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P&G brings back former CEO Lafley

To replace Bob McDonald in the wake of company’s poor performance.

Procter & Gamble, the world’s largest consumer products manufacturer, is bringing back its former CEO A.G. Lafley, replacing the embattled chief executive Robert A. “Bob” McDonald, as part of restructuring plans.

McDonald, who joined the company in 1980 and served as president and CEO from 2009 to 2013, will step down from his position by the end of June 2013, while Lafley will take over the new role with immediate effect.

Lafley has also been elected to the Board of Directors and will serve as its chairman.

The change in leadership comes in the wake of poor performance in the recent times that disappointed investors and analysts. It is also an urgent signal to push up sales to beat rivals.

Although P&G focuses on premium brands, McDonald, when he took over as the CEO, had to shift the strategy to lower cost products and newer markets to boost sales as financial crisis had left consumers short of cash.

However, as these efforts did not show much improvement in results, he had been under the strict scrutiny of the board for the last one year.

In the recent quarters, the company had shown some slight improvement in results, but it again slipped back in late April.

Under Lafley, the company held the top position in the global consumer products market with $84 billion sales and acquired major firms such as Gillette and Wella. However, since then, it lost its position to competitors such as Unilever.

Lafley joined the company in 1977 and served as president and CEO from 2000 to 2009.

Jim McNerney, lead director at P&G, said:  “AG’s record and his depth of experience at P&G make him uniquely qualified to lead the company forward at this important time. The board expects A.G. to further improve results, implement the current productivity plan, and facilitate an ongoing succession process. The Board is confident that he will continue improving P&G’s performance.”

Javier Escalante, an analyst at Consumer Edge Research, told the Financial Times that morale at P&G was as low today as it was when Lafley took over from Durk Jager in 2000. “So he knows how to appeal to the culture and the better part of Procter’s pride and drive,” Escalante said.

P&G shares grew by 0.4 per cent to $78.98 following the announcement of leadership change.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.