Sunday, December 7, 2003

[IMAGE] P&G chief financial officer Clayt Daley
(Glenn Hartong photo)

CFO in spotlight, off hot seat



By Cliff Peale
The Cincinnati Enquirer

When Wall Street analysts pour into Cincinnati this week to hear Procter & Gamble Co.'s story, Clayt Daley will be front and center.

P&G chairman and chief executive A.G. Lafley will headline the two-day event. But Daley, chief financial officer since 1998, has become far more than a corporate bean counter. With Lafley's blessing, he's emerged as P&G's chief advocate to investors on Wall Street.

With P&G sales and profits at record levels and its stock price at three-year highs, Daley's career is flying high. It wasn't always that way.

In the summer of 2000, after P&G missed Wall Street earnings expectations two quarters in a row, Daley was on the hot seat. The fiasco cost chairman and CEO Durk Jager his job. A scarred Daley remained, after a thorough evaluation by P&G's board.

CLAYTON C. DALEY JR.
• Job: Chief financial officer, Procter & Gamble Co.
• Age: 52
• Born: Canton, Ohio
• Residence: Indian Hill
• Family: Wife, Meredythe; two children
• Education: Davidson College, B.A., 1973; Ohio State University, MBA, 1974
• Joined P&G: 1974, at paper plant in Green Bay, Wisc.
• Promotions: Became director of corporate planning in 1986, comptroller of U.S. operations in 1991 and vice president in 1992. Promoted to corporate treasurer in 1994 and chief financial officer in 1998.
Today, he remains a watchdog, and a formidable presence driving P&G's financial performance. Lafley said one of Daley's attributes was that "he's a very direct communicator. He doesn't beat around the bush."

"Whenever I do a business review of either a business unit or the whole company, he's right by my side," Lafley said.

Ginger Kent, the Cincinnatian who worked with Daley when she was CEO of P&G's reflect.com Internet venture, said Daley is "incredibly buttoned up, and he knows his stuff."

"The bottom line is usually important to him, and that's where he's coming from," said Kent.

'He delivers'

At home, Daley's a wine collector, with a collection of antique corkscrews in his Indian Hill basement. But at work, standing well over 6 feet tall and with a deep voice, the 52-year-old Daley is an imposing, no-nonsense presence.

The CFO, who's at his desk downtown early every morning, has earned his keep in a 29-year P&G career as a bulldog negotiator. But he also has built a reputation as somewhat of a bully.

So just as P&G as a whole has become more transparent and accessible in the past few years, Daley also has clearly tried to moderate his image.

He acknowledged that under Lafley's mandate for more openness, "it's much easier for someone in my office to be collaborative."

"I can't say I've ever been worried about that (image)," he said, in a rare interview in his home. "I just focused on doing my job."

"But you always look back," he said. "I think, particularly in finance, you could always be more collaborative than maybe you were. In a company like P&G, you always felt like as a member of the finance function, you had to push."

These days, Daley is still pushing, with that directness that Lafley praised always on display. He personally negotiated P&G's $5.7 billion purchase of German hair-care giant Wella AG, its biggest acquisition ever. Later, he tersely told disgruntled Wella minority shareholders in public Web casts that they wouldn't get a higher price for their shares.

And when Wall Street rumors suggested that P&G might sell its Folgers or Pringles brands, Daley shot back, calling the reports "a bunch of baloney."

Within P&G, Daley has built a reputation of negotiating tough deals for the company.

"When Clayt goes out to negotiate on behalf of P&G, he delivers," said Mark Schar, former head of P&G's global business ventures group.

In P&G's quarterly conference calls with Wall Street, Daley is fully in command, handling the presentations until Lafley appears to answer questions.

"They really make themselves very open. They present themselves very well," said Marvin Roffman of Roffman Miller Associates, a Philadelphia-based money management firm that owns several million dollars in P&G shares. "A lot of that is (Daley), because he's a good communicator."

"Because of the numbers we're putting up, these are certainly calls that are more fun to do," Daley said. "The bottom line is, we've got a good story right now."

A long-term view

When asked his greatest contribution at P&G, Daley points to his role in strategic decisions.

Lafley cites Daley's work on the sale of P&G icons Crisco & Jif, as well as the outsourcing program that has moved thousands of employees to other companies from P&G.

"He actually pushed back on some of the early scope," Lafley said. "Clayt was always pushing us to not be penny-wise and pound-foolish, to not do something that would look good, but not be good in the long term."

Daley has responded well to innovative programs, like the online cosmetics experiment reflect.com, that don't necessarily provide immediate returns, said Schar.

"It would have been very easy for him to have taken a straight finance point of view on those 'whacked out' ideas, but he didn't do that," Schar added. "He's tough. He asks all the right questions. I always found him to be fair."

Lafley also calls Daley "our conscience on (generating) cash." That has left P&G with plenty of liquidity to buy companies like Clairol and Wella, without jeopardizing its solid-gold AA debt rating.

Gordon Brunner, P&G's retired chief technology officer and a former board member, called Daley "a capable and forceful personality."

"You can say without question that he's a very tough negotiator, a very bottom-line kind of guy," Brunner said. "Every company wants a CFO that's not only a bean counter, but participates in a strategic role."

'A very tough time'

Under P&G's structure, unveiled in 1999, Daley's finance function deals with global businesses to determine P&G's forecasts and actual results.

That turned into an ugly problem in 2000, when an organization unused to the rapid changes missed earnings two quarters in a row. The shortfalls sent P&G reeling, shaving $40 billion off its market value in four months.

And Daley found himself at the center of the firestorm, because he had been one of those assuring Wall Street that P&G results were on track. The company ended up paying $49 million to settle a shareholder lawsuit.

Jager paid the price, retiring from P&G when the second shortfall was announced. Daley remained, but was thoroughly investigated by the board of directors.

"The board does its job," Daley said, noting that he did not expect to be fired.

"We had a lot of discussions with the board about what happened. ... It's a shared responsibility. I don't personally, and I'm sure the people in the finance function, don't shirk our responsibility."

"There was just an awful lot of change going around. With the benefit of hindsight, it put the company in a more unpredictable position than it likes to be in. It simply reduced our ability to be predictive.

"Everybody at that time was just trying to do the best they could."

Changing times

Daley and Lafley said the 2000 stock drop has inspired changes at P&G.

Even before the fall of Enron and the ensuing corporate governance scandals, Daley had taken the initiative and introduced a "financial stewardship" program throughout P&G. The goal: to let the company more cleanly track and thus ensure business results.

That has helped P&G keep its results consistent, even with troubled economies and political instability in Latin America, Lafley said.

"We saw things earlier, and we surfaced them faster," Lafley said. "We had the right people working on them. Clayt deserves credit for that."

E-mail cpeale@enquirer.com



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