Colgate-Palmolive Company (CL) Earnings Call Transcript & Summary

Good morning. Welcome to Colgate-Palmolive's 2021 Annual Meeting of Stockholders. Today's webcast may include forward-looking statements. Actual results could differ materially from those statements. Please refer to Colgate's most recent filings with the SEC, including its 2020 annual report on Form 10-K and subsequent SEC filings, all available on Colgate's website for a discussion of the factors that could cause actual results to differ materially from these statements. This webcast is being held in accordance with local health and safety guidelines. Precautions are in place to ensure the safety of Colgate employees. Portions of this webcast are prerecorded. Now I would like to turn the webcast over to Chairman, President and Chief Executive Officer, Noel Wallace.

Good morning, everyone. I'm Noel Wallace, President and CEO and Chairman of our company. On behalf of your Board of Directors, all of whom are joining us virtually today, I would like to welcome you to our 2021 Annual Stockholders Meeting. Consistent with recommended safe practices, we're conducting this meeting in a virtual manner with proper social distancing. I want to begin this year's meeting by thanking all 34,000 Colgate employees around the world for their tireless efforts over the past year. The COVID pandemic had a tremendous impact on the lives of Colgate people over the past 12 months -- impacts on their work, home, family and communities. Despite all of this, Colgate people remain dedicated to delivering health and hygiene products for people around the world, while driving strong results for you, our shareholders, and all of our stakeholders. In honor of these efforts, we have donated the products that would usually go into gift bags for the annual meeting to local charities around the United States that were chosen by our employees. These products have been sent to food pantries, animal shelters and other organizations that are helping people in our communities during these difficult times. This effort has helped 31 organizations around the country. In looking back at the 12 months since our last meeting, I'm very pleased with the results that our company has delivered. I will be back in a few minutes to provide my views on our 2020 performance after we have conducted the official business of the meeting. In my remarks, I will focus on 3 key priorities that successfully guided us to one of the most turbulent years in our history. First, we succeeded in 2020 by staying consistent to our values and purpose. Second, we adapted our strategies and acted with agility to win in a new operating environment. And third, we managed through the crisis with an eye always on the future. You can see the impact of these priorities by looking back at our 2020 results, and I also believe you will see them in our results in the future. I'm joined today on this webcast by 3 senior members of our leadership team. Jennifer Daniels, Chief Legal Officer and Secretary; John Faucher, Chief Investor Relations Officer; and Stan Sutula, Chief Financial Officer. Stan joined us last November after decades of finance leadership at IBM and then several years as Chief Financial Officer at Pitney Bowes. I also want to take this opportunity to acknowledge Helene Gayle, who's retiring from our Board of Directors after 11 years of service. We thank Helene for her wisdom and her guidance, particularly her work as Chair of our Nominating, Governance and Corporate Responsibility Committee. We wish you all the best going forward. I will now turn the meeting over to Jennifer, who will conduct the formal portion of this meeting. After we have addressed those matters, I will review the progress of our business and our strategies for future growth, after which we'll have a question-and-answer session. Now here is Jennifer.

Thank you, Noel, and good morning, everyone. I hope you're all well. First, a quick note about the question-and-answer session Noel mentioned. In order to provide our stockholders with the broadest opportunity to ask questions, we've had the stockholder question portal open since March 24 on proxyvote.com. Questions can also be submitted now through the end of the meeting using the Ask A Question text box on the virtual meeting web portal. We will do our best to answer as many questions as time allows, but only questions that are pertinent to the meeting will be addressed as detailed in our rules of conduct. Both the rules of conduct and the agenda for today's meeting are available in the Meeting Materials section of the web portal. I am pleased to present the formal portion of today's meeting, which I now call to order. Each stockholder of record on March 8, 2021, the record date for the meeting, has been given proper notice of the meeting and a quorum is present. Affidavits of mailing of this notice, the proxy materials and the annual report will be filed with the records of the meeting. Next, we will present the matters to be voted upon. There are 5 items of business on the agenda that require a voting by our stockholders, and the polls are open for voting. The votes will be tallied by Mr. Peter Descovich, the independent Inspector of Election, who joins us from Broadridge Financial Solutions. Please note that I will present all of the proposals, and then we will give stockholders an opportunity to make any comments on the proposals themselves after all the proposals have been presented. The first order of business is the election of directors as nominated by the Board. The nominees are as follows: Mr. John Bilbrey, former Chairman, President and Chief Executive Officer of The Hershey Company; Mr. John Cahill, Vice Chairman of The Kraft Heinz Company; Ms. Lisa Edwards, President and Chief Operating Officer of Diligent Corporation; Dr. Martin Harris, Associate Vice President of the Health Enterprise and Chief Business Officer of the Dell Medical School at the University of Texas at Austin; Ms. Martina Hund-Mejean, former Chief Financial Officer of Mastercard Inc; Ms. Kimberly Nelson, former Senior Vice President, External Relations of General Mills Inc.; Ms. Lori Norrington, Operating Partner of Lead Edge Capital LLC; Mr. Michael Polk, Advisory Director to Berkshire Partners and Chief Executive Officer of Implus LLC; Mr. Stephen Sadove, Founding Partner of JW Levin Management Partners, LLC; and Mr. Noel Wallace, Chairman, President and Chief Executive Officer of Colgate-Palmolive Company. There have been no other nominations pursuant to our bylaw procedures, and the Board recommends a vote for each of the nominees. The second item of business is the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2021. The Board recommends a vote for this proposal. Representatives from PricewaterhouseCoopers are also with us today, and they will be available during the question-and-answer session later in the meeting to respond to appropriate questions. The third item of business is the nonbinding advisory vote to approve the compensation of our named executive officers as described in the proxy statement. The Board recommends a vote for this proposal. The fourth item of business is a stockholder proposal submitted by Kenneth Steiner regarding an independent Board Chairman. We will now connect with Ms. Cam Franklin, who is representing Mr. Steiner to hear the statement in support of the proposal. Ms. Franklin, out of respect for the other stockholders in attendance and to allow ample time for Q&A, we ask that you please limit your comments to a period of 3 minutes. Operator, can you please open Ms. Franklin's line?

Good morning.

Good morning.

Proposal 4: Independent Board Chairman. The shareholders request the Board of Directors to adopt as policy and amend the bylaws as necessary to require the Board -- to require the Chair of the Board of Directors, whenever possible, to be an independent member of the Board. This proposal topic won 52% support at Boeing, 54% support at Baxter International and 46% support at Colgate-Palmolive in 2020. It is likely that this 46% at Colgate-Palmolive was a majority vote from the shares that have access to objective proxy voting advice. Unfortunately, small shareholders are forced to rely on the biased recommendations of management because they do not have access to objective proxy voting advice. Management is getting a free ride from the shares that do not have access to objective proxy voting advice. Management is more focused on giving the CEO the ego trip that goes with giving the CEO the 2 top jobs. It is more important to have an independent Chairman of the Board since our Lead Director, Stephen Sadove, has 14 years long tenure. Long tenure in a director is the opposite of independence. And independence can be the most important attribute for a director, especially a lead director. The 2020 proxy said Mr. Sadove contributed strong leadership to Colgate's Board since he joined in 2007. However, the 2020 proxy did not give one example of such strong leadership. Management promotes the fallacy that shareholders should be apathetic about improving corporate governance because management has an informal shareholder engagement process that has no rules, no independent oversight and can be abruptly shut down if shareholders say things that management does not want to hear. It is amazing the number of companies that brag about how they use their so-called shareholder engagement process to produce so-called feedback that is in lockset with the corresponding management sales pitches. The role of the CEO and management is to run the company. The role of the Board of Directors is to provide independent oversight of management and the CEO. Thus, there is a potential conflict of interest for a CEO to have the oversight role of Chairman. Shareholders are best served by an independent Board Chair who can provide a balanced power between the CEO and the Board. The primary duty of a Board of Directors is to oversee the management of a company on behalf of shareholders. A CEO serving as a Chair can result in excessive management influence on the board and weaker oversight of management. If you have voted against this proposal, please consider changing your vote before the polls close in a few minutes. Please vote yes, Independent Board Chairman Proposal #4.

Ms. Franklin, thank you for your interest in our corporate governance. The Board has recommended a vote against this proposal for the following reasons. The Board believes it would not be in the best interest of stockholders for our governing documents to require that an independent director serve as Chairman. The Board is committed to the highest standards of corporate governance, especially Board independence and accountability and has an independent lead director with clearly defined responsibilities to ensure proper checks and balances. Additionally, all committees of the Board are comprised entirely of independent directors, including the committee chairs. Stockholders are best served if the Board retains flexibility to decide what leadership structure works best for Colgate based on the facts and circumstances existing from time to time. The Board believes that the current leadership structure works well for Colgate at this time. For these reasons, and as discussed more fully in the proxy statement, the Board has recommended a vote against this proposal. The fifth and final item of business is a stockholder proposal by John Chevedden regarding reducing the threshold to call special stockholder meetings. We will now connect with Ms. Franklin, who is also representing Mr. Chevedden, to hear the statement in support of the proposal. Ms. Franklin, we do ask that you again, please limit your comments to a period of 3 minutes. Operator, can you please open Ms. Franklin's line again?

Good morning. Proposal 5: Special Shareholder Meeting Improvement by John Chevedden. Shareholders ask our Board to take the steps necessary to amend the appropriate company governing documents to give the owners of a combined 10% of our outstanding common stock, the power to call a special shareholder meeting. If you have voted against this proposal, please consider changing your vote before the polls close in a few minutes. It currently takes 1/3 of the shares that vote at the annual meeting to call for a special shareholder meeting. This proposal topic won more than 44% at each of 4 Colgate-Palmolive annual meetings since 2017. These 44% plus votes represented at least 51% support each year from the shareholders who have access to objective proxy voting advice, in spite of what management claims from its so-called shareholder engagement. Thus, Colgate-Palmolive should have previously adopted this proposal. Unfortunately, small shareholders are forced to rely on the biased recommendations of management because they do not have access to objective proxy voting advice. Management is thus getting a free ride from the shares but do not have access to objective proxy voting advice. The key benefit of a governance improvement proposal like this proposal is that it would not result in more cost because the mere presence of good governance serves as a guardrail to make sure that management performs well on its own. Because if management fails, shareholders have a remedy with peace to make their reforms known to management in a special shareholder meeting. The key benefit of -- as a good governance proposal is that it does not have to be used because its mere presence triggers better management performance. Management is focused on saving thousands of dollars on corporate governance when improved corporate governance can pay dividends in the millions. Management promotes the fallacy that shareholders should be restricted to only 1 formal means to raise an issue between annual meetings, the calling of the special shareholder meeting. Management promotes the fallacy that shareholders should be apathetic about improving corporate governance because management has an informal shareholder engagement process. It is amazing the number of companies that brag about how they use their so-called shareholder engagement process to produce so-called feedback that is in opposition to the way the same shareholders voted. Please vote yes, Special Shareholder Meeting Improvement Proposal #5. Thank you for your time.

Thank you again, Ms. Franklin, for your interest in our corporate governance. Our bylaws have permitted holders of 25% of Colgate's stock to call a special meeting since 2007. It is this existing right as well as other existing and meaningful rights to influence the governance of the company that led the Board to recommend a vote against this proposal. If implemented, this proposal would enable a very small number of stockholders to call a special meeting. The Board believes that it is not in the best interest of all stockholders to allow such a small minority to call special meetings, causing the company to incur significant expense and administrative burden to advance what may be a narrow agenda not favored by the majority of stockholders. For these reasons and as discussed more fully in the proxy statement, the Board has recommended a vote against this proposal. That concludes the matters to be voted on as outlined in the notice of the annual meeting. If any stockholder would like to make a comment regarding any of the proposals, please submit your comment through the web portal using the Ask A Question text box.

I understand that we've received 1 question regarding the proposal to the nonbinding advisory vote to approve the compensation of our named executive officers as described in the proxy statement. The question was, "What is the total CEO pay for 2020 and 2019?" I would refer the stockholder to our proxy, but the numbers are $14,364,118 for 2020 and $10,828,665 for 2019. I'll pause for any other comments. At this time, any stockholder who has not yet voted or wishes to change their vote may do so by clicking on the voting button on the web portal and following the instructions there. Stockholders who have sent in proxies or voted via telephone or Internet and do not want to revoke or change their vote, do not need to take any further action. We are now going to take a short pause to allow for any stockholders who have not yet voted to do so. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls for the meeting closed. I have received the preliminary tabulation from Broadridge. And on the basis of those preliminary tabulations, I am pleased to report that all the director nominees have been elected; that the selection of PricewaterhouseCoopers as our independent registered public accounting firm for 2021 has been ratified; and that the compensation of our executive officers named in the summary compensation table of the proxy statement has been approved by advisory vote. The preliminary tabulation also shows that the stockholder proposal on the independent Chairman did not receive the necessary majority, and, therefore, has not been approved. We share the proponent's commitment to good corporate governance, be assured that we continue to review the most effective means of governing the company in the stockholders' best interest. Finally, on the basis of the preliminary tabulation, the stockholder proposal on the threshold to call special stockholder meetings is too close to call. Our Inspector of Election will continue to confirm the numbers and tally any additional votes received during the meeting. Once the final results are available, we will file them with the SEC and post them on the Investor Relations portion of our website. The Board will review the voting results and consider them along with the interest of all stockholders in evaluating any changes to the special meeting procedures in our bylaws. The final vote count for each item will be reported on a Form 8-K filed within 4 business days of this meeting. That concludes the formal business of today's meeting, and I now declare the formal meeting adjourned. I will now turn it back over to Noel to review the progress of our company. After Noel's business update, we will answer your questions. If you wish to ask a question, please submit it now using the Ask A Question text box on the web portal. As I noted earlier, we will try to answer as many questions as time allows, but only questions that are pertinent to the meeting will be addressed as detailed in our rules of conduct found on the web portal. If there are any pertinent questions that cannot be answered during the meeting due to time constraints, we will respond directly to that stockholder after the meeting using the contact information provided. And now here's Noel's business review.

[Presentation] That video was put together by our wonderful design team to highlight the transformational and breakthrough innovation that we have launched over the past few years. Innovation is the lifeblood of future growth for our company, and you will hear me mention innovation many times today. Now let's discuss our 2020 performance. We finished 2020 in a very strong fashion with our highest level of annual organic sales growth since the depths of the financial crisis. Importantly, we continued to deliver balanced growth which we think is the key to sustainable strong performance. For the full year, we delivered both volume and pricing growth, organic growth in all 4 of our categories: Oral Care, Personal Care, Home Care and Pet Nutrition, and organic sales growth at every division with both emerging markets and developed markets performing well. Our strategy to deliver more impactful premium innovation is still in its early stages, but we believe the results are beginning to show. Importantly, this growth drove our financial results. We delivered strong gross margin expansion for the year, which allowed us to deliver solid earnings growth despite the headwinds from foreign exchange while still making significant investments to deliver on future growth. Our GAAP earnings per share grew double digits. And our base business earnings per share grew high single digits, our best performance in several years. Our free cash flow was up 18% for the year. We used that cash flow to invest back into our business to deliver future growth. Here are 2 great examples. We are building capacity for our first-of-its-kind recyclable toothpaste tube, one of our key sustainability initiatives, and we are building a center focused on small dogs which is the fastest-growing segment of the category for our rapidly growing Pet Nutrition business. We also used our strong cash flow to increase our dividend for the 58th consecutive year to pay down debt and to repurchase our shares. All in all, very strong results. So how do we deliver these results in the midst of a global pandemic? As I mentioned in the beginning, we used 3 strategies to guide us through the unprecedented volatility last year: staying true to our values and purpose in helping us navigate this environment; adapting our strategies and executing with agility; and managing through the crisis with an eye towards the future. On staying true to our values, we implemented programs to keep our employees safe and healthy while keeping our supply chain and laboratories up and running and delivering record output for our facilities. Nothing is more important than the safety and health of our Colgate people, and this will continue to be our top priority in 2021. We participated in the World Health Organization's #SafeHandsChallenge to raise awareness of the importance of proper handwashing and work with local NGOs and hospitals to distribute free health and hygiene products to people all over the world to help stop the spread of COVID and enable people to live healthier lives. Through these efforts, we delivered millions of bars of soap featuring the World Health Organization approved handwashing instructions to underserved communities around the world. Our values also drove our increased focus on diversity, equity and inclusion. 2020 marked a pivotal year for our society and our company as we sought to turn the tragic events of last summer into opportunities for greater understanding, learning and change. We rooted ourselves in Colgate's purpose. We are Colgate, a caring innovative growth company that's reimagining a healthy future for all people, their pets and our planet. In order to do this, our people, policies and programs must reflect the diversity of the communities in which we live and work. So this year, we stepped up to the challenges and opportunities before us. And we reassessed our approach to all aspects of DE&I from hiring and development to supplier diversity and communications to community outreach. While we still have much to do, we have made substantial progress over the past 12 months. This year, for the first time, we will issue a DE&I Annual Report, which you'll be able to access on our website. This report will provide an overview of our global DE&I strategy and metrics so that our stakeholders can track our progress on our key initiatives. On our second priority, adapting our strategies and executing with agility, we continue to execute our growth mindset strategies to drive sustainable, profitable growth through more impactful premium innovation, increased brand building and executing against our digital transformation. You saw the fruits of our innovation strategy in the video I showed you earlier. We're seeing tremendous benefits from products like Colgate Optic White Renewal Toothpaste and the Colgate Optic White Overnight Whitening pen in the U.S. We're very excited about our Colgate Diabetics brand that we're launching in India. This takes an ayurvedic approach to tackling the oral health issues that diabetics face. In China, our e-commerce premiumization strategy is running full steam ahead with products like our Colgate Enzyme Whitening Toothpaste. Now I'm going to show you some of our advertising from around the world that highlights this great innovation and works to build our brands for long-term growth. [Presentation]

The last ad there is part of our increased support behind equity advertising. Because the Colgate brand is so strong when we advertise the Colgate Equity as opposed to specific sublines like Triple Action, we see a benefit across the entire portfolio. And encouragingly, some of the increased ROI comes through incremental growth in toothbrushes and mouthwash. But this isn't simply putting an ad on that says Colgate. We need a compelling message that conveys what Colgate stands for. A global effort was made to identify human tension that Colgate can address with a global equity campaign. We found that corrosive pessimism is much more common now. It truly impacts how people live and go about their daily lives. So we came up with a simple mission, optimism and action in order to propel people forward into positive action. This demonstrates that by being courageous and smiling strong, everyone every day can change the world for the better. Our third focus area was positioning ourselves for growth in 2021 and beyond by taking advantage of the business momentum we generated in 2020 to invest for future growth. We managed through the crisis with an eye always towards the future. There are 3 reasons why I think we are better positioned than we were 12 months ago to drive growth in the future. The first is that as an organization, we have truly changed how we think about growth. As a company with leading brands, we have to be focused on driving category growth. We are focused on driving this growth in several ways: increasing the number of people buying our products; increasing the price that people are willing to pay for our products; and increasing the frequency of how often people use our products. We have strengthened existing tools and built new capabilities to drive this growth. For example, our use of equity advertising in both Hill's and Colgate and our move to digital advertising has allowed us to better measure the return on investment of our advertising, and we know it's increasing. The second reason is that we are developing a balanced view of how we deliver profitable growth. We know that in order to deliver a total shareholder return that is in the top tier of our peer group, we can't just grow the top line. We need to deliver profitable growth. You can see this in our 2020 results, where we delivered 8% base business earnings per share growth despite negative foreign exchange and increase in brand support and investment in future growth capabilities. We're doing this by focusing on every aspect of our business: premium innovation, revenue growth management, our Funding the Growth program and discipline on overhead spending. The third is that we are making the necessary transformation to our culture to unleash the true potential of Colgate people. The desire of Colgate people to win is unmatched. In 2020, we took several steps to accelerate the rate of change to build an organization for future growth. To that end, we have made real progress on e-commerce where we have brought in more external talent while upskilling existing talent. We have launched more online specific innovations like our Colgate Miracle Repair Toothpaste and Serum in China and invested broadly behind enhanced digital capabilities. And as you build out the right team, you need to provide the right tools and technology to digitally transform the organization. We continue to invest in systems to enable this transformation. Our transition to SAP S/4HANA, the development of our cloud capabilities and with our partners building support for our data and analytics journey. And we continue to accelerate our efforts behind sustainability, which is existential to our future growth. We just recently issued our 2021 Sustainability Annual Report where we discuss our 2025 sustainability strategy. We have new actions and targets, which we believe will expand our leadership role in the sustainability space. These actions and targets focus on how we impact our communities, our consumers, our retail partners and, of course, our environment. We have committed to the United Nations' 1.5-degree pledge to achieve net 0 carbon in our operations by 2040. We are also accelerating our efforts to eliminate plastic waste by reducing, reusing and recycling our plastic packaging over the next 5 years. Encouragingly, we had initially estimated that we would switch all of our toothpaste tubes to be recycled by the end of 2025. The rollout is proceeding well. And as we have gathered learnings from our lead markets, we now believe we can reach that goal sooner. So to sum it up, while I look back at 2020 as a year where our company battled through uncertainty to deliver strong results, I will also look back at it as a year where we elevated our performance and capabilities and positioned ourselves to deliver sustainable, profitable growth into the future. And we did all of this while remaining true to our purpose and values. There are no better examples of our purpose and values in action than You Can Make a Difference Awards winners. Each year, we recognize the very best of Colgate-Palmolive with the You Can Make a Difference Awards. We celebrate amazing teams who have demonstrated the highest standards of innovation, collaboration and execution. I'm extremely proud to share with you this year's 6 winning teams. [Presentation]

And with that, we'll turn it over to John Faucher, our Chief Investor Relations Officer, for the question-and-answer session.

Thanks, Noel, and good morning, everyone. My name is John Faucher, and I'm the Chief Investor Relations Officer at Colgate-Palmolive, and I'll be running the question-and-answer session with Noel this morning. So Noel, our first question is about Home Care and schools. "Where does Colgate see itself relative to schools opening back up and filling a need for air and contact surface cleansing in the current coronavirus culture? There is a market there." So Noel, I think this is a question about our Home Care business and particularly our cleaners and are we going after opportunities given the potential reopening related to COVID?

Well, thanks, John, and thank you for the insightful question. I think it's best for me to go back to 2020 and talk a little bit about some of the strategic changes that we made in our business that allow us to continue to accelerate the growth across our categories. And it really comes back to our purpose -- reimagining a healthier future for all. And that really shaped and informed all of our categories, particularly our Home Care category, where we felt we needed to adapt to the changing consumer behaviors we saw in the marketplace particularly in different markets around the world where health and hygiene became very, very important, particularly in making claims in some of our cleaning products around germ kill, enhancing the efficacy of those. And it was the agility of our teams all around the world from our R&D, to our marketing folks, to our manufacturing teams, they were able to create and adapt our portfolios really quickly to address the changing behaviors that you've identified and the need to improve efficacy and hygiene. And that's exactly what we did. And we've provided new portfolios that expanded the range of products that we have. We've introduced spray cleaners into the market. We've introduced wipes, portable wipes for people that have mobility needs for hygiene. And that has really allowed us to amplify our consumption opportunities in those categories. So specific to your question on schools, certainly, we've provided products that schools can use. We have industrial sizes that schools can buy. We have not targeted schools specifically, but an interesting idea for us to take on as we move forward. So we thank you for the insightful thought there.

Great. So Noel, our second question is about political contributions, and we have received a number of questions on this with respect to the company's political point of view on various issues and our policies on making political contribution. So do you want to comment on that?

Sure. First, let me say, we believe in fair and equitable elections for all. We believe in diversity, strongly believe in equity and inclusion and that everyone has a voice. Specific is -- deals with political donations. We've had a long-standing policy as part of our code of conduct to not make any political donations to parties or to candidates. In fact, on top of that, as part of our code of conduct, when we make donations to industry associations, we likewise require them not to be using our donations or our fees towards political aspiration. So again, we're focused on making sure that we stay true to our values, but not get involved in the political agenda. Thank you.

So Noel, the next question is about ESG, environment, social and governance. "So what has been the company's engagement in the area of ESG? Is this likely to grow in coming years?"

Well, I hope you got a sense for that in the earlier formal presentation, where we talked extensively about some of the great work our company is doing around sustainability. And likewise, the amplified and focused effort that we had around diversity, equity and inclusion this year. We're really excited about the progress we're making in both those spaces. Let's start with sustainability first. Obviously, we set some goals for 2020. We have established and hit almost all of those goals. They were very ambitious around climate change and recyclability. We likewise have now set new 2025 goals that are highly ambitious in the area of sustainability. That report will come out very shortly, and you'll get a chance to see that. We obviously provided ample information in our proxy that you can refer to relative to how we're addressing sustainability moving forward. But that report will come out shortly. Second, on diversity, equity and inclusion, a significant effort. We're a good company. We want to be a great company in that regard. We've appointed this last year a Chief Diversity, Equity and Inclusion Officer across -- for the company. They have worked across the board working to develop a phenomenal new strategy in the area of diversity, equity and inclusion, one that gets everyone to participate in that. You'll see that come out as well. We provided a lot more detail in the proxy statement this year in that regard. So we're very excited about our ESG efforts. The Board takes an active role in this space, helps to inform us, give us thoughts for what's happening in the areas they're involved with outside of Colgate and the independence that they bring to that regard -- to that conversation, which has been terrific. So you'll see that come out, and I think you'll be as proud as we are on the continued progress that we're making in both those areas.

Great. So Noel, we had a number of questions surrounding executive compensation. One said the management compensation is too high and that senior management can't just look at other companies and say, "Well, that person makes more money than me. I want more." Others mentioned the rising gap between workers and executives and said it's time to reverse course. So overall, I think the question is, how do we set compensation in a way that's fair? And I think we need to address this both from the executive standpoint but also for our overall Colgate employees.

Yes. Thank you. An important question. We have a very well structured compensation policy that is laid out in extensive detail in our proxy statement. So I hope you'll have a chance to go through that. And if there are any outstanding questions after you've gone through that, we'd be happy to answer that. Our Board is extremely engaged in the compensation process, as you can imagine. They work with independent consultants on the outside to do the proper benchmarking of the industry. Rest assured that the benchmarking that we do is not intended to get us to the high end of that benchmarking. We set a guideline that we like to pay at the median of that benchmark. We do a lot of work to ensure that we're being fair and equitable in our practices across the board. Specifically as it relates to our workforce around the world, likewise, we do extensive benchmarking externally to ensure that we have the right types of compensation strategies to attract and retain the best talent that we can possibly get at Colgate. So it's intended to be fair. It's intended to be equitable across the board. And we continue to use independent work on the outside to ensure that it informs our strategies moving forward and rest assured that the Board takes an active role in that process to ensure that we're doing what's right.

Great. So Noel, the next question is about the Board and the makeup of the Board. "I was to ask why there are no agents on the board. I do not find their absence representing an equal anything. Finally, there are a few women, but again, not representative of our percentage in the U.S.A. or world. Thank you for stacking up the selection process to hit other marks currently missed."

Yes. Thank you. Again, a very important topic, and we're very proud of the work that our Board has done around diversity. 40% of our Board is women, 30% of our Board comes from underrepresented minorities. And we continue to have the discussions on how do we amplify the experience and independence thinking of what the Board brings to the discussion. And that is obviously at the heart and soul of our diversity, equity and inclusion strategy. You will see that spelled out in a lot more detail when we issue our DE&I report which will be forthcoming. But again, it's something that I think we're very proud of. And certainly, as we look at the makeup of our Board, our Board will continually challenge themselves to find the best diversity of candidates to continue to supplement the strong independence that we have today.

Great. So another question on the Board. "Why do you persist in having Board members who have many commitments other than the company? The share prices languished per month, debt has risen yet self-serving management is raising their own salaries and the Board salaries. Our complex world demands unencumbered attention to the company, its needs, employees and investors."

Again, thanks for the question. Likewise, an important area. I'm thrilled with the participation of our Board. We have an extremely engaged Board of Directors. We had an attendance rate last year of 99% in both Board meetings and committees. They are actively involved in discussions, both at the committee and at the board level. In fact, many of our Board members use their time to get involved with our management teams around the world to brainstorm specific strategic areas and areas that we would like to further progress. They bring ideas from the outside based on the different experiences they bring to the Board. We have technology experience. We have packaged goods experience. We have health care experience. Great financial acumen across the board. And it's a Board that is actively involved in our business and helping us think through strategically opportunities to continue to grow and represent our shareholders. So again, a Board that's highly committed, no issue at all with engagement that we obviously have likewise in our bylaws the number of boards that our Board members can participate in. And rest assured that the engagement level is high, and we continue to ensure that we protect ourselves against any distractions that they may have. But overall, I'm very pleased with the progress we're making in that area.

Great. So Noel, the next question is on plastics. "I've been a shareholder for many years and asked this question before when we had in-person annual meetings. I like for Colgate to become an industry leader to have all plastic containers recycled by having a national deposit on them to incentivize people to do so just like the beverage industry in several states. It works and has a good social impact. Okay. Sorry. Could Colgate take the lead in lobby Congress to make this happen? The environmental damage done by plastics is too great to ignore any longer."

Yes. Thanks. An extremely important area and an area that Colgate has led on for many years around plastics, and we're recognized externally for the work that we've done in that area. But specifically, as we look at our 2025 goals, which again will be outlined in the new sustainability report that we'll be issuing shortly, you will see aggressive, aggressive goals in the area of plastics. So one of those will be reducing virgin plastics or new plastics by over 1/3 by 2025. Again, we are actively working with industry associations all over the world and in the U.S. to ensure that there's a circular economy to this that we improve recyclability of our products. As you're well aware, we took the lead in the world to launch the first fully recyclable toothpaste tube, no one else has done that. We've put that into the market. And we're sharing that technology around the world to promote recyclability of toothpaste tubes. But again, this is a significant effort by our company and the industry to find increasing ways to allow consumers to recycle our products, and we're actively involved in associations and working with local governments to ensure that we find ways to improve upon that.

Great. So the next question is also about sustainability, it's on climate change. So we have an investor that is a signatory to the Climate Action 100, an investor initiative that aims to ensure that the world's largest corporate GHG emitters, that's greenhouse gas, take necessary action on climate change. "investors worth $54 trillion in assets under management have signed up to support the Climate Action 100 initiative, equivalent to more than 1/3 of all assets under management globally. Climate change poses an unprecedented threat to company's operations, value chains, employees and communities. The economic cost of climate change from damage to facilities, disrupted operations and supply chains and lost productivity are already in the hundreds of millions of dollars and expected to reach trillions. While individual corporate actions to reduce emissions are critical, only public policy can deliver reductions and the speed of scale needed to limit the worst impacts of climate change. This is why climate change policy advocacy is an essential element of corporate sustainability leadership. With that, I'd like to ask the Board, what is the Board's role in reviewing trade association membership? And how those associations use your fees to lobby on climate change-related issues? As the company audited its trade associations lobbying activities on climate to ensure they are aligned with the company's own goal for net 0 operational emissions by 2040, how does the company treat any misalignment? And will you consider increasing public transparency on these 3 items moving forward? Thank you."

Yes. Let me start with the end in mind. Obviously, you saw within our sustainability goals for -- within the context of 2025 that we have set a 0 carbon emission goal for the company by 2040. In that regard, we obviously then partner with organizations and associations all over the world that mirror our ambitions, and they can work with us together to do that. I personally am very involved in various industry associations with peer CEOs from other major companies where we are all extensively committed to making great advancement in this area. We have signed up for the 1.5-degree climate pledge for the United Nations. And that is informing a lot of the strategies that you see for us. As we start to put these out in the public domain, we will then be coming back and working with external consultants to ensure that we have the right measurements in place and the right checkpoints to guarantee that we're making progress against the end goal. But rest assured that the industry, I think, is taking a much more active participation in it. Colgate has historically led in this space, and we will continue to do so.

Great. So the next question relates to COVID and people in terms of vaccines. "What are you doing to encourage employees to get the vaccine?"

We have provided extensive education opportunities for anyone to have discussions with experts, provided educational materials to our employees all over the world, have provided access to vaccinations where permissible by local guidelines in certain parts of the world. And obviously, strongly encouraging that everyone get the shot. As a result, we've seen great progress across our employee base around the world as reflected perhaps in the 2020 results. So we did a phenomenal job keeping our employees safe. That was our #1 priority of providing them any information they needed to ensure that they can keep themselves and their families safe, kept our factories working. And I think that's a testament to the team and the amount of work that we put in to ensure that we were taking care of our employees and giving them the information they needed. Moving forward, we will continue to provide any help that they need in some countries. We are providing the vaccination, as I mentioned. We're allowed and we'll continue to do so where permissible.

Great. So the next question is also COVID related. "Has the pandemic created any new positive trends for your company? And can you keep these trends going?"

Yes, if we go back to 2020, we certainly saw an elevation in some of our COVID-related categories. So categories likely with hand soap, we saw significant increases in consumption. We talked earlier in the Q&A around the Home Care category where likewise, we adapted our portfolios to address the changing consumer need. And we saw a lot of benefits from that. As we've stated externally, we do anticipate the categories will drop versus where they were in 2020, but remain above at an elevated level versus 2019. And that's basically what's been playing out so far. Again, I think we need to continue to adapt our categories. That agility I talked about earlier,will play into our innovation stream in 2021 to ensure that we're adapting to the changing category dynamics and the behavior needs that we see moving forward.

Okay. Noel, the next question is another climate-related question, and it's also from an investor with Climate Action 100. "Climate Action 100+ is an investor initiative that engages with companies that are systemically important to managing climate-related risk. To date, over 575 investors with approximately $54 trillion in assets under management have signed up to support the Climate Action 100+ initiative, equivalent to more than 1/3 of all assets under management globally. We consider the company's climate strategy to be critical to the long-term success of Colgate-Palmolive and feel that the company must cut emissions and help accelerate the transition to net 0 emissions by 2050 or sooner. This marks the Climate Action 100+ net 0 company benchmark was published assessing company's performance against the initiatives 3 high-level commitment goals: Reducing greenhouse gas emissions; improving governance; and strengthening climate-related financial disclosures. We note that there are areas in which the company is performing well, such as the company's goals to achieve net 0 carbon in its operations by 2040, which you had mentioned previously, and 100% renewable electricity in its global operations by 2030. We recommend that -- we commend the Board for these steps. However, the benchmark also shows that there is progress still to be made at Colgate-Palmolive. The company is in the bottom 20% of all companies assessed. Additional steps are necessary to manage climate-related risks and curb the greenhouse gas emissions in the company's value chain. I ask the Board of Directors and senior management of Colgate-Palmolive to join in proactive dialogue with us to address the company's climate strategy. When can we expect climate-related disclosures aligned with TCFD framework? And as part of that disclosure, when will the company be setting short- and medium-term targets as interim targets on the journey to achieving its net 0 by 2040 commitment, which covers Scope 1, 2 and 3 emissions?"

Again, as I said earlier, we're actively involved in this. We obviously have set the goals that you communicated there in your question. We are working now to ensure that we have a cadence of information that can come out to the market to ensure that we're making progress relative to the risk on our business. The Board takes active participation in looking at our risk management areas, of which climate change is one of them. We're working externally to get an assessment of what are some of the implications associated with that. And as that information becomes available and we get comfortable with it, we'll be certain to share that externally in the marketplace.

Great. The next question is on share repurchase. "Is Colgate repurchasing shares at the all-time high share price? And can we -- I believe the company should issue a report back to the shareholders identifying the cost basis of any shares repurchased."

Thank you. No. As we outlined coming into 2021 that we would be reinstituting our share purchase to historical levels, and that continues to be the case. That is done in concert and in alignment with our Board of Directors. And we continue to hold the strategies that we've had in the past, nothing has changed in that regard. As far as disclosure, we'll take your question on and give that consideration.

"Would the company consider virtual access to future in-person meetings for those who cannot attend?" So I think what that's related to Noel is the annual meeting. And we've obviously been going virtual the past 2 years because of COVID. Would we make this available going forward?

Yes, John, obviously, for the health and safety of our employees, we've kept the meeting virtual. We have not made a decision as it relates to our next year's shareholder meeting. And when we do, we'll be sure to let you know.

Great. So the next question is about our Personal and Home Care business. "I'm impressed by your ability to maintain key products in distribution during the pandemic. What are you doing to leverage the goodwill generated for many of our older Personal and Home Cleaning and Hygiene products during this extraordinary period?"

Well, we talked about, obviously, we've been not only involved in the portfolio transformation of our products, providing efficacious and hygiene, germ-related formulas. In Home Care, obviously, expanding the production to meet the needs in our liquid handsoap category. Likewise, I should say that we've used a lot of those products in our community outreach programs around the world where we have donated products to help those in need. And so we will continue to ensure that we have a balanced strategy of obviously meeting the needs of consumers and the demands in the marketplace while clearly giving back to the communities in which we serve.

Great. So Noel, the next question is on supply chain. It says, "Hi, Noel, how do we adapt our global supply chain to protect ourselves from potential future disruptions and to ensure business continuity?"

Yes. Thanks for that. Obviously, coming into COVID, we had everything thrown at us relative to supply disruptions around the world in our second and third tier suppliers. We were able to keep all of our plants running during that period. And I think it's a testament to the incredible supply chain organization that we have and the agility and flexibility that they demonstrate. That being said, we learned a lot over the last 14 months. And we've taken that learning and certainly incorporated into our strategies moving forward. And a big part of that is building more flexibility into our supply chain around the world. So many decisions have been taken to ensure that is the case. And we will continue to operate with the utmost agility and flexibility while providing the efficiency and quality products that you're accustomed to receiving moving forward. But rest assured, the supply chain is constantly changing and challenging themselves to get even better.

Great. So the next question is on direct-to-consumer. The channel, DTC, as we call it. "With respect to direct-to-consumer, it seems that when buying online from the CP website, you direct consumers to online retailers. Why don't you sell direct and maximize margin? I realize this would require some changes on the part of your distribution centers or utilizing a third-party e-com only distribution center. But the direct selling should increase margin and get the company even closer to consumers."

Yes, good question. We've obviously spent a lot of time watching the evolving consumer dynamics, particularly in the online space. You've seen in some of our earnings releases, how successful we've been in growing our e-commerce business and our online business around the world. We do have some direct-to-consumer platforms on some of our businesses around the world, not all of them. We use it as a way to gain learning on consumers. We learn it usually as a way to test and to validate new products in the marketplace really quickly in some of our innovation. We haven't found that the economics of our direct-to-consumer are nearly as strong as what we have when we sell through more online platforms like Amazon or Chewy or otherwise. And so therefore, we've decided to focus our efforts in the area where the growth is. That being said, moving forward, we are expanding our thinking around direct-to-consumer and looking for ways to make it more economical. But first and foremost, as I said earlier, it's a wonderful way to gather learning into the company. And we certainly use that in some of our products around the world.

Okay. Noel, so this is the last question. "So does Colgate have a strategy on using bitcoin and I'm assuming other digital currencies to transact business?"

No, we don't.

Okay. And with that, that is the last question for today. So back over to you, Noel. Thank you, everyone.

And with that, we'll close our annual meeting. We're grateful to all of you for attending, and we hope that you enjoyed discussing not only our results but also our exciting plans for the future. I believe our company is well positioned to deliver strong returns for our shareholders while also making progress on our commitments to all of our stakeholders. We hope that all of you stay healthy and well in these turbulent times, and we look forward to talking with you next year. And seeing how Sunday is Mother's Day, let me take this opportunity to wish all the mothers and grandmothers out there a very, very special day. Thank you, and goodbye, everyone.