Procter & Gamble’s Governance Evolution: Aligning Shareholder Value Through Strategic Accountability

Procter & Gamble (P&G) has long positioned itself as a corporate governance leader, but its 2025 proxy materials reveal a nuanced evolution in aligning executive incentives with shareholder interests. The company’s latest governance framework, outlined in its 2025 Proxy Statement, emphasizes board accountability through rigorous director elections, performance-linked compensation, and shareholder engagement. This analysis examines how P&G’s governance strategies—particularly its 2025 Stock and Incentive Compensation Plan—reflect a deliberate effort to balance executive rewards with long-term value creation, while navigating recent shareholder pushback on environmental and governance issues.

Shareholder Approval Trends: A Mixed but Resilient Record

P&G’s historical “Say on Pay” approval rates underscore a generally strong but uneven alignment with shareholder sentiment. In 2020, the company secured 91.78% approval for its executive compensation package [1], a figure that dipped to 90.65% in 2021 [2]. By 2022, approval rebounded to over 92% [3], only to face a rare setback in 2023 when a majority of shareholders voted against the proposal [4]. This dip, attributed to concerns over deforestation practices and sustainability governance [5], was followed by a 90.98% approval rate in 2024 [6], signaling a return to robust support.

The 2025 proxy statement introduces a revised compensation plan designed to address these concerns. By tying executive payouts to metrics such as organic sales growth, operating profit, and free cash flow productivity [7], P&G aims to reinforce the link between leadership performance and shareholder returns. Additionally, the plan mandates that senior executives hold stock valued at multiples of their base salary [8], a structural incentive to prioritize long-term value over short-term gains.

Board Accountability: Structure and Shareholder Pressure

P&G’s board accountability measures are anchored in its 14-director election process and advisory votes on executive compensation. The 2025 Proxy Statement highlights the election of 14 nominees, with a majority of directors receiving over 90% shareholder support in recent years [9]. However, 2022 saw mixed results, as some directors, including Governance & Public Responsibility Chair Angela Braly, faced declining approval rates amid criticism of the company’s environmental policies [10]. This shareholder discontent prompted P&G to adopt a “Fair Elections” proposal in 2023, requiring future governance amendments to secure shareholder approval [11].

The company’s leadership transition—Shailesh Jejurikar set to become CEO in 2025—also reflects a strategic focus on accountability. Jejurikar’s appointment follows a decade of governance reforms under outgoing CEO Jon Moeller, who oversaw a shift toward performance-based compensation and increased board diversity [12]. These changes aim to address lingering concerns about board independence and executive pay, particularly after the 2023 “Say on Pay” rejection.

Governance in Practice: Transparency and Shareholder Engagement

P&G’s governance framework is underpinned by its Purpose, Values, and Principles (PVPs), which mandate that all decisions prioritize shareholder interests [13]. The company’s 2025 proxy statement emphasizes transparency in financial reporting and internal controls, with a dedicated audit committee overseeing compliance [14]. However, the 2023 shareholder vote against the “Say on Pay” proposal highlights the need for further alignment. In response, P&G has expanded its shareholder engagement efforts, including detailed disclosures in its DEF 14A filings [15], to clarify how compensation structures reflect strategic priorities.

Conclusion: A Governance Model in Transition

Procter & Gamble’s governance evolution reflects a balancing act between executive incentives and shareholder demands. While its historical approval rates demonstrate strong support for leadership compensation, recent dips in shareholder confidence—particularly on environmental and governance issues—underscore the need for continuous adaptation. The 2025 Stock and Incentive Compensation Plan, with its performance-linked metrics and share ownership requirements, represents a critical step toward aligning executive and shareholder interests. As P&G navigates leadership transitions and sustainability challenges, its ability to maintain this alignment will be pivotal in sustaining long-term value.

Source:
[1] DEF 14A, [https://www.sec.gov/Archives/edgar/data/80424/000119312521258124/d38800ddef14a.htm]
[2] DEF 14A, [https://www.stocktitan.net/sec-filings/PG/def-14a-procter-gamble-company-definitive-proxy-statement-5eb10ad64b6c.html]
[3] P&G's 2022 Annual Meeting of Shareholders, [https://us.pg.com/blogs/pg-2022-annual-shareholders-meeting/]
[4] The Procter & Gamble Company NPS 2023, [https://materials.proxyvote.com/Approved/742718/20230811/NPS_548999/INDEX.HTML]
[5] P&G Shareholders Signal Discontent Over Forest Failures, [https://www.nrdc.org/bio/shelley-vinyard/procter-gamble-shareholders-signal-discontent-over-forest-failures]
[6] PROCTER & GAMBLE Co (Form: DEF 14A, Received, [https://d18rn0p25nwr6d.cloudfront.net/CIK-0000080424/d2641ee8-34f4-4afa-b05a-3efe825faf90.html]
[7] The Procter & Gamble Performance Stock Program (PSP), [https://contracts.justia.com/companies/procter-gamble-1075/contract/616482/]
[8] Procter & Gamble corporate governance, [https://us.pg.com/structure-and-governance/corporate-governance-overview/]
[9] Procter & Gamble : 2025 Proxy Statement, [https://www.marketscreener.com/news/procter-gamble-2025-proxy-statement-ce7c50ddd881f326]
[10] P&G CEO and chairman, corporate directors re-elected to board after vote, no challenge, [https://www.reuters.com/business/retail-consumer/pg-ceo-chairman-corporate-directors-re-elected-board-after-vote-no-challenge-2022-10-11/]
[11] Procter & Gamble 2023: Our Proxy Votes, [https://www.corpgov.net/2023/09/procter-gamble-2023-our-proxy-votes/]
[12] Procter & Gamble : 2025 Proxy Statement, [https://www.marketscreener.com/news/procter-gamble-2025-proxy-statement-ce7c50ddd881f326]
[13] Procter & Gamble corporate governance, [https://us.pg.com/structure-and-governance/corporate-governance-overview/]
[14] Procter & Gamble : 2025 Proxy Statement, [https://www.marketscreener.com/news/procter-gamble-2025-proxy-statement-ce7c50ddd881f326]
[15] DEF 14A, [https://www.sec.gov/Archives/edgar/data/80424/000119312525191749/d875382ddef14a.htm]