P.C: “Procter & Gamble vs. Bankers Trust: Caveat Emptor”

1/How did the strategy and culture of Bankers Trust change under Charles Sanford?

When Charles Sanford was made President of Bankers Trust in 1984, he pushed down the decision making through the organization giving large incentives and rewards to those who turned out to be more profitable for the company.

Besides, he changed the focus of the bank to wholesale banking activities involving corporate lending, investment management, government and public securities trading and corporate finance.

2/What was the nature of the relationship between Procter and Gamble and Bankers Trust?

Bankers Trust had been one of P&G’s principal bankers since 1966. From 1985 to 1993 BT acted as the Trustee and Paying Agent of record for P&G’s debt issues and at the same time, it served as a commercial and investment banking advisor, providing consulting services and continuous advice on debt management and issuances. This continued long-standing relationship was the base for the swap agreement that would later take place.

3/Was the swap entered into in 1993 in line with company policy on the use of derivatives?

P&G described itself as a conservative company that looked for minimizing exposure and reducing risk from exchange and interest rate fluctuations in the regular course of the company’s global business, as it was stated in the 1993 annual report. They also stated that the use of speculative, leveraged or open-ended transactions was not allowed. So it is clear the swap entered in that year was not in line with the policy, as they later admitted in 1994 when P&G stated that the swap was completely counter to the policy of conservatively managing their debt portfolio.

4/Why do you think PandG did not accept the offer of a plain vanilla swap