DEF 14A of Procter & Gamble Co, Aug 24, 2012

DEF 14A of Procter & Gamble Co

Filed Aug 24, 2012 · FY20120001193125-12-367535

Open on EDGAR

  1. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

    | Voting Information | 2 | | Board Composition | 5 | | Election of Directors | 7 | | Corporate Governance | 12 | | Director Compensation | 22 | | Report of the Compensation & Leadership Development Committee | 24 | | Compensation Discussion and Analysis | 25 | | Executive Compensation | 44 | | Summary Compensation Table | 44 | | Grants of Plan-Based Awards Table | 47 | | Outstanding Equity at Fiscal Year-End Table | 48 | | Option Exercises and Stock Vested Table | 52 | | Pension Benefits Table | 53 | | Nonqualified Deferred Compensation Table | 55 | | Payments upon Termination or Change in Control | 56 | | Security Ownership of Management and Certain Beneficial Owners | 61 | | Section 16(a) Beneficial Ownership Reporting Compliance | 64 | | Report of the Audit Committee | 64 | | Board Proposal to Ratify Appointment of the Independent Registered Public Accounting Firm | 66 | | Board Proposal to Approve, by Advisory Vote, the Company’s Executive Compensation (the Say on Pay vote) | 66 | | Shareholder Proposals | 67 | | 2013 Annual Meeting Date and Shareholder Proposals | 74 | | 2013 Annual Meeting Advance Notice Requirements | 74 | | Other Matters | 75 |

  2. Election of Directors

    Election of Directors All of the Board’s nominees for Director are incumbent nominees who will be elected for a one-year term. Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Susan Desmond-Hellmann, Robert A. McDonald, W. James McNerney, Jr., Johnathan A. Rodgers, Margaret C. Whitman, Mary Agnes Wilderotter, Patricia A. Woertz, and Ernesto Zedillo were elected for one-year terms at the 2011 annual meeting. The current terms of all nominees for Director will expire at the 2012 annual meeting. The Board has nominated each of these individuals for a new term that will expire at the 2013 annual meeting. Each of the nominees for Director has accepted the nomination and agreed to serve as a Director if elected by the Company’s shareholders. If any nominee becomes unable or unwilling to serve between the date of the proxy statement and the annual meeting, the Board may designate a new nominee, and the persons named as proxies will vote on that substitute nominee. The Board of Directors recommends a vote FOR Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Susan Desmond-Hellmann, Robert A. McDonald, W. James McNerney, Jr., Johnathan A. Rodgers, Margaret C. Whitman, Mary Agnes Wilderotter, Patricia A. Woertz, and Ernesto Zedillo as Directors to hold office until the 2013 annual meeting of shareholders and until their successors are elected.

  3. Election of Directors

    | Nominees for Election as Directors with Terms Expiring in 2013 | | | | | Angela F. Braly | Director since 2009, Age 51 | | | Ms. Braly is Chair of the Board, President and Chief Executive Officer of WellPoint, Inc. (a healthcare insurance company). She has served as Chair of the Board since March 2010 and President and Chief Executive Officer since 2007. She previously served as Executive Vice President, General Counsel, and Chief Public Affairs Officer of WellPoint from 2005 to 2007, and President and Chief Executive Officer of Blue Cross Blue Shield of Missouri from 2003 to 2005. As Chief Executive Officer of a major health benefits company that interacts directly with consumers, Ms. Braly has a vast amount of leadership, consumer industry, and marketing experience. Ms. Braly also brings a significant amount of government experience, given her prior role as General Counsel and Chief Public Affairs Officer for WellPoint, where she was responsible for the company’s government relations efforts, among other areas. Member of the Audit and Governance & Public Responsibility Committees. | | | | Kenneth I. Chenault | Director since 2008, Age 61 | | | Mr. Chenault is Chairman and Chief Executive Officer of the American Express Company (a global services, payments, and travel company), where he has served in various roles of increasing responsibility since joining the company in 1981. Mr. Chenault assumed his current responsibilities as Chairman and Chief Executive Officer in 2001. He has been a Director of International Business Machines Corporation since 1998. As Chairman and Chief Executive Officer of American Express, Mr. Chenault has significant leadership and financial experience. With more than 30 years of experience delivering products and services to consumers and businesses all across the world, Mr. Chenault brings consumer and business insights, marketing expertise, as well as a global perspective to the Board. Member of the Audit and Compensation & Leadership Development Committees. | |

  4. Election of Directors

    | | Scott D. Cook | Director since 2000, Age 60 | | | Mr. Cook is Chairman of the Executive Committee of the Board of Intuit Inc. (a software and web services company), which he co-founded in 1983. He served as President and Chief Executive Officer of Intuit from 1983 to 1994 and as Chairman of the Board of Intuit from 1993 through 1998. He has been a Director of eBay Inc. since 1998. As a co-founder and former Chief Executive Officer of Intuit, whose software is marketed and sold directly to consumers, and a current Director of eBay, Mr. Cook has a wealth of leadership, technology, consumer industry, and marketing experience that he brings to the Board. Chair of the Innovation & Technology Committee and member of the Compensation & Leadership Development Committee. | | | | Susan Desmond-Hellmann | Director since 2010, Age 55 | | | Dr. Desmond-Hellmann is Chancellor and Arthur and Toni Rembe Rock Distinguished Professor, University of California, San Francisco (“UCSF”), where she has served since August 2009. From 2004 through 2009, Dr. Desmond-Hellmann served as president of product development at Genentech (a biotechnology company), where she was responsible for pre-clinical and clinical development, business development, and product portfolio management. She joined Genentech in 1995. Prior to joining Genentech, Dr. Desmond-Hellmann was associate director of clinical cancer research at Bristol-Myers Squibb Pharmaceutical Research Institute. As Chancellor of UCSF, a member of the California Academy of Sciences board of trustees, and past president of product development at Genentech, Dr. Desmond-Hellmann has extensive leadership and technology experience. As a former member of the Federal Reserve Bank of San Francisco’s Economic Advisory Council, she also brings finance experience to the Board. Member of the Audit and Innovation & Technology Committees. | | | | Robert A. McDonald | Director since 2009, Age 59 | | | Mr. McDonald is Chairman, President and Chief Executive Officer of the Company, which he joined in 1980 and where he has held numerous positions of increasing responsibility in the United States and internationally, including Chief Operating Officer from 2007 to 2009 and Vice Chair, Global Operations, from 2004 to 2007. He has been a Director of Xerox Corporation since 2005. As someone who has spent his entire career with the Company, much of it outside of the United States, and who currently serves as Chief Executive Officer, Mr. McDonald has an extensive, in-depth knowledge of the Company’s business. His wide-ranging roles throughout his career at the Company also provide him with significant leadership, consumer industry, marketing, and international experience. | |

  5. Election of Directors

    | | W. James McNerney, Jr. | Director since 2003, Age 63 | | | Mr. McNerney is Chairman of the Board, President, and Chief Executive Officer of The Boeing Company (an aerospace, commercial jetliners, and military defense systems company), a position he has held since 2005. From 2001 to 2005, Mr. McNerney was CEO of 3M Company (a global technology company). Prior to his appointment as CEO of 3M Company, Mr. McNerney was employed by General Electric for nearly twenty years, where he held positions of increasing importance. He has been a Director of International Business Machines Corporation since 2009. As the Chief Executive Officer of Boeing, former Chief Executive Officer of 3M, and former executive of General Electric, Mr. McNerney brings a wealth of leadership, global, and technology experience. His extensive experience managing large, global manufacturing companies, as well as his insight into government affairs, enable him to advise the Board on a variety of strategic and business matters. Presiding Director, Chair of the Compensation & Leadership Development Committee, and member of the Governance & Public Responsibility Committee. | | | | Johnathan A. Rodgers | Director since 2001, Age 66 | | | Mr. Rodgers was the President and Chief Executive Officer of TV One, LLC (a media and communications company), from 2003 until his retirement on July 31, 2011. Prior to joining TV One, Mr. Rodgers was President of Discovery Networks for six years and worked for CBS, Inc. for twenty years, where he held a variety of executive positions. He has been a Director of Nike, Inc. since 2006 and of Comcast Corporation since 2011. As the former Chief Executive Officer of TV One, LLC, Mr. Rodgers has significant leadership experience. His past roles in media and communications, combined with management roles at Discovery Networks and CBS, Inc., also give him extensive consumer industry, marketing, and technology experience. Member of the Governance & Public Responsibility and Innovation & Technology Committees. | | | | Margaret C. Whitman | Director since 2011, Age 56 | | | Ms. Whitman was elected President & Chief Executive Officer of Hewlett-Packard (a computer software, computer hardware, IT consulting, and IT services company) in September 2011. She served as President and Chief Executive Officer of eBay Inc. from 1998 to March 2008. Prior to joining eBay, Ms. Whitman held executive level positions at Hasbro Inc., FTD, Inc., The Stride Rite Corporation, The Walt Disney Company, and Bain & Company. She also served as a Director of the Company from 2003 to 2008 and of DreamWorks Animation SKG, Inc. from 2005 to 2008, having resigned from both boards of directors in preparation for her 2010 California gubernatorial bid. She has been a Director of Zipcar, Inc. since 2011. As the former President and Chief Executive Officer of eBay, and previously as a senior officer of a number of consumer products companies, Ms. Whitman has extensive leadership and consumer industry experience. Her prior management roles also provide her with significant marketing and technology experience. Member of the Compensation & Leadership Development and Innovation & Technology Committees. | |

  6. Election of Directors

    | | Mary Agnes Wilderotter | Director since 2009, Age 57 | | | Mrs. Wilderotter is Chairman of the Board and Chief Executive Officer of Frontier Communications Corporation (a communications company specializing in providing services to rural areas and small and medium-sized towns and cities), which she joined as President and Chief Executive Officer in 2004. Mrs. Wilderotter held the title of President of Frontier until April 2012. Mrs. Wilderotter previously held positions as Senior Vice President of Worldwide Public Sector at Microsoft, President and Chief Executive Officer of Wink Communications, Inc., and Executive Vice President of National Operations for AT&T’s Wireless Service, Inc. She has been a Director of Xerox Corporation since 2006. Mrs. Wilderotter was a Director of The McClatchy Company from 2001 to 2007, and she was a Director of Yahoo! Inc. from 2007 to 2009. As Chief Executive Officer of Frontier Communications, and previously as Chief Executive Officer of Wink Communications, Mrs. Wilderotter has significant leadership experience. Her current role, along with her prior roles at Microsoft, Wink Communications, and AT&T, also give her a vast amount of consumer industry, marketing, and technology experience. Member of the Audit and Compensation & Leadership Development Committees. | | | | Patricia A. Woertz | Director since 2008, Age 59 | | | Ms. Woertz is Chairman, Chief Executive Officer, and President of Archer Daniels Midland Company (agricultural processors of oilseeds, corn, wheat, and cocoa, etc.), a company she joined in 2006. Ms. Woertz was named Chief Executive Officer and President in 2006 and Chairman in 2007. Prior to joining Archer Daniels Midland, Ms. Woertz held positions of increasing importance at Chevron Corporation and its predecessor companies. She began her career as a certified public accountant with Ernst & Ernst. As Chief Executive Officer of Archer Daniels Midland, Ms. Woertz has significant leadership experience. Having started her career as a certified public accountant, and with a broad range of executive roles at Chevron Corporation and its predecessor companies, Ms. Woertz also brings a significant amount of international, marketing, finance, government relations, and technology experience. Chair of the Audit Committee and member of the Governance & Public Responsibility Committee. | |

  7. Election of Directors

    | | Ernesto Zedillo | Director since 2001, Age 60 | | | Dr. Zedillo served as President of Mexico from 1994 to 2000 and currently serves as Director of the Center for the Study of Globalization and Professor in the field of International Economics and Politics at Yale University. He has been a Director of Alcoa Inc. since 2002 and Citigroup, Inc. and Promotora de Informaciones S.A. since 2010. Dr. Zedillo was also a Director of Union Pacific Corporation from 2001 to 2006. Dr. Zedillo’s prior service as President of Mexico provides him with significant government and leadership experience. His current role as Director of the Center for the Study of Globalization and Professor in the field of International Economics and Politics at Yale University provides him with a wealth of international experience. He also has significant financial experience, having previously served on the Audit Committee of Union Pacific and as the Secretary of Economic Programming and the Budget for Mexico, as well as having held various positions at the Banco de Mexico. Chair of the Governance & Public Responsibility Committee and member of the Innovation & Technology Committee. | |

  8. Director Nominees’ Experience

    Director Nominees’ Experience As described on pages 5-6 of this proxy statement, our Board is highly qualified and each Director brings a diversity of skills and experiences to the Board. The list below is a summary; it does not include all of the skills, experiences, qualifications, and diversity that each Director nominee offers, and the fact that a particular experience, skill, or qualification is not listed does not mean that a Director does not possess it.

  9. Director Nominees’ Experience

    | AREA OF EXPERIENCE | ANGELA F. BRALY | KENNETH I. CHENAULT | SCOTT D. COOK | SUSAN DESMOND- HELLMANN | ROBERT A. MCDONALD | W. JAMES MCNERNEY, JR. | JOHNATHAN A. RODGERS | MEG WHITMAN | MAGGIE WILDEROTTER | PATRICIA A. WOERTZ | ERNESTO ZEDILLO | | • Leadership, Strategy & Risk Management | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | | • Consumer Industry | ü | ü | ü | | ü | | ü | ü | ü | | | | • International | | ü | | | ü | ü | | | | ü | ü | | • Marketing | ü | ü | ü | | ü | ü | ü | ü | ü | ü | | | • Finance & Financial Reporting | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | | • Government | ü | | | | | ü | | | | ü | ü | | • Technology & Innovation | | | ü | ü | ü | ü | ü | ü | ü | ü | |

  10. Communication with Directors and Executive Officers

    Communication with Directors and Executive Officers Shareholders and others who wish to communicate with the Board or any particular Director, including the Presiding Director, or with any executive officer of the Company, may do so by writing to the following address: [Name of Director(s)/Executive Officer or “Board of Directors”] The Procter & Gamble Company c/o Secretary One Procter & Gamble Plaza Cincinnati, OH 45202-3315 All such correspondence is reviewed by the Secretary’s office, which logs the material for tracking purposes. The Board has asked the Secretary’s office to forward to the appropriate Director(s) all correspondence, except for personal grievances, items unrelated to the functions of the Board, business solicitations, advertisements, and materials that are profane.

  11. Shareholder Recommendations of Board Nominees and Committee Process for Recommending Board Nominees

    Shareholder Recommendations of Board Nominees and Committee Process for Recommending Board Nominees The Governance & Public Responsibility Committee will consider shareholder recommendations for candidates for the Board, which should be submitted to: Chair of the Governance & Public Responsibility Committee The Procter & Gamble Company c/o Secretary One Procter & Gamble Plaza Cincinnati, OH 45202-3315 The minimum qualifications and preferred specific qualities and skills required for Directors are set forth in Article II, Sections B through E of the Board’s Corporate Governance Guidelines. The Committee considers all candidates using these criteria, regardless of the source of the recommendation. The Committee’s process for evaluating candidates also includes the considerations set forth in Article II, Section B of the Committee’s Charter. After initial screening for minimum qualifications, the Committee determines appropriate next steps, including requests for additional information, reference checks, and interviews with potential candidates. In addition to shareholder recommendations, the Committee also relies on recommendations from current Directors, Company personnel, and others. From time to time, the Committee may engage the services of outside search firms to help identify candidates. During the fiscal year ended June 30, 2012, no such engagement existed (and none currently exists), and no funds were paid to outside parties in connection with the identification of nominees. All nominees for election as Directors who currently serve on the Board are known to the Committee and were recommended by the Committee to the Board as Director nominees. Pursuant to the Company’s Code of Regulations, a shareholder wishing to nominate a candidate for election to the Board at an annual meeting of shareholders is required to give written notice to the Secretary of the Company of his or her intention to make such nomination. The notice of nomination must be received at the Company’s principal executive offices not less than 140 days nor more than 240 days prior to the one-year anniversary of the preceding year’s annual shareholder meeting. Certain other notice periods apply if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date. Based on the one-year anniversary of the 2012 annual meeting, a shareholder wishing to nominate a candidate for election to the Board at the 2013 annual meeting must provide such notice no earlier than February 11, 2013, and no later than May 22, 2013. As set forth in the Company’s Code of Regulations, the notice of nomination is required to contain information about both the nominee and the shareholder making the nomination, including information sufficient to allow the Governance & Public Responsibility Committee to determine if the candidate meets certain criteria. A nomination that does not comply with the requirements set forth in the Company’s Code of Regulations will not be considered for presentation at the annual meeting.

  12. Director Compensation

    Director Compensation The objective of the C&LD Committee is to provide non-employee members of the Board a compensation package consistent with the size-adjusted median of the Peer Group. Directors can elect to receive any part of their fees or retainer (other than the grant of RSUs) as cash, retirement restricted stock or unrestricted stock. The Company did not grant any stock options to Directors in FY 2011-12. Effective October 11, 2011, non-employee members of the Board received the following compensation:

  13. Director Compensation

    | • | a grant of RSUs following election to the Board at the Company’s October 11, 2011 annual meeting of shareholders, with a grant date fair value of $160,000. These units will be forfeitable if the Director resigns during the year, will not deliver in shares until at least one year after the Director leaves the Board, and cannot be sold or traded until delivered in shares, thus encouraging alignment with the Company’s long-term interests and the interests of shareholders. These RSUs will earn dividend equivalents at the same rate as dividends paid to shareholders; |

  14. Director Compensation

    | • | an annual retainer fee of $110,000 paid in quarterly increments; and |

  15. Director Compensation

    | • | an additional annual retainer paid to the Presiding Director and Chair of each committee as follows: Presiding Director and Chairs of the Audit and C&LD Committees—$20,000; Chairs of the Governance & Public Responsibility and Innovation & Technology Committees—$15,000. |

  16. Director Compensation

    At their June 12, 2012 meeting, the Board of Directors, upon the recommendation of the C&LD, agreed to maintain the same overall compensation package for Directors, with the exception of approving slight increases in the annual retainers paid to the Presiding Director and Chair of the Audit Committee, to $30,000 and $25,000, respectively. These changes were made to better align these fees with the size-adjusted median of the Peer Group, and will be effective with the October 9, 2012 meeting. Non-employee members of the Board must own Company stock and/or RSUs worth six times their annual cash retainer. A number of the non-employee Directors were appointed or elected to the Board within the last few years. However, all non-employee Directors either meet or are on track to meet the ownership requirements within the five-year period established by the C&LD Committee. The following table and footnotes provide information regarding the compensation paid to the Company’s non-employee Directors in FY 2011-12. Directors who are employees of the Company receive no compensation for their services as Directors.

  17. Director Compensation Table

    Director Compensation Table

  18. Director Compensation Table

    | | Fees | | | | | | | Name | Annual Retainer(1) ($) | Committee Chair and Presiding Director Fees ($) | Total Fees Earned or Paid in Cash ($) | Stock Awards(2) ($) | All Other Com- pensation(3) ($) | Total ($) | | Angela F. Braly | 107,500 | 0 | 107,500(4) | 160,000 | 0 | 267,500 | | Kenneth I. Chenault | 107,500 | 0 | 107,500 | 160,000 | 0 | 267,500 | | Scott D. Cook | 107,500 | 15,000 | 122,500(5) | 160,000 | 0 | 282,500 | | Susan Desmond-Hellmann | 107,500 | 0 | 107,500 | 160,000 | 0 | 267,500 | | W. James McNerney, Jr. | 107,500 | 40,000 | 147,500(6) | 160,000 | 0 | 307,500 | | Johnathan A. Rodgers | 107,500 | 0 | 107,500(7) | 160,000 | 0 | 267,500 | | Margaret C. Whitman | 107,500 | 0 | 107,500 | 160,000 | 0 | 267,500 | | Mary Agnes Wilderotter | 107,500 | 0 | 107,500 | 160,000 | 0 | 267,500 | | Patricia A. Woertz | 107,500 | 20,000 | 127,500 | 160,000 | 0 | 287,500 | | Ernesto Zedillo | 107,500 | 15,000 | 122,500 | 160,000 | 0 | 282,500 |

  19. Director Compensation Table

    | (1) The annual retainer was increased from $100,000 to $110,000 effective October 11, 2011. This amount is paid in quarterly increments. Directors were paid $25,000 for the July-September 2011 quarter and $27,500 for the remaining three quarters of the fiscal year. |

  20. Director Compensation Table

    | (2) Annually, upon election at the Company’s annual meeting of shareholders, each Director is awarded a grant of restricted stock units (RSUs) with a grant date fair value of $160,000. As of the end of FY 2011-12: |

  21. Director Compensation Table

    | a. | Ms. Braly has 9,469 unvested stock awards outstanding. |

  22. Director Compensation Table

    | b. | Mr. Chenault has 14,273 unvested stock awards outstanding. |

  23. Director Compensation Table

    | c. | Mr. Cook has 29,175 unvested stock awards outstanding and 10,674 option awards outstanding. |

  24. Director Compensation Table

    | d. | Dr. Desmond-Hellmann has 2,541 unvested stock awards outstanding. |

  25. Director Compensation Table

    | e. | Mr. McNerney has 25,617 unvested stock awards outstanding. |

  26. Director Compensation Table

    | f. | Mr. Rodgers has 32,980 unvested stock awards outstanding and 6,644 option awards outstanding. |

  27. Director Compensation Table

    | g. | Ms. Whitman has 2,541 unvested stock awards outstanding. |

  28. Director Compensation Table

    | h. | Mrs. Wilderotter has 7,650 unvested stock awards outstanding. |

  29. Director Compensation Table

    | i. | Ms. Woertz has 9,843 unvested stock awards outstanding. |

  30. Director Compensation Table

    | j. | Dr. Zedillo has 25,528 unvested stock awards outstanding and 6,644 option awards outstanding. |

  31. Director Compensation Table

    Unvested stock awards include RSUs that have not delivered in shares and restricted stock for which the restrictions have not lapsed. RSUs earn dividend equivalents which are accrued in the form of additional RSUs each quarter and credited to each Director’s holdings. These RSUs have the same vesting restrictions as the underlying RSUs and are ultimately deliverable in shares. Restricted stock earns cash dividends that are paid quarterly with the option of reinvesting in Company stock.

  32. Director Compensation Table

    | (3) For one of the Board meetings during FY 2011-12, each Director was encouraged to bring a guest. For this meeting, the Company incurred cost associated with providing a minor commemorative item of de minimis value. For all Board meetings throughout the fiscal year, Directors were entitled to bring a guest so long as the Director used the Company aircraft to attend the meeting and the guest’s attendance did not result in any incremental aircraft costs. Directors and their guests are also covered under the same insurance policy as all Company employees for accidental death while traveling on Company business (coverage is $750,000 for each Director and $300,000 for a guest). The incremental cost to the Company for this benefit is $1,982. In addition, the Company maintains a Charitable Awards Program for current and retired Directors who were participants prior to July 1, 2003. Under this program, at their death, the Company donates $1,000,000 per Director to up to five qualifying charitable organizations selected by each Director. Directors derive no financial benefit from the program because the charitable deductions accrue solely to the Company. The Company funds this contribution from general corporate assets and made one payment during FY 2011-12. This program was discontinued for any new Director effective July 1, 2003. In FY 2011-12, the Company made a $500 donation on behalf of each Director to the Children’s Safe Drinking Water Program or to a different charity of their choice. Similar to the Charitable Awards Program described above, these donations were funded from general corporate assets, and the Directors derive no financial benefit from these donations because the charitable deductions |

  33. Director Compensation Table

    | accrue solely to the Company. As an employee Director, Robert A. McDonald did not receive a retainer, fees, or a stock award. Mr. McDonald attended Board meetings and activities as described above, and, in conjunction with those meetings, received the minor commemorative item. |

  34. Director Compensation Table

    | (4) Ms. Braly took her fees for FY 2011-12 in retirement restricted stock, which had a grant date fair value of $102,660. |

  35. Director Compensation Table

    | (5) Mr. Cook took his fees for FY 2011-12 in retirement restricted stock which had a grant date fair value of $117,568. |

  36. Director Compensation Table

    | (6) Mr. McNerney took his fees for FY 2011-12 in unrestricted stock, which had a grant date fair value of $147,674. |

  37. Director Compensation Table

    | (7) Mr. Rodgers took his fees for the first half of FY 2011-12 in cash. During the second half of FY 2011-12, he took half of his fees in cash and the remainder in retirement restricted stock which had a grant date fair value of $27,591. |

  38. Executive Summary

    Executive Summary Company Results Our results, in aggregate, have driven a below target payout in our FY 2011-12 short-term incentive program. While FY 2010-11 results were used to set FY 2011-12 long-term incentive compensation opportunities for our executives, including the Named Executive Officers’ (“NEO”) compensation components described on pages 35-38, our long-term incentive programs are currently tracking, in aggregate, to less than 50% of target, further reflecting the connection of pay to performance.

  39. Executive Summary

    Our Compensation Philosophy Our fundamental and overriding objective is to create value for our shareholders at leadership levels on a consistent basis. To accomplish this goal, we design executive compensation programs that emphasize pay for performance, support our business strategies, and discourage our executives from taking excessive risks. We ensure that target compensation opportunities for our executives are competitive with the target opportunities for comparable positions in our Peer Group (as defined below). This is crucial for retention of our talented employees who are committed to the Company’s long-term success and to spending their careers with the Company. The majority of our executives’ actual compensation is tied to the performance of the Company through short-term and long-term incentives. We use a combination of annual and three-year goals to ensure a strong connection between Company performance and actual compensation realized. Furthermore, we align the interests of executives and shareholders by tying a significant portion of executive compensation to the value of our Company’s stock. Employee stock ownership has been a cornerstone of our compensation and retirement programs since William Cooper Procter established the Company’s employee stock ownership plan in 1887. We reinforce employee stock ownership with our executives through share ownership requirements and share retention requirements from stock option exercises. These requirements, when combined with the significant percentage of executive compensation paid in Company equity, ensure that executives focus on building long-term shareholder value and benefit from this value along with our shareholders. Our Compensation Programs Our executive compensation program consists of four key components: salary, Short-Term Achievement Reward (“STAR”) and two long-term incentive equity programs—the Performance Stock Program (“PSP”) and the Key Manager Stock Grant. These four components constitute approximately 94% of each NEO total compensation. The remaining 6% consists of retirement and other benefits. We design our programs so that NEO compensation varies by type (fixed versus performance-based), length of performance period (short-term versus long-term), and form (cash versus equity). We believe that such variation is necessary to: (1) strike the appropriate balance between short and long-term business goals; (2) encourage the right behaviors and discourage excessive risk-taking; and (3) align the interests of the Company’s executives with our shareholders. While salary is the only key component of pay that is considered fixed, salary progression over time is based on individual performance. The values of the remaining components vary based on the performance of the individual, the performance of the individual’s business unit, and the performance of the Company as a whole. This mix of components is designed to incent both individual accountability and teamwork to build long-term shareholder value. The charts below show the average mix of the key components of NEO compensation by type, length, and form.

  40. Executive Summary

    Consistent with our design principles, actual compensation earned under each of our performance-based programs varies based on results. A 100% payout occurs when all goals are achieved. Payouts below 100% occur when goals are not achieved and payouts above 100% are possible when goals are exceeded. For example, from 2007-2011, the average STAR payout for NEOs ranged from a low of 89% versus target to a high of 143%. During this same period, the Company’s three-year long-term incentive program payout ranged from a low of 42% of target to a high of 120%. These payouts were based on the results delivered versus defined performance targets, highlighting the clear link between pay and performance that underlies our compensation programs. FY 2011-12 NEOs The Company’s NEOs for FY 2011-12 are: Robert A. McDonald, Chairman of the Board, President and Chief Executive Officer; Jon R. Moeller, Chief Financial Officer; Werner Geissler, Vice Chairman—Global Operations; E. Dimitri Panayotopoulos, Vice Chairman—Global Business Units; and Filippo Passerini, Group President—Global Business Services and Chief Information Officer. Throughout this Compensation Discussion and Analysis and the compensation tables that follow, we refer to the title of each NEO in effect on the last day of the fiscal year, June 30, 2012. CEO Compensation Mr. McDonald’s compensation is determined by the C&LD Committee with assistance from the C&LD Committee’s independent compensation consultant, Frederic W. Cook & Co. The C&LD Committee reviews survey and peer market data on chief executive officer compensation along with all elements of Mr. McDonald’s total compensation, including salary, STAR, Key Manager Stock Grant, PSP awards, any special equity award, and unrealized gains from stock options, restricted stock and RSUs, and the cost to the Company of all retirement programs, benefits, and executive benefits. Company results, as well as Mr. McDonald’s personal contributions and leadership, are also considered when making compensation decisions. The C&LD Committee’s decisions on Mr. McDonald’s FY 2011-12 compensation primarily considered the Company results as described above. In addition, the C&LD Committee also considered Mr. McDonald’s contributions to other important Company priorities such as sustainability, diversity, innovation, and the development of leadership needed for the long-term success of the Company. Under Mr. McDonald’s leadership, the Company continued to have strong performance in these areas as evidenced by many external recognitions including Fortune’s “Global Most Admired Companies,” Bloomberg Business Week/Hay Group’s “Twenty Best Companies for Leadership,” Global 100 Most Sustainable Corporations in the World, National Association of Female Executives’ “Top 50 Company for Executive Women,” and Diversity Inc’s “Top 50 Companies for Diversity.” The C&LD Committee modestly increased Mr. McDonald’s target compensation opportunity for FY 2011-12 to maintain his compensation at the size-adjusted median of the compensation opportunity for chief executive officers in our Peer Group and considering results achieved from July 2010 through June 2011. Of course, his actual compensation varies above or below this target opportunity based on actual performance, with 89% of Mr. McDonald’s key compensation components tied to Company performance. Specifically, 42% is based on results versus the three-year quantitative performance goals in the PSP, 30% is linked to longer term stock performance through the Key Manager Stock Grant, and 17% is based on FY 2011-12 results through STAR. In addition to a significant portion of his total compensation being performance-based, Mr. McDonald holds 13 times his salary in Company stock, RSUs, and granted performance stock units (PSUs), significantly exceeding the Board-approved stock ownership requirements, and illustrating his personal investment in building long-term shareholder value. FY 2011-12 Highlights

  41. Executive Summary

    | • | STAR Annual Bonus Program. The CEO STAR Target for FY 2011-12 increased from 175% to 190% of salary to align total annual cash opportunity and mix of pay for performance with other chief executive officers in the Peer Group. The FY 2011-12 STAR award payout as a percentage of STAR target was 80% for Mr. McDonald resulting in a STAR award of $2,432,000. This actual STAR payout was lower than last year despite the increase in STAR Target, further highlighting the link between CEO pay and Company results. |

  42. Executive Summary

    | • | Long-Term Incentive Programs. The C&LD Committee allocated about half of Mr. McDonald’s long-term incentive opportunity to PSP, and the remainder was awarded in stock options under the Key Manager Stock Grant. These long-term incentives were set to maintain Mr. McDonald’s compensation opportunity at the size adjusted median of other chief executive officers in the Peer Group. While the grant date fair value of these awards was $10,565,424, the actual payouts will vary. The PSP payout will occur in August 2014 based on the achievement of performance goals described on page 37 and the actual payout of the Key Manager Stock Grant depends on the Company’s future stock price. |

  43. Executive Summary

    | • | Engagement of Independent Adviser. Our C&LD Committee engages an independent compensation consultant, who performs no other work for the Company, to advise on executive compensation matters. |

  44. Executive Summary

    | § Execute employment agreements with executives containing special severance payments such as golden parachutes; |

  45. Executive Summary

    | § Utilize severance programs that are specific to executive officers; |

  46. Executive Summary

    | § Gross-up payments to cover personal income taxes or excise taxes that pertain to executive or severance benefits; |

  47. Executive Summary

    | § Re-price or backdate stock options; or |

  48. Executive Summary

    | § Grant time-based equity awards that vest immediately solely on account of a change-in-control (requires a qualifying termination following a change-in-control). |

  49. Executive Summary

    | § Multiple performance metrics under STAR and PSP to discourage excessive risk-taking by removing any incentive to focus on a single performance goal to the detriment of the Company; |

  50. Executive Summary

    | § Appropriate balance between short-term and long-term compensation to discourage short-term risk taking at the expense of long-term results; and |

  51. Our Compensation Philosophy

    | • | Support the business strategies. We align compensation programs with business strategies focused on long-term growth and creating value for shareholders. These programs provide an incentive for executives to meet and exceed Company goals. |

  52. Our Compensation Philosophy

    | • | To instill a focus on long-term success by holding executives accountable for long-term measures of success designed to provide superior returns for shareholders over time. |

  53. Our Compensation Philosophy

    How is competitiveness established for executive compensation? The C&LD Committee structures executive compensation so that total targeted annual cash and long-term compensation opportunities are competitive with the targets for comparable positions at 25 companies considered to be our peers, based on criteria described below (“Peer Group”). The C&LD Committee sets targets for each element of compensation based on the same elements of compensation paid to those holding similar jobs at companies in our Peer Group, focusing on positions with similar management and revenue responsibility. The C&LD Committee uses a regression analysis to adjust for the differences in revenue size within the Peer Group. For the CEO’s compensation analysis, the C&LD Committee considers the Company’s revenue and market capitalization compared to our Peer Group. The Peer Group is objectively determined and consists of companies that generally meet the following criteria:

  54. Our Compensation Philosophy

    | § Peer Group revenues range from $17 billion to $445 billion with a median of $69 billion; and |

  55. Our Compensation Philosophy

    | § Peer Group market capitalization ranges from $29 billion to $406 billion with a median of $91 billion. |

  56. Our Compensation Philosophy

    Each year, the C&LD Committee evaluates and, if appropriate, updates the composition of the Peer Group. Changes to the Peer Group are carefully considered and made infrequently to assure continuity from year to year. This year, 96% of the Peer Group remained the same. Ford Motor Company was added in place of Altria Group to improve the comparability of revenue and market capitalization of the Peer Group. The Peer Group currently consists of the following companies:

  57. Our Compensation Programs

    Our Compensation Programs What are the elements of the Company’s executive compensation programs? Annual Cash Compensation The Company’s annual cash compensation consists of salary and STAR. We collect and analyze data from the Peer Group on the total annual cash compensation opportunity (salary plus annual bonus target) for positions comparable to those at the Company. For each position, we set a target amount for both salary and STAR (“STAR Target”), where the STAR Target is an amount payable as a percentage of annual salary if all goals are met. The sum of the salary range midpoint and STAR Target for each position is generally set at the target median annual cash compensation opportunity of similar positions within our Peer Group, adjusted for size using a regression analysis of Peer Group revenues. Salary Salary provides a competitive fixed rate of pay, recognizing different levels of responsibility within the Company. Salaries are the basis for the STAR performance-based incentive program, as well as the basis for retirement programs, executive group life insurance, and certain benefits available to all employees. For FY 2011-12, Mr. McDonald’s salary remained unchanged at $1,600,000, which was in-line with chief executive officers in the Peer Group. Mr. Moeller’s salary was increased from $750,000 to $825,000 on July 1, 2011 to more closely align his salary with chief financial officers in the Peer Group. On July 1, 2011, Messrs. Geissler’s and Panayotopoulos’ salaries each increased $100,000 to $1,045,000 and $1,085,000, respectively. These increases recognize their expanded roles with the reduction in the number of Vice Chairmen from four to two and represent a shift in the operating model where the Vice Chairmen are increasingly responsible for total Company performance. Mr. Passerini’s salary increased from $750,000 to $800,000 on September 1, 2011 in recognition of his strong contributions and results within Global Business Services, making his FY 2011-12 total salary $791,667. STAR Annual Bonus The STAR program provides an incentive for approximately 14,000 senior managers to meet or exceed annual performance and business goals. The program primarily focuses on the achievement of Business Unit results, but includes a component that measures the performance of the Company as a whole. STAR awards are generally paid in cash, but executives can elect to receive their awards in RSUs, stock options, or deferred compensation. STAR awards are based on three factors: (1) STAR Target, (2) Business Unit performance, and (3) total Company performance. STAR awards are calculated using the following formula:

  58. Our Compensation Programs

    | • | STAR Target. The C&LD Committee sets STAR Targets, expressed as a percentage of salary for NEOs, based on the target annual bonus opportunities for similar positions in our Peer Group after taking into account the total annual cash compensation for those positions. Based solely on that analysis, the C&LD Committee made each of the following decisions. Effective with FY 2011-12, the CEO’s STAR Target increased from 175% to 190% of salary to maintain total targeted annual cash compensation opportunity and mix of pay for performance in-line with other chief executive officers in the Peer Group. The CFO’s STAR Target remained at 105% and the STAR Target for the Vice Chairmen remained at 115%. Mr. Passerini’s STAR target was increased from 75% to 90% to align total targeted annual cash compensation and mix of pay for performance with comparable roles in the Peer Group. |

  59. FY 2011-12 STAR Annual Bonus

    FY 2011-12 STAR Annual Bonus For FY 2011-12, there were 31 Business Unit Performance Factors that ranged between 55% and 165% of Target for a weighted average Business Unit Performance Factor of 96%. The Total Company Performance Factor was computed using organic sales growth within range but below target at 3.3%, and Core EPS well below target at -1%. These two results produced a FY 2011-12 Total Company Performance Factor of 83%, below target and near the bottom of the potential range of 80% to 130% reflecting the below target results. Based on the STAR formula described on page 32, the average FY 2011-12 STAR award was 80% based on the average of each Business Unit Performance Factor multiplied by the Total Company Performance Factor. The C&LD Committee reviewed the recommendations provided for the Business Unit Performance Factors and total STAR awards and, after considering the performance of the total Company and each Business Unit, approved the STAR award for each of these NEOs. The following chart shows the factors used to calculate the STAR awards for each NEO and the final C&LD approved STAR:

  60. FY 2011-12 STAR Annual Bonus

    | NEO | Business Unit Performance Factor | Total Company Performance Factor | STAR Award as % of Target | STAR Target ($) | STAR Award ($) | | Robert A. McDonald | Committee Decision Based on Performance(1) | | 80% | 3,040,000 | 2,432,000 | | Jon R. Moeller | Committee Decision Based on Performance(2) | | 88% | 866,250 | 762,127 | | Werner Geissler | 97% | 83% | 81% | 1,201,750 | 967,529 | | E. Dimitri Panayotopoulos | 93% | 83% | 77% | 1,247,750 | 963,138 | | Filippo Passerini | 115% | 83% | 95% | 720,000 | 687,240 |

  61. FY 2011-12 STAR Annual Bonus

    | (1) The Committee considers the overall Company average STAR award when determining Mr. McDonald’s award. |

  62. FY 2011-12 STAR Annual Bonus

    | (2) The Committee considers the Finance & Accounting STAR award when determining Mr. Moeller’s award. |

  63. FY 2011-12 STAR Annual Bonus

    Because they evaluate and recommend Business Unit Performance Factors for the other NEOs, the STAR awards for Messrs. McDonald and Moeller are determined separately and directly by the C&LD Committee. The CEO provides the C&LD Committee with a recommendation to assist with its evaluation and determination of Mr. Moeller’s STAR award. The C&LD Committee determined a STAR award of $2,432,000 for Mr. McDonald, which was equal to 80% of his STAR Target and in-line with the Company’s average STAR award as a percent of target. The C&LD Committee determined that an award in-line with the Company average was appropriate. The C&LD Committee, with input from Mr. McDonald determined that Mr. Moeller’s award be in the amount of $762,127 which was equal to 88% of his STAR Target. This award is the combination of the Finance & Accounting Business Unit Performance Factor and the Total Company Performance Factor. The Finance & Accounting Factor of 106% reflects Mr. McDonald’s assessment of the function’s performance throughout the fiscal year in areas such as strategy development, capital structure management, and internal controls. The C&LD Committee concluded that basing 100% of Mr. Moeller’s Business Unit Performance Factor on the performance of the Finance & Accounting Function was appropriate given his role as CFO. The STAR awards submitted to the C&LD Committee for Messrs. Geissler, Panayotopoulos and Passerini were calculated using the formula described on page 32 of this proxy statement. For Mr. Geissler, the calculated Business Unit Performance Factor was 97%, reflecting the weighted average of all the MDOs and the Product Supply Corporate Function, the organizations for which he has direct responsibility. For Mr. Panayotopoulos, the Business Unit Performance Factor was 93%, reflecting the weighted average of the GBUs, the organizations for which he has direct responsibility. Mr. McDonald also considered the weighted average of all the Company’s Business Unit Performance Factors when recommending the Business Unit Performance Factors for Messrs. Geissler and Panayotopoulos but recommended no further adjustments. For Mr. Passerini, the Business Unit Performance Factor of 115% reflects slightly above target results for GBS. The organization delivered significant incremental cost savings versus the going-in business plan, improved service levels, and user satisfaction. Summary of Total Annual Cash Compensation The total annual cash compensation for each of our NEOs for FY 2011-12 is the sum of each officer’s salary and STAR award and reflects the scope and complexity of the business he leads. Mr. McDonald’s total annual cash compensation was $4,032,000, which was below the median of actual annual cash compensation of chief executive officers in the Peer Group. The table below summarizes the total annual cash compensation of each NEO:

  64. FY 2011-12 STAR Annual Bonus

    | NEO | Salary ($) | STAR Award ($) | Total Annual Cash Compensation ($) | | Robert A. McDonald | 1,600,000 | 2,432,000 | 4,032,000 | | Jon R. Moeller | 825,000 | 762,127 | 1,587,127 | | Werner Geissler | 1,045,000 | 967,529 | 2,012,529 | | E. Dimitri Panayotopoulos | 1,085,000 | 963,138 | 2,048,138 | | Filippo Passerini | 791,667 | 687,240 | 1,478,907 |

  65. FY 2011-12 STAR Annual Bonus

    Long-Term Incentive Programs Long-term incentive compensation comprises the majority of total compensation for senior executives and is paid through two programs—the PSP and the Key Manager Stock Grant. The C&LD Committee uses competitive market data to set a total long-term compensation target consistent with the median total long-term compensation of comparable positions in the Peer Group regressed for revenue size. It then sets a PSP award equal to approximately one-half of each total long-term incentive target to ensure focus on the three-year quantitative performance goals utilized by the PSP. The remainder of the long-term incentive target is the basis for the Key Manager Stock Grant that may be adjusted for individual performance as appropriate. The C&LD Committee then approves the final PSP and Key Manager Stock Grants to be awarded to each NEO. The grant date fair value of the awards is computed based on financial factors as of the grant date. The ultimate value of these long-term incentive awards depends upon Company performance and stock price. Performance Stock Program The PSP focuses executives on the long-term goals most critical to the overall success of the Company. The value of PSP compensation is based on Company performance against three-year performance goals (“Performance Goals”) in categories (“Performance Categories”) focused on building shareholder value. The four Performance Categories include: organic sales growth, before tax operating profit growth, Core EPS growth, and free cash flow productivity. The C&LD Committee sets the Performance Goals for each three-year period that begins on July 1 and ends on June 30 three years later (the “Performance Period”). In the first year of each Performance Period, the C&LD Committee grants Performance Stock Units (“PSUs”) to participants (“Initial PSU Grant”). The C&LD Committee uses a sliding scale to measure results in each Performance Category to establish a performance factor (each, individually, a “Performance Factor” together, in the aggregate, “Performance Factors”). These Performance Factors range from a minimum of 0% to a maximum of 200%, with a target of 100% for each Performance Category. This results in a participant having the ability to earn a maximum number of shares of Common Stock equal to two times the Initial PSU Grant (if all four goals are achieved at the maximum level) or a minimum of zero depending on the Company performance versus the Performance Goals. Performance Factors for Company results falling between the minimum, target, and maximum levels are determined via linear interpolation. Using the sliding scale to reward performance versus the Performance Goals, as opposed to “all or nothing” goals, discourages participants from taking unnecessary risks to ensure a final payment under the program. This aligns the interests of the NEOs with shareholders by encouraging participants to focus on the long-term performance of the Company over a multi-year period. At the end of each Performance Period, the C&LD Committee determines the Performance Factor for each Performance Category based on the Company’s results versus the Performance Goals. The average of the four Performance Factors is multiplied by the Initial PSU Grant to determine the vested PSUs. The formula is as follows:

  66. FY 2011-12 STAR Annual Bonus

    | Average of: Sales Performance Factor, Profit Performance Factor, EPS Performance Factor, and Cash Flow Performance FactorX | Initial PSU Grant | = | Vested PSUs |

  67. FY 2011-12 STAR Annual Bonus

    The vested PSUs are then converted into Common Stock and delivered to the applicable participant following the end of the Performance Period. Participants may elect to defer receipt of Common Stock by choosing to receive RSUs instead of Common Stock. For the Performance Period July 1, 2011 through June 30, 2014, the C&LD Committee granted the following: Mr. McDonald, 98,737 PSUs with a grant date fair value of $6,160,718; Mr. Moeller, 33,324 PSUs with a grant date fair value of $2,079,259; Messrs. Geissler and Panayotopoulos, each 38,508 PSUs with a grant date fair value of $2,402,716; and Mr. Passerini, 21,328 PSUs with a grant date fair value of $1,330,766. The grant date fair values of these awards assume 100% of goals are achieved and 100% payout. The actual payout will vary depending on whether Performance Goals are achieved by June 30, 2014. The following chart outlines the Performance Goals established for each Performance Category and the minimum, target, and maximum levels for each Performance Factor.

  68. PSP Goals for the Performance Period July 1, 2011 through June 30, 2014

    The first payout of the three-year Performance Stock Program will occur in August 2013. The grants made in FY 2010-11 and FY 2011-12 are currently projecting to pay out significantly below target due to the results as described in the Executive Summary on page 25. The low payout projection for below target results highlights the connection of pay to performance and reinforces the design of the Performance Stock Program. Key Manager Stock Grant The Key Manager Stock Grant is the second component of the Company’s long-term incentive compensation for its senior executives. It is paid in stock options and/or RSUs, focuses senior executives’ attention on the long-term performance of the Company, and directly links executives’ interests to those of shareholders. Stock options are not exercisable (do not vest) until three years from the date of grant and expire ten years from the date of grant. RSUs are delivered in shares five years from the date of grant. In addition to focusing executives on the long-term success of the Company, these restrictions enhance retention because employees who voluntarily resign from the Company during the specified periods forfeit their grants. Key Manager Stock Grants are generally granted in stock options, but executives can elect to receive up to one-half of their grant in RSUs, with the exception of the CEO, whose grant form and amount is solely determined by the C&LD Committee. Once the Key Manager Stock Grant target is established based on the total long-term incentive target and the determination of the PSP target, the CEO recommends specific grants to the C&LD Committee for each NEO based on: (1) the prior year’s business results attributable to each NEO; (2) summaries of business results for each Business Unit attributable to each NEO for the current fiscal year; and (3) individual contributions to the business by each NEO, including that individual’s leadership skills. These recommendations can be up to 50% above or 50% below target. In exceptional cases, no grant will be awarded. The C&LD Committee retains full authority to accept, modify, or reject these recommendations. The C&LD Committee awarded Mr. McDonald a Key Manager Stock Grant of 522,721 stock options based on total Company and individual performance as described on page 27 of this proxy statement. While the grant date fair value of this award is $4,404,706, the actual payout of this grant will depend upon the Company’s future stock price. For FY 2011-12, the C&LD Committee awarded the following Key Manager Stock Grants to each of the NEOs: Mr. Moeller, 122,187 stock options with a grant date fair value of $1,029,608 and 8,146 RSUs with a grant date fair value of $482,201; Messrs. Geissler and Panayotopoulos, 207,346 stock options, each with a grant date fair value of $1,747,200; and Mr. Passerini, 51,837 stock options with a grant date fair value of $436,804 and 10,368 RSUs with a grant date fair value of $613,732. These grants were based on Mr. McDonald’s input using individual performance, and the C&LD Committee approved long-term incentive targets for similar jobs in our Peer Group. As with Mr. McDonald’s grant, the actual payout of these grants will depend upon the Company’s future stock price. Summary of Total FY 2011-12 Long-Term Incentive Compensation (PSP + Key Manager Stock Grant) The C&LD Committee sets long-term incentive opportunities for the NEOs using market data, the Company’s prior year results (as shown on page 25), and individual performance. While these long-term incentive opportunities are reported in terms of grant date fair value, actual payouts will vary. The PSP payout will occur in August 2014 based on the achievement of performance goals described on page 37 and the actual payout of the Key Manager Stock Grant depends on the Company’s future stock price. The C&LD Committee approved total long-term incentives for Mr. McDonald in order to maintain his long-term compensation opportunity at the size-adjusted median of chief executive officers in our Peer Group and to recognize total Company and individual performance as described on pages 27-28 of this proxy statement. The $10,565,424 grant date fair value of Mr. McDonald’s long-term incentive awards is $955,710 lower than the grant date fair value of last year’s awards due to the low risk-free interest rates, low stock volatility, and the Company’s current dividend yield used to determine the stock option grant date fair value. The lower grant date fair value for stock options also impacted each of the other NEOs long-term incentive values. The C&LD Committee approved an increase in total long-term incentives for Mr. Moeller, which is slightly above the median long-term compensation opportunity of other CFOs in the Peer Group for companies of similar size. This increase reflects Mr. Moeller’s strong performance and increased experience as CFO. The grant date fair value of his long-term incentive awards was $3,591,068. The C&LD Committee approved increases to the total long-term incentives for Messrs. Geissler and Panayotopoulos to position them in-line with the size-adjusted median long-term compensation opportunity of similar positions at other companies in our Peer Group. The increase recognizes their increased roles in leading the Company with the reduction in Vice Chairmen from four to two. The grant date fair value of Messrs. Geissler’s and Panayotopoulos’ awards was $4,149,916 each. The C&LD Committee approved an increase to Mr. Passerini’s total long-term incentives, which positions him slightly above similar positions at other companies in our Peer Group. This increase recognizes the continued strong results of the Global Business Services organization and his role as Chief Information Officer in addition to Group President–Global Business Services. The grant date fair value of Mr. Passerini’s long-term incentive awards was $2,381,302. Special Equity Awards On rare occasions, the C&LD Committee makes special equity grants in the form of restricted stock or RSUs to senior executives to assure retention of the talent necessary to manage the Company successfully or to recognize superior performance. There were no special equity awards granted to NEOs by the Committee during FY 2011-12. Retirement Programs The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan (“PST”) is the Company’s primary retirement program for U.S.-based employees. The PST is a qualified defined contribution plan providing retirement benefits for full-time U.S. employees, including the NEOs. Under the PST, the Company makes an annual contribution of cash which is used to purchase Company stock that is credited to each participant’s PST account, upon which dividends are earned. The amount of the stock grant varies based upon individual salaries and years of service. Some participants in PST (including the NEOs) do not receive their full grant due to federal tax limitations. As a result, they participate in the nonqualified PST Restoration Program. These individuals receive RSUs valued at an amount equal to the difference between the contribution made under PST and what would have otherwise been contributed under PST but for the tax limitations. Participants are vested in their PST accounts after five years, and their PST Restoration RSUs are forfeitable until they become eligible for retirement. We are proud of the way PST and the PST Restoration Program have created ownership at all levels of our Company. We believe these programs continue to serve the Company and its shareholders well by focusing employees on the long-term success of the business.

  69. Other Key Compensation Program Features

    Other Key Compensation Program Features This additional information may assist the reader in better understanding the Company’s compensation practices and principles. Engagement of Independent Adviser The C&LD Committee has directed Frederic W. Cook & Co., its outside and independent compensation consultant, to advise it on various compensation matters, including Peer Group identification, competitive practices and trends, specific program design, and actions with respect to NEO and principal officer compensation. Under the terms of its agreement with the C&LD Committee, Frederic W. Cook & Co. is prohibited from doing any other business for the Company or its management, and the C&LD Committee may contact Frederic W. Cook & Co. without any interaction with Company management. This arrangement ensures the independence of the C&LD Committee’s compensation consultant. The C&LD Committee meets with its outside and independent compensation consultant in an Executive Session at every C&LD meeting. Company management uses a separate compensation consultant, Meridian Compensation Partners, LLC, to provide compensation advice, competitive survey analysis, and other benchmark information related to trends and competitive practices in executive compensation. Avoidance of Poor Pay Practices Perquisites The Company provides limited benefits to NEOs to fulfill particular business purposes, as explained on page 39 of this proxy statement. No changes were made to executive benefits over the past year, and the Company continues to manage executive benefits as a very small percentage (2%) of total compensation for the NEOs. Employment Contracts The C&LD Committee believes employment contracts for executives are not necessary, because most executives have spent the majority of their professional careers with the Company and have developed a focus on the Company’s long-term success. Moreover, the C&LD Committee does not provide special executive severance payments, such as golden parachutes, to its executives. In the event the Company encourages a NEO, or any other U.S. employee, to terminate employment with the Company (but not for cause), that individual may receive a separation allowance of up to one year’s annual salary, calculated based on years of service. Tax Gross-Ups Generally, the Company does not increase payments to any employees, including NEOs, to cover non- business-related personal income taxes. However, certain expatriate allowances, relocation reimbursements, and tax equalization payments are made to employees assigned to work outside their home countries, and the Company will cover the personal income taxes due on these items in accordance with expatriate policy because there is a business purpose. In addition, from time to time, the Company may be required to pay personal income taxes for certain separating executives hired through acquisitions in conjunction with pre-existing contractual obligations. Governing Plans, Timing, Pricing, and Vesting of Stock-Based Grants All grants of stock options, PSUs, restricted stock and/or RSUs made after October 13, 2009, are made under The Procter & Gamble 2009 Stock and Incentive Compensation Plan (as amended) (“2009 Plan”). The 2009 Plan was approved by Company shareholders at the October 13, 2009, annual shareholders’ meeting. Previous grants were made under The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended) (“2001 Plan”) and The Gillette Company 2004 Long-Term Incentive Plan (“2004 Gillette Plan”). The 2001 Plan was approved by Company shareholders. The 2004 Gillette Plan was approved by Gillette shareholders and adopted by the Company in 2005 as part of our merger with The Gillette Company. The 2009 Plan contains a vesting provision commonly known as a “second trigger,” which limits accelerated vesting in the event of a change in control. Time-based awards assumed as part of a change in control would only vest for involuntary terminations of employment for reasons other than cause and for terminations of employment for good reason. With the exception of any special equity awards discussed on page 38 of this proxy statement, the Company grants stock, PSUs, RSUs, and stock options on dates that are consistent from year to year. If the C&LD Committee changes a grant date, it is done in advance and only after careful review and discussion. The Company does not backdate stock options. The Company has never re-priced stock options and is not permitted to do so without prior shareholder approval. We use the closing price of the Common Stock on the date of grant to determine the grant price for executive compensation awards. However, because the PST uses the value of shares based on the average price of Common Stock for the last five days in June, the grants of RSUs made under the PST Restoration Program and IRP follow this same grant price practice. The pre-established grant dates for the programs are as follows: PST Restoration and IRP, first Thursday in August; STAR, last business day on or before September 15; and PSP and Key Manager Stock Grants, last business day of February (and, if necessary for corrections, on the last business day on or before May 9). Mitigation of Excessive Risk-Taking Recoupment & Clawback The C&LD Committee’s Senior Executive Officer Recoupment Policy permits the C&LD Committee to recoup or “clawback” STAR or long-term incentive program payments made to executives in the event of a significant restatement of financial results for any reason. This authority is in addition to the C&LD Committee’s authority under the 2001 Plan and the 2009 Plan to suspend or terminate any outstanding stock options if the C&LD Committee determines that the participant violated certain plan provisions. Moreover, the 2009 Plan has a clawback provision that allows the Company or the C&LD Committee to recover certain proceeds from option exercises or delivery of shares if the participant violates certain plan provisions. Balanced Weighting of Performance Metrics in Compensation Programs The STAR program and PSP use balanced weighting of multiple performance metrics to determine the payout. This discourages excessive risk-taking by removing any incentive to focus on one goal to the detriment of others. STAR and PSP are described on pages 32-35 and pages 36-37 of this proxy statement, respectively. Prohibition of Use of Company Stock in Derivative Transactions The Company’s Insider Trading Policy prohibits NEOs from involving Company stock in pledging, collars, short sales, hedging investments, and other derivative transactions. Purchases and sales of Company stock by NEOs can only be made during the one-month period following public earnings announcements or, if outside these window periods, with express permission from the Company’s Legal Division or in accordance with a previously established trading plan that meets SEC requirements. Additional Information Deferred Compensation Plan The Procter & Gamble Company Executive Deferred Compensation Plan (“EDCP”) allows executives to defer receipt of up to 100% of their STAR award and/or up to 50% of their annual salary. Executives may also elect to convert a portion of their PST Restoration RSUs into notional cash contributions to the EDCP with investment choices that mirror those available to all U.S. employees who participate in the Company’s 401(k) plan. No above-market or preferential interest is credited on deferred compensation, as those terms are defined by the SEC. Tax Treatment of Certain Compensation Section 162(m) of the Internal Revenue Code limits the Company deductibility of executive compensation paid to certain NEOs to $1,000,000 per year, but contains an exception for certain performance-based compensation.

  70. Executive Compensation Changes for FY 2012-13

    Executive Compensation Changes for FY 2012-13 The C&LD Committee reviewed the competitiveness of total annual cash compensation as well as results achieved from July 2011 through June 2012 for the CEO, CFO, and Vice Chairmen at its June 12, 2012 meeting. As a result, the C&LD Committee made no changes to the salaries or STAR Targets for Mr. McDonald. Additionally, The C&LD Committee made no changes to the salary or STAR Target for Messrs. Panayotopoulos and Geissler. The total annual cash compensation opportunity of the CEO and Vice Chairmen remain aligned with similar roles at companies in our Peer Group with similar size. The C&LD Committee increased the salary of Mr. Moeller from $825,000 to $850,000 and increased his STAR Target from 105% to 115% for FY 2012-13. These increases provide Mr. Moeller with total annual cash compensation opportunity at the size adjusted median of other chief financial officers in the Peer Group. The C&LD Committee did not make any decisions in the June 12, 2012 meeting that impacted the compensation of Mr. Passerini.

  71. Summary Compensation Table

    Summary Compensation Table

  72. Summary Compensation Table

    | Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock Awards(2) ($) | Option Awards(3) ($) | Non- Equity Incentive Plan Com- pensation(4) ($) | Change in Pension Value and Nonqualified Deferred Com- pensation Earnings(5) ($) | All Other Com- pensation(6) ($) | Total ($) | | Robert A. McDonald | 2011-12 | 1,600,000 | 2,432,000 | 6,449,332 | 4,404,706 | 0 | 0 | 312,559 | 15,198,597 | | Chairman of the Board, President and Chief Executive Officer | 2010-11 | 1,600,000 | 2,632,000 | 5,599,736 | 6,171,877 | 0 | 0 | 184,424 | 16,188,037 | | | 2009-10 | 1,400,000 | 2,670,000 | 2,956,724 | 5,616,469 | 175,000 | 0 | 297,035 | 13,115,228 | | Jon R. Moeller | 2011-12 | 825,000 | 762,127 | 2,669,053 | 1,029,608 | 0 | 0 | 60,815 | 5,346,603 | | Chief Financial Officer | 2010-11 | 750,000 | 781,121 | 2,118,128 | 1,251,451 | 0 | 0 | 61,759 | 4,962,459 | | | 2009-10 | 675,000 | 807,975 | 516,146 | 1,161,306 | 37,500 | 0 | 59,634 | 3,257,561 | | Werner Geissler | 2011-12 | 1,045,000 | 967,529 | 2,551,836 | 1,747,200 | 0 | 421,000 | 149,240 | 6,881,805 | | Vice Chairman—Global Operations | 2010-11 | 945,000 | 1,137,284 | 2,907,394 | 1,112,405 | 0 | 132,000 | 70,859 | 6,304,942 | | | 2009-10 | 907,500 | 1,071,630 | 141,311 | 2,654,409 | 54,375 | 772,000 | 78,083 | 5,679,308 | | E. Dimitri Panayotopoulos | 2011-12 | 1,085,000 | 963,138 | 2,560,331 | 1,747,200 | 0 | 465,000 | 79,450 | 6,900,119 | | Vice Chairman—Global Business Units | 2010-11 | 985,000 | 886,490 | 1,733,915 | 2,595,600 | 0 | 0 | 75,238 | 6,276,243 | | | 2009-10 | 947,500 | 1,396,238 | 150,140 | 3,096,801 | 56,875 | 601,000 | 94,923 | 6,343,477 | | Filippo Passerini | 2011-12 | 791,667 | 687,240 | 2,049,952 | 436,804 | 0 | 118,700 | 65,182 | 4,149,545 | | Group President—Global Business Services and Chief Information Officer | | | | | | | | | |

  73. Summary Compensation Table

    | (1) For FY 2011-12, Bonus reflects 2011-12 STAR awards that will be paid on September 14, 2012. Each NEO can elect to take his STAR award in cash, deferred compensation, RSUs, or stock options. For FY 2011-12, Messrs. McDonald, Moeller, and Passerini elected 100% cash and Messrs. Geissler and Panayotopoulos elected 100% options. |

  74. Summary Compensation Table

    | (2) For FY 2011-12, Stock Awards include the grant date fair value of any PST Restoration Program awards and the PSUs granted in February 2012 under the PSP. For Messrs. Moeller and Passerini, 2011-12 Stock Awards also include the grant date fair value of RSUs granted in February 2012 under the Key Manager Stock Grant. The fair value of these awards is determined in accordance with FASB ASC Topic 718. For PSUs granted under the PSP, an executive must be an employee as of June 30th following the grant date to retain the PSUs (“retention period”), and the PSUs vest on August 20th following the end of the Performance Period (“vesting period”). For RSUs granted under the Key Manager Stock Grant, an executive must be an employee as of June 30th following the grant date to retain the RSUs (“retention period”), and the RSUs vest five years from the grant date (“vesting period”). Pursuant to SEC rules, the amounts shown exclude the impact of forfeitures related to service-based and performance-based vesting conditions. Please see Note 7 to the Consolidated Financial Statements contained in the Company’s 2012 Annual Report on Form 10-K for more information. |

  75. Summary Compensation Table

    | (3) Option Awards for FY 2011-12 include the grant date fair value of each Key Manager Stock Grant, determined in accordance with FASB ASC Topic 718. Executives must remain employed through June 30th following a Key Manager Stock Grant in order to retain these stock options (“retention period”) and these option grants vest three years from the date of grant (“vesting period”). Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the assumptions made in the valuation for the current year awards reflected in this column, please see Note 7 to the Consolidated Financial Statements contained in the Company’s 2012 Annual Report on Form 10-K. For information on the valuation assumptions with respect to grants made in prior fiscal years, please see the corresponding note to the Consolidated Financial Statements contained in the Company’s Annual Report for the respective fiscal year. |

  76. Summary Compensation Table

    | (4) This column reflects the portion of the Business Growth Program payout that was designated to be paid in cash, regardless of the form of payment elected by the individual NEO. The Business Growth Program was terminated at the end of FY 2009-10. |

  77. Summary Compensation Table

    | (5) This column reflects aggregate changes in the actuarial present value of Messrs. Geissler’s, Panayotopoulos’, and Passerini’s pension benefits under all defined benefit and actuarial pension plans. None of the other NEOs has a pension plan. None of the NEOs had above-market earnings on deferred compensation. |

  78. Summary Compensation Table

    | (6) Please see the table below for information on the numbers that comprise the All Other Compensation column. |

  79. Grants of Plan-Based Awards Table

    Grants of Plan-Based Awards Table

  80. Grants of Plan-Based Awards Table

    | NEO/Plan Name(1) | Grant Date(2) | Compensation & Leadership Development Committee Action Date | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares or Stock Units (#) | All Other Option Awards Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards(3) ($ per share) | Grant Date Fair Value of Stock and Option Awards(4) ($) | | | | | Threshold (#) | Target (#) | Maximum (#) | | | | | | Robert A. McDonald | | | | | | | | | | | Key Manager Options(5) | 02/29/2012 | 02/14/2012 | | | | | 522,721 | 67.52 | 4,404,706 | | Performance Stock Plan PSUs(6) | 02/29/2012 | 02/14/2012 | 0 | 98,737 | 197,474 | | | | 6,160,718 | | PST Restoration RSUs(7) | 08/04/2011 | 06/07/2011 | | | | 4,587 | | | 288,614 | | Jon R. Moeller | | | | | | | | | | | Key Manager Options(5) | 02/29/2012 | 02/14/2012 | | | | | 122,187 | 67.52 | 1,029,608 | | Key Manager RSUs(8) | 02/29/2012 | 02/14/2012 | | | | 8,146 | | | 482,201 | | Performance Stock Plan PSUs(6) | 02/29/2012 | 02/14/2012 | 0 | 33,324 | 66,648 | | | | 2,079,259 | | PST Restoration RSUs(9) | 08/04/2011 | 06/07/2011 | | | | 1,710 | | | 107,593 | | Werner Geissler | | | | | | | | | | | Key Manager Options(5) | 02/29/2012 | 02/14/2012 | | | | | 207,346 | 67.52 | 1,747,200 | | Performance Stock Plan PSUs(6) | 02/29/2012 | 02/14/2012 | 0 | 38,508 | 77,016 | | | | 2,402,716 | | PST Restoration RSUs(7) | 08/04/2011 | 06/07/2011 | | | | 2,370 | | | 149,120 | | E. Dimitri Panayotopoulos | | | | | | | | | | | Key Manager Options(5) | 02/29/2012 | 02/14/2012 | | | | | 207,346 | 67.52 | 1,747,200 | | Performance Stock Plan PSUs(6) | 02/29/2012 | 02/14/2012 | 0 | 38,508 | 77,016 | | | | 2,402,716 | | PST Restoration RSUs(7) | 08/04/2011 | 06/07/2011 | | | | 2,505 | | | 157,615 | | Filippo Passerini | | | | | | | | | | | Key Manager Options(5) | 02/29/2012 | 02/14/2012 | | | | | 51,837 | 67.52 | 436,804 | | Key Manager RSUs(8) | 02/29/2012 | 02/14/2012 | | | | 10,368 | | | 613,732 | | Performance Stock Plan PSUs(6) | 02/29/2012 | 02/14/2012 | 0 | 21,328 | 42,656 | | | | 1,330,766 | | PST Restoration RSUs(7) | 08/04/2011 | 06/07/2011 | | | | 1,676 | | | 105,454 |

  81. Grants of Plan-Based Awards Table

    | (1) For awards granted under the PST Restoration Program, dividend equivalents are earned at the same rate as dividends paid on Common Stock. All references below to delivery of RSUs in shares reflect the current election of the NEO and may be changed at a later date, subject to applicable tax rules and regulations. |

  82. Grants of Plan-Based Awards Table

    | (2) Grant dates for equity awards are consistent from year to year, as described on page 41 of this proxy statement. |

  83. Grants of Plan-Based Awards Table

    | (3) The options granted were awarded using the closing price of the Company stock on the date of the grant. |

  84. Grants of Plan-Based Awards Table

    | (4) This column reflects the grant date fair value of each award computed in accordance with FASB ASC Topic 718. |

  85. Grants of Plan-Based Awards Table

    | (5) These options are forfeitable until the later of retirement eligibility or June 30th after the grant date, vest on February 28, 2015, and expire on February 28, 2022. |

  86. Grants of Plan-Based Awards Table

    | (6) These units are forfeitable until the later of retirement eligibility or June 30th after the grant date, and will deliver in shares on August 19, 2014. |

  87. Grants of Plan-Based Awards Table

    | (7) These units will deliver in shares one year following retirement. |

  88. Grants of Plan-Based Awards Table

    | (8) These units are forfeitable until the later of retirement eligibility or June 30th after the grant date, and will deliver in shares on February 28, 2017. |

  89. Grants of Plan-Based Awards Table

    | (9) These units are forfeitable until Mr. Moeller is eligible for retirement, and will deliver in shares one year following such retirement. |

  90. Grants of Plan-Based Awards Table

    Outstanding Equity at Fiscal Year-End The following table and footnotes provide information regarding unexercised stock options and stock awards that have not yet vested as of the end of FY 2011-12.

  91. Option Exercises and Stock Vested Table

    Option Exercises and Stock Vested Table

  92. Option Exercises and Stock Vested Table

    | | Option Awards | | | Stock Awards | | | | Name | Option Grant Date | Number of Shares Acquired on Exercise(1) (#) | Value Realized on Exercise(2) ($) | Stock Award Grant Date | Number of Shares Acquired on Vesting(3) (#) | Value Realized on Vesting(4) ($) | | Robert A. McDonald | — | — | — | 09/15/2008 | 2,180 | 136,119 | | | — | — | — | 09/15/2009 | 3,417 | 213,357 | | | — | — | — | 09/15/2010 | 18,710 | 1,168,252 | | Jon R. Moeller | — | — | — | 10/10/2006 | 4,007 | 258,351 | | | — | — | — | 09/15/2009 | 2,174 | 135,745 | | | — | — | — | 09/15/2010 | 5,345 | 333,742 | | Werner Geissler | — | — | — | 10/10/2006 | 18,339 | 1,182,407 | | | — | — | — | 09/15/2010 | 4,725 | 295,029 | | E. Dimitri Panayotopoulos | — | — | — | 09/15/2008 | 1,894 | 118,261 | | | — | — | — | 09/15/2009 | 3,076 | 192,065 | | | — | — | — | 09/15/2010 | 7,588 | 473,795 | | Filippo Passerini | 09/13/2002 | 32,412 | 513,973 | — | — | — | | | — | — | — | 09/15/2009 | 2,282 | 142,488 | | | — | — | — | 09/15/2010 | 5,613 | 350,476 |

  93. Option Exercises and Stock Vested Table

    | (1) The Number of Shares Acquired on Exercise is the gross number of shares acquired. |

  94. Option Exercises and Stock Vested Table

    | (2) The Value Realized on Exercise was determined by multiplying the number of shares acquired by the difference between the average of the high and low price of the Company’s common stock on the date of exercise and the exercise price of the options. |

  95. Option Exercises and Stock Vested Table

    | (3) Numbers of Shares Acquired on Vesting is the gross number of shares acquired. Please see footnote 3 in the Outstanding Equity at Fiscal Year-End Table for the definition of vesting for Stock Awards. |

  96. Option Exercises and Stock Vested Table

    | (4) Value Realized on Vesting was determined by multiplying the number of shares acquired by the average of the high and low price of the Common Stock on the vesting date. |

  97. Option Exercises and Stock Vested Table

    Pension Benefits The following table and footnotes provide information regarding the Company’s pension plans for Messrs. Geissler, Panayotopoulos, and Passerini as of the end of FY 2011-12. None of the other NEOs had any such arrangements with the Company.

  98. Pension Benefits Table

    Pension Benefits Table

  99. Pension Benefits Table

    | Name | Plan Name | Number of Years of Credited Service(1) | Present Value of Accumulated Benefit(2) ($) | Payments During Last Fiscal Year ($) | | Werner Geissler | The Procter & Gamble Company Global IRA(3) | 21 years 9 months | 2,454,000 | — | | | The Procter & Gamble Pension Fund (Germany) | 21 years 9 months | 3,190,000 | — | | E. Dimitri Panayotopoulos | The Procter & Gamble Company Global IRA(3) | 20 years 5 months | 3,903,000 | — | | | The Procter & Gamble Pension Fund (UK) | 17 years 5 months | 1,830,000 | — | | Filippo Passerini | The Procter & Gamble Company Global IRA | 21 years 9.5 months | — | — | | | Procter & Gamble Italy Executive Pension Plan(4) | 20 years 1.5 months | — | 589,700 |

  100. Pension Benefits Table

    | (1) Numbers in this column are computed as of the same pension plan measurement date used for financial statement reporting purposes for the Company’s audited financial statements as found in Note 8 to the Consolidated Financial Statements contained in the Company’s 2012 Annual Report on Form 10-K. |

  101. Pension Benefits Table

    | (2) The following provides the assumptions used in each plan to calculate present value: |

  102. Pension Benefits Table

    | Assumptions | Global IRA | German Plan | UK Plan | Italy Plan | | Retirement age | 60 | 65 | 65 | 65 | | Discount rate | 4.00% | 4.20% | 5.00% | 5.20% | | Salary increase rate | 4.75% | N/A | N/A | N/A | | Social security increase rate | 2.25% (Germany)/ 3.25% (UK) | N/A | 3.25% | N/A | | Pension increase rate | N/A | 1.75% | 3.00% | N/A | | Pre-Retirement Decrements | None | None | None | None | | Post-Retirement Mortality Table | RP 2000 Combined Healthy White Collar table, sex distinct | Richttafeln 2005 G modified | Standard tables PNM/FA00 Medium Cohort table projected forward based on an individual’s year of birth | IPS 55 NP males |

  103. Pension Benefits Table

    The following exchange rates as of June 30, 2012, were used to calculate present value:

  104. Pension Benefits Table

    | US $1.25770 : Euro $1.00 |

  105. Pension Benefits Table

    | US $1.56060 : GBP $1.00 |

  106. Pension Benefits Table

    | (3) Because Messrs. Geissler, Panayotopoulos, and Passerini have reached age 55, they are eligible for early retirement under this plan. However, their benefits would be reduced by 5% for each year retirement precedes age 60. The earliest age at which they may retire with full benefits is age 60. |

  107. Pension Benefits Table

    | (4) The Procter & Gamble Italy Executive Pension Plan was closed during FY 2011-12. All balances were paid to participants. Mr. Passerini’s balance of $589,700 was distributed to him in September 2011. |

  108. Pension Benefits Table

    The Procter & Gamble Global International Retirement Arrangement (“Global IRA”) The Global IRA is designed to provide retirement benefits to certain employees whose benefits are frozen under their home country pension plan(s) as a result of having been transferred away from their home country on a permanent basis. The Global IRA benefit is calculated in accordance with the following formula: .017 x average (base) salary for three years preceding retirement x years of service outside of home country (before localization) The Global IRA accounts for the differences in retirement benefits attributable to a higher salary at the time of retirement than at the time of transfer out of the home country. As such, the Global IRA is reduced on a dollar-for-dollar basis by any retirement pension benefit paid by either the Company or the government, and which was earned through the employee’s home country. The Procter & Gamble Pension Fund (Germany) (“German Pension Plan”) The German Pension Plan is a defined benefit plan for Germany-based employees hired before December 31, 1999. The German Pension Plan provides for post-retirement payments based on the employee’s pensionable income, which for certain employees, including Mr. Geissler, includes a portion of their STAR award, and years of service at the time of retirement. The German Pension Plan benefit is calculated in accordance with the following formula: .017 x average (base) salary for three years preceding retirement x years of service The benefit is paid at retirement and reduced by the German social security benefit based on years of service. The normal retirement age is 65, and there is a surviving spouse benefit equal to 60% of the employee’s pension benefit. The Procter & Gamble Pension Fund (UK) (“UK Pension Plan”) The UK Pension Plan is a defined benefit plan for employees whose home country was within the United Kingdom for all or a portion of their career. The UK Pension Plan provides for post-retirement payments based on the employee’s salary and years of service at the time of retirement. The UK Pension Plan benefit is calculated in accordance with the following formula: .02 x years of service x employee’s pensionable base salary This benefit is paid at retirement and is reduced to account for government-sponsored pension benefits received by the employee. Furthermore, the UK Pension Plan includes a “temporary” pension benefit that provides temporary pension payments to those employees who retire after age 59, but before they reach their social security retirement age. The amount of these payments is based on the government-sponsored pension benefits that these employees will receive from the UK government when they retire and reach their social security retirement age. Temporary pension benefit payments under this plan cease when government pension payments begin. The Procter & Gamble Italy Executive Pension Plan (“Italian Pension Plan”) The Italian Pension Plan is a closed and settled defined benefit plan available to employees for service performed only in Italy for those employees who obtained the Italian legal classification “executive” between July 1986 and March 1993. The Italian Pension Plan provided a deferred vested benefit for participants whose home country changed from Italy. The benefit was calculated as follows: 0.017 x years of service x average of employee’s last 3 years pensionable salaries less the value of government pension plans As a result of the plan closure and settlement in FY 2011-12, Mr. Passerini’s vested benefit was paid out to him in September 2011. Nonqualified Deferred Compensation The following table and footnotes provide information regarding the Company’s non tax-qualified defined contribution and deferred compensation plans for each of the NEOs for FY 2011-12. For a complete understanding of the table and the footnotes, please read the narrative that follows the table.

  109. Nonqualified Deferred Compensation Table

    Nonqualified Deferred Compensation Table

  110. Nonqualified Deferred Compensation Table

    | Name | Plan Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY(1) ($) | Aggregate Earnings in Last FY(2) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | | Robert A. McDonald | PST Restoration Program | — | 275,715 | (11,942) | — | 2,379,807(3) | | Jon R. Moeller | PST Restoration Program | — | 107,593 | (1,468) | — | 460,665(4) | | Werner Geissler | Executive Deferred Compensation Plan | — | — | (4,598) | — | 456,694 | | | International Retirement Plan | — | — | (2,815) | — | 504,818(5) | | | PST Restoration Program | — | 141,318 | (4,486) | — | 969,388(6) | | E. Dimitri Panayotopoulos | International Retirement Plan | — | — | (28,174) | — | 2,496,635(7) | | | PST Restoration Program | — | 147,925 | (3,037) | — | 484,589(8) | | Filippo Passerini | International Retirement Plan | — | — | (8,507) | — | 197,416 | | | PST Restoration Program | — | 105,454 | (2,159) | — | 651,335 |

  111. Nonqualified Deferred Compensation Table

    | (1) Total reflects registrant contributions in the form of RSUs pursuant to the PST Restoration Program, 100% of which are also reported in the Stock Awards column of the Summary Compensation Table found on page 44 of this proxy statement. The PST Restoration Program is a nonqualified defined contribution plan. The contribution amount is the net number of RSUs awarded after withholding for applicable taxes, multiplied by the grant price. |

  112. Nonqualified Deferred Compensation Table

    | (2) Because none of the amounts included in this column are above-market earnings under SEC reporting rules, they are not reflected in the Summary Compensation Table. |

  113. Nonqualified Deferred Compensation Table

    | (3) Total includes $741,852 previously reported in Summary Compensation Tables for prior years. |

  114. Nonqualified Deferred Compensation Table

    | (4) Total includes $161,219 previously reported in Summary Compensation Tables for prior years. |

  115. Nonqualified Deferred Compensation Table

    | (5) Total includes $98,066 previously reported in Summary Compensation Table for prior years. |

  116. Nonqualified Deferred Compensation Table

    | (6) Total includes $285,003 previously reported in Summary Compensation Tables for prior years. |

  117. Nonqualified Deferred Compensation Table

    | (7) Total includes $166,378 previously reported in Summary Compensation Table for prior years. |

  118. Nonqualified Deferred Compensation Table

    | (8) Total includes $302,529 previously reported in Summary Compensation Tables for prior years. |

  119. Nonqualified Deferred Compensation Table

    The NEOs are eligible to participate in The Procter & Gamble Company Executive Deferred Compensation Plan (“EDCP”). Under EDCP, a participant may defer up to 50% of base salary and up to 100% of the STAR award. Amounts may be deferred for a minimum of one year or until termination of employment. Payments that commence upon retirement, death or disability may be taken in a lump sum or installments (over a maximum period of ten years). All other payments under the plan are paid as a lump sum. Amounts deferred under EDCP are credited with market earnings based on the same fund choices available to all employees under the Company’s tax-qualified plan. Participants may change fund choices on a daily basis. As described on page 39 of this proxy statement, federal tax rules limit the size of contributions that can be made to individuals pursuant to tax-qualified defined contribution plans like the PST. These limits are based on the annual salary of the plan participant. Because of these limits, certain participants, including the NEOs, are unable to receive their full contributions pursuant to the terms and conditions of the PST. To account for these limitations, the Company utilizes the PST Restoration Program. This is a nonqualified defined contribution plan under which the Company makes an additional annual contribution in the form of RSUs to those executives whose calculated contribution to their PST accounts was limited by federal tax laws. These RSUs are forfeitable until the executive becomes eligible for retirement. Executives can elect to receive either a lump sum payment one year post-retirement or ten annual installment payments beginning one year post-retirement, or they can defer receipt of either the lump sum or the ten annual installments to six or eleven years post-retirement. Generally, executives have up until retirement to change a previous deferral election, with any such deferral elections or changes to deferral elections made in compliance with Section 409A of the Internal Revenue Code. These RSUs earn dividend equivalents at the same rate as dividends on Common Stock and are accrued in the form of additional RSUs each quarter and credited to the executive’s holdings. The value of each RSU may increase or decrease over time as the value is tied to the price of the Common Stock. NEOs may convert certain of their PST Restoration Program RSUs into contributions to the EDCP. All such contributions are forfeitable until the executive becomes eligible for retirement and are paid out in the same manner described above. The Company’s IRP is designed to provide retirement benefits for employees whose participation in retirement plans in their home countries has been suspended because they are on assignments outside of that country. Under the IRP, the Company makes an annual contribution for each participant equal to the contribution that would have been made under the participant’s home country retirement plan had the participant remained in that country and eligible to participate in that plan. Historically, Company contributions to IRP were placed into one of several investment vehicles available within the IRP, at each participant’s election. Participants in the U.S. receive their contributions in RSUs. These contributions vest according to the terms and conditions of the participant’s home country retirement plan. Upon retirement from the Company, participants must elect to receive distributions from their IRP accounts in one of four ways: (1) fixed-income annuity, (2) variable annuity, (3) lump sum, or (4) annual installments (over a maximum of 15 years). Amounts the NEOs defer under any of the above mentioned plans that are scheduled to be paid after termination of employment must be held by the Company for a minimum of six months in order to comply with Section 409A of the Internal Revenue Code.

  120. Payments upon Termination or Change in Control

    Payments upon Termination or Change in Control The Company does not have any employment contracts with its NEOs that require severance payments upon termination of their employment. Certain elements of compensation are, however, treated differently upon various termination of employment scenarios, as described below. The following describes how certain elements of compensation are generally handled under these scenarios for all Company employees, including the NEOs.

  121. Payments upon Termination or Change in Control

    | • | Base Salary—Base salary is paid through the last day worked, regardless of reason for termination of employment. In the event that the Company encourages a U.S. employee to terminate employment with the Company (but not for cause), that individual may receive a separation allowance of up to one year’s annual base salary, calculated based on years of service. |

  122. Payments upon Termination or Change in Control

    | • | STAR—Individuals who work through the last day of the fiscal year are eligible for the STAR award payable for that year, regardless of the reason for termination of employment. Individuals who retire or terminate as a result of Company encouragement (not for cause) prior to fiscal year-end receive a pro-rated amount. Past short-term bonus awards where the employee voluntarily elected stock or options in lieu of cash are either retained or paid out in a lump sum, regardless of the reason for termination. |

  123. Payments upon Termination or Change in Control

    | • | Equity Awards under the Company’s Key Manager Annual Stock Grant program, PSP, the PST Restoration Program, and IRP—Treatment is governed by the Company’s equity compensation plans and depends on the reason for termination of employment, as follows. Past equity awards where the employee voluntarily elected stock or stock options in lieu of cash or unrestricted stock are either retained or paid out in a lump sum, regardless of the reason for termination. Further, in certain situations, employees are entitled to keep all equity awards according to their original terms. Each of the following assumes that the individual fully complies with the provisions of the Company’s equity compensation plans, including compliance with the Company’s Purpose, Values, and Principles and |

  124. Payments upon Termination or Change in Control

    | the provision that prohibits individuals from competing with the Company following termination of employment, each of which can result in forfeiture and/or cancellation of outstanding equity awards. |

  125. Payments upon Termination or Change in Control

    | § Voluntary Termination by the Employee |

  126. Payments upon Termination or Change in Control

    | – | All stock options that were not vested are forfeited effective upon the date of termination. |

  127. Payments upon Termination or Change in Control

    | – | All vested stock options that were not exercised prior to termination are forfeited. |

  128. Payments upon Termination or Change in Control

    | – | All RSUs for which the forfeiture date has not yet occurred are forfeited effective upon the date of termination. |

  129. Payments upon Termination or Change in Control

    | – | All PSUs for which the Performance Period has not yet completed are forfeited effective upon the date of termination. |

  130. Payments upon Termination or Change in Control

    | § Retirement or Permanent Disability |

  131. Payments upon Termination or Change in Control

    | – | Key Manager Annual Stock Grant stock options and RSUs are forfeited unless the individual is employed through June 30th following the grant, with stock options held until expiration and Key Manager RSUs delivering in shares, each according to their original terms. |

  132. Payments upon Termination or Change in Control

    | – | Business Growth Program RSUs are retained according to their original terms. |

  133. Payments upon Termination or Change in Control

    | – | All other RSUs for which the forfeiture date has not yet occurred are forfeited, unless otherwise agreed to by the C&LD Committee. |

  134. Payments upon Termination or Change in Control

    | – | PSUs are retained according to their original terms if individual is employed through June 30th following the grant. |

  135. Payments upon Termination or Change in Control

    | § Company Encouraged Termination, Not for Cause |

  136. Payments upon Termination or Change in Control

    | – | Key Manager Annual Stock Grant stock options and RSUs are forfeited unless the individual is employed through June 30th following the grant, with stock options held until expiration and RSUs delivering in shares, each according to their original terms. |

  137. Payments upon Termination or Change in Control

    | – | All other RSUs for which the forfeiture date has not yet occurred are forfeited, unless otherwise agreed to by the C&LD Committee. |

  138. Payments upon Termination or Change in Control

    | – | PSUs are retained according to their original terms if the individual is employed through June 30th following the grant. |

  139. Payments upon Termination or Change in Control

    | § Termination for Cause |

  140. Payments upon Termination or Change in Control

    | – | All stock options and RSUs are forfeited effective upon the date of termination. |

  141. Payments upon Termination or Change in Control

    | – | All PSUs for which the Performance Period has not yet completed are forfeited effective upon the date of termination. |

  142. Payments upon Termination or Change in Control

    | § Change in Control |

  143. Payments upon Termination or Change in Control

    | – | 2001 Plan: All stock options vest immediately. All RSUs are deliverable in shares immediately. The purpose of this “single trigger” vesting provision was to protect Company employees in the event of a change in control by accelerating the vesting schedule for their outstanding equity awards. |

  144. Payments upon Termination or Change in Control

    | – | 2009 Plan: |

  145. Payments upon Termination or Change in Control

    | Ÿ | Stock Options/RSUs: All stock options vest immediately and all RSUs are deliverable in shares immediately upon change in control for any awards not assumed. For awards that are assumed, stock options vest and RSUs are deliverable in shares only if a participant’s employment is involuntarily terminated for reasons other than cause or the participant terminates their employment with “good reason.” |

  146. Payments upon Termination or Change in Control

    | Ÿ | PSUs: All PSUs will vest at 100% of the Initial PSU Grant, or the PSP target if the Initial PSU Grant has not occurred, upon a change in control that meets the requirements of a change in control under Section 409A of the Internal Revenue Code, and shall be paid in shares of Common Stock at the time of such change in control. If there is a change in control event that does not meet the requirements of a change in control event under Section 409A, all outstanding PSP Awards will be settled according to the original terms and conditions. |

  147. Payments upon Termination or Change in Control

    | § Death—All stock options, RSUs, and PSUs transfer by will or laws of descent and distribution. All stock options vest immediately. All RSUs are deliverable in shares immediately. All PSUs vest according to the original terms of the grant. |

  148. Payments upon Termination or Change in Control

    | • | Special Equity Awards—In special circumstances, the C&LD Committee may make a special award of restricted stock or RSUs. Terms and conditions of these awards are determined by the C&LD Committee at the time of grant. In the event of a change in control, all restrictions lapse immediately. |

  149. Payments upon Termination or Change in Control

    | • | Retirement Plans—The retirement plans in which the NEOs participate do not discriminate in scope, terms, or operation for NEOs versus all other participants. All NEOs are fully vested in PST and will retain all shares upon termination of employment regardless of reason. PST Restoration RSUs vest upon eligibility for retirement. Messrs. Geissler, Panayotopoulos, and Passerini are retirement eligible and therefore entitled to a Global IRA benefit value upon separation from the Company. Messrs. Geissler, Panayotopoulos, and Passerini are each fully vested in their respective IRP and country pension plan account balances and therefore, would retain those balances upon termination for any reason. |

  150. Payments upon Termination or Change in Control

    | • | Deferred Compensation—Cash amounts deferred under EDCP have been earned and therefore are retained upon termination for any reason. Any RSUs granted pursuant to the PST Restoration Program or IRP would be treated as described above under Equity Awards. The same is true for any cash contributions to EDCP resulting from the conversion of PST Restoration RSUs. None of these amounts are included in the following table because they are reported in the Nonqualified Deferred Compensation Table on page 55 of this proxy statement. |

  151. Payments upon Termination or Change in Control

    | • | Executive Benefits |

  152. Payments upon Termination or Change in Control

    | § Executive Group Life Insurance—Benefits are retained if employee is eligible for early retirement. |

  153. Payments upon Termination or Change in Control

    | § Financial Counseling—Employee may use the remaining balance until the end of the current calendar year for reimbursable charges under the program. |

  154. Payments upon Termination or Change in Control

    | § Unused Vacation—Employee is entitled to lump sum payment equal to value of accrued, but unused, vacation days. |

  155. Payments upon Termination or Change in Control

    | § Other Programs—In most cases, participation ends on the last day worked, unless otherwise agreed to by the C&LD Committee. |

  156. Payments upon Termination or Change in Control

    | • | Expatriate and Relocation Program—If an employee’s expatriate assignment terminates for any reason, the Company would pay for relocation to the home country and would cover future taxes due related to the expatriate assignment. |

  157. Payments upon Termination or Change in Control

    The following table and footnotes quantify the payments and benefits that each NEO would be required to be paid under the Company’s compensation programs upon various scenarios for termination of employment or a change in control of the Company.

  158. Payments upon Termination or Change in Control Table

    Payments upon Termination or Change in Control Table

  159. Payments upon Termination or Change in Control Table

    | Name | Voluntary Termination, Retirement, Permanent Disability or Termination for Cause(1) ($) | Company Encouraged Termination, not for Cause(2) ($) | Change in Control or Death(3)(4) ($) | | Robert A. McDonald | | | | | Stock Options | 0 | 0 | 0 | | Stock Awards | 0 | 0 | 14,494,568 | | Salary | 0 | 1,600,000 | 0 | | Executive Group Life Insurance | 0 | 0 | 4,640,000 | | Jon R. Moeller | | | | | Stock Options | 0 | 0 | 0 | | Stock Awards | 0 | 0 | 5,161,294 | | Salary | 0 | 825,000 | 0 | | Executive Group Life Insurance | 0 | 0 | 1,691,250 | | Werner Geissler | | | | | Stock Options | 0 | 0 | 9,820 | | Stock Awards | 0 | 0 | 13,901,791 | | Salary | 0 | 1,045,000 | 0 | | Executive Group Life Insurance | 0 | 0 | 2,246,750 | | E. Dimitri Panayotopoulos | | | | | Stock Options | 0 | 0 | 0 | | Stock Awards | 0 | 0 | 4,010,099 | | Salary | 0 | 1,085,000 | 0 | | Executive Group Life Insurance | 0 | 0 | 2,332,750 | | Filippo Passerini | | | | | Stock Options | 0 | 0 | 0 | | Stock Awards | 0 | 0 | 5,460,254 | | Salary | 0 | 800,000 | 0 | | Executive Group Life Insurance | 0 | 0 | 1,520,000 |

  160. Payments upon Termination or Change in Control Table

    | (1) As noted above, no severance payments are required to be made to any of the NEOs under any of these termination of employment scenarios. Retention of certain elements of compensation, such as equity-based compensation, may vary depending on the reason for termination. For a complete understanding of these differences, please see the narrative section above. |

  161. Payments upon Termination or Change in Control Table

    | (2) Each of the NEOs has enough years of service with the Company to receive one year’s salary upon a Company encouraged termination of employment (not for cause). As noted above, the Committee has discretion to allow a NEO to retain certain equity awards that otherwise would be forfeited under the Company’s compensation programs in the event of a Company encouraged termination (not for cause). The amounts shown for salary assume a June 30, 2012 termination. |

  162. Payments upon Termination or Change in Control Table

    | (3) The amounts shown for stock options and stock awards represent the in-the-money value of unexercisable stock options and unvested PSUs and RSUs (excluding PST Restoration RSUs and IRP RSUs which are reported in the Nonqualified Deferred Compensation Table) that would immediately become exercisable and/or deliverable in shares, respectively, upon a change in control or death of the NEO, based on the Company’s closing stock price on June 30, 2012, of $61.25. The amounts shown for the Executive Group Life Insurance death benefit assumes a June 30, 2012 death. A change in control does not trigger payment of a death benefit. |

  163. Payments upon Termination or Change in Control Table

    | (4) The totals included in this column assume that the option and stock awards granted under the 2009 Plan vest upon change in control. However, except for PSP, awards do not vest unless: (a) the awards are not assumed or (b) the awards are assumed, but the recipient is terminated without cause or resigns with “good reason.” PSP awards vest at 100% of the Initial PSU Grant (or 100% of the PSP Target if the change in control occurs prior to the Initial PSU Grant) if there is a change in control that meets the requirements of a change in control under Section 409A of the Internal Revenue Code and shall be paid in shares of Common Stock at the time of the change in control. PSP awards will vest and pay according to the terms and conditions of the Initial PSU Grant in the case of a death of the participant. The table below shows the values of the in-the-money unexercisable stock options and unvested stock awards made pursuant to the 2009 Plan (which are included in this column) that would not vest on a change in control unless one of the second trigger events occurred as well. |

  164. Payments upon Termination or Change in Control Table

    | Name | Vesting Value/ Second Trigger ($) | | Robert A. McDonald | | | Stock Options | 0 | | Stock Awards | 2,861,049 | | Jon R. Moeller | | | Stock Options | 0 | | Stock Awards | 1,468,715 | | Werner Geissler | | | Stock Options | 9,820 | | Stock Awards | 1,442,989 | | E. Dimitri Panayotopoulos | | | Stock Options | 0 | | Stock Awards | 0 | | Filippo Passerini | | | Stock Options | 0 | | Stock Awards | 1,309,709 |