Team D

Alberto, Ivi Desiree

Del Rosario, Crystel Anne
Gamboa, Dominic Joe
Melocotones, Cyrah

Critique Paper on the Compensation Plan and Philosophy of Procter and Gamble

(P&G)

I. Compensation Plan of Procter and Gamble (P&G)

Procter and Gamble (P&G) is undeniably one of the leading companies of

consumer goods. The revenue of the company generates more than 1 billion dollars

annually. Some of the well-known products of P&G here in the Philippines are Ariel,

Downy, and Tide (laundry care); Folgers (coffee); Head & Shoulders, Pantene

(haircare); Olay (skincare); Pampers (diapers); and Pringles (snacks). Ariel, Downy, and

Tide (laundry care). P&G became one of the first companies to innovate and the

pioneer company to practice brand-management systems, employee-profit sharing

programs, and extensive market research in America (The Procter & Gamble Company,

2021). According to the Fortune 500 website, Procter and Gamble rank 50th on top

companies worldwide (2020) alongside Apple, Microsoft, Walt Disney, and Facebook, to

name a few. Procter & Gamble is also one of the top 10 companies in the Philippines to

work for according to Jobstreet, placed at the 9th rank. High compensation, medical

insurance, life insurance, retirement plans, and life/work balance are some of the things

that P&G boasts having for their employees (IMoney.ph, 2017).

 Procter & Gamble’s Compensation philosophy comprises three principles. First,

the company pays more to its employees when there is an excessive load of work and

pays less when the workload is less. Second principle states that the company pays its

employees by using the target competitive rate in the market of similar size and nature

companies and lastly, P&G pays according to business strategies that create value for

its shareholders and helps in the growth of the business. These principles appreciate

the right behaviours, enable the company to create value for its shareholders.

Moreover, these also encourage the training and development of employees.

(Employee Compensation Plan at P&G, 2020).

P&G is among the top 25 companies in the world that provide strong

compensation and benefits to their employees. P&G compensate their workers using

different criteria, based on the employee’s performance. One of the basic objectives of

P&G is to create value for its shareholders at different levels of leadership. The

company designs a compensation program which is competitive to the market. P&G

compensation program consists of four components. The four components are: Salary

(Base Pay), Long term incentive programs, short term achievement reward and two

long terms. (Employee Compensation Plan at P&G, 2020).

P&G maintains a moderate balance between its short term and long-term

incentive plans. It also pursues the policy based on work hours. Furthermore, P&G also

uses a clawback policy of compensation in which certain payments of compensation are

translated in the form of financial statements. The company provides their workers with

flexible work hours to maintain a balance between their personal and professional life.

Lastly, P&G also provides health insurance to their employees. It also facilitates them
by giving paid time off and paid vacations. (Employee Compensation Plan at P&G,

2020).

PinoyExchange, a discussion forum used by employees to share their

experiences and opinions, had a thread about the competitive compensation and

benefits program of P&G. According to the website and the past employees of Procter

and Gamble, the company prides itself on a very competitive compensation and

rewards system. An employee shared that the minimum salary is 20 thousand pesos

even as a probationary employee for six months. After being regularized, employees

can have their car plan and be eligible for the 15 monthly payments. However,

employees also shared that the culture inside P&G is a very competitive one.

Employees must be able to really showcase their skills and abilities to be able to climb

up the industrial ladder. One employee also shared that in his perspective, P&G culture

is one of the best working environments he has ever seen; and that during his 4 years

of stay at the company, he realized that culture is very much more important than

compensation (2000). The official website of P&G presents the employee benefits that

are available for future employees since the company believes that their employees

deserve to live better lives; and that the company values, appreciates, and believes that

employees play an integral part in the meaningful work that the company does

(Employee Wellness and Benefit Programs | P&G Careers, 2021). Work and life

balance, total competitive rewards such as discounted P&G products, pension plan,

vacation time, and financial education, life insurance, including medical and wellness

programs extended to the family, are some of the website’s presented benefits.
 Procter & Gamble initially utilized a commission-based agency compensation

model in 1991. However, the company shifted into the Stock and Incentive

Compensation Plan in 2001 to strengthen its interests and subsidiaries acknowledged

for its tremendous success. In this compensation plan, the employees are allowed to

become a shareholder through ownership of the company’s “common stock” (Stock and

Incentive Compensation Plan - Procter & Gamble Co. - FindLaw, 2001). This is given to

employees to motivate them to remain in the company for a longer tenure. Under Article

O of the Compensation Plan, the implementation duration was agreed to last until July

10, 2011. Regardless of the compensation plan’s termination date, no one is affected by

the stock appreciation rights granted before the termination. P&G created a new Stock

and Incentive Compensation plan in 2014 to amend and extend the ownership of stocks

and increase the employees’ share to motivate the employees to stay in the company

and its subsidiaries. The 2014 Stock and Incentive Compensation Plan of P&G is the

current utilized compensation plan and is set forth to last for ten years following its

effectiveness. In this current compensation plan, the total number of shares available is

increased to 160,000,000 instead of the previous 100,000,000 shares in the 2001 Stock

and Incentive Plan. To be eligible for this plan, the employee must agree to stay for an

additional year inside the company and must not engage in “any activity or provide any

services, whether as a director, manager, supervisor, employee, adviser, consultant or

otherwise, for three (3) years following the date of the Participant’s Termination of

Employment”. Under section 15.2 of The Procter & Gamble 2014 Stock and Incentive

Compensation Plan, “payment or vesting of an Award to a Covered Employee that is

intended to qualify as Performance-Based Compensation shall be based upon

Performance Measures, as measured during the Performance Period” (Law Insider:

Incentive Compensation Plan, 2014) which means that the award system of P&G is

based heavily on the performance and growth of their employees.

II. Critique about the Compensation Plan of Procter and Gamble (P&G)

P&G exhibits a good example of following the Section 2 of RA No. 6758 where

the company provides the compensation policy of the State, according to their official

website, policies and practices, whereas P&G is committed to fair pay, transparent

compensation principles and a diverse and inclusive workplace. Based on audits they

have conducted over the last year in the U.S., Canada, Mexico, Germany, U.K.,

Switzerland, Australia and several other countries with statistically significant male and

female populations, we have confirmed that we pay equitably at P&G for similar roles

and similar performance, regardless of gender or ethnicity. The company mentioned

that when it comes to gender pay equity, we recognize that paying equitably for similar

roles and performance is just one important piece of the equation. The other is 50/50

representation of women and men at all levels. On average, P&G hires 50% women into

our management roles, and today, more than 46% of our managers globally are

women. We have deliberate plans and goals in place to get to 50/50 at all levels.

As for the company’s benefits, it is an important factor in considering career

opportunities that portion of your total compensation in helping an employee build

financial independence and provide protection against the unexpected for the years

ahead. Salary is only a part of a well-developed compensation program. A P&G

employee will be receiving more than just a paycheck. Total compensation includes pay
(base salary), benefit program such as medical insurance, life insurance, retirement

plans, as well as stock purchase program and other forms of recognition. In salary, they

believed that salaries should stand out from the crowd and that they are applying two

principles when defining salaries, We pay competitively, they review salary ranges each

year through benchmarking with the finest companies that compete with P&G for market

share and people and ensure our salaries are competitive. And We pay for

performance, as salary increases happen steadily throughout the employee’s career

and will vary based on the employee’s performance progression where each employee

has their own salary plan to correctly reward each individual contribution. P&G also has

Holiday Entitlement, in addition to bank holidays, new hires will be benefiting from 24

days’ paid holiday specifically in the United Kingdom and 23 days’ paid holiday in

Ireland. The company also has a discount scheme called My P&G Discounts, where it

gives P&G employees unbeatable savings at hundreds of retailers. From high street

favorites to the big supermarkets and smaller retailers, an employee can get a discount

every time either through online cashback, or reloadable saver cards. P&G is also

offering a competitive contributory pension scheme, upon becoming a permanent P&G

employee, an individual account (for an employee's retirement account/pension fund)

will be set up on their behalf. Offering a simple and flexible way of saving for the

employee’s retirement, by aiming to help in securing a lifetime pension when retirement

arises.

The compensation plan of P&G does have a huge impact on their employee’s level

of engagement. Having an upright and competitive plan prepared for their employees,

means they are looking for the cream of the top performance and skills, delivering positive
results. Is this good for the employee in terms of motivation? Extrinsically, yes. This is a

way for the employee to provide a sense of satisfaction from their hard work. The benefits

and incentives that were mentioned above are truly motivating. With this in mind, the

competitiveness and expectation of the company to its employees to execute positive

results would be very high. Thus, the employee’s performance influences heavily on the

compensation package.

P&G’s strategy to strengthen and acknowledge employee’s success by allowing

them to become a shareholder of the company’s common stock is a communal practice

amongst multinationals. This provides extra benefit to entice and retain the company’s

valued employees. In the Philippine context, employees who usually receive stock options

are foreign expatriates. Since this is considered a benefit for foreign employees, based

on current regulations, this I considered to be either additional compensation or a taxable

fringe benefit (Fernandez, The Manila Times, 2018). These types of benefits are also

common for higher company positions such as chief executives, and or managerial

positions. Acquiring stocks in a company would also denote entitlement which springs the

employee’s self-esteem.

For the rank-and-file employees, based on our observations, the said benefit may

also apply however is occasionally given. The reason for this is perhaps that stocks are

still uncommon for Filipino households given its technicality and the effort to learn it’s

twists and turns. Another possible reason is that it is not seen as a “tangible” type of

benefit and is that we are used to receiving bonus and benefits in the form of monetary,

and other tangible benefits that are usually a physical form like vehicles, equipment, etc.

We see this as something of a “valuable” asset compared to owning stocks. Nonetheless,

acquiring a share of the company’s stock is a good way to invest when done right, which

means it requires proper research, and planning.

Above everything, for the most part of P&G as a company is driven to provide its

consumers the best service and products, and it can’t be done if not because of the

company’s employees. A company that is administered responsibly and ethically which

also supports and provides an appealing environment to work for their employees, P&G

have proven how to be a model of a global corporate citizen as the company is one of the

500 companies in the world.

References:

Employee Compensation Plan at P&G. (February 26, 2020).

https://fastgulfassignmentsolutions.blogspot.com/2020/02/employee-

compensation-plan-at-p.html

Employee Wellness and Benefit Programs | P&G Careers. (2021). Pgcareers.com;

PGcareers. https://www.pgcareers.com/benefits

Fortune Editors. (2020, May 18). Fortune 500. Fortune; Fortune.

https://fortune.com/fortune500/2020/search/

Gradcracker Limited. Benefits | Procter & Gamble Hub.

https://www.gradcracker.com/hub/55/procter-and-gamble/additional-

content/156/benefits

imoney. (2017, April 25). Top Companies In The Philippines & Why You’d Want

To Work For Them. IMoney.ph. https://www.imoney.ph/articles/top-10-

companies-in-philippines/

Incentive Compensation Plan. (2014). Law Insider; Law Insider.

https://www.lawinsider.com/documents/ekhFvPATScy
Pinoy Exchange (1999, December 15). Best paying companies in the Philippines.

PinoyExchange. https://www.pinoyexchange.com/discussion/10473/best-

paying-companies-in-the-philippines

Stock and Incentive Compensation Plan - Procter & Gamble Co. - FindLaw.

(2001). Findlaw. https://corporate.findlaw.com/contracts/compensation/2001-

stock-and-incentive-compensation-plan-procter-amp-gamble.html

Strategy Online (1999). P&G plots new performance-based compensation plan.

Strategy. https://strategyonline.ca/1999/09/27/26744-19990927/

Taxability of stock options. (The Manila Times).

https://www.manilatimes.net/2018/05/14/business/columnists-

business/taxability-of-stock-options/398621/

The Procter & Gamble Company - Company Profile, Information, Business

Description, History, Background Information on The Procter & Gamble

Company. (2021). Referenceforbusiness.com.

https://www.referenceforbusiness.com/history2/83/The-Procter-Gamble-

Company.html

The Procter & Gamble Company - Policies & Practices

https://us.pg.com/policies-and-practices/fair-pay/