CEO contender Arnold steps down at P&G

CINCINNATI - The Procter & Gamble Co. said Susan E. Arnold stepped down as president yesterday, which leaves chief operating officer Robert A. McDonald as the front-runner to be the next chief executive of the world's largest maker of consumer products.

Arnold, who was P&G's highest-ranking woman, and McDonald were promoted in 2007 in a move that some analysts perceived as setting up a succession for chairman and chief executive A.G. Lafley. Both McDonald and Arnold are 55 and have been with the company since 1980.

But Lafley, P&G's CEO since 2000 and now 61, has dismissed suggestions that he is ready to retire. He told analysts in December: "The rumors of my passing are greatly exaggerated."

Arnold, the president for global business units, helped lead the growth of P&G's beauty operations. McDonald is a veteran executive for the Asian emerging markets where the company increasingly sees its future growth.

Arnold, who could emerge as a candidate for a top position at another company, wasn't immediately available for comment. She will retire Sept. 1, P&G said; its announcement said she had long intended to step down when she turned 55. Her birthday was Sunday.

Wendy Nicholson, a Citi Investment Research analyst, scoffed at that reason, writing in a note yesterday that it "sounds like baloney to us."

She pointed out that Arnold had been promoted less than two years ago, and said the beauty and health businesses that Arnold led had underperformed lately.

"Whether an internal decision about succession, or simply a change in enthusiasm about her current role or about PG, prompted her departure, with Arnold gone, we think it is pretty clear that McDonald will succeed Lafley," Nicholson wrote.

Ali Dibadj, a senior analyst for Sanford C. Bernstein & Co. of New York, said he already had considered McDonald the favorite.

While Arnold was a key architect in the growth of P&G's beauty business, Dibadj said, other executives have been taking on increasing roles.

"I would say the bench strength in that business is strong," said Dibadj.

However, Nicholson expressed concern about the loss of another key executive - Clayton C. Daley Jr. had stepped down as chief financial officer Jan. 1 - while P&G is battling difficult economic conditions.

Shares of P&G, whose brands include Tide detergent, Pampers diapers, and Gillette shavers, fell yesterday to a 52-week low. They closed at $44.18, down $1.53 or 3 percent. They had traded as high as $73.57 in the last year.

Arnold will be on "special assignment" to Lafley until retirement. Her job won't immediately be filled. The company said three vice chairmen who had reported to her would report to Lafley, "reducing a layer of management as part of the company's ongoing simplification effort."

Lafley praised Arnold as a role model and credited her with helping P&G's beauty business nearly triple in size, from $7 billion in 1999 to $20 billion in sales behind such brands as Olay skin care, Pantene shampoo, and Head & Shoulders shampoo. She also has been a major contributor to global sustainability goals.

Arnold, whose P&G firsts included first female president and first vice chairwoman, is frequently ranked among the most powerful women in U.S. business.

She was named vice chair for P&G Beauty in 2004, then vice chair for Beauty and Health in 2006. She also serves on several boards of directors, including McDonald's Corp. and Walt Disney Co., and will continue those roles, P&G said.