VOTERS: BREAK UP TERMS.(Business)

Byline: Alexander Coolidge Post staff reporter

Procter & Gamble shareholders Tuesday solidly voted in favor of corporate gadfly Evelyn Davis' proposal to destagger terms for the blue chip company's board of directors.

But while the measure collected roughly 56 percent of the vote -- over management's objections -- there is a catch. The item was advisory only, so company officials will mull over it and decide whether to propose a formal change of rules next year.

"This would allow the directors to be more independent," Davis told shareholders at the Aronoff Center for the Arts in Cincinnati.

P&G board members used to be all elected at once until the company lengthened and staggered the terms in 1985. Destaggering boards is thought to make them more accountable to shareholders and has become a popular shareholder cause in America since the Enron meltdown and other corporate scandals.

P&G has just closed on its biggest-ever acquisition -- more than $5 billion for an 80 percent stake in German hair care giant Wella AG -- and is subject of continued speculation that it will purchase German beauty company Beiersdorf AG. But Chief Executive A.G. Lafley noted Tuesday that all of the last fiscal year's growth was generated from in-house brands rather than acquisitions. Before the meeting, Lafley declined to comment on a potential Beiersdorf acquisition, but later added P&G envisions 50 percent of future product ideas and innovations coming from outside the company.

Last year, P&G grew its sales 8 percent to $43.4 billion. Its net earnings were up 19 percent to $5.2 billion. The company said its profit margin of 12 percent was the highest in 50 years.

Hit with a recent spate of lawsuits by competitors over P&G's advertising claims -- including one brought by the makers of heartburn drug Pepcid against P&G's Prilosec OTC, Lafley assured shareholders the company was working with industry groups to mediate disputes.

Nearly 100 demonstrators, including animal rights activists, gathered outside the meeting. Some sympathetic shareholders inside praised P&G's decision to sell fair trade coffee over the Internet but urged it to expand its offerings under the Millstone brand. Lafley said he believed the coffee, which is meant to deliver better wages to impoverished bean farmers, would appear on store shelves soon.