Comments From The Procter & Gamble Company




The Procter & Gamble Company (“P&G” or the “Company”) responds to express its strong disagreement with the June 2006 report by The Corporate Library entitled “The Opportunistic Timing of CEO Stock Option Awards” for the following reasons:


  • P&G does not time option grants to advantage recipients.  Specific grant dates are pre-determined a year in advance based on established guidelines.  The current grant date for the annual stock option award is the last business day of February.  The current grant date for P&G’s annual bonus program, in which employees can opt for stock options instead of cash, is the last business day before September 16.  P&G’s grant dates are pre-set and pre-approved, contrary to the suggestion from your report that the timing is somehow opportunistic.


  • P&G’s grants currently have a mandatory vesting period of three years before any option becomes exercisable.  Even once exercisable, the Company’s top executives must hold for one additional year net shares received from stock option exercises, with only very limited exceptions for awards payable in cash or unrestricted securities but taken as options.  The Company’s Chief Executive is subject to a two-year holding period, which has been in effect since June 2004.  In light of this delayed period, the timing of a news release within 30 days of an option grant can hardly be said to benefit executives who cannot possibly enjoy the grant proceeds until several years later.


  • P&G’s disclosure practices are unrelated to the timing of its option grants.  Given the frequency of the Company’s routine earnings and other announcements, there is little opportunity to meet the buffer between corporate disclosures and option grants proposed by The Corporate Library.  In many cases, the timing of the Company's disclosures is required by law or listing standard, so there is no possibility to accelerate, defer, or skip the release.  And where the disclosure is voluntary, P&G does not think that shareholder interests would be served by suppressing or delaying the release of corporate information simply to create an arbitrary buffer around pre-set grant dates.


  • The data points in the June 2006 report were selective and insufficient to show meaningful trends.  A broader analysis would have revealed the consistency of P&G’s grant dates and demonstrated how its disclosure practices are not designed to benefit grant participants. 


  • The Company’s Board of Directors takes its governance responsibilities very seriously, and P&G’s practice of granting stock options is a central element of its properly regulated, competitively benchmarked compensation programs.  They are designed to—and do—deliver year-to-year and long-term increases in shareholder value.  Indeed, the vast majority of compensation for P&G executives is at-risk, vests over time, and is tied directly to the Company’s long-term success.


Had you contacted the companies featured in your report before publishing it, P&G could have provided you with this and other important information concerning its rigorous and disciplined process for issuing stock options.  P&G requests that you consider this in the future.