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:
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.
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.
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
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.
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.