P&G Cuts CEO Lafley's Bonus After Earnings Shortfall

By Serena Ng 

Procter & Gamble Co. cut Chief Executive A.G. Lafley's bonus by $1.1 million in the company's recently ended financial year, after the consumer-goods company's sales and profit growth came up short of its targets.

Mr. Lafley, who came out of retirement in May 2013 to run P&G a second time, received total compensation of $18.3 million in the year ended in June, a 6.2% decrease from his $19.5 million compensation package the previous year, according to a proxy statement the company filed on Friday.

The decline was mainly due to a smaller bonus of $3.29 million, which was down from $4.4 million a year earlier. P&G said it paid Mr. Lafley 66% of his target bonus because the company didn't reach its profit and sales goals.

P&G reported net income of $7 billion for the year through June 30, down 40% from a year ago. Sales fell 5% to $76.3 billion, weighed down by the weakening of many foreign currencies against the U.S. dollar. The company's organic sales growth, a measure that excludes currency swings and the effect of acquisitions and divestments, grew 1%, as a result of weakness in P&G's beauty division and challenges the company faced in China and other markets.

At the start of P&G's last fiscal year, the compensation committee of P&G's board had set a 3% organic sales growth target and a 5% target for growth in so-called core earnings per share, which excludes certain items like restructuring costs. The company ended up not meeting the earnings target, reporting a 2% decline in core earnings per share growth mainly because of currency swings.

Mr. Lafley's salary remained at $2 million and he received stock awards valued at $12.4 million. P&G paid $512,040 to cover the cost of Mr. Lafley's use of the company's aircraft when he commuted to its offices in Cincinnati from his home in Florida and when he traveled to attend board meetings at other companies.

On Nov. 1, Mr. Lafley will become P&G's executive chairman and hand over the CEO reins to David Taylor, a 35-year company veteran. The two will work together to pull P&G out of a yearslong performance slump.

Mr. Taylor, 57 years old, currently oversees P&G's divisions that make up around 40% of its sales. He received a $6.1 million compensation package in the year to June, including $945,000 in salary and a $790,272 bonus.

P&G earlier said that after Mr. Taylor becomes CEO, he will receive a base salary of $1.6 million, with a target bonus of 200% of his base salary, as well as equity grants under the company's long-term incentive program. Mr. Lafley will receive a base salary of $1.25 million in his executive chairman role, with an annual bonus target of 150% of that amount.

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August 28, 2015 18:54 ET (22:54 GMT)

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