Procter & Gamble Co. - Shareholder/Analyst Call

| About: The Procter (PG)

Procter & Gamble Co. (NYSE:PG)

October 11, 2011 9:00 am ET


Robert A. McDonald - Chairman, Chief Executive Officer and President

Unknown Speaker -

Deborah Platt Majoras - Chief Legal Officer and Secretary

Unknown Executive -


Dan Isett

Julie Goodridge - FlightSafety International, Inc.

Julian Martinez

Robert A. McDonald

Thank you. Good morning, ladies and gentlemen. I'm Bob McDonald, the Chairman of the Board, President and Chief Executive Officer of Procter & Gamble. I'd like to welcome everyone to P&G's 2011 Annual Meeting of Shareholders. I'd also like to welcome all of our shareholders who are listening this morning 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 members of the Board of Directors who are present today. Will each of you please stand as I introduce you? Angela Braly, 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 our Innovation and Technology Committee. Sue Desmond-Hellmann, Chancellor and Arthur and Toni Rembe Rock Distinguished Professor, University of California, San Francisco. Sue joined the board on December 11, 2011 -- 2010, I'm sorry. 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, recently retired President and Chief Executive Officer of TV One. Meg Whitman, recently appointed President and Chief Executive Officer of the Hewlett Packard Company. Meg rejoined the board on February 8, 2011. Maggie Wilderotter, Chairman of the Board, President, Chief Executive Officer of Frontier Communications Corporation. Pat Woertz, Chairman, Chief Executive Officer and President of Archer Daniels Midland Company. Pat is the Chair of the Audit Committee. Ernesto Zedillo, former President of Mexico and current Director of the Center for the Study of Globalization, professor of International Economics and Politics at Yale University. Ernesto is the chair of the Governance and Public Responsibility Committee and a member of the Proxy Committee.

We also have a number of our top Procter & Gamble officers here with us today. They are seated in the front rows. I'll now take the time to introduce all of them. Now let me introduce Greg Weaver and John Rhodes of Deloitte & Touche. Could you please stand? Mr. Weaver is a senior client partner of Deloitte & Touche, and the advisory partner on the Procter & Gamble account. Mr. Rhodes is the partner responsible for all services provided to Procter & Gamble, and he directly supervised the audit of the company's fiscal 2011 financial statements. They are present in the event that there are questions which are more appropriately answered by the 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 today, and to provide time for shareholder questions, we have 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 the rules. The digital clock appearing in the lower left-hand corner of the screen behind me will then count down the time remaining for each speaker. Please go to the nearest microphone if you wish to speak and identify yourself to the attendant. Please state your name and affiliation clearly and speak directly into the microphone, so that everyone can hear 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 would be limited to the time when the proposals are introduced. We won't revisit these discussions later in the meeting or during the general question-and-answer session.

Now turning to our agenda, I'd like to ask Debbie Majoras to address some preliminary matters, and to summarize the minutes of the Annual Meeting of Shareholders held last October. Debbie?

Deborah Platt Majoras

Thank you, Bob. First, let me remind everyone that the presentations today will contain references to some non-GAAP financial measures. The required reconciliations to GAAP numbers can be found on the company's website at The presentation may also contain statements about our future business prospects. For a discussion of factors which 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 12, 2010. 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 13, 2009, were approved. Mr. Robert A. McDonald presented the report on the business. The 10 directors nominated were elected to hold office until the expiration of their terms in 2011. A board proposal was presented to ratify the appointment of the independent auditors. One shareholder proposal was presented, a proposal that recommended that we adopt cumulative voting, presented by Mr. McDonald on behalf of Mrs. Evelyn Y. Davis. After discussion and voting, the board proposal was adopted. The shareholder proposal was rejected. After shareholder questions-and-comments were discussed, the meeting was adjourned.

Robert A. McDonald

If there are no corrections, the minutes of the Annual Meeting of Shareholders held October 12, 2010, are approved as recorded.

The next item on the agenda is the report on the business.

In 2 weeks, Procter & Gamble will celebrate a milestone that very few companies have ever achieved, our 174th year of business. Only three other Fortune 50 companies have been in business as long as Procter & Gamble. Fewer than 40 nations have existed as long.

P&G's longevity is remarkable, but even more remarkable is the constancy of Procter & Gamble's purpose. We have been in the same business since the company was founded here in Cincinnati in 1837. We've never strayed from our focus on improving life, which we've done by understanding people's needs better than any other company, and by providing branded products that people use and trust nearly every single day of their lives.

With our purpose as inspiration, we built a global nearly $83 billion business. We touched and improved the lives of more than 4 billion people worldwide. We're on track to reach 5 billion people by the midpoint of this decade. Now I believe we can reach nearly everyone on the planet before the century is over.

We're equally committed to growing responsibly and sustainably. We believe that our responsibilities to consumers, to shareholders and society are highly congruent. They are not in conflict.

We do well by doing good, and we're able to do good because we do well. It's a virtuous cycle. It motivates the highest levels of performance by our people and our business partners.

At the heart of everything we do is an unrelenting focus on innovation. Innovation is the primary way we fulfill our purpose. It's the driving force behind our strategy, as it always has been at P&G.

Our experience has proven that promotions may win a quarter here and there, but innovation wins decades. When you connect these elements, you have what is essentially the formula for P&G's success. You have a purpose that calls on us to understand consumers' needs and to meet those needs with innovation. Standards that compel us to operate with discipline, integrity and a deep sense of responsibility. And a core belief in doing the right thing for the long-term health of our business, even as we execute the priorities necessary to grow in the short term as well.

We're staying true to this enduring success model today. In fact, it's more critical than ever, because we're navigating some of the most challenging business and economic conditions of the past several decades. We know we have work left to do to deliver the growth you expect from P&G, but we're making solid, reliable progress, and we have even a stronger foundation for growth in the years ahead.

With that in mind, I want to use this year's Chairman's address to help you understand what we accomplished this past year, and where we're going for going forward.

We entered fiscal 2011 with 3 clear objectives. Objective one was to execute our purpose-inspired growth strategy. We're touching and improving the lives of more consumers in more parts of the world more completely. We're innovating up and down value tiers. We're expanding in the geographic whitespace, especially in emerging markets. And we're entering adjacent categories in filling out regimen portfolios to meet the fullest range of consumer needs.

Our second objective is to grow market share by growing organic sales 1 to 2 percentage points ahead of underlying market growth. Organic sales growth was up 4%, generally ahead of competition. We held or grew market share in categories representing about 60% of our business in 4 of the 5 regions of the world, and then 11 of the 17 top countries, and on 17 of our $24 billion brands.

Our third objective was to grow core earnings per share in the range of 7% to 9%. We did this with 8% core earnings per share growth, right at the midpoint of our initial guidance range for the year, and consistent with our long-term target range.

We haven't grown consistently at the rates we aspire to, but our performance represents dependable progress, especially when you consider the backdrop of global recession and 2 big surges in commodity costs. In fact, we've grown both the top and the bottom lines very dependably for the past 11 consecutive years, including 3 of the most difficult years since the Great Depression.

In just this past year alone, we faced nearly $2 billion in higher commodity costs, little to no market growth in developed markets, political instability in the Middle East and in North Africa, and the tragic earthquake and tsunami in Japan.

We continued to strengthen our investments in innovation and in advertising even in the face of these strong headwinds. These investments represent our focus on the long-term health of our brands and our business.

On the strength of these results, we increased our quarterly dividend by 9%. This is an important part of how we provide value for Procter & Gamble shareholders. Our stock has about a 3.3% yield, which makes it one of the highest dividend yields in our industry.

We also maintained a strong dividend growth rate over the past 3 years, at a time when many of our competitors and other large US-based companies significantly decelerated dividend growth rates. We're particularly proud of the fact that P&G has paid a dividend for 121 consecutive years, and we've increased the dividend for 55 consecutive years at a compound average growth rate of 9.5%. In total, we paid $5.8 billion in dividends in fiscal 2011, and we returned $7 billion to shareholders through the repurchase of Procter & Gamble stock. This is good performance in a very demanding business and economic environment. I'm proud of the Procter & Gamble people around the world, who are responsible for these results. But I'm also clear-eyed about our performance. It was good, but not yet great. We don't settle for good in this company. The men and women of Procter & Gamble are as committed to great performance as every preceding generation of P&Gers has been in our 174-year history.

Delivering great performance requires discipline. When the most important forms of discipline at P&G is priority setting, and we have 4 very clear priorities for the year ahead.

First, we want to continue our sales growth momentum. Second, we want to execute the price increases we've taken with excellence. Third, we want to deliver quality earnings growth driven by operating income. And fourth, we want to improve productivity in everything that we do. Not one of these priorities is dispensable. We must focus on them equally and deliver them all.

Executing price increases with excellence will be a big step towards sales growth momentum. Delivering strong sales growth while improving productivity drives operating earnings growth. All of it comes together to deliver growth on the top and the bottom lines. Anyone can do one or the other, but shareholders expect us to do both. We know we have to deliver.

Now the thread that runs through all of these priorities is innovation. I don't know of a company that's delivered sustainable top and bottom line growth over time, that's not also been the innovation leader of its industry. There are many examples from P&G's own experience to prove this point. I'll just mention 2.

Back in the late 1970s, we had a 35% share of the laundry category in the United Kingdom. We were fighting hard just to maintain that share level. But then we stepped up our game with a series of game-changing innovations over 3 decades. Daz automatic detergent, concentrated liquid detergent and most recently, Liquitabs. We now enjoy around a 50% leadership market share.

Oral Care is another good example. In the 1990s, we lost Oral Care leadership for one reason, our competition out-innovated us. Pure and simple. We stepped up our innovation game once again. We delivered a string of product breakthroughs that included Crest Whitestrips, Crest Pro-Health and Crest 3D White. As a result, we restored Procter & Gamble's leadership of the U.S. Dentifrice category. We now have nearly a 40% share in the U.S., the highest ever, and we're expanding these innovative products all over the world.

I could go on. These and many other experiences like them, reinforce our commitment to innovation as the fundamental driver of Procter & Gamble's growth. We invest about $2 billion a year in research and development, roughly 60% more than our next closest competitor, and more than most of our competitors combined. The investment continues to pay off. Innovation and portfolio expansion remain critical growth drivers, and are central to fulfilling the company's purpose of touching and improving the lives of the world's consumers.

We currently have one of the strongest innovation and global expansion programs in Procter & Gamble's history, and we have a strong pipeline going forward. We do regular in-depth innovation reviews to ensure we have a sufficient pipeline to deliver our growth targets. Based on our most recent assessment, I'm confident we have the innovation pipeline that we can deliver our growth goals for at least the next 3 to 5 years.

To some degree, our innovation track record speaks for itself. Last year, we launched 8 of the 25 most successful new products in our industry in the United States. Crest 3D White was the #1 launched product.

Over the past 16 years, we've had 132 products in the top 25, more than our 6 largest competitors combined. We are recognized by SymphonyIRI Group, which tracks these pacesetters, these pacesetter products, these products that lead in sales, as one of the past decade's most successful innovators.

But these facts tell only a part of the story. My confidence has reinforced, not only by the specific initiatives and plans I see in our reviews, but also importantly by the people behind them. They're smart. They're insightful. They're relentless, almost to the point of being obsessed with how they can improve people's lives every single day. And they're genuinely inspired by our purpose, which gives meaning to their work and inspires tremendous dedication and performance. P&G people are the great intangible that has never been especially visible outside our company, but which has always been the engine of our growth.

I want you to meet a few of these people today. People who see big potential in the total -- in the little moments of life: brushing teeth, washing hair, showering, shaving, caring for the baby, cleaning the house, doing the dishes and the laundry. Moments that make up everyday life. These moments are our innovation inspiration. And our innovators are everyday heroes in ways large and also small.

For example, a team of P&Gers in our blades and razors business went to India a couple of years back. They conducted literally thousands, thousands of interviews. They spent time with people in their homes and tagged along on shopping trips. They gained a deep understanding of the role shaving plays in the lives of Indian men. They learned. They observed and they experienced so much while they were there. And their experience shaped the design, the manufacturing and the marketing of Gillette Guard, which is now the best-selling razor in India by far, and has become the platform product we're expanding to emerging markets all over the world.

Here's Graham Simms who recently retired from Procter & Gamble to tell you the story.


Another great example comes from our Oral Care business. One of our brand teams learned that having great teeth ranks right up there with great hair and clothes for many consumers. They believe that taking good care of their mouth is as much about beauty as it is about hygiene. They want healthy teeth, but they also want a smile that turns heads.

Now we had the technology to give them what they want, but the problem occurred at the store shelf. Shopping for whitening products can be a very confusing experience. It's often unclear which product works best or if they work well together.

So this insight led to a simple idea, bring the best of Crest whitening products into one collection, make it easy to find at the shelf and deliver brilliant results when you use these products together. The result was Crest 3D White. Here's their story.


Another of my favorites comes from Gain, a brand that has ferociously loyal consumers. We call them Gainiacs. They wanted products that would bring the Gain scent into more of their everyday routines. With comments like, "I've always loved the scent of Gain laundry detergent, why not develop it for dishes?" So we did. Let's watch.


Head & Shoulders is yet another great example. The brand has delivered 10 consecutive years of growth, and is now the #1 shampoo brand in the world. It's also a brand that's been studying and soothing people's scalps for 50 years. We keep learning and caring and innovating. Here's the impact we're having.


I'd like to share just one more example. This one's from Old Spice, and this one's a fun one. Guys don't want body washes and deodorants that make them smell like fruit or flowers. And guess what, the women who purchase 60% of these products for their men -- for the men in their lives, also don't want them to smell that way either. Old Spice have the products guys wanted, and that women wanted for their guys. But getting their attention was not easy, until we discovered a big idea. Please watch.


I could talk at length about our strategies and systems and processes. But my experience, nothing inspires as much confidence as seeing P&G people up close. When I stop to realize what a difference our people are making in the consumers' lives every day and in every part of the world, I can't help but be terribly inspired.

And on that note, I want to close with one final example. The work we do every day to protect our environment, to help those in need, and in particular, to step-up in times of grave disaster.

We were at the Clinton Global Initiative Annual Meeting just 2 weeks ago. P&G is working closely with the Clinton Global Initiative, because we know we can help tackle some of the world's most challenging problems. We also know that as we do this, we build relationships that strengthen our business today and help ensure our success well into the future. Here's what President Clinton had to say about Procter & Gamble.


This is a standard we aspire to. We must do well to meet your needs as P&G shareholders. But we also must do good to fulfill our responsibility as a leading company in the 21st century. A sustainable business requires a sustainable world. Our purpose and our growth strategy requires us to act. We're engaging in a way that creates shared value with our sustainability work. Shared value means that P&G's innovation creates benefits for our business, for our partners and for the world.

Take, for example, our Pampers-UNICEF partnership. We recently announced the commitment to eliminate maternal neonatal tetanus by the year 2015. That's right. Eliminate it. Eliminate it from the face of the world. And it will be done with the help of Pampers moms. They've enabled the donation of 300 million tetanus vaccines so far, by purchasing Pampers and there's more to come. That's brand building for the 21st century.

Our long-term vision for environmental sustainability is equally challenging and far reaching. We are committed to achieving 100% renewable energy in all of our plants. Zero consumer manufacturing waste going to landfills, 100% renewable or recycled materials for our products and packaging.

Now we don't yet have all the answers necessary to achieve this vision, but we're working in a disciplined manner to make meaningful progress, and that creates shared value at every single step along the way.

Pantene, for example, is using plastic derived from plants for their packaging. This new material which comes from sugarcane is a first for the mass hair care industry. We launched it in Western Europe, and we're expanding it to North America this fall. Our ad testing had showed some of the strongest results ever. That's brand building for the 21st century.

And last, we stepped up to our broader responsibilities when we help restore everyday life in times of disaster. Nowhere was this clear in the past year, than the work we did in Japan, following the tragic earthquake and tsunami there. This is P&G's everyday heroes at their best. Please watch.


That story touches me in a very personal way. I arrived in Japan, 1 week after the Kobe earthquake of 1995. I remember vividly. I remember all the steps we took to ensure our people were safe. And then being inspired by the courage and tireless devotion of Procter & Gamble employees, who did everything they could to take care of people.

We were the only multinational company to win an award later from the Japan Business Federation or Keidanren, for the heroic acts of our people. We were honored, but not surprised. Doing whatever it takes to save people or to help them get back on their everyday lives is in our DNA. There's no difference between our business strategy and our social responsibility. They're one and the same, and we know the road ahead is challenging.

We're operating in a very tough economic environment, with high degrees of uncertainty. But we've been through tough periods before. We've always stayed focused on what must be done in the present, while not losing sight of what it will take to keep growing in the future. We're maintaining that focus today. We're not the kind of company that chases short-term commodity or currency movements at the expense of our strategy. And we're confident our strategy is right, now and for the long term. We're in the business of improving lives, and whenever we do so, we earn the trust and the loyalty of consumers.

Here's one last video that captures the essence of who we are and what we do. Please watch.


Our purpose is inspiring. Our priorities are clear. Our operations are disciplined and responsible, and our people are among the very best in business. And our efforts continue to be relentlessly focused on innovation that improves everyday life, now and for generations to come. This is what reinforces my confidence in our future and in our ability to deliver the growth you expect from Procter & Gamble. Thank you.

The next line of business is the election of directors. All directors elected at this meeting will hold offices for a 1-year term until the 2012 annual meeting of shareholders, and until their successors are elected.

In order to be elected, a director must receive more for votes than against. While these -- those voting at this meeting raise your hand, I'm sorry -- will those of you voting at this meeting raise your hand, and an usher will give you a ballot. If you've already voted your proxy, there is no need to vote, unless you want to change your vote.

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

Deborah Platt Majoras

Thank you, Bob. The Board of Directors, acting upon the recommendation of the Governance and Public Responsibility Committee, nominates the following 11 individuals for election of directors to hold office until the annual meeting in 2012, and until their successors are elected: Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Susan Desmond-Hellmann, Robert A. McDonald, W. James McNerney, Johnathan A. Rodgers, Margareth C. Whitman, Maggie Wilderotter, Patricia A. Woertz and Ernesto Zedillo.

Robert A. McDonald

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 14 on the agenda. Each speaker will be allowed one turn at the microphone for a maximum of 3 minutes.

Are there any questions?

Unknown Executive

Mr. Chairman, Lewis -- I'm sorry, Lois Walsh [ph], a shareholder.

Unknown Speaker

Mr. Chairman, could you tell me what criteria is used when you recruit people to run as directors? I have often wondered how somebody who is in a very integral position in their corporation, can spend time being on various boards. I'll have a seat and listen to your answer.

Robert A. McDonald

Thank you, for the question, Ms. Walsh. We have a quite a detailed set of criteria that we're looking for, as we go out to find new directors. It includes things like financial expertise. Pat Woertz, for example, the CEO and Chairman of ADM, is the head of our Audit Committee, and she previously has been the Chief Financial Officer of other companies. So she has a lot of financial experience, which is very helpful to our company. Similarly, Johnathan Rodgers was with -- was the CEO, Chairman of TV One, has a lot of experience in the media business. And I could go on and on. Each director has unique qualifications beyond just their leadership, which is all outstanding, and that's the reason that we asked them to join the board. Relative to the second part of your question, all of us benefit from board experiences outside our own company. In fact, at the Procter & Gamble Company, we encourage our presidents and above to be on an outside boards, so they learn about the governance of a corporate -- of a corporation. And many other companies have a similar policy. Many companies also have policies that limit the participation. So for example, for our presidents who serve on boards outside Procter & Gamble, they're only allowed to be on one board, and that of course preserves their time and their focus on the Procter & Gamble business.

Seeing no other questions, and that there's no further discussion, the nominations are closed. The voting on these nominations and the proposals will take place later in the meeting.

We'll now proceed with the 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 65 of the proxy statement. Although the Board of Directors is not required to submit this matter to the shareholders, we believe it is 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, as discussed on Page 65 of the proxy statement. Is there any question on this motion?

Just as a reminder, each speaker will be allowed one turn at the microphone for a maximum of 2 minutes. Any questions?

Seeing none, the next item on the agenda is the board proposal for an advisory vote on executive compensation, otherwise known as Say on Pay. The proposal appears on Pages 65 and 66 of the proxy statement.

The Board of Directors recommends a vote for this resolution, as discussed on Page 66 of the proxy statement. Is there any discussion on this motion?

Deborah Platt Majoras

I do have one question here, Karl Beckman [ph], shareholder.

Unknown Speaker

Mr. Chairman, for the past couple of years, the board has recommended its shareholders vote against an advisory vote on executive compensation, also known as Say on Pay. This year, the board recommends a for vote on the advisory vote on Executive compensation. Why did the board change its opinion in this matter? And what happens if the proposal does not pass? I realize that the Dodd-Frank Wall Street reform and Consumer Protection Act is involved here.

Robert A. McDonald

Mr. Beckman [ph], the previous votes were taken in a context of where the law was not clear. And as a result of that, the board decided at the time to propose a vote against, until the law became clear. With the passage of the laws on Say on Pay, the Dodd-Frank measure you mentioned, the laws are now clear, and that's why we think the vote for this proposal is appropriate at this time. This vote as you know, is nonbinding, but we do highly value the opinion of our shareholders.

Thank you, very much, for your question, Mr. Beckman [ph].

The next board proposal -- I'm sorry, is there one other question?

Unknown Executive

Season Makos [ph], proxy from Mercy Investments.

Unknown Speaker

Mr. Chairman, I have a question about the executive compensation program. You talked in your materials that your executive comp is aligned with your business strategy, and we've just heard a wonderful presentation from you about how sustainability is an integral business strategy for the corporation. And in fact, many investors view Procter & Gamble as a leader in sustainability. And so my question to you is, how are sustainability metrics incorporated into your executive compensation program?

Robert A. McDonald

Thank you, for that. You're right in that, that our compensation program is largely based on performance, and is aligned with the value of our shareholders. As a result of that, the metrics that each one of our leaders has, includes measures on sustainability. We've made progress on sustainability over the past many years, and we measure every one of our leaders against their efforts to improve sustainability. For example, when we have our innovation reviews every year, Bruce Brown our Chief Technology Officer, I, Len Sauers, our Vice President of Sustainability, look at those innovation programs to make sure that we're working, and that we're putting enough resources against the innovation to lead to more sustainable products. As I said, we want to run our plants on renewable energy, use renewable materials on our products, and have nothing go to landfills, and provide products that are better for sustainability. So far, I'm proud that 9 of our plants send nothing to landfills. But we would like to get all of our plants there. And so we measure it. We reward people who do it right, and we work with people who need help.

Thank you for the question, Ms. Makos.

Other questions? The next board proposal is to vote on the frequency of Say on Pay. The proposal appears on Page 66 of the proxy statement. The Board of Directors recommends a vote for 1 year, as discussed on Page 67 of the proxy statement.

Is there any discussion on this motion? Just as a reminder, each speaker will be allowed one turn at the microphone for a maximum of 2 minutes.

Final board proposal is to amend the amend the Amended Articles of Incorporation, as discussed on Page 67 of the proxy statement. The Board of Directors recommends a vote for this resolution, as discussed on Page 67 of the proxy statement. To pass a majority of the issued and outstanding shares must vote in favor of the proposal.

Is there any discussion on this motion?

Now we will move on to shareholder proposals. Remember that each proponent is limited to a total of 5 minutes to introduce and discuss the proposal. We entertain a maximum of 3 additional speakers on each proposal for 2 minutes each. We must be mindful of everyone's time at this meeting.

The first shareholder proposal was submitted by Mrs. Evelyn Y. Davis, editor of Highlights and Lowlights. Mrs. Davis has submitted a proposal recommending that we adopt cumulative voting.

Unfortunately, Mrs. Davis could not join us today, and I agreed to present her proposal in her absence. In order to save time, please refer to the text as printed on Page 68 of the proxy statement. Since Mrs. Davis is not present, I will allow 1 shareholder to speak for 5 minutes to discuss this proposal. Would anyone like to speak on this proposal?

Thank you.

For the reason cited on Page 68 of the proxy statement, the Board of Directors recommends a vote against this proposal. To pass the majority of shares participating in the voting must vote in favor of this proposal.

We'll now move on to shareholder proposal number two, which was submitted by People for the Ethical Treatment of Animals. PETA has submitted a proposal recommending that the board release a plan for entirely phasing out Iams' use of animals in the laboratories.

Will the representative from PETA, please proceed to the nearest microphone and announce yourself to the attendant.

Deborah Platt Majoras

Amanda Nordstrom [ph], proxy holder, representing People for the Ethical Treatment of Animals.

Robert A. McDonald

Good morning, Ms. Nordstrom.

Unknown Speaker

Good morning, Chairman. My name is Amanda Nordstrom, and I'm a research associate at PETA, People for the Ethical Treatment of Animals. I'm here today to ask my fellow shareholders to vote in favor of shareholder proposal 2, which calls on the Procter & Gamble pet food subsidiary, Iams, to release a plan to replace laboratory tests on animals with humane in-home testing methods, by the end of 2011. After PETA exposed the cruel treatment of dogs and cats at an Iams independent contract facility, Iams promised to use only its own laboratories and a humane testing program, using companion animals in their own home.

We have fought Iams for currently conducting the majority of its experiments in-home, but nearly the 500 dogs and cats are still forced to live in the company's laboratories for years on end.

These dogs and cats are reportedly locked in cages for more than 23 hours a day, where they have their blood drawn repeatedly, sleep on cold cement floors, receive only 20 minutes of socialization and are denied the loving families they deserve. The test they are subjected to are not required by any government entity.

Disturbingly, the commitment to animals Iams expressed after PETA's exposé seems to have waned entirely. Procter & Gamble documents revealed that the Iams Animal Welfare Advisory Board, did not even hold one meeting last year to discuss the welfare of dogs and cats at the facility. Reportedly, there was no independent review of the their pet care program either.

Additionally, Iams has repeatedly refused to allow representatives of PETA or the media to see what goes on behind their laboratory walls. Iams' closed-door policy is in stark contrast to that of their competitor Hill's, which has openly invited the media and representatives of PETA to tour the facilities where they conduct entirely noninvasive companion animal-feeding trials.

We want to work with Iams to make it the industry leader by moving towards 100% in-home testing. We hope you will support this resolution, and thank you very much for your consideration.

Robert A. McDonald

Thank you, Mr. Nordstrom.

Iams has an industry-leading animal welfare and alternatives program. The vast majority of dogs and cats that take part in Iams' nutritional feeding studies live in homes. It's not technically feasible today to move all nutritional studies to an in-home setting.

Iams is committed to continuing to move as many studies in the homes as possible, and the size and scope of its in-home testing program has expanded greatly since its inception and since PETA's last shareholder resolution on the same subject.

PETA's purpose is develop products that improve the lives of the world's consumers. We have the responsibility to ensure these products are safe and in compliance of all regulations. Unfortunately, animal testing still needs to be conducted on rare occasions to meet these responsibilities. I emphasize, rare, because Procter & Gamble has reduced its animal testing 98% over the past 25 years while our business has grown over sixfold.

We accomplished this through the development of more than 50 alternative tests, which required an investment by Procter & Gamble of over $285 million to date. The remaining testing we do today is done as a last resort, and for evaluations which no animal alternative exist. Now we're going to continue to invest millions of dollars every year toward the development of alternatives for these evaluations, and we'll continue this investment until the necessary alternatives are developed.

Thank you, Ms. Nordstrom.

The final shareholder proposal was submitted by Northstar Asset Management Inc., in which they recommend that the Board of Directors adopt a policy under which the annual proxy statement contains a proposal describing electioneering contributions and communications.

Before I ask the representative from Northstar Asset Management to introduce the proposal, I want to point out that late last week, we made a supplementary proxy filing to disclose that in 2010, we made one exception to our general policy and approved the $40,000 contribution to Partnership for Ohio's Future, which expressed support for 2 Ohio state judicial candidates. This contribution has also been discussed on our website.

I'd also like to point out that the Center for Political Accountability, which has coordinated the campaign for greater political contribution disclosures for almost a decade, recognizes Procter & Gamble as a corporate leader on political disclosure.

This proxy supplement is further evidence of our desire to ensure transparency around our political contribution policy and practices. Will the representative from Northstar Asset Management, please proceed to the nearest microphone and announce yourself to the attendant.

Deborah Platt Majoras

I have a Julie Goodridge, representing Northstar, she's a shareholder.

Robert A. McDonald

Good morning, Ms. Goodridge.

Julie Goodridge - FlightSafety International, Inc.

My name is Julie Goodridge, and I am the CEO of Northstar Asset Management in Boston, and the beneficial owner of 17,880 shares of Procter & Gamble. I'm here to ask for your support of resolution #3. We're concerned that the P&G Good Government Fund makes contributions to political candidates that violates Procter & Gamble's stated company values.

We are not concerned about disclosure, because these contributions are disclosed with the Federal Election Committee. P&G provides a broad range of protections for employees, including protections for individuals on the basis of sexual orientation, gender identity and expression, marital status or any other legally protected factor.

The Good Government Fund is a political action committee or PAC, with the stated purpose of participating in the political process to help shape a public policy and legislation that has a direct impact on our company. This engagement ensures that the interest of our employees, consumers and shareholders are fairly represented in all levels of government around the world.

According to the records on the Federal Election Commission website, unfortunately, 40% of our PAC's political contributions have gone to federal officials who oppose hate crime protection; opposed the repeal of don't ask, don't tell; and to senators sponsoring the Marriage Protection Amendment, which would eliminate same-sex marriage in all states.

Our PAC contributions since 2009 include $5,000 to David Vitter, co-author of the Marriage Protection Amendment; $12,500 to Rob Portman, who's views opposing gay adoption and same-sex marriage caused more than 100 University of Michigan law graduates to walk out of his commencement speech in May of this year; and $6,000 to Geoffrey Davis, a representative rated 0 by the Human Rights Campaign for voting no on prohibiting job discrimination based on sexual orientation and his complete opposition to GLBT rights.

Ohio Congressman Steve Chabot, has received 22 direct contributions from our PAC since 1998. Chabot supports an amendment to the U.S. Constitution which would ban and prevent same-sex marriage; supports banning gay adoptions; and voted to continue job discrimination based on sexual orientation.

A record of giving does not support our company values. Our employees, consumers and shareholders are not being fairly represented by David Vitter, Rob Portman, Geoffrey Davis and Steve Chabot.

In the light of diminished shareholder value and negative publicity surrounding a 2010 incongruent donation by Target, a company with similar employee protections, we're concerned that political spending of any kind connected to our company name will come under increasing scrutiny. We believe that stated company values must be reflected in our political spending decision or diminished shareholder value may result.

A recent New York Times opinion piece by John Bogel, founder and former CEO of Vanguard, "The Supreme Court itself put the onus on shareholders to control corporate political giving. In his opinion for the majority of his Citizens United, Justice Anthony Kennedy, predicated the First Amendment right of free speech on the ability of shareholders to ensure that speech reflects their views rather than diverting corporate assets for the benefit of executives. He suggested that any abuse could be corrected by shareholders through the procedures of corporate democracy."

We believe that political contributions which are incongruent with stated company values, can call into question our brand and reputation. We do not want to see our shares of P&G drop precipitously because management has violated the trust of employees, consumers and shareholders, by supporting candidates or causes that work across purposes.

We cannot allow political giving to put our company at risk of boycotts or shareholder lawsuits, while subjecting our brands to reputational risk. We believe that seeking the right to vote on political spending is a duty for our shareholders and fiduciaries to protect the value of our stock.

We ask that you advance the rights of all shareholders by voting yes on proposition 3. Thanks.

Robert A. McDonald

Thank you, Ms. Goodridge.

Is there any further discussion on this proposal? Once again, up to 3 speakers may address this proposal for a maximum of 2 minutes each.

Our policy is -- our company policy is to not use corporate funds to support the giving to political organizations. We have now made sure that, that policy will be tightened up and that those contributions will have to be approved by the CEO.

Nevertheless, we do not believe it would be prudent to vote for this proposal. In fact, we're recommending a vote against this proposal because we don't want to limit our ability to do such things in the future. The Procter & Gamble purpose is to touch and improve lives, and it doesn't discriminate against people. We think that we should improve the lives of all people around the world without regard to sexual orientation, race, gender or whatever.

As a result, we also believe our employee population should look and represent the consumers that we're trying to serve. So we respect every individual's right to be who they are. Diversity is at the very core of our beliefs as a company. And our historical support for these candidates was based on specific business issues, and does not reflect support for any of their views that they may have on social issues. Thank you.

For reasons cited on pages 71, 72 of the proxy statement, that supplemented by our proxy filing on October 6, the Board of Directors recommends a vote against this proposal. To pass, a majority of shares participating in the voting must vote in favor of this proposal. That includes a discussion on the shareholder proposals, and will now proceed with the voting.

Is there anyone else who needs a ballot so that they can vote here today? Please raise your hand and an usher will give you a ballot. Once you've completed your ballot, please hold it up so the ushers can collect it.

Results of the voting will be announced later in this meeting. It's now time for questions or comments on other matters related to the company's business which have not already been discussed. During this period, please confine your comments to new subjects of discussion. We don't want to revisit discussion of proposals previously addressed during the meeting. And to be fair to all, no shareholder would be allowed to have more than one 2-minute turn at the microphone, until I've determined that other shareholders have had an equal chance to address the meeting. There will also be a limit of 3 speakers on any one subject. And also in the interest of time, we will allow no more than 30 minutes for this question-and-answer period. Are there any questions?

Question-and-Answer Session

Unknown Executive

Tim White [ph], a shareholder.

Unknown Speaker

Mr. McDonald, I had a quick question to see if I could possibly have Werner Geissler identify himself, I have a fast question for him after the meeting, please.

Robert A. McDonald

There's Mr. Geissler. For those of you who don't know, Werner Geissler is the Vice Chairman of Global operations for Proctor & Gamble, and is also currently serving as the chair, along with his wife Sabine for the World Choir Games which will be in Cincinnati in 2012. Werner, thank you for your service.

Other questions?

Deborah Platt Majoras

I have Dan Isett, proxy holder.

Robert A. McDonald

Mr. Isett, please.

Dan Isett

Mr. Chairman, my name is Dan Isett. I'm here to represent the Parents Television Council, a national nonprofit organization, whose goal is to protect children from sex, violence and profanity in entertainment. I'm here today to applaud Procter & Gamble for its unwavering commitment to family-friendly and responsible corporate advertising standards. Over the European -- over the years, rather, P&G has continuously sponsored family-friendly shows such as Biggest Loser, Extreme Makeover Home Edition and Dancing with the Stars. As the world's largest advertiser, such a commitment by P&G has an enormous undertaking and we certainly recognize that. But it's also proof positive that such a commitment is possible. Your leadership should be envied by corporations across the whole country, and indeed around the world. Our appreciation today extends beyond just your family-friendly advertising policies. Thanks to P&G and your collaborative work with companies like Wal-Mart, you're actually helping to produce urgently needed television programming for families such as A Walk In My Shoes, A Change of Plans, Truth Be Told and others. We would simply like to commend P&G for providing these safe and sound entertainment options to millions of American families. It has been our honor and pleasure to promote and to distribute information about those shows to our members and the people around the country and to the public at large. So in behalf of our 1.3 million members, we proudly commend you, and we encourage you to continue your leadership role for corporations around the country.

Robert A. McDonald

Thank you very much, Mr. Isett. For the purpose of touching and improving lives, as I said in my Chairman's address, you can't compartmentalize that. You have to make it pervasive in everything you do. And as the world's largest advertiser, as Mr. Isett said, we have a responsibility to improve the quality of programming on television. 70% of U.S. families are unhappy with the quality of programming on U.S. television. So we've bucked up our policy. We've partnered with other companies to join our efforts. We are making a difference. And as Mr. Isett said, we've partnered with Wal-Mart to create Family Movie Nights and we're going to continue to do that. We think it's terribly important to improve the quality of programming. And as the largest advertiser in the world, we see that as our responsibility. Thank you, Mr. Isett.

Unknown Executive

Julian Martinez, proxy on behalf of Jane Garcia, a shareholder.

Robert A. McDonald

Mr. Martinez, good morning.

Julian Martinez

Mr. Chairman, I'm representing SER-Jobs for Progress National. SER is a national nonprofit 501(c)(3) corporation serving the needs of Hispanic Americans. SER was organized in 1964 by the League of United Latin American Citizens and the Americans in behalf of Spanish prepare for and find jobs. SER now operates charter schools, day care centers, one-stop centers, programs for the elderly, teaches financial literacy courses and many other services that help individuals to become productive members of our society. SER is made up of 30 affiliate organizations across the country, operating in over 200 cities and serving over 1.3 million individuals a year. We are recognized by the U.S. Department of Labor as a premier community-based organization, serving the employment needs of the Hispanic community. Hispanic Business Magazine recognizes SER as one of the top 25 nonprofit Hispanic organizations in the nation. We at SER would like to take this opportunity to thank Procter & Gamble for all they have done for the Hispanic community in general and for the support they have given SER in the past in particular. You also should be commended on the diversity of your Board of Directors. You have one of the most diverse Board of Directors of the Fortune 500 companies. Your diversity of recruitment and retention of Hispanic employees is exemplary. We know that much of this is due to your commitment, Mr. Chairman. And for this, we want to thank you.

Robert A. McDonald

Thank you, Mr. Martinez. I'm humbled.

Julian Martinez

SER worked with Procter & Gamble in the past, and we'd like to reengage so that we can help you make this world a better place. Board member, Ernesto Zedillo is an excellent choice, and we are confident he will give you unique insights into the Latino communities, both domestically and internationally. According to the last U.S. census, Hispanic population grew from 35.3 million to 50.5 million from 2000 to 2010, and accounted for over half the national growth rate, 1 of 4 children is now Latino and a number of Hispanic owned businesses grew by 44% from 2002 to 2007, compared to 15% by non-Hispanic firms. The combined Latino population of the U.S. is greater than the total population of Canada and larger than any other Latin American countries, except Mexico and Brazil. Procter & Gamble recognizes the significance of Hispanic markets in the U.S., and we commend you for it and we commit -- and your commitment to diversity. Thank you, for this opportunity to address you.

Robert A. McDonald

Thank you, Mr. Martinez.

We are committed to diversity. I talked in my remarks about the importance of innovation. We honestly believe that diversity is actually critical to our innovation. We obviously need to have an employee base in the board that represents the consumers we're trying to serve. But this diversity provides nodes that make connections, and innovation is oftentimes connecting two seemingly unconnected ideas. You know Alexander Graham Bell invented the telephone to help hearing-impaired people. He worked in a deaf academy. Marconi invented the radio for two ships to communicate at sea, and Thomas Watson said that the United States might need 2 or 3 computers someday when he invented the computer. In each case, innovation doesn't happen in a straight line. Marconi didn't expect the radio to come on land. Alexander Graham Bell didn't expect all of us to carry cellphones and Thomas Watson didn't expect all of us to have more computing power on our automobiles than the computers I worked on when I went to West Point. Innovation doesn't happen in straight lines. And the diversity of our organization is what provides the nodes for that innovation to occur. We are very proud of the diversity of our organization. That's a necessity for us. We're also proud of our Board of Directors. We think it's the best Board of Directors anywhere in the world. And we're also very proud of President Zedillo, and his contributions, particularly as it relates to the Hispanic community. Thank you very much, Mr. Martinez.

Yes, sir?

Deborah Platt Majoras

I have Robert Badgely [ph], shareholder.

Robert A. McDonald

Mr. Badgely, good morning.

Unknown Speaker

I'd like to welcome Meg Whitman to the Procter & Gamble board, and congratulate her on becoming President of Hewlett-Packard. I think she's a positive addition. Which brings me to my question. Number one, is Hewlett-Packard a vendor or a supplier of information technology services to Procter & Gamble? And approximately, what percentage of your total information technology budget is paid to Hewlett-Packard?

Robert A. McDonald

Thank you, Mr. Badgely. Well, as you can -- we're thrilled to have Meg back on our Board of Directors. You may recall that she was on our Board of Directors. Many of you may not know this, but Meg Whitman started her career at Procter & Gamble. We're very proud of that. She left then to run for political office. She came back. And just in the last couple of weeks, she's been appointed the CEO of Hewlett-Packard. The Procter & Gamble Company does do business with Hewlett-Packard. But as you would expect from your company, we followed the appropriate steps to understand what steps, if any, we needed to take given Meg's position at Hewlett-Packard. The first step is when every -- when any situation changes with any member of the Board of Directors, including my own, they immediately need to resign their position as a Director of the company. So Meg and I talked. She was very quick in getting me a letter of resignation. The Board of Directors chose to not accept that letter of recommendation because of Meg's contributions to the board over many years. The next step we did is we looked at the Securities and Exchange guidelines to make sure that the business relationship between Procter & Gamble and Hewlett-Packard was not an impediment. And maybe since that's a legal issue, I'll ask our Chief Legal Counsel, Debbie Majoras, to talk about that and the subsequent steps we've taken.

Deborah Platt Majoras

Sure, Bob. Thank you very much. As a first step, our Governance & Public Responsibility Committee took up the issue, and they looked first under the SEC and New York Stock Exchange rules and also under our P&G policies, which are designed to incorporate those rules, as well as best governance practices to determine whether Meg Whitman could still be considered to be an independent board member. You see, when a board member works for a company that has a business relationship with P&G, we need to make a determination about whether she can be considered an independent board member and therefore serve on any committee and not have restrictions. So the governance committee, with our help, undertook the analysis and determined that because Ms. Whitman does not hold more than 5% of the Hewlett-Packard Company because the business that we do with HP constitutes less than 1% of Hewlett-Packard's revenues and because she is not directly involved in negotiating the transaction between us that she could be considered to be independent. The governance committee then took another step to look at the company's related transaction policies and conflict of interest policies to make sure that we're not putting our board, our company or, in particular, Ms. Whitman's Hewlett-Packard in a difficult conflict of interest situation. And the governance committee determined that it would recommend to the board that we put in place some restrictions on discussions that Ms. Whitman will be allowed to participate in, in the boardroom. So we will make sure that Meg is excluded from any discussions in the boardroom on our overall IT strategy and certainly, our IT outsourcing strategy and our contract with HP. The board then met, and by unanimous consent, took -- approved those recommendations by the governance committee. And that is why today, we could still have Meg nominated as a Director continuing for Procter & Gamble.

Robert A. McDonald

Thank you, Deb. Thank you for the questions, sir. Any other questions or comments?

Unknown Speaker

Requesting an additional 2 minutes, Karl Beckman [ph], shareholder.

Robert A. McDonald

Yes, Mr. Beckman [ph]?

Unknown Speaker

Yes, Mr. Chairman. A large portion of the notice of annual meeting and proxy statement pertains to the compensation package. Do you feel that the compensation is justified considering that Colgate-Palmolive stock price is $27 higher than P&G? Likewise, Colgate-Palmolive is lower, the market cap is lower, 4x as low, and the price per earnings ratio, the earnings per share and the dividend is higher than P&G's. On top of all of that, it's my opinion that P&G products are the best, and the employees are the best, and the operations are based in locations that have a low cost of living. Colgate-Palmolive seems to be a better investment for the investor. Yesterday, the news media reported that Procter & Gamble's stock was the worst performer in the Dow Jones Industrial 30. Some other concerns is -- are: will the company be able to sustain a collapse of the European economy? Does the company have a plan in place to deal with the collapse of the European economy? I would also like you to comment, if we have time, personal comments is to your opinion of the algorithmic trading that goes on, on Wall Street. That's also known as robotic training -- or trading? And also, does P&G ever submit comments when the government solicits public comments for such matters such as reinstating the uptick rule? And in addition, would you voice your personal opinion regarding whether or not the government should reinstate the uptick rule?

Robert A. McDonald

Mr. Beckman [ph], our fundamental and overwriting objective is to create value for our shareholders. And to do that at leadership levels on a consistent basis. We want to be in the top third of our competitive peer group until the shareholder return. And we've done that over a long period of time. Our robust growth strategy and clear priorities are necessary for sustainable growth. But we also have to ensure our reward strategy is tightly aligned with our growth strategy. Our priorities for the year ahead are clear. I talked about those. Continuing sales growth momentum, restoring operating earnings growth, executing pricing with excellence and doing all of this where we improve productivity. We design our compensation programs to encourage and reward these results. About 86% of the key components of total compensation of our top executives is based on company performance, 86%. Importantly, compensation at P&G is designed so that executive management can only do well if the company also does well. And obviously, if the shareholders do well. Relative to the European Union, Mr. Beckman [ph], I can assure you, we have many scenarios that we are working against in order to be ready for any future issues that may arise. In terms of robotic trading or commenting on different proposals, yes, we do provide comments to members of government in order to ensure that their policies and regulations are consistent with growing a business, growing an economy and creating more jobs. Thank you, Mr. Beckman [ph]. Any other questions or comments?

We now have the results of the voting. I'm advised by the inspector of election that each of the 11 nominees listed in the proxy statement has received more 4 votes than against and has been elected to a one-year term expiring at the annual meeting in 2012; that the board proposal to ratify the appointment of independent registered public accounting firm has been adopted with at least 99.08% votes cast in favor; that the board proposal for an advisory vote on executive compensation has been adopted with at least 97.51% votes cast in favor; that the board proposal for the frequency on the Say on Pay vote has been adopted for every one year with at least 85.63% votes cast in favor of one year, 0.66% votes cast in favor of 2 years, 13.71% votes cast in favor of 3 years; that the board proposal to amend the amended Articles of incorporation has been adopted with at least 99.21% of the issued and outstanding shares cast in favor; that the shareholder proposal to adopt cumulative voting has been defeated with at least 76.53% votes being cast against or a favorable vote of just 23.47% of the shares participating; that the shareholder proposal to entirely phase out Iams' use of animals in laboratories has been defeated with at least 97.62% votes being cast against or a favorable vote of just 2.38% of the shares; and finally, that the shareholder proposal to include a proposal on the annual proxy statement describing the company's electioneering contributions and communications has been defeated with at least 93.3% votes being cast against or a favorable vote of just 6.7% of the shares. Certified totals and percentages will be available later from the secretary.

This completes today's business. I want to again to express my appreciation for your confidence and support. I want to thank so many of you who have been long-term shareholders of the Procter & Gamble company. Now may we have a motion to adjourn? Thank you. Thank you very much. The meeting is adjourned. Thank you.

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