PROCTER & GAMBLE Co — Proxy Solicitation & Information Statement 2004

Aug 30, 2004

DEFA14A 1 l08362cdefa14a.htm PROCTER & GAMBLE DEFA14A Procter & Gamble PAGEBREAK

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, 2004

Mr./Mrs.

Dear :

I am writing to provide some perspective on Procter & Gamble’s classified Board structure and ask for your vote to retain it. This structure has helped ensure continuity and stability of experienced Directors for almost two decades, contributing to P&G’s business and financial success. We see no reason to change it.

Currently, our Board is divided into three classes, each of which is elected for a three-year term. Shareholders overwhelmingly approved this structure in 1985 by a vote of 74% of the shares outstanding (85% of the votes cast). Despite the benefits of the classified Board, some shareholders have expressed interest in moving to the annual election of Directors.

In response, the P&G Board conducted an in-depth review of its classified structure, including consultation with outside legal and governance experts. The Board unanimously concluded that annual election of all Directors is not in the best interest of P&G or its shareholders. Nevertheless, the Board believes shareholders should have a voice on this issue and is submitting the matter to a binding vote at the 2004 Shareholder Meeting.

We believe the classified Board structure should be maintained for a number of reasons:

| • | Classified Boards promote continuity and stability that create
long-term shareholder value. Longer terms enable us to attract and
retain high-quality Directors who develop a more detailed
understanding of the Company’s operations, maintain a longer-term
perspective and can help preserve long-term Company strategies. In a
global, complex and diverse company like P&G, this continuity is
critical for informed, experienced oversight and decision-making. |
| --- | --- |
| • | P&G’s results show the current classified Board structure works.
During the 19-year period it has been in place, on average, earnings
have doubled every 5-6 years; sales have doubled nearly every 10
years; and a $1,000 investment at that time with dividends reinvested
is now worth over $20,000. Over the past three years, earnings are up
122%; sales are up 30%; and the Company’s share price has almost
doubled. There is no reason to risk this kind of financial and
business success by potentially harming the Board’s continuity and
stability. |
| • | Annual elections do not guarantee long-term success for any company.
Annual elections may encourage Directors to focus on shorter-term
issues and may even encourage Directors to submit to short-term
pressures. |
| • | The classified Board structure does not preclude an unsolicited
takeover. Classified Boards do provide greater shareholder protection
in the event of a takeover attempt for less than fair value. They
help ensure the necessary time and perspective to determine if the bid
is adequate and fair, to negotiate better value, or to seek more
beneficial alternatives that maximize shareholder value. |

P&G has been in operation for more than 167 years. Continuity, stability and long-term focus have been hallmarks of our success, and should continue to be. We have benefited from Directors who have a depth of history and experience with P&G. There is no good reason to change a system that is working well.

I ask you to vote against the declassification of P&G’s Board.

Sincerely, A. G. Lafley