There's been a change at the top of Proctor & Gamble (PG). Sort of. This morning the company announced the immediate departure of CEO Bob McDonald. McDonald has been under pressure from activist investor Bill Ackman making the "retirement" somewhat predictable. The wrinkle is that McDonald will be replaced by his predecessor A.G. Lafley who returns from retirement four years after leaving the company.
P&G's move is the second time in as many months that a floundering corporation has gone back to the future by bringing back a departed CEO. Last month J.C. Penney (JCP) did much the same thing when it brought back Myron "Mike" Ullman just 17 months after firing him in favor of Ron Johnson.
The week also saw JPMorgan (JPM) CEO and Chairman Jamie Dimon win a shareholder vote of approval allowing him to keep both titles. Taken as a whole it's hard not to see P&G's move in the context of a larger bifurcation of corporate America. On one side are younger, more innovative companies seeking change through youth movements; on the other are more traditional retreats back to an older world where elderly white males exert dictatorial power and radical change is frowned upon if not rejected out of hand.
Call it the rise of the Zombie CEOs.
As my Breakout co-Host Matt Nesto points out, McDonald has hardly been an unmitigated failure at P&G. The stock has seen strong gains over the last 52 weeks and is up nearly 20% year-to-date. "It's not like it's been lagging, they just did a big acquisition, things are moving, they've acknowledged some mistakes in their growth areas; it's a big company."
All three moves are a function of risk aversion. In prosperous times there's an unwillingness to make radical moves even when a situation calls for change. Lafley, Dimon, and Ullman are all more than capable but decidedly old school. Three years ago tradition was crumbling all around the world, and upheaval was welcome and needed.
Now that the markets have risen in a general way and the economy is inching back, "tradition," predominately white, male, and elderly though it may be, is more highly valued. When the tide is rising, no detergent pun intended, innovation is more difficult. Don't rock the boat, make waves, or any other nautical metaphor of change you may choose is the preferred strategy in prosperous times.
Unfortunately, comfort with the past and present doesn't lead to a prosperous future. There's a reason J.C. Penney paid Johnson $55 million to oust Ullman. Lafley and Dimon are first ballot Hall of Fame CEO's, but P&G wasn't setting the the world on fire when Lafley left and the financial crisis illustrated a fatal lack of checks and balances in financial institutions.
P&G is up today, JPM is near all time highs, and JCP has rallied huge since Johnson got the boot. That's great in the now and fantastic for shorter-term investors. For the true "buy and hold" share owners; however, clinging to the old executives and way of doing business is ultimately fatal.
For those playing the game for the long-haul, embracing change is the winning strategy; especially when times are good.
- Jamie Dimon