Management, Shareholders and the Board Working Together
Corporate Governance is the interaction of the management, shareholders and Board of Directors to help ensure that all investors—both shareholders and creditors—are protected against managers acting solely in their own best interest. Corporate Governance consists of laws, policies, procedures and, most importantly, practices that ensure the well-being of the assets of the Company. Corporate Governance is at its highest levels when management acts as if they are long-term investors in the Company.
The policies, procedures and practices spelled out in this section demonstrate that Procter & Gamble takes Corporate Governance very seriously. Our management acts as long-term investors of the Company because they, like most Procter & Gamble employees at all levels, are in fact long-term investors.
Employees Are Long-Term Investors
In 1887, before P&G was even a publicly traded company, William Cooper Procter introduced a profit-sharing program for employees. At the time he said, “We should let the employees share in the firm’s earnings. That will give them an incentive to increase earnings.” He revised that program in 1903 to have the profit sharing be awarded in the form of actual P&G stock. He reasoned that as employees became stockholders, their economic interests and those of the Company would be bound more closely together.
That program still exists today with a large part of each U.S. employee’s retirement consisting of P&G stock. Additionally, virtually all employees own P&G stock or stock rights via various investment programs. Because of that fact, employees’ economic interests are aligned to those of the Company.
Further, our Executive Share Ownership Program requires senior executives to own shares of Company stock and/or restricted stock units valued at eight times base salary for the Chief Executive Officer, and five times base salary for the other senior executives. Non-employee directors must own Company stock and/or restricted stock units worth six times their annual cash retainer. These compensation programs help to ensure the alignment of the interests of our senior executives and directors with shareholders.
A Foundation of Integrity, Control and Stewardship
P&G has a strong history of operating with integrity throughout the Company—at all levels, in all countries, both internally and externally. Our actions and the actions of all our employees are governed by our Purpose, Values and Principles. The basis for every decision we make at P&G can be found in our Purpose, Values and Principles—our PVPs. The clarity and constancy of the Company’s PVPs is the one factor above all others that has driven the Company’s growth over generations. Our commitment to operate responsibly is reflected in the steps we have in place to ensure rigorous financial discipline and Corporate Governance.
- We have an active, capable and diligent Board of Directors that meets the required standards of independence, with members who understand their role in providing strong Corporate Governance. Our Audit Committee is comprised exclusively of independent directors, with significant financial knowledge and experience. The Audit Committee also meets regularly in private session with the Company’s independent auditors, Deloitte & Touche LLP.
- We maintain a strong internal control environment. Our rigorous business process controls include written policies and procedures, segregation of duties and the careful selection and development of employees. The system is designed to provide reasonable assurance that transactions are executed as authorized and appropriately recorded, that assets are safeguarded and that accounting records are sufficiently reliable to permit the preparation of financial statements conforming in all material respects with accounting principles generally accepted in the U.S. We monitor these internal controls through an ongoing program of audit self-assessment and internal and external audits.
- We maintain disclosure controls and procedures designed to ensure that information required to be disclosed is recorded, processed, summarized and reported in a timely and accurate manner. Our Disclosure Committee is comprised of senior-level executives responsible for evaluating disclosure implications of significant business activities and events.
- We execute financial stewardship by maintaining specific programs and activities to ensure that employees understand their fiduciary responsibilities to shareholders. This ongoing effort encompasses financial discipline in strategic and daily business decisions and brings particular focus to maintaining accurate financial reporting and effective controls. In addition, our Global Leadership Council is actively involved in rigorous oversight of the business.
- We reinforce key employee responsibilities through the Company’s Worldwide Business Conduct, which details management’s and the Board of Directors’ commitment to conduct the Company’s business affairs with high ethical standards. Every employee is required to be trained on the Company’s Worldwide Business Conduct Manual, and every employee is held personally accountable for compliance. Portions of the Worldwide Business Conduct Manual comprise P&G’s Code of Ethics for SEC and New York Stock Exchange Regulatory Purposes, as further described in the Manual.
Doing What’s Right
P&G’s reputation is earned by our conduct: what we say, what we do, the products we make, the services we provide and the way we act and treat others. As conscientious citizens and employees, we want to do what is right. For P&G, and our global operations, this is the only way to do business.
- Board Composition
The Board of Directors at P&G consists of men and women who are leaders in the fields of business, government, law, medicine and education. To learn more about the members of our Board, see the Board of Directors’ biographies.
- Board Committees & Charters
To help the Board effectively and efficiently fulfill its responsibilities, four committees deal with specific topics facing the Company. Each of these four committees has its own charter that details its purpose, duties and responsibilities.
- Corporate Governance Policies
Corporate Governance consists of laws, policies, procedures, and most importantly, practices that ensure the well-being of the assets of the Company. The Company has detailed Corporate Governance policies to help ensure the highest level of integrity in all of the Board and Company affairs.
- Articles of Incorporation
Our Articles of Incorporation are the primary rules governing the management of P&G and are filed with the State of Ohio.
- Code of Regulations
P&G’s Code of Regulations is adopted by the Company’s shareholders and further defines the governance of the Company, how its affairs shall be conducted, the composition and conduct of the Board of Directors, and the duties of certain officers of the Company.
- Our Political Involvement
P&G participates in the political process to help ensure that the interests of our employees, consumers, and shareholders are fairly represented at all levels of government around the world.