Power Sheet: P&G CEO Says Don’t Vilify Free Trade

Is there a Presidential candidate for business? It’s tough to say. Hillary Clinton has moved increasingly to the left, now opposing TPP (at least, at this writing) while the actual businessman, Donald Trump, has erupted with pro-nationalist, anti-trade diatribes have sent shivers down the spines of many CEOs of global companies.

And while P&G CEO David Taylor won’t give an endorsement to anyone (“Absolutely not,” he told me in an interview on August 2), he does acknowledge that the election and Brexit represent a longer-term threat to trade and other topics of critical importance to companies like his. “Free trade is important,” he says, “and my hope is that the political leaders around the world don’t vilify it because of political pressure.”

Trade agreements, of course, are critical to companies like the $65.3 billion-in-sales P&G, which operates in 70 different countries. They help a company move its inputs and finished products around the world to the most efficient places–ideally making more money for the shareholders and providing products more cheaply as a result. But that argument is starting to lose strength, said GE CEO Jeff Immelt in a recent speech, Globalization “is being blamed for unemployment and wage inequality,” he said. “There is a general sense that this must be somebody else’s fault; and improving competitiveness is not an option.”

If this trend continues, the ability of companies like P&G to return to robust sales will become ever more challenging. (In the company’s most recent quarter, announced yesterday, it beat estimates, earning $.79 per share while posting sluggish topline organic growth of 2%.) This is one reason that Taylor, like Immelt, has begun to stress what he calls “localization.” “I think the lens we look at to manage our business has changed,” he says. “You’ve got to look through the lens of the local market more and more.” (For more on P&G’s strategy of delayering management, see Can P&G Find It’s Aim Again?) At the same time, Taylor says, “The need for me to invest more time in government affairs is more relevant than it was two years ago.”

What’s not clear is whether better government relations can have much impact on a world that suddenly feels more split apart than knit together.

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