Procter & Gamble's CEO Hosts 2013 Annual Meeting of Shareholders Conference (Transcript)

Oct. 8.13 | About: The Procter (PG)

Procter & Gamble Co. (NYSE:PG)

2013 Annual Meeting of Shareholders Conference

October 8, 2013, 9:00 AM ET

Executives

A.G. Lafley - Chairman of the Board, President and Chief Executive Officer

Jon Moeller - Chief Financial Officer

Debbie Majoras - Chief Legal Officer and Secretary

Analysts

Operator

Good morning, ladies and gentlemen. Welcome to the 2013 P&G Annual Shareholders Meeting. Please take a moment and turn off all cell phones, while the meeting is in session. Now, please stand for the national anthem, sung by the Fairview-Clifton German Language School Choir.

A.G. Lafley

Good morning, ladies and gentlemen, and welcome to the 2013 P&G Annual Shareholders Meeting. I am A.G. Lafley, Chairman of the Board, President and Chief Executive of The Procter & Gamble Company. And I would like to welcome everyone to our Annual Meeting of Shareholders this morning.

I would also like to welcome all of our shareholders, who are listening to this meeting via the Internet. This meeting is now called to order. Notice of the meeting was sent to each shareholder of record and a quorum is present in person or by proxy.

Now, I'd like to get started with introductions. Here with me on stage is Jon Moeller, our Chief Financial Officer; and Debbie Majoras, our Chief Legal Officer and Secretary.

I would now like to introduce the members of our board. Would each of you please stand as I introduce you? Angela Braly, former Chair of the Board, President and Chief Executive Officer of WellPoint Inc.; Ken Chenault, Chairman and Chief Executive Officer of the American Express Company; Scott Cook, Chairman of the Executive Committee of the Board of Intuit Inc. Scott is the Chair of the Innovation and Technology Committee. Sue Desmond-Hellmann, Chancellor; and Arthur and Toni Rembe, Rock Distinguished Professor, University of California, San Francisco; Terry Lundgren, Chairman, President and Chief Executive Officer of Macy's, Inc. Terry joined the Board on January 8, 2013. Jim McNerney, Chairman of the Board, President and Chief Executive Officer of Boeing. Jim is also our presiding Director, Chair of the Compensation and Leadership Development Committee and a member of the Proxy Committee. Johnathan Rodgers, retired President and Chief Executive Officer of TV One. Jonathan regrettably is retiring from the board after this meeting and is not standing for reelection. I want to take this opportunity to thank Jonathan for his dedicated service to The Procter & Gamble Company over the past 12 years. Jonathan, thank you very much. Meg Whitman, President and Chief Executive Officer of the Hewlett Packard Company; Maggie Wilderotter, Chairman of the Board and Chief Executive Officer of Frontier Communications Corporation; Pat Woertz, Chairman, Chief Executive Officer and President of Archer Daniels Midland Company. Pat is Chair of the Audit Committee. Ernesto Zedillo, former President of Mexico and current Director of the center for the Study of Globalization and professor of International Economics and Politics at Yale University. Ernesto is Chair of the Governance and Public Responsibility Committee and a member of the Proxy Committee.

We also have a number of our executive officers here with us today. They are seated in the front rows. In the interest of time, I am not going to introduce each and every one of them, but I would ask them to please stand and be recognized. Thank you.

Now, I'd like to introduce Greg Weaver and John Rhodes of Deloitte & Touche. Thank you. Mr. Weaver is a Chairman and CEO of Deloitte & Touche LLP and the advisory partner on the P&G account. Mr. Rhodes is the partner responsible for all services provided to P&G and he directly supervised the audit of the company's fiscal 2013 financial statements. They are present in the event that there are questions, which are more appropriately answered by our auditors.

As Chair, I have appointed Peter Descovich of Broadridge Financial Solutions as Inspector of Election for this meeting. He will supervise the voting. In order to handle our business expeditiously this morning and to provide time for shareholder questions, we've established a few simple rules about the conduct of the meeting. Each of you should have a copy of the agenda. On the left-hand side of the agenda booklet are the guidelines for the conduct of the meeting. We ask that you cooperate in following these guidelines. In fairness to all shareholders, we intend to enforce these few, but simple rules.

The digital clock appearing in the lower left-hand corner of the screen behind me will countdown the time remaining for each speaker. When we open the microphones for comment, please go to the nearest microphone, if you wish to speak. Please identify yourself to the attendant. Please state your name and affiliation clearly and speak directly into the microphone, so that all of us could hear you and what you have to say, and so that we have a clear recording of the meeting to assist in preparing the official record of the meeting. If anyone seated in the balcony wishes to speak, please come down to the main level and use one of the standing microphones.

I'd like to remind you that comments regarding proposals will be limited to the time when the proposals are introduced. We will not revisit these discussions later in the meeting during the general question-and-comment session.

Turning to our agenda, I will ask Debbie Majoras to address some preliminary matters and to summarize the minutes of the Annual Meeting of Shareholders held last October. Debbi?

Deborah Majoras

Thanks, A.G. First, let me remind everyone that the presentation today will contain references to some non-GAAP financial measures. The required reconciliations to GAAP numbers can be found on the company's website, www.pg.com. The presentation may also contain statements about our future business prospects. For a discussion of factors that could affect these forward-looking statements, please also see the company's website.

Now, turning to the Annual Meeting of Shareholders last year, which was held in Cincinnati, Ohio, on Tuesday, October 9, 2012, the Chairman of the Board presided and appointed the Inspector of Election at the meeting. The minutes of the Annual Meeting of Shareholders held on October 11, 2011 were approved. Mr. Robert A. McDonald presented the report on the business.

The 11 directors nominated were elected to hold office until the expiration of their terms in 2013. Two board proposals were presented. The first proposal was to ratify the appointment of the independent auditors and the second was for an advisory vote on executive compensation, the Say-on-Pay vote.

Three shareholder proposals were presented. First, a proposal submitted by NorthStar Asset Management Inc. that recommended the company submit an annual report outlining all political contributions made by the company. Second, a proposal presented by As You Sow, recommending that the company asses the feasibility of adopting a policy of extended producer responsibility. And third, a proposal submitted by Ms. Myra K. Young, recommending that the company adopt a simple majority standard. After discussion and voting, the board proposals were adopted.

Shareholder proposals to provide an annual report on political contributions and to adopt an extended producer responsibility policy were rejected. The shareholder proposal to adopt a simple majority voting standard was approved. After shareholder questions-and-comments were discussed, the meeting was adjourned. A.G.?

A.G. Lafley

If there are no corrections or additions, the minutes of the Annual Meeting of Shareholders held October 9, 2012, are approved as recorded. Debbie, would you please comment on next years meeting?

Deborah Majoras

Sure, A.G. As you know, we are always looking for ways to be more productive in everything we do, including in meetings like this one. And so we are considering other venues in Cincinnati for holding this meeting. So shareholders should check the 2014 proxy statement that will come out next August to learn where in Cincinnati the 2014 Annual Meeting will be held.

A.G. Lafley

Thank you, Debbie. Next item on the agenda is the report on the business. It's energizing and honor and a privilege to be back and to be with you today, our shareowners. Over the past three-and-a-half to four years, I was active in private equity and business startups and advisory work with Fortune 100 Companies in teaching and in writing. And from that broadened vantage point, I am convinced that P&G has what it takes to grow to deliver value and to win.

We're committed to make the changes we know we need to make to improve our performance. That starts with getting clear on what winning is. For us, it means winning with those who matter most, consumers, customers and shareowners. We aspire to be the leading-consumer products company with consumer preferred brands and products. P&G's performance in fiscal 2013 was a step in that direction.

We met or exceeded our commitments. Organic sales growth was 3%, core earnings per share grew 5%. We made strong progress on working capital and capital spending, which enabled us to deliver 98% adjusted free cash flow productivity. We returned $12.5 billion in cash to shareholders, a 110% of our net earnings. $6.5 billion in dividends and $6 billion through share repurchase. In April, we raised the dividend by 7%.

While we met our objectives, we know we can do better. We've established value creation for consumers and shareholders as our clear priority. This starts with winning the value equation with the consumer, who is always our boss. The consumer value equation is simply the benefits our brands promise and our products deliver for the price consumers pay.

This promise shows up that the zero moment of truth, when the consumer searches for information about a brand or product; at the first moment of truth, when the consumer chooses a product; and at the second moment of truth, when the consumer uses the product and decides whether to buy it again. We need do win more of these moments of truth more often.

We'll measure business performance through operating total shareholder return and integrated measure of value creation at the business unit level. Strong operating TSR requires sales growth, progress and growth in operating margins and strong cash flow productivity. Business units will be guided by focused strategies, differentiated business models and disciplined operating plans that prioritize the most important choices for creating value.

We're focusing first on our core businesses, which include the leading most profitable brands, categories and countries. Delivering strong results in our core businesses is the largest contributor to shareholder value creation. Core businesses are an important contributor to growth and an enabler of investments and product innovation, developing markets and new distribution channels.

Our strongest business unit and total company positions are in the U.S. We need to ensure P&G's home market stays strong and stays growing. We will focus developing market and distribution channel investments in the categories and countries with the largest size of prize and the highest likelihood of winning.

Developing markets, driven by demographic and household income growth will continue to be a significant growth driver for our company. We will continue to introduce new and improved plans and products and to establish in new categories. We will continue to focus the company's portfolio, allocating resources to businesses where we can create value and continuing to exit those where we cannot.

Second, we are significantly strengthening productivity and cost savings efforts. Innovation and productivity in the end are the two biggest drivers of value creation. Innovation has always been P&G's life-blood. Our choice is to be the innovation leader in every product category, where our brands compete.

Our business model is based on this choice and we've designed a business portfolio that enables us to compete in categories that are highly responsive to innovation. Here are just a few examples. In oral care, we introduced Crest 3D White. The Crest and Oral B product regimen works together to improve the visible whitening of teeth after as little as one day's use. Crest 3D White Toothpaste has grown market share in the U.S. for 40 consecutive months since launch.

In fabric care, Tide PODS was introduced in February 2012. Tide PODS has now already generated over $600 million in sales and has grown to more than 6% of the total laundry category in the U.S. and more than 70% of the unit-dose segment. We've reapplied P&G's proprietary product technology to Ariel in Western Europe, Latin America, Central and Eastern Europe, the Middle-East and Africa.

We will continue to expand the superior product technology to Gain Flings. Downy Unstoppables and Gain Fireworks have helped drive U.S. fabric enhance their value share to over 60%, up more than 2 points versus a year ago. We'll build on this momentum in February with the introduction of three new sizes of Downy Unstoppables and a new scent, Moonlight Breeze on Gain.

In Baby care in North America, we are shipping major innovation upgrades across the entire line, providing superior dryness, comfort and fit, particularly overnight to better deliver what moms want indeed for their babies. Well, innovation has always been a core strength. We are committed to make productivity a core strength and a sustainable competitive advantage as well. We will make productivity systemic, not episodic. We will measure productivity, we will recognize it and we will reward it.

Productivity is particularly important in a slower growth world and in an environment of increased volatility. Commodity cost, currency and other volatility. Greater productivity means more opportunities to invest in core business growth, in new channels, in new markets and in brand and product innovation.

We are working to accelerate and strengthen P&G productivity and cost savings. We see opportunities across all elements of cash and cost. We're mobilized to address the next round of productivity initiatives. We're working these projects in parallel on shorter cycle times to get our results quicker.

Developing markets, we have opportunities to locate supply chains, close to the customers and the consumers we serve. This will enable us to reduce cost and serve consumers better and faster. In developed markets, we are studying options that would reduced the number of manufacturing and distribution locations, build scale across the categories and reduce cost and inventory, all while improving service to our customers. This will require investment that will generate very attractive returns.

We'll improve marketing return on investment, driven by a better mix of media, greater message clarity and greater efficiency in non-advertising marketing spending. We'll improve employee effectiveness by simplifying our organization structure and by focusing us all on value-added work. We'll flow resources to our work and shared services, where we can improve effectiveness and efficiency.

Our third focus area is to step-change operating discipline. We simply have to execute better, more consistently and more reliably everyday around the world to win with consumers and customers. Execution is after all the only strategy they every see. Quality execution will enable us to deliver superior value in consumer preferred brands and products and to be the preferred customer and supplier through external partners. P&G operating discipline, executing with excellence have long been hallmarks of this company's success. We're committed to return to the standards of excellence necessary to win.

One final focus area is to make strategic focused investments in research and development and go-to-market capabilities. These are two P&G core strength and two important sources of competitive advantage and growth. They are critical to winning the first and second moments of truth with consumers.

The changes we are making in these four areas, reestablishing value creation as our primary measure of success, investing in innovation and go-to-market capabilities, accelerating productivity savings and improving operating discipline and execution are all important changes, we believe will improve performance. Our objective for fiscal 2014 is to build on the momentum of this last year, making this year another stepping stone to P&G's long-term growth and value creation objectives.

I am confident the company has what's needed to win with consumers, customers and shareowners. We have a strong brand portfolio, $25 billion brands and 15 more with $0.50 billion to $1 billion in annual sales. We have a well-balanced geographic portfolio. We are the leading non-food consumer products business in the U.S. The largest and fastest growing developed market and the leading household and personal care business in developing markets, both are significant value creation opportunities.

We have a brand and a product innovation portfolio in pipeline that will only get stronger. We have a broad and strong portfolio of productivity initiatives. Most fundamentally, we have an exceptional, engaged, motivated organization. P&G people are passionate about consumers and providing P&G's brands and products that make our everyday life a little bit better.

P&G'iers bring tremendous experience and expertise to our business everyday. Believe me, they are committed to win. They are P&G's most important asset, a critical core strength and ultimately our competitive advantage.

We've taken a hard look at what we need to do and how we need to change to perform better. We're committed to do what it takes to get P&G back to balanced, consistent, reliable and sustainable growth and value creation for consumers, customers, and you, our shareowners. Thank you, very much.

The next item of business is the election of directors. All directors elected at this meeting will hold office for a one-year term, until the 2014 Annual Meeting of Shareholders and until their successors are elected. In order to be elected, a director must receive more for votes than against. All those voting at this meeting, please raise your hands now and an usher will give you a ballot. If you've already voted your proxy, there is no need to vote now, unless you want to change your vote.

I'll now ask Debbie Majoras to place the nomination, the 11 nominees shown in the proxy statement. Debbie?

Deborah Majoras

Thank you, A.G. The Board of Directors acting upon the recommendation of the Governance and Public Responsibility Committee nominates the following 11 individuals for election as directors to hold office until the Annual Meeting in 2014 and until their successors are elected. Angela Braly, Kenneth Chenault, Scott Cook, Susan Desmond-Hellmann, A.G. Lafley, Terry Lundgren, W. James McNerney Jr., Margaret Whitman, Mary Agnes Wilderotter, Patricia Woertz and Ernesto Zedillo.

A.G. Lafley

All of the nominees are currently on the Board of Directors. I will now take questions-and-comments on the nominations. Questions concerning operations of the business should be held until Item 11 on the agenda. Each speaker will be allowed one turn at the microphone for a maximum of three minutes.

If there are no questions and no further discussion, the nominations are closed and the voting on these nominations and on the proposals will take place later in the meeting.

We'll now proceed with board proposals. The first proposal is to ratify the appointment of Deloitte & Touche as the independent registered public accounting firm. This proposal appears on Page 62 of your proxy statement. Although the Board of Directors is not required to submit this matter to shareholders, we believe it's important that you have a say in the appointment of the independent public accounting firm. The Board of Directors recommends a vote for this resolution. Is there any discussion on this motion?

Seeing none, the next item on the agenda is the board proposal to amend the company's regulations to reduce certain supermajority voting requirements. This proposal is in response to the affirmative vote of the shareholders on a proposal submitted at last year's meeting. This proposal appears on Page 63 of the proxy statement. Again, the Board of Directors recommends a vote for this resolution. Is there any discussion on this motion?

The next item on the agenda is the board proposal to adopt the Procter & Gamble 2013 Non-Employee Directors' Stock Plan. This proposal can be found on Pages 63 through 68 of the proxy statement. Again, the Board of Directors recommends a vote for this resolution. Any discussion or comment on this motion?

Moving on. Finally, we have the board proposal for an advisory vote on executive compensation, otherwise known as Say-on-Pay. This proposal appears on Pages 68, 69 of the proxy statement. The Board of Directors recommends a vote for this resolution. Is there any discussion on this motion?

Debbie Majoras

[ph] Karl Beckman, shareholder.

Unidentified Company Representative

Thank you, Mr. Chairman. To my fellow shareholders, you need to consider carefully whether we should keep rewarding and rubber stamping the compensation of the named executive officers, the NEOs in the current manner. In other words, you may wish to vote against the advisory approval of executive compensation.

I realize that my comments come rather late and many of you have already voted your proxy. I am concerned about executive compensation and salaries. The money belongs to the company and the shareholders. I spoke about this very matter, in this very room in October of 2011. Other corporations that were in the house within personal care product sector were performing better than P&G. That lackluster performance also grabbed the attention of an active shareholder. Without him, we may not have seen a boost in dividend and price per share.

Last year in June 2012, the Cincinnati Business Courier performed a survey, wrote an article and found that Mr. Robert McDonald was the most overpaid local CEO. I believe that they based their opinion on compensation and performance. In July of 2012, the media reported that the board supported Mr. McDonald. This was reported about the same time that the active shareholder purchased a significant number of shares of stock.

In the past couple of years, I feel that the corporation has made some poor decisions. P&G withdrew its membership from ALEC, the American Legislative Exchange Council. The ALEC promotes free market ideas and capitalism. The media reported that P&G was still interested in the deal to sell the Pringles brand to Diamond Foods after it was disclosed that Diamond Foods had accounting irregularities.

Within the 2013 proxy statement, 37 pages are devoted to compensation, included in those 37 pages are 18 pages, which were devoted to executive compensation. The proxy statement contained 79 total pages.

In November of 2013, Swiss citizens will be voting on capping CEO pay at 12 times the salary of the lowest paid worker in the company. We, the shareholders need a new method of securing results from executive officers. Much like based of our owners need a new method of securing results from managers and players. The corporation is never going to change its current executive compensation program as long as you continue to vote for the advisory approval of executive compensation. Thank you.

A.G. Lafley

If it's any cancellation and just as a matter of interest, when the board asked me to comeback, I did not even ask about my compensation. So I'm here for duty, it's an honor and a privilege and it's an honor to serve with this team and my management colleagues and our employees around the world.

I think the other thing that you need to understand is in the proxy, which you referred to, we try to be very clear as a company that we pay for performance, that we totally agree with the point you made on paying for performance and paying for results. We try to pay fairly and that means competitively in a marketplace and our Directors and the compensation committee do I think quite a thorough job of keeping up to speed on what's competitive.

And I think most importantly, as a shareowner, you want to know that we're paid for supporting our business strategies. We're paid for delivering over the mid and the long-term. We're paid not to take excessive risk. So I know this is a very, how shall I say, interesting subject for many of you, but I wanted you to understand my personal situation and I wanted you to understand the point of view of the company. Yes, sir.

Unidentified Company Representative

Mr. Chairman, this is [ph] Jim Baker. Mr. Baker is a shareholder.

Unidentified Company Representative

First of all, welcome back A.G. It's good to see you again.

A. G. Lafley

Thank you, Mr. Baker.

Unidentified Company Representative

I have four questions about the long-term executive compensation plan. And I believe, I should direct those to the Chairman of the Compensation Committee, is that correct?

A. G. Lafley

I think that's probably correct. You agree, Jim?

James McNerney

Yes.

A. G. Lafley

Go ahead with the questions, and we'll do the tossup here.

Unidentified Company Representative

First question, given the importance of total shareholder return as articulated by you and past Chairman, and I believe by everybody in this audience, why isn't TSR a part of the long-term executive compensation package?

A. G. Lafley

I think I can take a shot at that. It actually is and we disaggregate the drivers, so revenue growth, operating profit growth, cash productivity. And for the top executives of the company, it is the driver of their mid-term compensation. So it is. We just break it into pieces. And we earn it, a piece at a time, and we have to earn it in the aggregate. And you may have noticed, in the last year we only earned a very small part of it.

Unidentified Company Representative

I understand. The second question. Given that none of the business targets were met in the period 2010 through 2013, that three year period. And that those targets were reduced for the three year period 2013 through 2015. Why were top management given raises or given the opportunity to increase your compensation for achieving lower business results?

A. G. Lafley

I think that one is difficult for me to comment on, Jim. It's historical.

James McNerney

I think during the first period, you mentioned, you're right. The targets were largely missed and the payouts reflected that. They were very much below par and they should have been below par. I also think in a post financial crisis world, you ask about lower targets going forward, they were marginally lower, but so were the targets of all of our competitors. And it is a much slower growth world that this team is confronting. And the compensation committee is convinced that achieving progress against those targets would be at least as difficult as achieving the ones that they missed earlier and were compensated appropriately because of that.

Unidentified Company Representative

You didn't answer the second piece?

James McNerney

I was having trouble keeping track of them all.

Unidentified Company Representative

The second piece was senior management. The past CEO, the CFO, the Vice Chairman, they were granted increases for achieving lower targets. It doesn't seem to hand together specifically in light of A.G.'s introduction and the need to improve. So why are we paying more for achieving less?

James McNerney

Well, I think about between 80% and 85% of the compensation that the NEOs and the senior management, including A.G. get is tied to the performance that we just discussed. A very smaller percentage is salary. And salary is benchmark against the competitive environment and is relatively small, its base pay and performance has taken care of in a much larger piece of their pay. And so in aggregate, their compensation was down significantly during that three year period, not withstanding small raises in the base pay.

Unidentified Company Representative

The long-term compensation for the period, for the next three years, the opportunity to earn more was granted, correct? In the 4% to 8%.

James McNerney

Yes. In the three year plan.

Unidentified Company Representative

To provide more compensation against lower targets in the three year plan is that correct?

James McNerney

As I mentioned before the targets were set. They were marginally lower than the previous three years. And the reason they were is that the growth rates of the markets and those are much lower than they were in the previous three. So we're trying to match the targets to the market. They actually have to gain more market share going forward than they did in the planned three years going back. So it's a challenging plan for them and it should be.

A.G. Lafley

That concludes the session on board proposals. There are no shareholder proposals on the ballot. So we will now proceed with the voting. Is there anyone else who needs a ballot, so they can vote here today? Please raise your hand, if you do, and an usher will give you one. Once you've completed your ballot, please hold it up, so we can collect it. Results of the voting will be announced later in the meeting.

Before we turn to questions or comments on other matters related to the company's business, I'd like to announce that the Board of Directors has declared P&G's quarterly dividend. The dividend of $0.6015 per share will be payable on or after November 15, 2013, to common stock shareholders of record at the close of business on October 18, 2013, and to preferred stock shareholders of record at the start of business on October 18, 2013.

P&G, as you know, has been paying a dividend for 123 consecutive years, ever since the company was incorporated in 1890. We've increased our dividend for 57 consecutive years. We are committed, as I said earlier to returning cash to you, P&G's shareowners.

It is now time for questions or comments on other matters related to the company's business, which have now already been discussed. During this period please confine comments to new subjects of discussion. We will not revisit discussion of proposals previously addressed during the meeting.

To be fair to everyone present, no shareholder will be allowed to have more than one two-minute turn at the microphone, until we've determined that other shareholders have had an equal chance to address our meeting. There will be a limit of three speakers on any one subject. Also in the interest of time, we will allow 30 minutes for this question-and-comment period. Are there any questions?

Question-and-Answer Session

Debbie Majoras

I have Timothy Winter, President of the Parents Television Council, a shareholder.

Unidentified Company Representative

Good morning, Mr. Chairman. I'm Tim Winter, President of Parents Television Council, a non-profit non-partisan group committed to protecting children from sex, violence and profanity in entertainment. I have traveled from Los Angeles to thank P&G, for its commitment to families, as demonstrated by its superb advertising practices.

P&G is the world's largest advertiser and we know adhering to such strict media buying standards is not easy. But the company's diligent effort is not just good for families, it's good for the corporate bottomline too. Ohio State University researchers have found that TV viewers are more likely to recall the product being advertised, if the advertisement airs within the family-friendly programming as opposed to explicit programming. And Wal-Mart's marketing research has found that their media dollars generate an additional 18% return on investment, if aired during safe programming compared to explicit programming, 18%.

Mr. Lafley, as you commenced your new term leading Procter & Gamble, will you sir commit to continuing the company's extraordinary corporate responsibility and leadership through its marketing and advertising practices? Thank you.

A.G. Lafley

Thank you for your long journey and thank you for your appreciation and recognition. I think you know for over 75 years, P&G has been an innovator in creating and sponsoring branded entertainment. I think you also know we continue to work closely with best-in-class entertainment partners around the world to bring families entertainment options they can enjoy together. Thank you.

Jon Moeller

Mr. Chairman, I have Julian Martinez. Mr. Martinez is a proxy for shareholder Jane Garcia.

Unidentified Company Representative

Thank you, Jon. My name is Julian Martinez and I represent SER-Jobs for Progress National. We are the premier workforce development organization serving Hispanic community in the U.S. In the past, we have worked closely with P&G. Unfortunately our contract retired and we have been unable to reestablish our relationship with P&G. We will appreciate if you could assign one of your staff to work with us, so that we can continue our relationship and serve the growing Latino community. Latino's are now 55 million in the U.S. and will be the world's 13 largest economy. One in three students entering schools are now Latinos. Thank you, Mr. Chairman.

A.G. Lafley

I think probably the best thing for you to do is give your name to one of the ushers. I have no idea or understanding of the historical circumstances or the current circumstances, but I am sure if we're not connected, the right people from your organization with the right people from our organization we can get that done.

Debbie Majoras

[ph] Karl Beckman, shareholder.

Unidentified Company Representative

Thank you, Mr. Chairman. Last year, the corporation withdrew its membership in ALEC, the American Legislative Exchange Council. I come before you to request that corporation renew its membership in this organization. ALEC promotes and protects free market ideas and capitalism. It is nation's largest non-partisan, individual, public-private membership association of state legislators. I should disclose that I have worked with member of ALEC in the past. It is imperative that P&G be profitable. The Board of Directors, shareholders, employees, charities, taxing districts and others all have a stake in the corporation.

Corporations are under attack by the government and other groups. Corporations are being told what kind of health insurance they must provide. The banking industry has been nationalized by the Dodd-Frank Wall Street Reform Act. The fast food industry is being told to post calorie counts, eliminate super-size drinks, and double workers' ROE pay.

The tax code is 74,000 pages long. The government is stating that there will be catastrophic consequences for the United States and the world if the debt ceiling is not raised by October 18, 2013. That date is only 10 days from today. The demonization of the corporations has to got to stop. Corporations are made of people. When corporations hurt, people hurt. Do I have your word that the corporation will reexamine P&G's membership in ALEC?

A.G. Lafley

Well, you certainly hit a number of themes that I am sure resonated with our shareowners today and some of our management team. I don't know the specific situation on ALEC, but Debbie is responsible for our overall government relations, operation, including all of the state and local affairs work. So we'll take a look at it.

Unidentified Company Representative

Mr. Chairman, I have [ph] Carol Ralph. Ms. Ralph, is a shareholder.

Unidentified Company Representative

Thank you. Let's talk about computers share. This is the company that provides all the information quarterly to the shareholders, instead of Procter & Gamble doing that now. They sent me something fascinating, which was information on how I could get my quarterly report. I don't like that. When I called them they said, you have to get it over the internet, and I said I would prefer to get it quarterly. And they said, you must call us and contact us every single quarter that you want a report. That makes no sense. Do you think perhaps Procter & Gamble could intervene here and make it easier for people to get their reports mailed to them, including the yearly report, the Annual Report which they all said that we've put on the Internet. I'd rather not work on the Internet. Thank you.

A.G. Lafley

Loud and clear. First, let me reassure you that we really are committed to providing all of our shareowners with the absolute highest level of service. In July, we did move some of our shareholders service operations to computer share. They just have technology and scale that we believe can ultimately offer our shareholders a better level of service capability and technology that frankly we weren't able to deliver. It sounds like that you're not getting it. So we will dig into your specific request and we will try to continue to improve that service. I mean, obviously we want improved service. We want all the technology, we can get available to us, but we want to deliver for our shareowners in the end. Thank you.

Debbie Majoras

[ph] Walter Ochenski, shareholder.

Unidentified Company Representative

My name is [ph] Walter Ochenski and I'm former Gillette employee. At first, I would like to congratulate you to very good results in last year. And I am very glad to see you Mr. Lafley, again on this position. My question is related to your business in Venezuela. Your cash in Venezuela, at least in local currency is still growing.

In U.S. dollar it's not the case, but before you sold $1.1 billion now and now you're showing $913 million as of June 21, '13, according to official rates. However, if we would use the black market rates, your balance would be only $130 million. You write in your Annual Report that P&G has limited ability access to official rates and also you write in your Annual Report that there is little information available about new auction process or the underlined auction rates.

So it appears to me that you don't know what the value of your cash is in Venezuela. Based on my experience with high inflation countries, I would say that black market rates of today are official rates of tomorrow. Therefore, what would you say if somebody will argue that your cash in Venezuela is not $900 million, but only $130 million?

More importantly, I would like to know how do you manage the business in a country with inflation of 45% and currency regulations differently than in other countries. How do we assure that going forward you will generate cash, which equal to you see in the U.S.?

A.G. Lafley

Venezuela is obviously a complex situation. And I told Jon, he was going to get a question and this one is his.

Jon Moeller

First of all, I think it's important to state that Venezuela has historically been a very attractive business for Procter & Gamble. It's a country we continue to be very strongly committed to. It's been a very good business for us. It's been a large and frankly very profitable business. We do have some challenges that we manage. You rightly pointed out that foreign exchange has been one of those significant challenges.

And you asked how do we deal with that high inflation in context versus how we might deal with that in other markets. And we're really focused on two things. The first, is getting as productive as we can, sourcing locally when we can. And then as well, taking pricing as the valuation occurs, which we've been able to do relatively successfully overtime, to offset the impact of foreign exchange. You also rightly pointed out that our cash in our balance sheet would be less in the event of devaluation, that's correct. And that's why we call it out in our disclosures, in our financial statements.

A.G. Lafley

Ultimately, our focus on a country like Venezuela is very long-term. And it's on serving Venezuelan consumers to the best of our abilities, which we've done often on the first 60 years by providing the best value we can in our brands and products. And when you're in inflationary environments, when you're in volatile economies and volatile government situations, and we are in more than one around the world, you have to mange the daily business that's very short-term. You have to manage the mid-term, but you also have to keep your eye ultimately on the long-term and that's what we try to juggle.

Unidentified Company Representative

Mr. Chairman next is [ph] Helga Schwab. Ms. Schwab is a shareholder.

Unidentified Company Representative

Good morning, Mr. Lafley and good morning the board. Welcome back. Got a couple of questions for you. Number one, last year when we had this meeting, there was some folks here from, I believe Sacramento plant, the union people. They had some issues. Did these issues ever get resolved? That's number one question.

A.G. Lafley

I am told, yes.

Unidentified Company Representative

I am not a union person, but we want to have labor peace, right?

A.G. Lafley

I also like resolved issues are better than the alternative.

Unidentified Company Representative

Number two. A recent article in the Wall Street Journal says Basics Get Luxury Treatment. That's sounds fine. However, in the current economic climate luxury treatment, does that sound like a very smart move? I as a consumer do not like luxury treatment. I cannot afford luxury treatment. I'm a little old lady living on a fixed income. I like to do that, but I cannot afford it. So please explain that?

A.G. Lafley

Well, I don't recall the article you're referring to, but I will simply say this. We seek to serve as many consumers as possible. Low-income consumers, middle-income consumers and high-income consumers, consumers on fixed incomes, consumers on all kinds of incomes, consumers without income in the short-term.

So we have to create a category and brand portfolio that stretches from a basic and affordable opening entry, like Charmin Basic or Bounty Basic or Gain or Simply Tide, which will be introduced after the first of the year. And we provide brands and products for the middle of the market and occasionally we provide small, everyday luxuries in the household care and personal care business for other consumers. So hopefully, we have a good selection and assortment of brands and products that meet your needs.

Unidentified Company Representative

One more question.

A.G. Lafley

Three, not two. Who is counting?

Unidentified Company Representative

I still have time.

A.G. Lafley

Yes, you do.

Unidentified Company Representative

I also read that it is costing us $2,000 for your travel expenses or whatever to go back and forth. Is that the reason why we don't have any goodies out there?

A.G. Lafley

Touche. Well, this is the business meeting, so we thought we wouldn't serve a three-course breakfast or five-course lunch, because at our business meetings inside P&G and with other customers, suppliers and partners we sort of attend the business. Regarding my expenses, my home is in Florida. That's were my family is, my father and my wife and my home. I couldn't change that this time around, but I am here every week or where I need to be in the business. And as part of the first year, the compensation package the board offered to defray some of that expense, with that $2,000, so that's what's it's for. Thank you. They are unrelated.

Unidentified Company Representative

Mr. Chairman next is [ph] Jim Becker. Mr. Becker is a shareholder.

Unidentified Company Representative

A.G., you talked about a strategy of increasing productivity, how are you going to measure that?

A.G. Lafley

Ultimately, it gets measured in three or four ways. First of all, it's in the value we deliver in our brands and products everyday in the store to consumers. My very strong point of view is we should be looking hard at any cash or cost expense that doesn't add meaningful value to the brands and products we offer you, our shoppers and consumers and retail stores around the world everyday. So that's the first thing. Can we keep our prices competitive and a good value to consumers?

The second point I would make is, when you cut through everything at a company like this, in an industry like ours, ultimately, innovation and productivity drive all of the growth and value creation. They drive virtually all of it. So we just need to get the balance right. And what's been going on is we've been pretty systemic, pretty sustainable on a brand and product innovation basis.

We've been more episodic, and done these sorts of, frankly somewhat disruptive restructurings every five to seven years to handle the productivity side. And what we're simply doing is moving to a strategy and moving to an operating approach where we work on productivity on an ongoing basis. We make it more systemic.

And I guess the third thing I would say -- so it should ultimately show up in our growth numbers, right, which are net sales. And it should show up in the drivers, should show up in our operating TSR and it should show up in the drivers of operating TSR, our margins and our cash productivity.

And then I guess the last thing I would say, in addition to a better value for consumers, in addition to delivering some better business and financial numbers, which ultimately drive shareholder return. We believe more productivity gives us more opportunities, more opportunities to invest in our core businesses, more opportunities to invest in developing markets, which will continue to grow faster than developed markets, and frankly more opportunities to invest in product innovation. And we've got a pretty full pipeline and portfolio that we want to bring to market over the next three, five, seven, 10 years.

Unidentified Company Representative

Let me understand, the metrics will be increased business results?

A.G. Lafley

Increased business results, better consumer value and you will see a certain amount of reinvestment in the business that will result in mid and longer-term.

Unidentified Company Representative

And fewer of these one-time, but they're not one-time, restructuring efforts, is that correct?

A.G. Lafley

I hope so. Well listen, I'm not going to tell you there will never be another restructuring. We're in an incredibly competitive global marketplace. So there will be restructurings as we move in and out of industries, in and out of geographies, in and out of businesses. The point I'm trying to make is that our productivity work will become more ongoing and more systemic.

Unidentified Company Representative

Mr. Chairman, next speaker is [ph] Susan Mullins. Ms. Mullins is a shareholder.

Unidentified Company Representative

My question is about advertising. And I wanted to know why is, P&G spending advertising dollars on the extremist news outlet Al-Jazeera?

A.G. Lafley

Well, I think you know that we serve something over 4 billion consumers around the world. And we build our brands and we generate trial and purchase for our products by advertising their benefits to a wide range of consumers in countries around the world, across many different kinds of media and across many different kinds of programming. We recognize that some of the venues in which our ads appear will not be appreciated by or favorable or frankly relevant to some of our audience.

Unidentified Company Representative

Do you plan to make any changes?

A.G. Lafley

Well, I think that, do we plan to make any changes? We are making changes every day based on the prior conversation, some balance of the audience we're trying to reach, the medium we're using to reach it, whether it's digital or a more traditional medium. And frankly, the content that surrounds it and it's a series of ongoing judgments that our business and operating managers in the company is trying to make every day and we're trying to strike the right balance.

Unidentified Company Representative

Well, I hear what's you're saying. I'd just like to point out that [indiscernible] started to advertise with them and because of the outpour they stopped. So I hope that people will call and write and if others agree with me?

Jon Moeller

I understand and thank you for your comment.

Unidentified Company Representative

Mr. Chairman, next is [ph] Lloyd Shanahan. Mr. Shanahan is a proxy for Timothy Shanahan, a shareholder.

Unidentified Company Representative

I have a question. I have an undergrad degree in computer science and I have the graduate degrees in finance and accounting. I work for a higher Ivy League University. And my question is on security and the transfer of all of our data that was made between Procter & Gamble and Computershare. Now, I will add, I do also work with Computershare under several other accounts, yet I have had issues in transferring and gaining access into the shareholder system to check on all of my shares that I administer. Could you please tell me and the rest of us here, do we have a representative from Computershare that we could ask about the assurity of the security of all of our data that was transferred?

Jon Moeller

Would you please give your name to an usher and we will connect you to someone who can do that. I can't do it. And I don't see Filippo here this morning or anybody from GBS that I could connect you with right away. But I do want to make sure that we address your issues. So just make sure we have your name and a way to contact you.

Unidentified Company Representative

And I will tell you, at the current time, I'm putting my full space of my bank account numbers and the social security numbers of my children in the hands of Procter & Gamble. So A. G. I'm putting out a lot of faith in you. So help through that please, that would be wonderful. Even if you could have a statement later on or give us some kind of issue that maybe somebody will be following up would be wonderful. Not just myself, I'm sure the rest of the people here have concerns as well.

Debbie Majoras

We definitely want to address all of your concerns on Computershare. And I understand that our colleague Gene Kimbrew from Shareholder Services is here. And so perhaps, Gene if you could speak out the gentleman who just asked the question, we might even be able to talk about it today. Thank you.

Debbie Majoras

If there are no other speakers, [ph] Mr. Beckman would like to speak again.

Unidentified Company Representative

Thank you, Mr. Chairman. I want to end the meeting on somewhat of a positive note. I am pleased with the dividend stream and the continued quality of Procter & Gamble products. I did have one other question that sort of related to the advertising and you've already answered this in some respects. The question has now turned into more of a comment. Perhaps, you could briefly explain how the company makes a decision and reaches the balance, when it comes to memberships and political organizations, sponsorships and advertising. And I mentioned, about the company not renewing its membership in ALEC.

P&G is also sponsoring the 2014 winter Olympics, which are to be held in Russia. I had the opportunity to tour the Olympics facilities in Lake Placid, New York this past summer. They are quiet extensive. Go team USA. This sponsorship amounts to advertising for P&G, there is an intrinsic dollar figure associated with the sponsorship. However, there is also a petition that has been circulated concerning anti-gay, lesbian, bisexual, transgender laws in Russia that have been enacted. Some pundits compare those laws to human right abuses. There is an intrinsic negative advertising with regards to the petition in media coverage.

In addition, P&G initially stated that they did not have any comment regarding the petition. How does a company determined to dollar figure on advertising in a situation like this? How does the company know that they are making correct decision? And as you probably are aware for the past couple of years, there has been a shareholder proposal that would have allowed shareholders to have an advisory vote on donations made by the corporation in the political action committee. The Board of Directors recommended a vote against the shareholder proposals? How can the corporation know that they are making the correct decision, when the board doesn't feel that the shareholders with their vast unique life experiences can make the correct decision? Thank you.

A.G. Lafley

Well, you hit a number of questions there. And I'm going to try to take through them. First, it is our expectation that International Olympic Company will do the right thing and come to the right decision regarding the issue raised on the gains. Secondly, we've view the Olympics as a long-term investment. Yes, on the one hand it fulfills our purpose of improving lives, but on the other hand it has been a very good business builder for us. And we translate very specific Olympic support into very specific retail activity in stores around the world. And that builds our business and that generate sales and profits for us.

On the political contributions point. I believe, Debbi, this is true all of our contributions are made public disclosed. We do not use any company profits or money to support any issues or candidates. In fact, it's company's policy not to use corporate funds. We do have a very modest, good government committee. It is appropriately governed and administered by an advisory board. And I think as you know, we primarily support issues or candidates, who support issues that we think make sense for the company, R&D, innovation, free trade, et cetera. Thank you.

We now have the results of the voting. Thank you. And I am advised by the Inspector of Election that each of the 11 nominees listed in the proxy statement has received more four votes than against and has been elected to a one-year term expiring at the Annual Meeting in 2014.

That the board proposal to ratify the appointment of the independent registered public accounting firm has been adopted with at least 99% votes cast in favor. That the board proposal to amend the company's regulations to reduce certain supermajority voting requirement has been adopted with at least 65% of the issued and outstanding shares cast in favor.

That the board proposal to adopt P&G 2013 Non-Employee Directors' Stock Plan has been adopted with at least 90% of votes cast in favor. And finally, that the board proposal for an advisory vote on executive compensation has been adopted with at least 96% of votes cast in favor. Certified totals and specific percentages will be available later from the Secretary.

This completes today's business. I again want to express my appreciation for your confidence and support of our company. I want to thank so many of you, who've been long-term shareowners of P&G stock. And now may I please have a motion to adjourn?

Unidentified Company Representative

Motion to adjourn.

A.G. Lafley

Thanks you very much. This meeting is adjourned. Have a good day.

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