new members should be added to the Board and individuals to fill vacant Board positions;
    recommending to the Board the Director nominees for the next annual meeting of shareholders and whether to accept the resignation of any incumbent Director nominee who received a greater number of “against” votes than “for” votes in a non-contested election;
    recommending Board committees and committee assignments;
    periodically reviewing and recommending updates to the Corporate Governance Guidelines;
    educating the Board and the Company on applicable governance laws and regulations;
    assisting the Board and the Company in interpreting and applying the Corporate Governance Guidelines and other issues related to Board governance; and
    evaluating the Board and the Directors.

The G&PR Committee also oversees the Company’s strategies and work related to its public responsibility, including:

 

    overseeing the Company’s commitment to making a meaningful impact around the world through the Company’s Citizenship efforts in the areas of social investments and environmental sustainability, by reviewing strategies and plans for improving lives in ways that enable people to thrive and that increase their quality of living;
    overseeing the Company’s community and government relations;
    overseeing the Company’s product quality and quality assurance systems; and
    overseeing protection of the Company’s corporate reputation and other matters of importance to the Company and its stakeholders.

INNOVATION & TECHNOLOGY COMMITTEE

The I&T Committee reviews and makes recommenda-tions to the Board on major strategies for technical and commercial innovation to increase shareholder value and has responsibilities for other subjects relating to:

 

    overseeing the Company’s approach to technical and commercial innovation;
    overseeing the innovation, technology development, and acquisition process to assure ongoing business growth; and
    overseeing development of measurement and tracking systems that are important to successful product and commercial innovation.
 

 

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The I&T Committee reviews annually:

 

    product and package performance via a holistic product assessment;
    historical tracking of initiatives versus targets, and the impact of initiatives on brand growth; and
    the Company’s forward-looking innovation portfolio.

The Board’s Oversight of Risk

The Company’s senior management has the responsibility to develop and implement the Company’s strategic plans and to identify, evaluate, manage, and mitigate the risks inherent in those plans. It is the responsibility of the Board to oversee the development and execution of the Company’s strategic plans and to understand the associated risks and the steps that senior management is taking to manage and mitigate those risks. The Board takes an active approach to its role in overseeing the development and execution of the Company’s business strategies as well as its risk oversight role.

This approach is bolstered by the Board’s leadership and Committee structure, which ensures the full Board properly considers and evaluates potential enterprise risks under the auspices of the Chairman of the Board and Lead Director, and further considers and evaluates certain risks at the Committee level.

As part of its strategic risk management oversight, the full Board conducts a number of reviews throughout the year to ensure that the Company’s strategy and risk management is appropriate and prudent, including:

 

    A comprehensive annual review of the Company’s overall strategic plan, with updates throughout the year.
    Direct discussions with the Chairman and CEO, in semi-executive sessions held at six Board meetings, about the state of the business.
    Reviews of the strategic plans and results for the Company’s business sectors, including the risks associated with these strategic plans, at Board meetings during the year.
    Reviews of other strategic focus areas for the Company, such as innovation, information security, and human capital management. The Board also has overall responsibility for leadership succession for the Company’s most senior officers, including the CEO, and reviews succession plans on an ongoing basis.
    Annual review of the conclusions and recommendations generated by management’s enterprise risk management process. This process involves a cross-functional group of the Company’s senior management, which identifies on a continual basis current and future potential risks facing the Company, partnering with Global Internal Audit, business leaders, and other governance organizations on actions to appropriately manage and mitigate those potential risks. In conjunction with the Company’s enterprise risk management process, management also maintains an information and operational technology risk management program, which analyzes emerging cybersecurity threats as well as the Company’s plans and strategies to address them.

In addition, the Board has delegated certain risk management oversight responsibilities to specific Board Committees, each of which reports regularly to the full Board. In performing these oversight responsibilities, each Committee has full access to management, as well as the ability to engage independent advisors. Additionally, each Committee ensures that management has developed sufficient plans to mitigate the risks identified.

 

 

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Audit Committee

Oversees the Company’s overall risk management process, focusing on accounting and financial controls, financial statement integrity, information security, cybersecurity, legal and regulatory compliance, tax policy and compliance, business continuity planning, and ethics and compliance programs, and routinely discusses the Company’s risk profile, risk management, and exposure with management, internal auditors, and our independent registered public accounting firm.

 

Compensation & Leadership Development Committee

Reviews risks related to the development and succession planning of the Company’s executive officers as well as risks associated with the Company’s compensation policies and practices, as discussed further below under “Compensation-Related Risk.”

 

Governance & Public Responsibility Committee

Reviews risks related to the Company’s corporate governance structure and processes, including Director qualifications, succession planning, and independence, as well as risks related to product quality, public policy, social issues, environmental sustainability, and the Company’s reputation.

 

Innovation & Technology Committee

Reviews risks related to emerging technologies, the changing media landscape, the Company’s integration of new technology, ingredient safety, and our overall innovation strategy.

 

 

COMPENSATION-RELATED RISK

As part of its risk oversight responsibilities, the C&LD Committee annually reviews our compensation policies and practices. The C&LD Committee employs an independent compensation consultant, Frederic W. Cook & Co., Inc., which does not work for management and, among other tasks, reviews and reports on all the Company’s executive compensation programs, including the potential risks and other impacts of incentives created by the programs. For more details on the arrangement with Frederic W. Cook & Co., Inc., please see the section entitled “Engagement of Independent Advisor” found on page 44 of this proxy statement.

The independent compensation consultant’s review included an analysis of the Company’s short-, medium-, and long-term compensation programs covering key program details, performance factors for each program, target award ranges, maximum funding levels, and plan administrative oversight and control requirements. Key program elements assessed relating to potential compensation risks were pay mix, performance metrics, performance goals and payout curves, payment timing and adjustments, severance packages, equity incentives, stock ownership requirements, prohibitions on hedging and pledging, and trading policies. Members of management also performed a risk assessment of the Company’s other compensation programs including maximum program spending, program design elements, payment authorizations, and overall confirmation that plans do not encourage excessive

risk-taking. The results of the consultant’s analysis of the Company’s executive compensation programs, as well as management’s review of the Company’s other compensation programs, were shared with the C&LD Committee, which concluded that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

In reaching its conclusion, the C&LD Committee noted that the Company’s compensation programs include a mix of cash and equity, as well as annual, medium-term, and long-term incentives. This mix of compensation, the design features of these programs, and the Company’s respective oversight and control requirements mitigate the potential of any individual inclination toward taking unnecessary risks. The C&LD Committee also acknowledged various other features of the Company’s compensation programs, policies, and practices designed to mitigate unwarranted risk. For example, the Company’s annual cash bonus program, STAR, provides the C&LD Committee with discretion to reduce or eliminate any award that would otherwise be payable. In addition, the performance metrics under STAR include both quantitative measures (e.g., top-line growth, bottom-line profits, free cash flow, etc.) and qualitative measures (e.g., relative performance, internal controls, innovation, etc.). These non-metric features mitigate the risk of an executive focusing too much on the specific financial metrics under STAR. Moreover, the performance metrics associated with the STAR Company Factor (core earnings per share growth and

 

 

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organic sales growth) are aligned with the Company’s business plans and strategic objectives.

Further, the C&LD Committee recognized that the Company’s longer-term incentives include a balanced portfolio of stock options, restricted stock units, and performance stock units (under the Performance Stock Program, or PSP). These longer-term incentives incorporate a variety of payout horizons that focus executives on long-term performance: 10-year terms with three-year cliff vesting for stock options, three-year cliff vesting for restricted stock units, and a three-year performance period for performance-vested stock. The C&LD Committee also noted that the design of the PSP reduces the likelihood that an executive will focus too much on a single performance measure by including four different performance categories with weightings of 20% or 30% each to provide a balanced risk profile. The categories are: organic sales growth relative to competitive peers, constant currency core before-tax operating profit growth, core earnings per share growth, and free cash flow productivity. In addition, actual performance against goals with respect to each of these performance measures will yield a payout from a minimum of 0% to a maximum of 200% of a senior executive’s target incentive opportunity. Using this sliding scale approach, versus an all-or-nothing approach, discourages participants from taking unnecessary risks. Furthermore, beginning with the most recent PSP award, a relative Total Shareholder Return multiplier was added to ensure further alignment with shareholder interests. Each of the financial measures is defined and further explained on page 41 of this proxy statement.

Finally, the C&LD Committee acknowledged that the Company has a global compensation and benefits policy review board that authorizes any new plans and monitors existing plans as well as maintains several policies intended to mitigate inappropriate risk taking, including stock ownership guidelines for senior executives, a recoupment policy that can be applied in the event of any significant financial restatement, and an insider trading policy that prohibits margin and hedging transactions by senior executives.

Additional Governance Matters

COMPANY POLICY REGARDING EMPLOYEE, OFFICER, AND DIRECTOR HEDGING

The Company’s Global Insider Trading Policy generally prohibits Directors, senior executives, other designated employees, and certain persons or entities related to these individuals, from engaging in hedging, short sales, pledging, collars, or any other derivative transaction involving the use of market investments to manage the risk of price movements in Company stock or to leverage the potential return of a predicted move in Company stock. Exceptions to this general policy require approval from the Company’s CLO. Certain aspects of this policy do not apply to Trian Fund Management, L.P. (“Trian”), an institutional investment manager of which Mr. Peltz is Chief Executive Officer, and the funds and investment vehicles managed by Trian. The Company’s general policy nevertheless applies to Mr. Peltz in his individual capacity.

REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS

The Worldwide Business Conduct Manual requires that all employees and Directors disclose all potential conflicts of interest and promptly take actions to eliminate any such conflict when the Company requests. In addition, the Company has adopted a written Related Person Transaction Policy that prohibits any of the Company’s executive officers, Directors, or any of their immediate family members from entering into a transaction with the Company, except in accordance with the policy.

Under our Related Person Transaction Policy, the CLO has primary responsibility for determining whether, based on the facts and circumstances, a related person has a direct or indirect material interest in a proposed or existing transaction. If the CLO determines that the related person would have a direct or indirect material interest in the transaction, the CLO must present the transaction to the Audit Committee for review or, if impracticable under the circumstances, to the Chair of the Audit Committee, who must then either approve or reject the transaction in accordance with the terms of the policy. While making this determination, the Audit Committee must consider all relevant information available and, as appropriate, take into consideration the following:

 

   

whether the transaction was undertaken in the ordinary course of business of the Company;

 

 

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    whether the transaction was initiated by the Company or the related person;
    whether the transaction contains terms no less favorable to the Company than terms that could have been reached with an unrelated third party;
    the purpose of the transaction and its potential benefits to the Company;
    the approximate dollar value of the transaction, particularly as it involves the related person;
    the related person’s interest in the transaction; and
    any other information regarding the related person’s interest in the transaction that would be material to investors under the circumstances.

The Audit Committee may only approve the transaction if it determines that the transaction is not inconsistent with the best interests of the Company as a whole. Further, in approving any such transaction, the Audit Committee has the authority to impose any terms or conditions it deems appropriate on the Company or the related person. Absent this approval, no such transaction may be entered into by the Company with any related person. The Audit Committee has reviewed and approved the following transactions.

Jon R. Moeller, the Company’s Vice Chairman, Chief Operating Officer (COO) and Chief Financial Officer (CFO), is married to Lisa Sauer, a long-tenured employee of the Company who currently holds the position of Vice President—Product Supply, Global Home Care Products and External Supply Solutions. Her total compensation last year was approximately $969,000, consisting of salary, bonus, equity grants, and retirement and health benefits. Her compensation is consistent with the Company’s overall compensation principles based on her years of experience, performance, and position within the Company. Prior to Mr. Moeller becoming CFO, the Audit Committee approved the continued employment of Ms. Sauer with the Company under the Company’s Related Person Transaction Policy, concluding that her continued employment was not inconsistent with the best interests of the Company as a whole.

Deborah P. Majoras, the Company’s Chief Legal Officer and Secretary, is married to John M. Majoras, one of approximately 900 partners in the law firm of Jones Day. The Company has hired Jones Day, in the ordinary course of business, to perform legal services. The Company’s relationship with Jones Day dates back more than 30 years and significantly precedes

Ms. Majoras joining the Company as Vice President and General Counsel in 2008 from the Federal Trade Commission, where she served as Chairman. Mr. Majoras does not receive any direct compensation from the fees paid to Jones Day by the Company, his ownership in the Jones Day law firm is significantly less than 1%, and the fees paid by the Company to Jones Day in the last fiscal year were less than 1% of their annual revenues. Under the Company’s Related Person Transaction Policy, the Audit Committee reviewed and approved the continued use of Jones Day as a provider of legal services to the Company, but required the Company’s CEO to approve any recommendations by Ms. Majoras to hire Jones Day for a specific legal matter. In doing so, the Committee concluded that the Majorases did not have a direct or indirect material interest in the Company’s hiring of Jones Day and that the relationship was not inconsistent with the best interests of the Company as a whole.

R. Alexandra Keith, Chief Executive Officer—Beauty, is married to Christopher Keith, a long-tenured employee of the Company who currently holds the position of Vice President—Brand Franchise Leader, Baby Care and Brand Building Organization, Global Baby and Feminine Care. His total compensation last year was approximately $879,000, consisting of salary, bonus, equity grants, and retirement and health benefits. His compensation is consistent with the Company’s overall compensation principles based on his years of experience, performance, and position within the Company. Upon Ms. Keith becoming President – Global Hair Care and Beauty Sector, the Audit Committee approved the continued employment of Mr. Keith with the Company under the Company’s Related Person Transaction Policy, concluding that his continued employment was not inconsistent with the best interests of the Company as a whole.

Fama Francisco, Chief Executive Officer—Baby and Feminine Care, is married to Noel Francisco, a P&G employee who currently holds the position of Senior Manager—Human Resources, International Benefits & Expat Medical Plan Design. His total compensation last year was approximately $208,000, consisting of salary, bonus, and retirement and health benefits. In addition, Ms. Francisco is the sister-in-law of Mr. Carlo Francisco, a former P&G employee who during FY 2018-19 held the position of Associate Director—Sales, Corporate Market Strategy & Planning and Direct Drug Pharma, Philippines. His total compensation last year was approximately $170,000, consisting of salary,

 

 

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CORPORATE GOVERNANCE            
          

 

bonus, equity grants, and retirement and health benefits. Both Messrs. Noel and Carlo Francisco started with the Company well before Ms. Francisco’s appointment as an executive officer. In addition, their respective compensation is consistent with the Company’s overall compensation principles based on their years of experience, performance, and positions within the Company. Upon Ms. Francisco becoming President – Global Baby Care and Baby and Feminine Care Sector, the Audit Committee approved the continued employment of Messrs. Noel and Carlo Francisco with the Company under the Company’s Related Person Transaction Policy, concluding that their continued employment was not inconsistent with the best interests of the Company as a whole.

M. Tracey Grabowski, the Company’s Chief Human Resources Officer, is the sister-in-law of Mr. Andy Ingal, a long-tenured P&G employee who currently holds the position of Senior Account Executive, Market Operations. His total compensation last year was approximately $214,000, consisting of salary, bonus, and retirement and health benefits. His compensation is consistent with the Company’s overall compensation principles based on his years of experience, performance, and position within the Company. Upon Ms. Grabowski’s appointment as the Company’s Chief Human Resources Officer, the Audit Committee approved the continued employment of Mr. Ingal with the Company under the Company’s Related Person Transaction Policy, concluding that his continued employment was not inconsistent with the best interests of the Company as a whole.

Francis S. Blake, a Director, is the stepfather of Asher Lanier, an employee of the Company who currently holds the position of Growth Analyst, Shave—Albertsons. Mr. Lanier’s total compensation last year was approximately $136,000, consisting of salary and retirement and health benefits. His compensation is consistent with the Company’s overall compensation principles based on his years of experience, performance, and position within the Company. Mr. Lanier was hired into an entry-level position with the Company and Mr. Blake played no role in Mr. Lanier’s hiring. In addition, Mr. Blake does not directly or indirectly manage Mr. Lanier’s ongoing career or individual compensation. Finally, Mr. Lanier does not share a household with Mr. Blake. In anticipation of Mr. Lanier’s total compensation exceeding $120,000 in FY 2017-18, the Audit Committee reviewed and approved the continued employment of Mr. Lanier with the Company under

the Company’s Related Person Transaction Policy, concluding that his continued employment was not inconsistent with the best interests of the Company as a whole.

Other than as noted above and in the Compensation Committee Interlocks and Insider Participation section below, there were no transactions, in which the Company or any of its subsidiaries was a participant, the amount involved exceeded $120,000, and any Director, Director nominee, executive officer, or any of their immediate family members had a direct or indirect material interest reportable under applicable SEC rules or that required approval of the Audit Committee under the Company’s Related Person Transaction Policy, nor are there any currently proposed.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All members of the Compensation & Leadership Development Committee during FY 2018-19 were independent directors, and none were employees or former employees of the Company.

Margaret C. Whitman, a Director and member of the C&LD Committee during most of FY 2018-19, is the Chief Executive Officer of Quibi, a mobile media company in which she also has an approximately 6% ownership stake. In June 2019, after Ms. Whitman was no longer a member of the C&LD Committee, the Company agreed to enter into a sponsorship agreement with Quibi, under which the Company will pay $1 million in 2019 as part of an initial sponsorship and will pay in monthly installments an additional $14 million beginning upon launch of the Quibi service, which is scheduled to occur in April 2020. The Company’s discussions with Quibi regarding a potential business relationship began with Quibi founder Jeffrey Katzenberg prior to Ms. Whitman’s investment and employment; the transaction was entered in the normal course of business and was not initiated by Ms. Whitman. The Company ultimately entered into the agreement with Quibi after an extensive two-sided, arms-length negotiation. The Audit Committee reviewed and approved the Company’s agreement with Quibi under the Company’s Related Person Transaction Policy, and that approval required that someone other than Ms. Whitman continue to be the primary manager of Quibi’s relationship with the Company. In doing so, the Committee concluded that the agreement was not inconsistent with the best interests of the Company as a whole.

 

 

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            CORPORATE GOVERNANCE
        

 

There are no Compensation Committee interlocks between the Company and any other entities in which one of our executive officers serves on the compensation committee (or equivalent) or the board of directors of another entity whose executive officer(s) served on our C&LD Committee or Board of Directors.

COMMUNICATION WITH DIRECTORS AND EXECUTIVE OFFICERS

Shareholders and others who wish to communicate with the Board or any particular Director, including the Lead Director, or with any executive officer of the Company, may do so by email at [email protected] or by writing to the following address:

[Name of Director(s)/Executive Officer or “Board of Directors”]

The Procter & Gamble Company

c/o The Corporate Secretary’s Office

One Procter & Gamble Plaza

Cincinnati, OH 45202-3315

All such correspondence is reviewed by the Corporate Secretary’s office, which logs the material for tracking purposes. The Board has asked the Corporate Secretary’s office to forward to the appropriate Director(s) all correspondence, except for personal grievances, items unrelated to the functions of the Board, business solicitations, advertisements, and materials that are profane.

 

 

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DIRECTOR COMPENSATION            
          

 

Director Compensation

The objective of the C&LD Committee is to provide non-employee members of the Board a compensation package consistent with the size-adjusted median of the Peer Group. Directors can elect to receive any part of their fees or retainer (other than the annual grant of Restricted Stock Units (“RSUs”)) as cash, RSUs, or unrestricted stock. Consistent with the practice of the past several years, the Company did not grant any stock options to Directors in FY 2018-19. Non-employee members of the Board received the following compensation:

 

    a grant of RSUs following election to the Board at the Company’s October 9, 2018 annual meeting of shareholders, with a grant date fair value of $175,000. These units are forfeited if the Director resigns during the year, unless the resignation is for reasons of antitrust laws, or the Company’s conflict of interest, corporate governance, or continued service policies. These RSUs do not deliver in shares until at least one year after the Director leaves the Board and cannot be sold or traded until delivered in shares, thus encouraging alignment with the Company’s long-term interests and the interests of shareholders. These RSUs will earn dividend equivalents at the same rate as dividends paid to shareholders;
    an annual retainer fee of $110,000 paid in quarterly increments; and
    an additional annual retainer paid to the Lead Director and Chair of each committee as follows: Lead Director, $30,000; Chair of the Audit Committee, $25,000; Chair of the C&LD Committee, $20,000; Chairs of the Governance & Public Responsibility and Innovation & Technology Committees, $15,000.

At its June 11, 2019 meeting, the Board of Directors, upon the recommendation of the C&LD Committee, agreed to raise the annual retainer fee to $120,000, increase the annual award of RSUs to $200,000, and increase the additional annual retainer for Committee Chairs by $5,000 each. The Board also raised the Lead Director retainer to $40,000. The C&LD Committee recommended these increases because Director compensation had been essentially unchanged since 2013 and compensation was clearly below the size-adjusted median of the Peer Group. These changes bring Director compensation back in line with the peer group market median.

Non-employee members of the Board must own Company stock and/or RSUs worth six times their annual cash retainer. A number of the non-employee Directors were appointed or elected to the Board within the last few years. However, all non-employee Directors either meet or are on track to meet the ownership requirements within the five-year period established by the C&LD Committee.

 

 

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            DIRECTOR COMPENSATION
        

 

The following table and footnotes provide information regarding the compensation paid to the Company’s non-employee Directors in FY 2018-19. Directors who are employees of the Company receive no compensation for their service as Directors.

 

DIRECTOR COMPENSATION

                   
    

Fees

              

Name

  

Annual
Retainer
($)

  

Committee
Chair & Lead
Director Fees
($)

  

Total Fees
Earned or
Paid in
Cash1

($)

  

Stock
Awards2
($)

  

All Other
Compensation3
($)

  

Total
($)

Francis S. Blake

  

110,000

  

  

110,000

  

175,000

  

0

  

285,000

Angela F. Braly

   110,000    15,000    125,000    175,000    0    300,000

Amy Chang

   110,000       110,000    175,000    0    285,000

Kenneth I. Chenault

   68,444       68,444    175,000    0    243,444

Scott D. Cook

   110,000    15,000    125,000    175,000    0    300,000

Joseph Jimenez

   110,000       110,000    175,000    0    285,000

Terry J. Lundgren

   110,000    20,000    130,000    175,000    0    305,000

W. James McNerney, Jr.

   110,000    30,000    140,000    175,000    0    315,000

Nelson Peltz

   110,000       110,000    175,000    0    285,000

Margaret C. Whitman

   110,000       110,000    175,000    0    285,000

Patricia A. Woertz

   110,000    25,000    135,000    175,000    0    310,000

Ernesto Zedillo

   68,444         68,444    175,000    0    243,444

1 Director fees are paid quarterly. Each Director may elect to take these fees in cash, unrestricted stock, RSUs (which vest immediately), or a combination of the three. The RSUs earn dividend equivalents that are subject to the same vesting provision as the underlying RSUs and are accrued in the form of additional RSUs each quarter and credited to each Director’s holdings. Mr. Blake elected to take $105,000 of his fees in unrestricted stock, which had a grant date fair value of $105,146. Ms. Braly elected to take $120,000 of her fees in RSUs, which had a grant date fair value of $120,196. Mr. Chenault retired from the Board on February 13, 2019, and his retainer was prorated accordingly. He elected to take $13,444 of his fees in cash and $55,000 in RSUs, which had a grant date fair value of $55,071. Mr. Cook elected to take $120,000 of his fees in unrestricted stock, which had a grant date fair value of $120,196. Mr. Jimenez elected to take $105,000 of his fees in RSUs, which had a grant date fair value of $105,146. Mr. Lundgren elected to take $125,000 of his fees in RSUs, which had a grant date fair value of $125,254. Mr. McNerney elected to take $135,000 of his fees in unrestricted stock, which had a grant date fair value of $135,063. The remaining Directors took their fees in cash. Dr. Zedillo retired from the Board on February 13, 2019, and his retainer was prorated accordingly.

2 Each year, upon election at the Company’s annual meeting of shareholders, every Director is awarded a $175,000 grant of RSUs. These RSUs vest after one year as long as the Director remains on the Board. Each Director has 2,176 RSUs outstanding (representing the grant on October 9, 2018, and subsequent dividend equivalents).

In addition, Ms. Braly has 4,992 shares of retirement restricted stock outstanding as of June 30, 2019.

3 For all Board meetings throughout the fiscal year, Directors were entitled to bring a guest so long as the Director used the Company aircraft to attend the meeting and the guest’s attendance did not result in any incremental aircraft cost. Directors are also covered under the same insurance policy as all Company employees for accidental death while traveling on Company business (coverage is $750,000 for each Director). The incremental cost to the Company for this benefit is $3,541. In addition, the Company maintains a Charitable Awards Program for current and retired Directors who were participants prior to July 1, 2003. Under this program, at their death, the Company donates $1,000,000 per Director to up to five qualifying charitable organizations selected by each Director. Directors derive no financial benefit from the program because the charitable deductions accrue solely to the Company. The Company funds this contribution from general corporate assets. In FY 2018-19, no payments were made. The Company also made a $500 donation on behalf of each Director to the Children’s Safe Drinking Water Program or to a different charity of their choice. These donations were also funded from general corporate assets, and the Directors derive no financial benefit from these donations because the charitable deductions accrue solely to the Company. In recognition of Kenneth I. Chenault’s service on the Board, at his retirement the Company made a contribution of $10,000 to the Smithsonian’s National Museum of African American History and Culture. As an employee Director, Mr. Taylor did not receive a retainer, fees, or a stock award.

 

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C&LD COMMITTEE REPORT            
          

 

C&LD Committee Report

Compensation Committee Report

The Compensation & Leadership Development Committee of the Board of Directors has reviewed and discussed the following section of this proxy statement entitled “Compensation Discussion & Analysis” with management. Based on this review and discussion, the Committee has recommended to the Board that the section entitled “Compensation Discussion & Analysis,” as it appears on the following pages, be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

Terry J. Lundgren, Chair

Joseph Jimenez

W. James McNerney, Jr.

 

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            COMPENSATION DISCUSSION & ANALYSIS
        

 

Compensation Discussion & Analysis

Introduction

The focus of this discussion and analysis is on the Company’s compensation philosophies and programs for its named executive officers (“NEOs”) for FY 2018-19. Effective July 1, 2019, the Board appointed Mr. Moeller as Chief Operating Officer, in addition to his then-current responsibilities. Also effective July 1, 2019, as part of the organizational redesign, Ms. Ferguson-McHugh was appointed CEO-Family Care and P&G Ventures, and Ms. Tastad was appointed Group President-North America and Chief Sales Officer.

 

 

 

LOGO

 

David S. Taylor

Chairman of the Board,

President and Chief Executive Officer

 

 

LOGO

 

 

Jon R. Moeller

Vice Chairman, Chief
Operating Officer and
Chief Financial Officer

  LOGO  

Mary Lynn Ferguson-McHugh

CEO-Family Care and P&G

Ventures

LOGO

 

 

Deborah P. Majoras

Chief Legal Officer

and Secretary

  LOGO  

Carolyn M. Tastad

Group President-North
America and Chief Sales
Officer

 

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COMPENSATION DISCUSSION & ANALYSIS            
          

 

FY 2018-19 Results—Key Compensation Measures

The Company’s focus for FY 2018-19 was on the execution of four key strategic priorities: extend our margin of competitive superiority across the five consumer touchpoints (product, package, brand communication, retail execution, and value), drive productivity savings to fund investments for growth and enhance our industry leading margins, strengthen our organization structure, and constructively disrupt our industry. The Company met or exceeded its going-in targets for its key compensation measures. This led to above-target payouts in our bonus programs.

 

Key Compensation Measures

  

Original FY 2018-19

Targets1

  

FY 2018-19 

Actuals2

Organic Sales Growth3

   2% to 3%    5%

Core EPS Growth4

   3% to 8%    7%

Adjusted Free Cash Flow Productivity5

   ³90%    105%

1 The targets above reflect the original FY 2018-19 financial guidance provided by the Company on July 31, 2018.

2 FY 2018-19 actuals for Organic Sales Growth, Core EPS Growth and Adjusted Free Cash Flow Productivity were used in the calculation of Year 3 Performance Stock Program results, as further detailed on page 42.

3 Organic Sales Growth is a measure of sales growth excluding the impacts of acquisitions, divestitures, foreign exchange and the impact from the July 1, 2018 adoption of a new accounting standard for “Revenue from Contracts with Customers” from year-over-year comparisons. See Exhibit A for a reconciliation of non-GAAP measures.

4 Core EPS Growth is a measure of the Company’s diluted net earnings per share growth, adjusted for the gain on dissolution of the PGT Healthcare partnership, the Shave Care impairment charge and anti-dilutive impacts in fiscal 2019, the transitional impacts of the U.S. Tax Act and losses on early extinguishment of debt in fiscal 2018 and incremental restructuring charges in both fiscal 2019 and 2018. See Exhibit A for a reconciliation of non-GAAP measures including details on the items being adjusted.

5Adjusted Free Cash Flow Productivity is the ratio of adjusted free cash flow (Operating Cash Flow less Capital Expenditures and the tax payment for the transitional tax related to the U.S. Tax Act) to Net Earnings adjusted for the gain on dissolution of the PGT Healthcare partnership and the Shave Care impairment charge. See Exhibit A for a reconciliation of non-GAAP measures.

 

Organic Sales Growth was 5% and broad based. We grew organic sales in 9 of 10 global categories and all of our 15 largest markets are growing or holding organic sales. Core EPS Growth of 7% was in the upper end of the original target range despite headwinds from foreign exchange, commodities, transportation, and tariffs (which impacted net earnings by approximately -13% or -$1.4 billion, in total).

To address these headwinds, the Company increased pricing to partially recover foreign exchange impacts in key emerging markets and executed price increases in developed markets to help offset higher commodity costs. We also delivered productivity

savings across all elements of cost: cost of goods sold, non-manufacturing overhead, and marketing. For example, the Company delivered $1.0 billion in gross cost of goods savings, spanning materials, manufacturing, and logistics. In total, productivity improvements contributed 260 basis points of operating margin benefit. Finally, we executed some select asset sales.

Adjusted Free Cash Flow Productivity was 105%, ahead of target. These cash results enabled the return of $12.5 billion to shareholders ($7.5 billion in dividends and $5.0 billion in share repurchase).

 

 

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            COMPENSATION DISCUSSION & ANALYSIS
        

 

Executive Compensation Practices

Our executive compensation practices are designed to incent strong performance, support good governance, and mitigate excessive risk-taking.

 

  What We Do:

 

 

Target compensation at the median of an appropriate peer group, with substantial variation based on performance.

 

 

Significant share ownership and equity holding requirements are in place for senior executives.

 

 

Multiple performance metrics under STAR and PSP remove any incentive to focus on a single performance goal to the detriment of other goals.

 

 

Appropriate balance between short-term and long-term compensation discourages short-term risk-taking at the expense of long-term results.

 

 

Double Trigger. Time-based equity awards do not vest solely on account of a change-in-control (requires a qualifying termination following a change-in-control).

 

 

Engagement of an Independent Advisor. Our C&LD Committee engages an independent compensation consultant, who performs no other work for the Company, to advise on executive compensation matters.

 

 

Clawback policy permits the C&LD Committee to recoup certain compensation payments in the event of a significant restatement of financial results for any reason. Additionally, the two most recent stock plans allow recovery of proceeds from stock awards if a participant violates certain plan provisions such as taking actions that may damage the reputation, goodwill, or stability of the Company.

  What We Do Not Do:

 

 

No employment contracts with executives containing special severance payments such as golden parachutes.

 

 

No special executive retirement programs and no severance programs that are specific to executive officers.

 

 

No gross-up payments to cover personal income taxes or excise taxes that pertain to executive or severance benefits.

 

 

No excessive perquisites for executives.

 

 

No hedging or engaging in the following transactions that include shares of Common Stock: pledging, collars, short sales, and other derivative transactions.

 

 

No re-pricing or backdating stock options.

 

 

 

Our Compensation Objectives

Our fundamental and overriding objective is to create value for our shareholders at leadership levels on a consistent long-term basis. To accomplish this goal, the C&LD Committee designs executive compensation programs that:

 

    Emphasize Pay for Performance by aligning incentives with business strategies to reward executives who achieve or exceed Company, business unit, and individual goals, while
   

removing any incentive to focus on a single performance goal to the detriment of others.

 

    Pay Competitively by setting target compensation opportunities to be competitive with other global corporations of similar size, value, and complexity.

 

   

Focus on Long-Term Success by including equity as a cornerstone of our executive pay programs and by using a combination of short-term and long-term incentives to ensure a strong

 

 

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COMPENSATION DISCUSSION & ANALYSIS            
          

 

   

connection between Company performance and actual compensation realized.

The C&LD Committee approaches CEO and overall executive compensation with the same pay principles used to set compensation at all levels of the Company: we pay competitively, we pay for performance and contribution, and we work to ensure we have equitable pay practices across our organization. To that end, the C&LD Committee reviews a broad spectrum of information, including the ratio between the total compensation of the median employee and the total compensation of the CEO (found of page 64 of this proxy). Across the Company, total compensation is benchmarked against an appropriate peer group, using median market pay as the competitive benchmark. Compensation can then can be adjusted based on performance. In setting CEO and executive pay, the C&LD Committee takes into account the executive’s experience in the particular role as well as the performance of the total Company and business units, and also considers individual performance. In setting CEO pay, other factors are considered by the Committee such as the degree of pay alignment with the company’s relative Total Shareholder Return (TSR) rank and the appropriate mix of pay between short- and long-term, fixed and performance-based pay.

Emphasizing Pay for Performance

Our executive compensation program consists of four key components: salary, the Short-Term Achievement

Reward (STAR), and two long-term incentive equity programs – the Performance Stock Program (PSP) and the Long-Term Incentive Program (LTIP). For FY 2018-19, these four components constituted approximately 95% on average of each NEO’s total compensation. The remaining 5% consisted of retirement income and other benefits.

We design our programs so that NEO compensation varies by type (fixed versus performance-based), length of performance period (short-term versus long-term), and form (cash versus equity). We believe that such variation is necessary to: (1) strike the appropriate balance between short- and long-term business goals; (2) encourage appropriate behaviors and discourage excessive risk-taking; and (3) align the interests of the Company’s executives with our shareholders.

While salary is considered a fixed component of compensation, salary progression over time is based on individual performance and the scope of responsibilities of the role. The remaining compensation components vary based on the performance of the individual, the performance of the individual’s business unit, and the performance of the Company as a whole. This mix of components is designed to incentivize both individual accountability and collaboration to build long-term shareholder value. The charts below show the average mix of the four key components of FY 2018-19 NEO compensation based on type, length, and form of compensation.

 

 

 

LOGO    LOGO    LOGO

 

Consistent with our design principles, performance-based programs pay out at 100% when target goals are achieved. Payouts below 100% occur when target goals are not achieved, and payouts above 100% are possible when target goals are exceeded. Over the previous ten years, the average STAR payout for NEOs ranged from a low of 67% of target to a high of 167% of target. Since the inception of PSP in 2010, the final

performance result has ranged from a low of 20% to a high of 123%. For the current year, the average STAR payout for the NEOs was 167% of target, and the PSP performance result for the three years ending June 30, 2019, was 123%. The combined realized pay for STAR and PSP was 161% of target for the NEOs in aggregate. Over the past five years the combined STAR and PSP realized pay for the NEOs was 83% of target. Payouts

 

 

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            COMPENSATION DISCUSSION & ANALYSIS
        

 

under these programs were based on the results achieved as compared to the pre-established performance targets, highlighting the clear link between pay and performance that is the cornerstone of our compensation programs.

Paying Competitively

The C&LD Committee structures executive compensation so that total targeted annual cash and long-term compensation opportunities are competitive with the targets for comparable positions at companies considered to be our peers (“Peer Group”), based on criteria described below. The C&LD Committee sets targets for each element of compensation considering the same elements of compensation paid to those holding similar roles at companies in our Peer Group, focusing on positions with similar management and revenue responsibility. For the CEO’s compensation analysis, the C&LD Committee considers the Company’s revenue, market capitalization, and relative performance compared to our Peer Group.

The Peer Group is objectively determined and consists of global companies that generally meet the following criteria:

 

    have revenue comparable to the Company ($67 billion) and/or market capitalization comparable to the Company (approximately $230 billion as of December 2018);
    Peer Group revenues range from $15 billion to $495 billion with a median of $69 billion; and
    Peer Group market capitalization ranges from $35 billion to $660 billion with a median of $162 billion.

 

    compete with the Company in the marketplace for business and investment capital;

 

    compete with the Company for executive talent; and

 

    have generally similar pay models. We do not compare with companies in the financial services or insurance industries, where the mix of pay elements or program structure is generally materially different from our mix of pay elements and program structure.
 

 

Each year, the C&LD Committee evaluates and, if appropriate, updates the composition of the Peer Group. Changes to the Peer Group are carefully considered and made infrequently to ensure continuity from year to year. For FY 2018-19, the Committee did not make any changes to the Peer Group, which consists of the following companies:

 

3M   Colgate-Palmolive   Home Depot   Merck   Pfizer
AT&T   ExxonMobil   IBM   Microsoft   United Technologies
Boeing   Ford Motor Co.   Johnson & Johnson                       Mondelez                       Verizon Communications        
Chevron   General Electric                       Kimberly-Clark   Nike   Wal-Mart Stores
Coca-Cola   HP Inc.   Lockheed Martin   PepsiCo  

 

While the target total compensation for our NEOs is set considering the size-adjusted median target total compensation within our Peer Group, actual compensation varies depending on the NEO’s responsibility and experience in the particular role, as well as on total Company, business unit, and individual performance. Consistent with our principles to pay for performance and pay competitively, substantial differences may exist among NEOs’ pay.

Focus on Long-Term Success

To reinforce the importance of stock ownership and long-term focus for our most senior executives, including the NEOs, the C&LD Committee established the Executive Share Ownership Program and Equity Holding Requirement.

The Executive Share Ownership Program requires the CEO to own shares of Company stock and/or RSUs (including granted Performance Stock Units (“PSUs”)) valued at a minimum of eight times salary. Mr. Taylor currently holds approximately 23 times salary. All other NEOs must own stock and/or RSUs (including granted PSUs) valued at a minimum of four or five times salary, depending on the NEO’s role. The C&LD Committee annually reviews these holdings, and in 2019 each NEO exceeded these requirements.

The Equity Holding Requirement ensures executives remain focused on sustained shareholder value even after exercising their stock options or receiving shares from RSU settlements or PSU payouts. The equity holding requirement applies when an executive, including an NEO, has not met the ownership requirements of the Executive Share Ownership Program. When the holding requirement applies, the

 

 

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COMPENSATION DISCUSSION & ANALYSIS            
          

 

CEO is required to hold the net shares received from stock option exercises and RSU and PSU settlements for at least three years, and the other NEOs are required to hold net shares received for at least one year. The holding requirement does not apply to unrestricted stock or to STAR awards that executives elect to take as stock options instead of cash.

Elements of Our Compensation Programs

Annual Cash Compensation

The Company’s annual cash compensation consists of salary and STAR. We collect and analyze data from the Peer Group on the total annual cash compensation opportunity (salary plus annual bonus target) for positions comparable to those at the Company. We consider the target median annual cash compensation opportunity for each position within our Peer Group, adjusted for size using a regression analysis of Peer Group revenues, to set a salary range mid-point and a target for STAR, as a percentage of salary (“STAR target”).

SALARY

Mr. Taylor’s annual salary increased 6.25% to $1,700,000 effective January 1, 2019, based on his performance in leading the Company to improved total shareholder return, and competitive market data. The increase was 2% on an annualized basis because this was his first salary adjustment in over three years. The salary for Mr. Moeller increased by 5% to $1,050,000 effective July 1, 2018, reflecting his individual performance in his role as Vice Chair and CFO, which includes responsibility for Information Technology, Global Business Services, and Mergers and Acquisitions. The Committee also increased Ms. Ferguson-McHugh’s salary by 3.5% to $880,000 effective August 1, 2018, based on her performance managing the Family Care and P&G Ventures businesses and market movement. The Committee increased Ms. Majoras’ salary by 3.5% to $890,000

based on her performance as well as market movement, effective February 1, 2019. Finally, the Committee increased the salary for Ms. Tastad by 5.5% to $760,000 effective February 1, 2019, reflecting her strong performance managing the North America business.

STAR ANNUAL BONUS

The STAR program links a substantial portion of each NEO’s annual cash compensation to the Company’s performance for the fiscal year. The program focuses on the achievement of business unit results, but also includes a component that measures the performance of the overall Company. STAR awards are generally paid in cash, but executives can also elect to receive all or part of their awards in stock options or deferred compensation.

The Committee made several changes to the STAR program in its June 2018 meeting that were effective starting with the 2018-19 program. These changes provide a stronger emphasis on business unit results, increase the range of possible outcomes to better match incentive payouts with performance, and also reflect investor feedback:

 

    The range of payouts related to the Company and Business Unit Factors were expanded to 0%-200%, replacing the prior ranges of 70%-130% of target and 50%-150% of target, respectively. Exceptional performance may now result in higher awards, while poor performance could result in a zero payout.
    The formula is now weighted to increase focus on business unit results, with the Business Unit Factor weighted 70% and the Company Factor weighted 30%.
    The formula is now additive rather than multiplicative.
 

 

STAR awards are now calculated using the following formula:

 

 

LOGO

 

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The basis for each element of STAR is:

 

    STAR Target. The C&LD Committee sets STAR targets as a percentage of salary for NEOs using annual bonus benchmarks for similar positions in our Peer Group.
    Business Unit Performance Factor. The CEO, CFO, and CHRO (“STAR Committee”) recommend Business Unit Performance Factors for each business unit, based on a retrospective assessment of the performance of each of the 18 business units against six metrics: organic sales growth, operating profit growth, adjusted free cash flow productivity, value share, operating TSR, and internal controls. This assessment is compared to each business unit’s role in the portfolio, reflecting the different industries in which the Company’s businesses compete and their growth potential. The C&LD Committee then determines the Business Unit Performance Factors based on the STAR Committee’s recommendations. None of the officers on the STAR Committee participates in discussions or recommends their own STAR awards to the C&LD Committee. The Business Unit Performance Factors can range between 0% and 200%. The Business Unit Performance Factor for global business services and corporate functions is the weighted average of all the global business units (“GBU”) and selling and market operations (“SMO”) Business Unit Performance Factors in order to align all organizations with the six metrics.

The Business Unit Performance Factor for NEOs who lead multiple business units is based on a combination, as determined by the STAR Committee, of the results of the business units for which the NEO is ultimately responsible. There are no separate performance goals for the business unit combinations for purposes of compensation.

To better align STAR awards with individual and local performance, the President of each business may differentiate award levels based on the overall performance of lower level divisions, provided the total expenditure does not exceed what was approved by

the STAR committee. This differentiation does not impact NEO compensation.

 

    Total Company Performance Factor. The C&LD Committee sets targets for the Company’s annual Organic Sales Growth and Core EPS Growth as the basis for the Company Performance Factor to encourage a balanced focus on both top-line and bottom-line results and to encourage collaboration among the business units. These targets are typically linked to the external financial guidance provided at the beginning of the fiscal year, and the Core EPS target specifically includes the expected impact of our share repurchase program. The Committee establishes performance targets and a payout scale from 0% to 200% for each measure, with each weighted 50% and added together to produce the Total Company Performance Factor.

While the formula described above is used to calculate potential STAR awards, the C&LD Committee retains the authority to make no STAR award in a given year and the discretion to accept, modify, or reject management’s recommendations for any or all employees, including the NEOs.

FY 2018-19 STAR ANNUAL BONUS

Mr. Taylor’s STAR target remained unchanged from last fiscal year at 200% of salary. The STAR target for Mr. Moeller remained unchanged at 130% of salary. The target for Ms. Ferguson-McHugh remained unchanged at 100% of salary. The STAR target for Ms. Majoras is 110% which reflects higher market practice for Chief Legal Officer. The target for Ms. Tastad is 100%.

At the beginning of FY 2018-19, the C&LD Committee established the Organic Sales Growth target at 2.5% to 3% and the Core EPS Growth target at 5%. These goals were used to establish a payout scale from 0% to 200% of target for each measure with a 100% payout for target performance. Each measure’s results were weighted at 50% and added together to derive the Total Company Performance Factor. Organic Sales Growth and Core EPS Growth were 5% and 7% respectively, resulting in a Total Company Performance Factor of 171%.

 

 

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The C&LD Committee then reviewed the recommendations provided for the 18 Business Unit Performance Factors and, after considering the performance of the total Company and the appropriate combination of Business Unit Performance Factors for each NEO, approved the following STAR awards:

 

FY 2018-19 STAR AWARDS

NEO

  

STAR

Target

($)

 

    

Business Unit
Factor

(70% Weight)
(%)

 

  

Total Company
Factor

(30% Weight)
(%)

 

  

STAR
Award

($)

 

    

STAR

Award

(% of Target)   

 

David Taylor

     3,400,000      154    171      5,409,400      159

Jon R. Moeller

     1,365,000      154    171      2,171,715      159

Mary Lynn Ferguson-McHugh

     880,000      177    171      1,543,300      175

Deborah P. Majoras

     979,000      154    171      1,557,589      159

Carolyn M. Tastad

     760,000      190    171      1,400,680      184

 

In keeping with good governance practices, the NEO members of the STAR Committee (CEO, CFO) did not recommend their own awards. Instead, the C&LD Committee used the weighted average of all Business Unit Performance Factors and the Total Company Performance Factor to determine the awards according to the STAR formula. This resulted in an award of $5,409,400 for Mr. Taylor, and $2,171,715 for Mr. Moeller.

The STAR awards recommended to the C&LD Committee for Ms. Ferguson-McHugh, Ms. Majoras, and Ms. Tastad were computed using the formula described on page 36 of this proxy statement. This resulted in an award of $1,543,300 for Ms. Ferguson-McHugh, an award of $1,557,589 for Ms. Majoras, and an award of $1,400,680 for Ms. Tastad.

Long-Term Incentive Programs

The majority of the NEOs’ compensation is delivered through two long-term incentive programs tied to sustained Company performance: the PSP and the LTIP.

The C&LD Committee uses competitive market data to set total long-term compensation targets considering the median total long-term compensation of comparable positions in the Peer Group, regressed for revenue size.

The CEO recommends NEO grants to the C&LD Committee based on benchmarked long-term compensation targets, adjusted for business results and individual contributions attributable to each NEO, including that individual’s leadership skills and focus on key Diversity & Inclusion initiatives. These recommendations can be up to 50% above or 50% below the benchmarked target for each level and role.

The C&LD Committee retains full authority to accept, modify, or reject these recommendations. In exceptional cases, no grant will be awarded. One half of each NEO’s annual long-term compensation is allocated to PSP through an initial PSU grant as defined below. The other half is an LTIP grant.

PERFORMANCE STOCK PROGRAM (PSP)

The PSP aligns the interests of the NEOs with shareholders by encouraging NEOs to focus on the aspects of the long-term performance of the Company that create shareholder value. In the first year of each three-year performance period, the C&LD Committee grants PSUs to each NEO. The number of PSUs that vest at the end of the performance period will depend on Company results against predetermined performance goals over the three-year period.

For 2018-19, the C&LD Committee made several changes to ensure that awards reflect performance versus external competitive benchmarks, to better align rewards to business results, and to reflect suggestions made by our shareholders, as follows:

 

    Replaced the Organic Sales Growth metric with a Relative Organic Sales Growth metric that compares our sales growth performance to that of our consumer products competitive peer set.
    Added a Relative Total Shareholder Return (R-TSR) modifier comparing our total shareholder return to that of our consumer products competitive peer set. The R-TSR modifier will provide a 125% multiplier for three-year cumulative results in the top quartile of our peer set, and a 75% multiplier for results in the bottom quartile.
 

 

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The C&LD Committee sets targets at the beginning of each performance period for the following categories (“Performance Categories”): Relative Organic Sales Growth weighted 30%; Constant Currency Core Before-Tax Operating Profit Growth weighted 20%; Core EPS Growth weighted 30%; and Adjusted Free Cash Flow Productivity weighted 20%. These measures are balanced financial metrics that the Company has found are the key drivers of Total Shareholder Return.

The Core EPS growth target for year one of the PSP program is typically linked to the external financial guidance provided at the beginning of the fiscal year. The Core EPS targets for years two and three are based on our longer-term expected growth rates. These

targets include the best estimates of the impact of our share repurchase program. The C&LD Committee then assigns a minimum and maximum performance goal for each Performance Category. At the end of the three-year performance period, each Performance Category will have a Performance Factor between 0% and 200%, depending on results achieved in each category. The Performance Factor will be 100% if the business results for the category are at target. Business results falling between the minimum and maximum performance goals are determined via linear interpolation. We believe that using a sliding scale to reward performance, as opposed to “all or nothing” goals, discourages participants from taking unnecessary risks to earn payments under the program.

 

 

To determine the vested PSUs, at the end of each three-year performance period, the C&LD Committee multiplies the initial PSU grant (plus compounded dividend equivalents) by the weighted average of the Performance Factors and the new Relative TSR modifier, which is set at 125% for results in the top quartile of our peer set, and 75% for results in the bottom quartile. The formula is as follows:

 

 

 

LOGO

 

PSUs vest at the earliest of the end of the three-year performance period or when the individual becomes retirement eligible, provided the NEO was an employee on June 30 following the grant date of the PSUs. Final payouts are not determined until the end of the three-year performance period. Upon vesting of their PSUs, NEOs may elect to defer receipt of the shares of Common Stock by choosing to instead receive deferred RSUs.

Note that the Performance Factors for the 2016-2019 PSP Performance Period, which ended on June 30, 2019, are different from the factors described above (see page 42 for details).

LONG-TERM INCENTIVE PROGRAM (LTIP) GRANT

The LTIP grant is the second component of the Company’s long-term incentive compensation for its senior executives. Executives can elect to receive all or

a portion of their LTIP grants in either RSUs or stock options, with the exception of the CEO, whose grant form and amount is solely determined by the C&LD Committee. Stock options do not vest (and therefore are not exercisable) until three years from the date of grant and expire ten years from the date of grant, or earlier in the case of certain termination events. RSUs cliff vest three years after grant date and are delivered, upon vesting, in shares of Common Stock, along with compounded dividend equivalents. In addition, NEOs must be employed on the June 30 following the grant date to retain the awards, even if they are eligible for retirement. These awards focus executives on the long-term success of the Company, and we believe the vesting restrictions enhance retention because employees who voluntarily resign from the Company during the specified vesting periods forfeit their grants.

 

 

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FY 2018-19 LONG-TERM INCENTIVE GRANTS

The following long-term incentive grants were made in FY 2018-19. The actual compensation realized by each NEO will be determined by future Company performance.

 

FY 2018-19 LONG-TERM INCENTIVE GRANTS

     PSP Grant    LTIP Grant    Total    
     PSUs   

Grant Date

Fair Value

   Options    RSUs   

Grant Date

Fair Value

  

Grant Date    

Fair Value    

 

NEO

   (#)    ($)    (#)    (#)    ($)    ($)    

David Taylor

   55,716    6,375,025    230,586    31,698    6,375,101    12,750,126    

Jon R. Moeller

   26,315    3,010,962    160,153    7,638    3,010,882    6,021,844    

Mary Lynn Ferguson-McHugh

   13,475    1,541,810    54,672    7,823    1,541,832    3,083,642    

Deborah P. Majoras

   12,237    1,400,158    49,650    7,104    1,400,164    2,800,322    

Carolyn M. Tastad

   13,227    1,513,433    26,833    11,518    1,513,444    3,026,877    

 

The C&LD Committee approved $12,750,000 in long-term incentive value for Mr. Taylor. In awarding a modest increase in at-risk performance-based pay, the Committee considered Mr. Taylor’s performance in leading the Company to improved total shareholder returns, as well as market data on our peer group CEOs.

The C&LD Committee approved a total long-term incentive award of $6,021,730 for Mr. Moeller. This award reflects the scope of Mr. Moeller’s role as CFO which includes responsibilities that exceed most other Peer Group CFOs, including oversight of the Company’s Global Business Services, Information Technology, and Mergers and Acquisitions.

The Committee approved an award of $3,083,450 for Ms. Ferguson-McHugh based on business results and recognition of her significant contributions to Diversity & Inclusion Company objectives. Ms. Majoras received an award of $2,800,250 to recognize her sustained top performance to the Company as CLO. Finally, the Committee approved an award of $3,026,750 for Ms. Tastad reflecting her business results for the North America business. The award for Ms. Tastad was also reflective of key contributions she made to the Company’s Diversity & Inclusion initiatives.

 

 

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PSP GOAL SETTING

In conjunction with deciding the amount and allocation of the NEOs’ long-term incentive opportunities for FY 2018-19, the C&LD Committee set the PSP Performance Factors listed below for the three-year performance period starting July 1, 2018 through June 30, 2021. Additionally, based on shareholder feedback, the C&LD Committee established a relative TSR multiplier at 75% for three-year TSR results in the bottom quartile of the consumer products competitive peer set, and 125% for results in the top quartile. The delivery of results against these factors will determine the ultimate payout for this portion of compensation.

 

PSP GOALS FOR PERFORMANCE PERIOD JULY 1, 2018–JUNE 30, 2021

   

Organic Sales Growth
Percentile Rank in Peer Group

(30% Weighting)1

  

Constant Currency Core
Before-Tax Operating
Profit Growth

(20% Weighting)2

  

Core EPS Growth

(30% Weighting)3

  

Adjusted Free
Cash Flow Productivity

(20% Weighting)4

       
    

%

Growth

  

Payout

Factor

  

%

Growth

  

Payout

Factor

  

%

Growth

  

Payout

Factor

   %   

Payout

Factor

    
    80th    200%    ³10.7    200%    ³11.3    200%    ³115    200%    
    70th    167%    9.0    167%    9.6    167%    107    167%    
    60th    133%    7.4    133%    8.0    133%    98    133%    
    Target 50th    100%    Target 5.7    100%    Target 6.3    100%    Target 90    100%    
    40th    67%    4.0    67%    4.6    67%    82    67%    
    30th    33%    2.4    33%    3.0    33%    73    33%    
    £20th    0%    £0.7    0%    £1.3    0%    £65    0%    

1 Organic Sales Growth is a measure of sales growth excluding the impacts of acquisitions, divestitures, foreign exchange and (as appropriate) certain other items from year-over-year comparisons, and will be based on the 3-year compound annual growth rate within a peer group of directly competitive consumer product companies. See Exhibit A for a reconciliation of non-GAAP measures.

2 Constant Currency Core Before-Tax Operating Profit Growth is a measure of operating profit growth adjusted to exclude foreign exchange impacts and certain items that are not deemed to be part of the Company’s sustainable results, and will be based on the 3-year compound annual growth rate. See Exhibit A for a reconciliation of non-GAAP measures.

3 Core EPS Growth is a measure of the Company’s diluted net earnings per share growth, adjusted for certain items that are not deemed to be part of the Company’s sustainable results, and will be based on the 3-year compound annual growth rate. See Exhibit A for a reconciliation of non-GAAP measures.

4 Adjusted Free Cash Flow Productivity is the ratio of the 3-year sum of Operating Cash Flow excluding (as appropriate) certain impacts less the 3-year sum of Capital Expenditures to the 3-year sum of Net Earnings excluding (as appropriate) certain charges. See Exhibit A for a reconciliation of non-GAAP measures.

 

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LOOKING BACK: REALIZED PAY FOR PSP PERFORMANCE PERIOD JULY 1, 2016–JUNE 30, 2019

In addition to setting the performance goals for the new PSP cycle, the C&LD Committee reviewed the results for the Performance Period (July 1, 2016 to June 30, 2019), which pays out at the end of FY 2018-19. The C&LD Committee reviewed these results against the goals established at the beginning of that Performance Period to determine the realized pay for each NEO. Note that the measures used in the FY 2016-19 program differ from those used in programs beginning with performance period July 1, 2018 to June 30, 2021 as follows: Organic Sales Growth is not a relative measure based on a percentile rank within a peer group, and the R-TSR modifier is not included.

 

PSP RESULTS FOR JULY 1, 2016–JUNE 30, 2019

Performance Factors

 

  

Target

 

  

Actual

 

  

Weight

 

  

Result

 

Organic Sales Growth1

 

   2.8%

 

   2.8%

 

   30%

 

   100%

 

Constant Currency Core Before-Tax Operating Profit Growth2

 

   4.7%

 

   5.0%

 

   20%

 

   110%

 

Core EPS Growth3

 

   6.0%

 

   7.2%

 

   30%

 

   140%

 

Adjusted Free Cash Flow Productivity4

 

   90%

 

   101%

 

   20%

 

   144%

 

PSP Payout (Average of Performance Factors)

 

                  123%

 

1 Organic Sales Growth is a measure of sales growth excluding the impacts of the India Goods and Services Tax implementation in fiscal 2018, the adoption of a new accounting standard on revenue recognition in fiscal 2019, acquisitions, divestitures, and foreign exchange from year-over-year comparisons.

2 Constant Currency Core Before-Tax Operating Profit Growth is the 3-year compound annual growth rate of Before-Tax Operating Profit, adjusted to exclude foreign exchange impacts, charges for certain European legal matters in fiscal 2016, the charges for Shave Care impairment in fiscal 2019 and incremental restructuring in all periods. See Exhibit A for a reconciliation of non-GAAP measures.

3 Core EPS Growth is the 3-year compound annual growth rate of the Company’s diluted net earnings per share from continuing operations, adjusted for charges for early extinguishment of debt in fiscal 2017 and 2018, the transitional impacts of the U.S. Tax Act in fiscal 2018, the gain on dissolution of the PGT Healthcare partnership, the charges for Shave Care impairment and anti-dilutive impacts in fiscal 2019 and incremental restructuring in all periods. See Exhibit A for a reconciliation of non-GAAP measures.

4 Adjusted Free Cash Flow Productivity is the ratio of the 3-year sum of Operating Cash Flow excluding certain divestiture impacts in fiscal 2017 and tax payments related to the transitional taxes from the U.S. Tax Act in fiscal 2019 less the 3-year sum of Capital Expenditures to the 3-year sum of the Net Earnings excluding the Shave Care impairment charges and the gain on the dissolution of the PGT Healthcare partnership in fiscal 2019, the transitional impact of the U.S. Tax Act in fiscal 2018, the losses on early extinguishment of debt in fiscal 2018 and 2017 and the gain on the sale of the Beauty Brands business in fiscal 2017. See Exhibit A for a reconciliation of non-GAAP measures.

Based on results delivered, the NEOs received PSP payouts at 123% of target, which resulted in the following PSU awards for each NEO.

 

REALIZED PAY FOR PERFORMANCE PERIOD JULY 1, 2016–JUNE 30, 2019

Named Executive Officer

 

  

Initial # of
PSUs Granted
Plus Dividend
Equivalents

 

  

Market Value
of Target Award
@ $109.65/share

 

  

PSP Payout
Factor

 

  

Final # of
PSUs Awarded

 

  

Market Value of    
Final Award    
@ $109.65/share    1

 

David Taylor

 

   70,804

 

   7,763,614

 

   123%

 

   87,089

 

   9,549,309    

 

Jon R. Moeller

 

   31,934

 

   3,501,545

 

   123%

 

   39,279

 

   4,306,942    

 

Mary Lynn Ferguson-McHugh

 

   17,819

 

   1,953,866

 

   123%

 

   21,918

 

   2,403,309    

 

Deborah P. Majoras

 

   16,964

 

   1,860,067

 

   123%

 

   20,866

 

   2,287,957    

 

Carolyn M. Tastad

 

   16,226

 

   1,779,181

 

   123%

 

   19,958

 

   2,188,395    

 

1 The value of PSUs at target and awarded was calculated by multiplying the number of PSUs and accumulated dividend equivalents by the Company stock price as of June 28, 2019. These PSUs will deliver in shares of Common Stock or RSUs (as elected by the participants) in August 2019. The market value of the final award does not include a final payment of dividend equivalents on the PSUs, which will take place on August 15, 2019, prior to delivery in shares.

 

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Special Equity Awards

On occasion, the C&LD Committee makes special equity grants in the form of RSUs to senior executives to encourage retention of the talent necessary to manage the Company successfully or to recognize superior performance. No special equity award was granted to any NEO in FY 2018-19.

Retirement Programs

The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan (“PST”) is the Company’s primary retirement program for U.S.-based employees. The PST is a qualified defined contribution plan providing retirement benefits for full-time U.S. employees, including the NEOs. Under the PST, the Company makes an annual contribution of cash, which is used to purchase Company stock that is credited to each participant’s PST account, upon which dividends are earned. The amount of the stock grant varies based upon individual salaries and years of service.

Some participants in the PST (including the NEOs) do not receive their full contributions due to federal tax limitations. As a result, they participate in the nonqualified PST Restoration Program. These individuals receive RSUs valued at an amount equal to the difference between the contribution made under the PST and what would have otherwise been contributed under the PST but for the tax limitations. Participants are vested in their PST accounts after five years of service, and similarly their PST Restoration RSUs become non-forfeitable after five years of service.

In addition, some individuals who would otherwise participate in the PST are ineligible due to their work locations. As a result, they participate in the nonqualified International Retirement Plan (“IRP”). These individuals receive RSUs valued at an amount equal to the contribution that would have otherwise been contributed under PST had they been eligible to participate in the PST. IRP RSUs also become non-forfeitable after five years of service.

The Supplemental Retirement Income (SRI) Program has been used on rare occasions when recruiting highly experienced new hires. Because the annual PST retirement benefit contribution is calculated based on years of service, SRI is designed to help the Company provide retirement benefits to the experienced new hire at a level similar to those who have spent their careers at the Company. Under the SRI Program, the

Company makes an annual retirement benefit contribution calculated as if the participant had an additional ten years of service in the PST. Participants receive this contribution in the form of RSUs. This contribution continues for 10 years, at which point the contribution is decreased until the combined PST and SRI awards do not exceed the maximum value for the PST in that year. Prior to joining the Company, Ms. Majoras was a highly experienced antitrust lawyer and the former Chair of the Federal Trade Commission. Placing her in the SRI Program so that her retirement benefits would be similar to those provided to career P&G employees helped the Company recruit Ms. Majoras and her essential set of skills and experiences.

The PST, the PST Restoration Program, the IRP, and the SRI Program have created ownership at all levels of the Company. These programs continue to serve the Company and its shareholders well by focusing employees on the long-term success of the business.

For non-U.S.-based employees, individual country plans provide retirement benefits. In addition, employees who work in multiple countries during their careers may also be eligible for supplemental benefits under the Global International Retirement Arrangement (“IRA”). Ms. Tastad participates in both a country plan for Canadian employees and the IRA.

Executive Benefits

The Company provides certain other limited benefits to senior executives to fulfill particular business purposes, which are primarily for convenience and personal security. No changes were made to executive benefits over the past year, and the Company continues to manage executive benefits as a very small percentage (less than 2%) of total compensation for the NEOs during FY 2018-19.

Benefits that safeguard senior executives, such as home security systems, secured workplace parking, and annual physical health examinations, are available to NEOs, as needed. While Company aircraft are generally only used for Company business, for security reasons the CEO is required by the Board to use Company aircraft for all air travel, including personal travel. To increase executive efficiency, in limited circumstances, NEOs may travel to outside board meetings on Company aircraft. In addition, if a Company aircraft flight is already scheduled for business purposes and can accommodate additional passengers, NEOs and their spouses/guests may join these flights for personal travel. To the extent any

 

 

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travel on Company aircraft (e.g. personal/spouse/guest travel) results in imputed income to an NEO, the NEO is responsible for paying the taxes on that income, and the Company does not provide separate gross-up payments based on the NEO’s personal income tax due. We also reimburse NEOs for the cost of some tax preparation and financial counseling to keep NEOs’ attention focused on Company business, and to support accurate personal tax reporting. To remain competitive and retain our top executives, we offer executive group whole life insurance coverage (equal to annual salary rate plus STAR target up to $5,000,000). Also, to further increase executive efficiency, we provide limited local transportation within Cincinnati. The C&LD Committee periodically reviews these arrangements as needed to ensure they meet business needs and remain in line with market practices.

Employment Contracts

The C&LD Committee believes employment contracts for executives are not necessary because our executives have developed a focus on the Company’s long-term success. Moreover, the C&LD Committee does not provide special executive severance payments, such as golden parachutes, to its executives. In the event the Company encourages an NEO, or any other U.S. employee, to terminate employment with the Company (but not for cause), that individual may receive a separation allowance of up to one year’s annual salary, calculated based on years of service.

Other Key Compensation Program Features

This additional information may assist the reader in better understanding the Company’s compensation practices and principles.

Engagement of Independent Advisor

The C&LD Committee renewed its agreement with Frederic W. Cook & Co., to advise on various compensation matters, including Peer Group identification, competitive practices and trends, specific program design, and actions with respect to NEO and principal officer compensation. Prior to the renewal, the C&LD Committee evaluated the independence of Frederic W. Cook & Co., taking into account any relationships with the Company’s directors, officers, and employees in accordance with NYSE listing standards. Based on this evaluation, the C&LD Committee concluded that Frederic W. Cook & Co. is an

independent advisor. Under the terms of its agreement with the C&LD Committee, Frederic W. Cook & Co. is prohibited from conducting any other business for the Company or its management, and the C&LD Committee has direct responsibility for oversight and compensation of the work performed by Frederic W. Cook & Co. The C&LD Committee generally meets with its independent compensation consultant in an Executive Session at regularly scheduled C&LD Committee meetings.

Company management uses a separate compensation consultant, Meridian Compensation Partners, LLC, to provide compensation advice, competitive survey analysis, and other benchmark information related to trends and competitive practices in executive compensation.

Tax Gross-Ups

Generally, the Company does not increase payments to any employees, including NEOs, to cover non-business-related personal income taxes. However, certain expatriate allowances, relocation reimbursements, and tax equalization payments are made to employees assigned to work outside their home countries, and the Company will cover the personal income taxes due on these items in accordance with expatriate policy because there is a business purpose to their relocations. In addition, from time to time, the Company may be required to pay personal income taxes for certain separating executives hired through acquisitions in conjunction with pre-existing contractual obligations.

Governing Plans, Timing, Pricing, and Vesting of Stock-Based Grants

All grants of stock options, PSUs, and/or RSUs made to employees and non-employee Directors after October 14, 2014, are made under The Procter & Gamble 2014 Stock and Incentive Compensation Plan (as amended) (“2014 Plan”). The 2014 Plan was approved by Company shareholders at the 2014 annual shareholder meeting. Previous outstanding grants were made under The Procter & Gamble 1992 Stock and Incentive Compensation Plan (as amended) (“1992 Plan”), The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended) (“2001 Plan”), The Procter & Gamble 2003 Non-Employee Directors’ Plan (“2003 Plan”), and The Procter & Gamble 2009 Stock and Incentive Compensation Plan (as amended) (“2009 Plan”).

 

 

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The 2014 Plan contains a vesting provision commonly known as a “double trigger,” which limits accelerated vesting in the event of a change in control. Time-based awards assumed as part of a change in control would only vest for involuntary terminations of employment for reasons other than cause and for terminations of employment for good reason. Performance awards not assumed as part of a change in control would be paid at the target level.

With the exception of any special equity awards discussed on page 43 of this proxy statement, the Company grants stock, PSUs, RSUs, and stock options on dates that are consistent from year to year. If the C&LD Committee changes a grant date, it is done in advance and only after careful review and discussion. The pre-established grant dates for the programs are as follows: PST Restoration and IRP, first Thursday in August; STAR, last business day on or before September 15; and PSP and LTIP Grants, last business day of February (and, if necessary for corrections, on the last business day on or before May 9).

The Company has never re-priced stock options and is not permitted to do so without prior shareholder approval. The Company does not backdate stock options. We use the closing price of the Common Stock on the date of grant to determine the grant price for executive compensation awards. However, because the PST uses the value of shares based on the average price of common stock for the last five days in June, the grants of RSUs made under the PST Restoration Program, IRP, and SRI follow this same grant price practice.

Mitigation of Excessive Risk-Taking

RECOUPMENT & CLAWBACK

The C&LD Committee’s Senior Executive Officer Recoupment Policy permits the C&LD Committee to recoup or “clawback” certain STAR or long-term incentive program payments made to executives in the event of a significant restatement of financial results for any reason. This authority is in addition to the C&LD Committee’s authority under the 2014 Plan and prior plans to suspend or terminate any outstanding equity if the C&LD Committee determines that the participant violated certain plan provisions. Moreover, the 2014 Plan and 2009 Plan each have a clawback provision that allows the Company or the C&LD Committee to recover certain proceeds from option exercises or delivery of shares if the participant violates certain plan provisions such as

taking actions that are significantly contrary to the best interests of the Company, including actions that cause harm to the Company’s reputation, stability, or goodwill.

PROHIBITION OF USE OF COMPANY STOCK IN DERIVATIVE TRANSACTIONS

The Company’s Global Insider Trading Policy prohibits NEOs from engaging in derivative transactions involving Company stock, including pledging, collars, short sales, hedging investments, and other derivative transactions. Purchases and sales of Company stock by NEOs can only be made during the one-month period following a public earnings announcement or, if outside these window periods, with express permission from the Company’s Legal Division or in accordance with a previously established trading plan that meets SEC requirements.

Deferred Compensation Plan

The Procter & Gamble Company Executive Deferred Compensation Plan (“EDCP”) allows executives to defer receipt of up to 100% of their STAR awards and up to 75% of their annual salary. Executives may also elect to convert a portion of their PST Restoration RSUs into notional cash with investment choices that mirror those available to all U.S. employees who participate in the Company’s 401(k) plan. No above-market or preferential interest is credited on deferred compensation, as those terms are defined by the SEC.

Tax Treatment of Certain Compensation

Section 162(m) of the Internal Revenue Code limits the deductibility of executive compensation paid to certain NEOs to $1,000,000 per year. Prior to the passage of the Tax Cut and Jobs Act of 2017 (“TCJA”), the limitation did not apply to certain performance-based compensation. Stock options awarded under LTIP, as well as awards granted under the STAR and PSP programs, were intended to satisfy the performance-based requirements for deductible compensation pursuant to Section 162(m). The C&LD Committee, however, reserved the discretion to authorize payment of compensation that might not be deductible if it believed the payment of such compensation was in the best interests of the Company and its shareholders.

The TCJA repealed the performance-based compensation exemption, effective for taxable years

 

 

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beginning January 1, 2018, and expanded the definition of covered employees whose compensation is subject to the annual $1 million deduction limitation to cover compensation paid to the CFO plus any individual who has previously been a covered employee, even if the individual no longer holds the position. The law provides limited transition relief for certain employment arrangements in place as of November 2, 2017. Due to the uncertainty of the application of Section 162(m) as a result of the TCJA, there is no assurance that historical compensation intended to satisfy the performance-based requirements for exemption will be deductible in future years. New compensation awarded to NEOs in excess of $1 million starting in 2018 and later will generally no longer be deductible even if performance-based.

Although this tax deduction is no longer available, the C&LD Committee intends to continue to use performance metrics in compensation because it believes aligning NEO incentives with Company performance is essential to creating long-term value for our shareholders.

Executive Compensation Changes for FY 2019-20

At its June 11, 2019, meeting, the C&LD Committee updated the pay structure for the principal officers to align with the new organization structure effective July 1, 2019. Based on the expanded scope of Mr. Moeller’s role, which now includes additional responsibility as Chief Operating Officer, he received a salary increase of 9.5% taking his annual salary to $1,150,000, and an increase in STAR target from 130% to 140%, both effective July 1, 2019. Mary Lynn Ferguson-McHugh received a 3.4% increase in salary to $910,000 effective July 1, 2019, reflecting market movement and performance managing her businesses.

At the August 13, 2019, meeting, the Committee agreed to review principal officer salary decisions annually in the August meeting, effective with the 2019-20 fiscal year. Future salary adjustments will be made effective September 1 of each respective year. This change better aligns fiscal year-end business results with the compensation decisions for the executive officers. In this review, Ms. Majoras received a 2.2% salary increase, moving her salary to $910,000 effective September 1, 2019. Ms. Tastad received an increase of 5.3%, resulting in a salary of $800,000 effective September 1, 2019.

 

 

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Executive Compensation

The following tables, footnotes, and narratives provide information regarding the compensation, benefits, and equity holdings in the Company for the NEOs.

Summary Compensation

The following table and footnotes provide information regarding the compensation of the NEOs, for the fiscal years shown.

 

FY 2018–19 SUMMARY COMPENSATION TABLE

Name and

Principal Position

 

 

Year

 

 

Salary
($)

 

 

Bonus1
($)

 

 

Stock
Awards2
($)

 

 

Option
Awards3
($)

 

 

Non-
Equity

Incentive

Plan

Compen-

sation

($)

 

 

Change in
Pension
Value and
Non-

qualified
Deferred
Compen-
sation
Earnings4
($)

 

 

All
Other
Compen-
sation5
($)

 

 

Total

($)

 

 

David Taylor

                 

Chairman of the

  2018–19   1,650,000   5,409,400   9,768,118   3,251,263   0   0   420,031   20,498,812

Board, President

  2017–18   1,600,000   2,736,000   9,642,358   3,125,011   0   0   250,887   17,354,256

and Chief Executive
Officer

  2016–17   1,600,000   4,080,384   9,226,929   3,000,001   0   0   188,863   18,096,177

Jon R. Moeller

  2018–19   1,050,000   2,171,715   3,911,517   2,258,157   0   0   85,939   9,477,328

Vice Chairman and

  2017–18   1,000,000   1,111,500   3,637,453   2,100,126   0   0   110,277   7,959,356

Chief Financial Officer

  2016–17   950,000   1,453,637   3,520,417   2,029,563   0   0   75,184   8,028,801

Mary Lynn

                 

Ferguson-McHugh

                 

Group President—

  2018–19   877,500   1,543,300   2,429,675   770,875   0   0   75,741   5,697,091

Global Family Care
and P&G Ventures

  2017–18
2016–17
  847,500
817,500
  698,062
1,409,974
  2,550,837
2,370,115
  813,390
755,001
  0
0
  0

0

  67,867
80,329
  4,977,656
5,432,919

Deborah P. Majoras

                 

Chief Legal Officer and

Secretary

  2018–19   872,500   1,557,589   2,207,352   700,065   0   0   90,516   5,428,022

Carolyn M. Tastad

                 

Group President—

  2018–19   736,667   1,400,680   2,734,909   378,345   0   657,000   80,954   5,988,555

North America Selling and

Market Operations

                                   

1 For FY 2018-19, Bonus reflects FY 2018-19 STAR awards that will be paid on September 13, 2019. Each NEO who participated in STAR could elect to take his or her STAR award in cash, deferred compensation, or stock options. For FY 2018-19, Mr. Taylor chose to take his STAR award as 25% stock options, 70% cash, and 5% deferred compensation. Ms. Tastad chose to take her award as stock options. Ms. Ferguson-McHugh, Ms. Majoras, and Mr. Moeller took their awards in cash.

2 For FY 2018-19, Stock Awards include the grant date fair value of any PST Restoration Program and Supplemental Retirement Income Program awards and the PSUs granted in February 2019 under the PSP. It also includes the grant date fair value of RSUs granted in February 2019 under the LTIP Stock Grant. The amount shown is determined in accordance with FASB ASC Topic 718. For more information regarding these awards, including retention and vesting requirements and applicable performance measures, see pages 37-42 of the Compensation Discussion & Analysis.

3 Option Awards for FY 2018-19 include the grant date fair value of each LTIP Stock Grant, determined in accordance with FASB ASC Topic 718.

 

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We utilize an industry standard lattice-based valuation model to calculate the fair value for stock options granted. Assumptions utilized in the model, which are evaluated and revised to reflect market conditions and experience, were as follows:

 

Years ended June 30:

    

2019

    

2018

    

2017

Interest rate

    

2.5–2.7%

    

1.9–2.9%

    

0.8–2.6%

Weighted average interest rate

    

2.6%

    

2.8%

    

2.6%

Dividend yield

    

3.0%

    

3.1%

    

3.2%

Expected volatility

    

17%

    

18%

    

15%

Expected life in years

    

9.2

    

9.2

    

9.6

Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatility is based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. For information on the valuation assumptions with respect to grants made in prior fiscal years, please see the corresponding note to the Consolidated Financial Statements contained in the Company’s Annual Report for the respective fiscal year. For more information regarding these awards, including retention and vesting requirements and applicable performance measures, see page 39 of the Compensation Discussion & Analysis.

4 This column reflects aggregate changes in the actuarial present value of Ms. Tastad’s pension benefits under The Procter & Gamble Company Global IRA and The Procter & Gamble Company Canada Plan. None of the other NEOs has a pension plan. None of the NEOs had above-market earnings on deferred compensation.

5 Please see the table below for information on the numbers that comprise the All Other Compensation column.

 

ALL OTHER COMPENSATION

Name and

Principal Position

  Year  

Retirement
Plan
Contributionsi

($)

  Executive
Group Life
Insuranceii
($)
  Flexible
Compensation
Program
Contributionsiii
($)
  Expatriate,
Relocation
and Tax
Equalization
Paymentsiv
($)
  Executive
Benefitsv
($)
 

Totalvi

($)

 

David Taylor

             

Chairman of the

  2018–19   55,555   13,776   5,450   0   345,250   420,031

Board, President

  2017–18   54,157   9,384   5,350   0   181,996   250,887

and Chief Executive
Officer

  2016–17   52,648   5,177   5,300   0   125,738   188,863

Jon R. Moeller

  2018–19   55,555   9,314   5,450   0   15,620   85,939

Vice Chairman and

  2017–18   54,157   7,710   5,350   0   43,060   110,277

Chief Financial Officer

  2016–17   52,648   6,281   5,300   0   10,955   75,184

Mary Lynn

             

Ferguson-McHugh

             

Group President—

  2018–19   55,555   4,507   5,450   0   10,229   75,741

Global Family Care
and P&G Ventures

  2017–18
2016–17
  54,157
52,648
  3,025
1,741
  5,350
5,300
  0
1,187
  5,335
19,453
  67,867
80,329

Deborah P. Majoras

             

Chief Legal Officer and

Secretary

 

  2018–19   79,750   7,353   3,413   0   0   90,516

 

Carolyn M. Tastad

             

Group President—

North America Selling and

Market Operations

 

  2018–19   55,555   7,759   5,450   0   12,190   80,954

i Amounts contributed by the Company pursuant to the PST, a qualified defined contribution plan providing retirement benefits for U.S.-based employees. NEOs also receive contributions in the form of RSU grants pursuant to the PST Restoration

 

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Program, a nonqualified defined contribution plan. Ms. Majoras also received retirement benefit contributions in the form of RSU grants pursuant to the Supplemental Retirement Income Program, a nonqualified defined contribution plan. These RSU awards are included in the Stock Awards column of the Summary Compensation Table.

ii Under the Executive Group Life Insurance Program (“EGLIP”), the Company offers key executives who have substantially contributed to the success and development of the business, and upon whom the future of the Company chiefly depends, life insurance coverage equal to salary plus their STAR target up to a maximum of $5,000,000. These policies are owned by the Company. Because premium payments are returned to the Company when the benefit is paid out, we believe the annual premiums paid by the Company overstate the Company’s true cost of providing this life insurance benefit. Accordingly, the amounts shown in the table are an average based on Internal Revenue Service tables used to value the term cost of such coverage for calendar year 2018 and calendar year 2019, which reflect what it would cost the executive to obtain the same coverage in a term life insurance policy. The average of the two calendar years was used because fiscal year data is not available. The average of the dollar value of the premiums actually paid by the Company in calendar years 2018 and 2019 under these policies were as follows: Mr. Taylor, $73,786, Mr. Moeller, $83,145, Ms. Ferguson-McHugh, $79,542, Ms. Majoras, $59,931, and Ms. Tastad, $67,842 . This program is in addition to any other Company-provided group life insurance in which an NEO may enroll that is also available to all employees on the same basis.

iii Flexible Compensation Program Contributions are given in the form of credits to pay for coverage in a number of benefit plans including, but not limited to, medical insurance and additional life insurance. Employees may also receive unused credits as cash. Credits are earned based on PST years of service.

iv The Company provides assistance to certain employees, including NEOs, related to expenses incurred in connection with expatriate assignments and Company-required relocations. The Company did not pay any such assistance to the NEOs in FY 2018-19.

v In addition, all NEOs are entitled to the following personal benefits: financial counseling (including tax preparation), an annual physical examination, occasional use of a Company car, secure workplace parking, and home security and monitoring. The costs associated with Mr. Taylor’s use of a Company car were $23,228. The costs associated with home security and monitoring for Mr. Taylor were $54,384. While Company aircraft is generally used for Company business only, the CEO is required to use Company aircraft for all air travel, including travel to outside board meetings and personal travel, pursuant to the Company’s executive security program established by the Board of Directors. While traveling on Company aircraft, the CEO and Chairman of the Board may bring a limited number of guests (spouse, family member, or similar guest) to accompany him. The aggregate incremental aircraft usage costs associated with Mr. Taylor’s personal use of the Company aircraft during FY 2018-19 were $261,820. Mr. Moeller, Ms. Ferguson-McHugh, Ms. Majoras, and Ms. Tastad are permitted to use the Company aircraft for travel to outside board meetings and, if the Company aircraft is already scheduled for business purposes and can accommodate additional passengers, may use it for personal travel and guest accompaniment. The aggregate incremental aircraft usage costs associated with Mr. Moeller’s personal use of the Company aircraft were $5,320 and for Ms. Tastad were $2,040. None of the other NEOs used the Company aircraft for these purposes in FY 2018-19. The incremental costs to the Company for these benefits, other than use of Company aircraft, are the actual costs or charges incurred by the Company for the benefits. The incremental cost to the Company for use of the Company aircraft is calculated by using an hourly rate for each flight hour. The hourly rate is based on the variable operational costs of each flight, including fuel, maintenance, flight crew travel expense, catering, communications and fees, including flight planning, ground handling and landing permits. For any flights that involved mixed personal and business usage, any personal usage hours that exceed the business usage are utilized to determine the incremental cost to the Company.

vi This total does not reflect a charitable donation of $10,000 made by the Company to the Children’s Safe Drinking Water Program on behalf of the Company’s Global Leadership Council, of which each NEO is a member. This donation was funded from general corporate assets, and the NEOs derived no financial benefits from this donation because this charitable deduction accrues solely to the Company.

 

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Grants of Plan-Based Awards

The following table and footnotes provide information regarding grants of equity under Company plans made to the NEOs during FY 2018-19.

 

GRANTS OF PLAN-BASED AWARDS

 

Name/Plan

 

Grant
Date1

 

Compensation

& Leadership

Development

Committee

Action Date

 

 

Estimated Future

Payouts Under

Equity Incentive Plan Awards

   

All
Other
Stock
Awards:

Number
of

Shares
or

Stock
Units

(#)

   

All

Other
Option
Awards:
Number

of

Securities

Underlying

Options

(#)

   

Exercise
or Base
Price

of

Option

Awards2

($ per

share)

   

Grant

Date

Fair

Value

of

Stock

and

Option

Awards3

($)

 
 

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

 

David Taylor

                                                               

LTIP Options4

  02/28/2019   02/12/2019                                     230,586       98.55       3,251,263  

LTIP RSUs5

  02/28/2019   02/12/2019                             31,698                       3,123,838  

PSUs6

  02/28/2019   02/12/2019     0       55,716       111,432                               6,375,025  

PST Restoration RSUs7

  08/02/2018   06/12/2018                             3,457                       269,255  

STAR Stock Options8

  09/14/2018   08/14/2018                                     143,748       83.61       1,641,602  

Jon R. Moeller

                                                               

LTIP Options4

  02/28/2019   02/12/2019                                     160,153       98.55       2,258,157  

LTIP RSUs5

  02/28/2019   02/12/2019                             7,638                       752,725  

PSUs6

  02/28/2019   02/12/2019     0       26,315       52,630                               3,010,962  

PST Restoration RSUs7

  08/02/2018   06/12/2018                             1,898                       147,830  

Mary Lynn Ferguson-McHugh

                                                           

LTIP Options4

  02/28/2019   02/12/2019                                     54,672       98.55       770,875  

LTIP RSUs5

  02/28/2019   02/12/2019                             7,823                       770,957  

PSUs6

  02/28/2019   02/12/2019     0       13,475       26,950                               1,541,810  

PST Restoration RSUs7

  08/02/2018   06/12/2018                             1,501                       116,908  

Deborah P. Majoras

                                                               

LTIP Options4

  02/28/2019   02/12/2019                                     49,650       98.55       700,065  

LTIP RSUs5

  02/28/2019   02/12/2019                             7,104                       700,099  

PSUs6

  02/28/2019   02/12/2019     0       12,237       24,474                               1,400,158  

SRI RSUs9

  08/02/2018   06/12/2018                             623                       48,524  

PST Restoration RSUs7

  08/02/2018   06/12/2018                             752                       58,571  

Carolyn M. Tastad

                                                               

LTIP Options4

  02/28/2019   02/12/2019                                     26,833       98.55       378,345  

LTIP RSUs5

  02/28/2019   02/12/2019                             11,518                       1,135,099  

PSUs6

  02/28/2019   02/12/2019     0       13,227       26,454                               1,513,433  

PST Restoration RSUs7

  08/02/2018   06/12/2018                             1,109                       86,377  

STAR Stock Options8

  09/14/2018   08/14/2018                                     48,232       83.61       550,809  

1 Grant dates for equity awards are consistent from year to year, as described on page 45 of this proxy statement.

2 The options granted were awarded using the closing price of the Company stock on the date of the grant.

3 This column reflects the grant date fair value of each award computed in accordance with FASB ASC Topic 718. For stock awards, the actual amount paid will be based on the stock price on the delivery date. For options, the actual amount paid will be determined by multiplying the number of shares acquired by the difference between the market price of the Company’s common stock upon exercise and the grant price of the options.

4 These options are forfeitable until the later of retirement eligibility or June 30th after the grant date, and will become exercisable on February 28, 2022, and expire on February 28, 2029.

 

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5 These units are forfeitable until the later of retirement eligibility or June 30th after the grant date, and will deliver in shares on February 28, 2022. These units accumulate dividend equivalents at the same rate as dividends paid on common stock.

6 For awards granted under the Performance Stock Program, see page 41 of the Compensation Discussion & Analysis for applicable performance measures. These units are forfeitable until the later of retirement eligibility or June 30th after the grant date, and will deliver in shares in August 2021 unless elected otherwise by the NEO, subject to applicable tax rules and regulations. These units accumulate dividend equivalents at the same rate as dividends paid on common stock.

7 For awards granted under the PST Restoration Program, dividend equivalents are earned at the same rate as dividends paid on common stock. These units will deliver in shares one year following retirement unless elected otherwise by the NEO, subject to applicable tax rules and regulations.

8 These options are nonforfeitable, and will become exercisable on September 15, 2021, and expire on September 15, 2028.

9 For awards granted under the SRI Program, dividend equivalents are earned at the same rate as dividends paid on common stock. These units will deliver in shares one year following retirement unless elected otherwise by the NEO, subject to applicable tax rules and regulations.

 

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Outstanding Equity at Fiscal Year End

The following table and footnotes provide information regarding unexercised stock options and stock awards that have not yet vested as of the end of FY 2018-19.

 

OUTSTANDING EQUITY AT FISCAL YEAR-END

       

                       Option Awards                      

 

                   Stock Awards                  

Name/Plan

  Grant
Date
  Number of
Securities
Underlying
Unexercised
Options
Exercisable1
(#)
  Number of
Securities
Underlying
Unexercised
Options
Unexercisable1
(#)
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Number
of
Shares
or Units
of Stock
that
Have
Not
Vested2
(#)
  Market
Value of
Shares or
Units of
Stock
that
Have Not
Vested3
($)
 

Equity

Incentive

Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
that
Have Not
Vested2
(#)

 

Equity

Incentive

Plan
Awards:
Market
Value of
Unearned
Shares,
Units or
Other
Rights
that
Have Not
Vested3
($)

 

David Taylor

 

                               

 

Key Manager

 

 

 

02/28/2013

 

 

 

108,297

 

     

 

76.1800

 

 

 

02/28/2023

 

               

 

STAR

 

 

 

09/13/2013

 

 

 

74,520

 

     

 

79.0500

 

 

 

09/13/2023

 

               

 

Key Manager

 

 

 

02/28/2014

 

 

 

116,960

 

     

 

78.6600

 

 

 

02/28/2024

 

               

 

STAR

 

 

 

09/15/2014

 

 

 

65,054

 

     

 

83.8700

 

 

 

09/15/2024

 

               

 

Key Manager

 

 

 

02/27/2015

 

 

 

176,202

 

     

 

85.1300

 

 

 

02/27/2025

 

               

 

STAR

 

 

 

09/15/2015

 

 

 

68,275

 

     

 

69.4500

 

 

 

09/15/2025

 

               

 

Key Manager

 

 

 

02/29/2016

 

 

 

205,095

 

     

 

80.2900

 

 

 

02/27/2026

 

               

 

STAR

 

 

 

09/15/2016

 

     

 

126,874

 

 

 

88.0600

 

 

 

09/15/2026

 

               

 

LTIP

 

 

 

02/28/2017

 

     

 

280,899

 

 

 

91.0700

 

 

 

02/26/2027

 

               

 

STAR

 

 

 

09/15/2017

 

     

 

315,392

 

 

 

93.2700

 

 

 

09/15/2027

 

               

 

LTIP

 

 

 

02/28/2018

 

     

 

252,017

 

 

 

78.5200

 

 

 

02/28/2028

 

               

 

PSP

 

 

 

02/28/2018

 

                         

 

82,881

 

 

 

9,088,011

 

STAR

 

09/14/2018

     

143,748

 

83.6100

 

09/14/2028

               

LTIP

 

02/28/2019

     

230,586

 

98.5500

 

02/28/2029

               

PSP

 

02/28/2019

                         

56,107

 

6,152,242

Jon R. Moeller

                               

Key Manager

 

02/29/2012

 

122,187

     

67.5200

 

02/28/2022

               

Key Manager

 

02/28/2013

 

127,987

     

76.1800

 

02/28/2023

               

Key Manager

 

02/28/2014

 

130,626

     

78.6600

 

02/28/2024

               

Key Manager

 

02/27/2015

 

132,151

     

85.1300

 

02/27/2025

               

Key Manager

 

02/29/2016

 

150,393

     

80.2900

 

02/27/2026

               

LTIP

 

02/28/2017

     

190,034

 

91.0700

 

02/26/2027

               

LTIP

 

02/28/2018

     

169,365

 

78.5200

 

02/28/2028

               

PSP

 

02/28/2018

                         

37,133

 

4,071,633

LTIP

 

02/28/2019

     

160,153

 

98.5500

 

02/28/2029

               

PSP

 

02/28/2019

                         

26,500

 

2,905,725

Mary Lynn Ferguson-McHugh

                           

Key Manager

 

02/29/2012

 

37,027

     

67.5200

 

02/28/2022

               

Key Manager

 

02/28/2013

 

39,381

     

76.1800

 

02/28/2023

               

Key Manager

 

02/28/2014

 

49,899

     

78.6600

 

02/28/2024

               

Special Award

 

11/03/2014

                 

5,723

 

627,527

       

Key Manager

 

02/27/2015

 

48,162

     

85.1300

 

02/27/2025

               

Key Manager

 

02/29/2016

 

54,802

     

80.2900

 

02/27/2026

               

LTIP

 

02/28/2017

     

70,693

 

91.0700

 

02/26/2027

               

LTIP

 

02/28/2018

     

65,596

 

78.5200

 

02/28/2028

               

PSP

 

02/28/2018

                         

21,573

 

2,365,479

LTIP

 

02/28/2019

     

54,672

 

98.5500

 

02/28/2029

               

PSP

 

02/28/2019

                         

13,570

 

1,487,951

 

52  The Procter & Gamble Company            
          


Table of Contents
            EXECUTIVE COMPENSATION
        

 

OUTSTANDING EQUITY AT FISCAL YEAR-END

       

                       Option Awards                      

 

                   Stock Awards                  

Name/Plan

  Grant
Date
  Number of
Securities
Underlying
Unexercised
Options
Exercisable1
(#)
  Number of
Securities
Underlying
Unexercised
Options
Unexercisable1
(#)
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Number
of
Shares
or Units
of Stock
that
Have
Not
Vested2
(#)
  Market
Value of
Shares or
Units of
Stock
that
Have Not
Vested3
($)
 

Equity

Incentive

Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
that
Have Not
Vested2
(#)

 

Equity

Incentive

Plan
Awards:
Market
Value of
Unearned
Shares,
Units or
Other
Rights
that
Have Not
Vested3
($)

Deborah P. Majoras

                               

Key Manager

 

02/29/2012

 

88,863

     

67.5200

 

02/28/2022

               

Key Manager

 

02/28/2013

 

95,170

     

76.1800

 

02/28/2023

               

Key Manager

 

02/28/2014

 

45,131

     

78.6600

 

02/28/2024

               

STAR

 

09/15/2014

 

20,964

     

83.8700

 

09/15/2024

               

Key Manager

 

02/27/2015

 

50,218

     

85.1300

 

02/27/2025

               

STAR

 

09/15/2015

 

24,075

     

69.4500

 

09/15/2025

               

Key Manager

 

02/29/2016

 

55,113

     

80.2900

 

02/27/2026

               

STAR

 

09/15/2016

     

26,736

 

88.0600

 

09/15/2026

               

LTIP

 

02/28/2017

     

67,299

 

91.0700

 

02/26/2027

               

STAR

 

09/15/2017

     

56,241

 

93.2700

 

09/15/2027

               

LTIP

 

02/28/2018

     

58,500

 

78.5200

 

02/28/2028

               

PSP

 

02/28/2018

                         

19,239

 

2,109,666

LTIP

 

02/28/2019

     

49,650

 

98.5500

 

02/28/2029

               

PSP

 

02/28/2019

                         

12,323

 

1,351,217

Carloyn M. Tastad

                               

STAR

 

09/13/2013

 

8,145

     

79.0500

 

09/13/2023

               

Key Manager

 

02/28/2014

 

29,240