* Meeting is notable for absence of activist investor Ackman
* CEO defends "40/20/10" strategy
* Pershing Square analysts attend, but not Ackman
* All board members re-elected; shares down in afternoon
By Jessica Wohl
CINCINNATI, Oct 9 (Reuters) - Procter & Gamble Co'sCEO stood behind the company's plan for increasing profit andsales at a drama-free annual meeting notable for the absence ofWilliam Ackman, the activist investor who has pushed hard forchange in recent months at the world's largest maker ofhousehold products.
Chief Executive Bob McDonald defended the strategy ofdeveloping major new products while the company at the same timeseeks to cut $10 billion in costs.
Tuesday's meeting, held in P&G's hometown of Cincinnati,came as something of a respite for McDonald months afterAckman's Pershing Square Capital Management took a stake in P&G,
putting pressure on the CEO and the board to improveperformance.
McDonald, who has been at the helm since July 2009, isrefocusing on core categories, countries and innovations withboth the $10 billion restructuring and a strategy laid out inJune that homes in on the company's 40 biggest businesses, 20biggest new products and 10 key developing markets.
Ackman, who disclosed his stake in the maker of Tidedetergent and Crest toothpaste too late to have any proposals onthe agenda, was not in attendance, and only one shareholderreferred to him, asking why it took the investment of anactivist to boost P&G's stock.
"If we remain focused on the plan I talked about, the40/20/10 plan, with improved innovation from discontinuousinnovation, with productivity improvement, then we are allconvinced that shareholders will get an increase in value andthe stock will reflect that," McDonald replied, withoutmentioning Ackman directly. "We are focused like a laser, we areholding our own feet to the fire to do this."
Though Ackman was absent, several of his analysts - who arefar less recognizable than the 6-foot, 3-inch hedge fund managerwith the shock of gray hair - were in the crowd listeningclosely.
Since Ackman became involved in the stock, P&G's board hasexpressed confidence in the plans laid out by chairman,president and CEO McDonald. The board has publicly backedMcDonald, giving the former Army captain time to overhaul the175-year old company, which is struggling keep up withcompetitors.
Shares of P&G have risen since Ackman's stake was disclosedbut have trailed the gains in the Dow Jones industrial average, of which they are a component, so far this year.
All 11 board members, including McDonald, were elected foranother year at the meeting. A shareholder proposal on adoptinga simple majority vote to pass all such proposals passed, whiletwo other shareholder proposals were defeated.
P&G shares were down 0.6 percent at $68.69 on Tuesdayafternoon on the New York Stock Exchange. The stock is up 9.3percent since Ackman's stake was disclosed in July.
McDonald was under pressure even before news of Ackman'sstake surfaced, after lackluster earnings and the Februaryannouncement of the $10 billion restructuring plan that analystsdeemed insufficiently transformative.
"In our view, management cannot afford to fall short of itspromises again, as the clock is ticking on its turnaround,"Morningstar analyst Erin Lash said earlier this month. "It ispossible that P&G could be forced to consider breaking up thishousehold and personal-care behemoth."
Pershing Square is P&G's 10th-largest shareholder, with21.92 million shares, or 0.79 percent of the company'soutstanding shares, according to Thomson Reuters data.
Only a week ago in New York, Ackman exerted public pressureon P&G by answering a few questions about his plans for thecompany. Ackman met with P&G's board in September at theManhattan office of Kenneth Chenault, the CEO of AmericanExpress Co and a P&G board member.
At that meeting, Ackman did not mince words about what heconsidered McDonald's lackluster performance and the aspectsthat need repair if company performance is to improve. For now,Ackman has left his suggestions with the board.
Ackman has been instrumental in shaking up management atCanadian Pacific Railway Ltd and retailer J.C. Penney CoInc .
P&G stumbled in recent months as competitors failed to match
some of the price increases it imposed on goods includinglaundry and dish detergents to mitigate higher commodity costs.The strengthening dollar has also trimmed the value of sales inoverseas markets.
"The announced restructuring is a direct result ofpersistent questions about P&G's ability to grow profitably,"said Lash.
Still, several of the attendees at Tuesday's event said theystand behind the company and its leader.
"They are going in the right direction," said Bill Harding,an 86-year-old shareholder who lives in Kettering, Ohio, aftergrowing up in Cincinnati. Harding and his wife, Pat, said thatthey reinvest their dividends in P&G and still think it is oneof the best companies in the country, if not the world.
(Additional reporting by Svea Herbst-Bayliss in Boston; editingby Matthew Lewis)
Keywords: PROCTER MEETING/