Obama Chooses Former P&G CEO McDonald for Veterans Affairs Post

Jun 30, 2014 4:58 pm ET

June 30 (Bloomberg) -- President Barack Obama nominated Bob McDonald, the former chief executive officer of Procter & Gamble Co., to head the troubled Department of Veterans Affairs, reflecting the view that the agency’s woes are a management failure.

“He’s no nonesense, he’s pragmatic, he does not seek the limelight,” Obama said today in Washington. “He knows the key to any successful enterprise is staying focused on the people you’re trying to serve.”

Turning around the VA will take a “new culture of accountability,” Obama said, and it won’t be an easy task. “Bob’s the manager we need to help get this done.”

If confirmed by the Senate, McDonald will succeed Eric Shinseki, who resigned last month amid a scandal over failures of the agency’s medical system. Sloan Gibson has served as acting VA secretary since May 30.

A West Point graduate and U.S. Army veteran who oversaw more than 120,000 employees as P&G’s CEO, McDonald is being asked to lead a department that serves more than 8 million veterans annually.

“You put a manager in to fix what clearly is a managerial problem,” said Matt McCormick, vice president and portfolio manager at Cincinnati-based Bahl & Gaynor Inc., which holds about 4.2 million P&G shares. “He’s far superior to who we had doing this before.”

‘Corrosive Culture’

In a report issued by the White House on June 27, the department was portrayed as hobbled by a “corrosive culture” and lack of accountability. Its medical system has been beset by extended waits for appointments and allegations of falsified records to cover up those delays. VA officials often ignore orders from its central office, according to a summary of the report by White House Deputy Chief of Staff Rob Nabors.

House Speaker John Boehner, an Ohio Republican, said in a statement that McDonald is “the kind of person who is capable of implementing the kind of dramatic systemic change that is badly needed and long overdue at the VA.”

McDonald gave $10,000 each in 2012 to Republican campaign committees aiding Boehner and Mitt Romney, Obama’s opponent in that year’s presidential election, Federal Election Commission reports show.

McDonald “dealt with many stakeholders who have differing agendas; that should help him running the VA,” said Ali Dibadj, a New York-based analyst at Sanford C. Bernstein & Co.

McDonald, 61, retired from Cincinnati-based P&G in June 2013 after 33 years at the company. He took over as CEO in July 2009 after serving as chief operating officer.

Turnaround Plan

After losing market share to rivals such as Unilever, McDonald embarked on a turnaround plan in 2012 to cut $10 billion in costs through 2016 and renew focus on the company’s leading businesses. During this period, McDonald also faced pressure from activist investor Bill Ackman, who had bought a stake in the consumer products maker and pushed to replace him.

P&G’s stock rose 51 percent while McDonald was CEO.

He rose to lead P&G’s Northeast Asia operations in 1999 after stints in the Philippines and Japan. In 2001, McDonald became president of the global fabric and home-care business. Three years later, he was made vice chairman for global operations. He became chief operating officer in 2007.

McDonald was replaced by his predecessor at P&G, A.G. Lafley, who had started working at the company in 1977.

“Following his military service, and a distinguished career spanning three decades at P&G, we congratulate Bob McDonald on his appointment to this critically important position of leading U.S. Veterans Affairs,” Lafley said in a statement.

West Point

McDonald, who graduated from West Point in 1975 with an engineering degree and served as a captain in the Army for five years before joining P&G in 1980, was Lafley’s hand-picked successor. He was a multilingual operations expert who was seen as a steady hand for uncertain times.

While Lafley was known for bold moves, such as his $57 billion acquisition of the Gillette Co., McDonald cultivated a more methodical, deliberative style.

Taking over during the depths of the U.S. recession, McDonald introduced lower-priced items to complement the company’s premium-priced products and woo cautious consumers back from generic brands. He also accelerated the company’s march into faster-growing emerging markets.

--With assistance from Lauren Coleman-Lochner, James Callan and Nancy Moran in New York, Mary Schlangenstein in Dallas and Phil Mattingly in Washington.