University of Chicago
Type of paper: Thesis/Dissertation Chapter
Ethical decision making for Procter And Gamble
Procter & Gamble (PG) is a global investor, a company that is always on top of marketing and reinforcing its brand names as being at the top of the pack. One example of how the company has used social media to reinforce its brand and then offer a short term income play. The creativity in marketing today can be amazing when one uses social networking in combination with brand awareness. And this type of quick thinking and awareness can set a company apart, contributing to sales. Procter and Gamble is a great example of this. P&G has a purpose to keep current on events that happen through the day that could have an impact on its brands. It looks for things that could possibly have a direct attitude upon loyal customers. “In one instance, for example, the Tide brand came to the rescue after a fiery explosion during the Dayton 500 covered the Speedway with 200 gallons of burning fuel. TV viewers watched track workers using Tide to clean the track during a two-hour delay in the Great American Race. 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. A.220.127.116.11. External reporting on social/ethical issues 100.0% A+ The company provides comprehensive and transparent social/ethical reporting on a regular basis. Coverage: Group-wide coverage (= 100% of employees are covered by reporting). Comment: The company reports on social/ethical issues in its Sustainability Reports and on its corporate website as well as affiliated websites (www.scienceinthebox.com, www.pgbeautyscience.com). The company provides information on employees (diversity and health & safety data, layoffs/outplacement programs, training, working conditions), product responsibility, as well as on its community involvement and philanthropic initiatives. In addition, P&G reports on HSE non-compliance and fines. Some issues in the report are covered in-depth (e.g. community initiatives, diversity, training and consumer information). Some issues, however, are only covered in a rather general way (e.g. working conditions). Apart from policies and standards, there is only little information on the company’s supply chain management such as on supplier audits or counseling with regard to social issues. The company’s 2007 sustainability report was prepared using the Global Reporting Initiative’s reporting guidelines. No information is available whether the report has been audited by an external accountant. BATAVIA, Ohio (AdAge.com) — Procter & Gamble Co. and Unilever have battled over many things over the decades, from soap shares to spy scandals. But the latest battleground may be the most surprising and intriguing — a race to show who’s best at saving the world. P&G Global Marketing Officer Jim Stengel
P&G Global Marketing Officer Jim Stengel
Nothing indicates the growing hold “ethical marketing” has on the industry better than the concept’s growing embrace by the world’s two biggest spenders. While both have been engaged in such efforts for years, they’re talking about them, and particularly advertising them, like never before.
No less than Bill Gates recently mentioned Unilever as a top-of-mind example of a company involved in sustainability efforts in a CNBC interview from the World Economic Forum in Davos, Switzerland. Unilever also won top honors in global ethical-reputation rankings from PR-monitoring firm Covalence in 2007 and Columbia University’s Botwinick Prize in business ethics, in part for such efforts as Dove’s “Campaign for Real Beauty” which aims to reach 5 million girls with self-esteem programs.
In fact, the line between doing good and marketing has become blurry enough that Dove’s “Evolution” viral video had to be yanked from a not-for-profit classification at the last minute to qualify for last year’s Film Grand Prix at Cannes.
The same day as Mr. Gates’ interview, P&G indicated it would be communicating about its sustainability efforts — defined to encompass a broad range of community-betterment programs — a much bigger priority in 2008.
P&G goes beyond
It will be hard to do more communicating than P&G already has done. At least eight P&G brands have active ad campaigns touting environmental or philanthropic efforts, everything from Always and Tampax supporting efforts to keep African girls in school by providing them with free sanitary-protection products to Pantene collecting locks of hair for cancer patients. Two of those efforts already are leading to new-product launches, in the cases of Pantene and Pur water filters, the latter having switched ad agencies in part to advance its cause-related marketing.
Though both P&G and Unilever see prospects for substantial gains from such efforts on their bottom lines and for the communities in which they operate, both acknowledge that much of the effort is for internal consumption. Simply put, it’s getting impossible to attract or retain marketers without a solid reputation for ethical marketing.
“We are seeing, particularly with the new generation of young business people and young marketers, that they are only attracted to companies that fit with their own value set,” said Kevin Havelock, president of Unilever U.S. “And the value set of the new generation is one that says this company must take a positive and global view on the global environment. … The ethical positions we take on brands like Dove, the positions we take on not using models of size zero across any of our brands, the positions we take in terms of adding back to communities … these all underpin an attractive proposition for marketers.”
It’s a similar story at P&G, which has had a fairly long tradition of marketers leaving for philanthropic or religious pursuits.
Cause-marketing efforts have “a big motivational impact,” said P&G Global Marketing Officer Jim Stengel. “It fires the agencies up, too. … It just feels like you’re playing to a higher-order ideal.”
But neither P&G nor Unilever is just preaching to the choir anymore, or even limiting the message to its long-standing public-relations silo. They’re increasingly incorporating their cause marketing into mainstream brand advertising and product assortments.
P&G’s Pur has one of the most elaborate cause-marketing efforts — a $20 million program that aims to purify 2 billion liters of water in Africa and save 10,000 lives by 2012.
New Age as the program may be, the ads are classic package goods. The Pur water-purification packets make for an amazing product demo. Take the most turbid swamp water imaginable, mix in a sachet of Pur Purifier of Water and strain it through a cloth. Within a minute or so, it produces a pitcher of perfectly clear, drinkable water.
The trouble is, the people who need it most have no money. Hence it became one of the cornerstone projects in the company’s global Live, Learn, Thrive philanthropic program, albeit with a commercial twist.
P&G has licensed the product to Canada’s Reliance Products for a U.S. launch aimed at campers and disaster-preparedness kits that broke in late February behind a feature in P&G’s March and April Brand Saver newspaper coupon inserts.
Saatchi gets in the game
Though those ads for the P&G-Reliance effort came from Quigley-Simpson, a Los Angeles direct-response agency, Pur’s shift to a sustainability message played a role in the shift of the brand’s creative account to Omnicom Group’s TBWA/Chiat Day, Playa Del Rey, Calif., from Publicis Groupe’s Saatchi & Saatchi, Los Angeles, last year.
Saatchi lost Pur, but the agency has definitely not given up on sustainability. In January, Saatchi acquired San Francisco-based consultancy Act Now Productions, headed by former Sierra Club executive turned Wal-Mart consultant Adam Werbach, to form a Saatchi & Saatchi S (for sustainability).
The growing interest in sustainability issues from P&G, Unilever, Wal-Mart and others is creating ripples of change throughout marketing services. ARS Group, which for decades has tested TV copy for P&G and others in package-goods, recently formed its own green consulting unit, ARSGreen.
What ARS is finding underlines the big reason that sustainability has become so popular with analytical package-goods types: it works — at least sometimes.
Green ads in the ARS database do about as well as others on recall and persuasion, said Ashley Grace, president of ARSGreen and head of research and development for ARS Group. Doing about average is actually a testament to sustainability’s selling power, as he sees it.
“In our database, about one out of 50 ads usually has a negative tone,” Mr. Grace said. “In the green data set, it’s more like 75%.” ARS has found for decades that negative ads — which raise a problem without offering a real solution — usually fare poorly in tests. But negative green ads generally do about average. And green ads that go the extra step of offering tangible solutions can sometimes score exceptionally well. Ashley Grace, president of ARSGreen and head of research and development for ARS Group Ashley Grace, president of ARSGreen and head of research and development for ARS Group
While many in the package-goods industry believe sustainability messages resonate with only about 10% to 15% of consumers, ARS research indicates such appeals can sway about two-thirds of people, including 24% in the hard-core health and sustainability segment who rate both personal and environmental health highly.
To be sure, copy testing is widely loathed by advertising agencies, particularly creatives. But marketers such as P&G use the results because they correlate with sales results.
It’s clear that ethical marketing really can make a difference in people’s lives. For example, since P&G’s Pantene launched its Beautiful Lengths program in 2006 to solicit locks of hair to be woven into wigs for women receiving cancer treatments, it has gotten enough donations to make 3,000 wigs. Compare that to the 2,000 wigs created over 10 years by the previously existing charity in the space, Locks of Love.
It doesn’t hurt P&G, of course, that Oprah snipped the locks of Hilary Swank on air for one of those wigs, or that schoolgirls have organized events to collect hundreds of hair donations at once. Oh, and it dovetails nicely with the launch of Pantene Beautiful Lengths shampoo and conditioner later this year to care for those long locks.
Of course, such programs only work if other factors, such as product and pricing, are also right. For example, P&G Chairman-CEO A.G. Lafley identified the U.S. Pantene business as the only real problem in the company’s global hair-care portfolio in a January investor conference call, but the share losses date to the brand’s restage last year, not to the launch of Beautiful Lengths a year earlier. Unilever’s Campaign for Real Beauty, while very much alive, last year stopped delivering double-digit sales gains Unilever had seen the first two years of the effort. Dove’s 2007’s new-product lineup didn’t go over as well as prior years (and a price hike on bar soap, not initially reciprocated by P&G and others, didn’t help, either).
By whatever name — ethical, sustainable or cause marketing “is an important secondary factor” for consumers, said Unilever’s Mr. Havelock. “A great product at the right price is the entry point,” he said. “Once there, a company or a brand that has a social responsibility position or a sustainability position will then have an edge over other brands.”
Of course, in an age of social media, marketing’s good deeds seldom go entirely unpunished, and never unquestioned. Even P&G’s ads about efforts to provide free sanitary protection in Africa to help keep girls from missing school, which broke in December from Publicis Groupe’s Leo Burnett Co., have prompted lengthy discussions on some blogs criticizing the motives in using giveaways to develop new markets — and generating more waste as a result.
“When you do it in the right way, with the right tone and authenticity, consumers reward us [for these programs],” Mr. Stengel said, citing Pampers’ 20-country, multiyear effort to fight tetanus via Unicef as the P&G program that appears to have had the biggest positive impact on sales and brand equity to date.
Such programs work best when owned by the brand, which is why P&G, like Unilever, has generally avoided multi-company efforts such as the Red campaign to fight AIDS or the Susan G. Komen pink-ribbon campaign against breast cancer, instead focusing on efforts linked specifically to their own brands’ equity and function. “It has to be right for the brand’s voice,” said Mr. Stengel. “And it has to really work for the business.”