Commentary

Peltz Loses Battle For P&G Seat But Will Continue To Engage

Activist investor Nelson Peltz may — may — have lost the vote to gain a seat on the Procter & Gamble Co. board, but he says he’s not going away, calling the victory that CEO David Taylor claimed at the annual shareholder’s meeting yesterday to be “Pyrrhic” at best.

“According to our proxy solicitors, today’s vote is too close to call and it will take more time to determine the outcome. We await the certified election results by the independent inspector of election,'' Peltz’ Trian Fund Management, which owns $3.5 billion worth of P&G stock, says in a statement.

“Minutes after P&G said it had defeated the biggest proxy challenge in history,” Peltz told CNBC’s Squawk on the Street’s Sara Eisen that “the company had put ‘ego’ over shareholder interests” and that “‘no matter what happens,’ P&G should put him on the board,” Berkeley Lovelace Jr. reports for CNBC.com.

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“Even if they win, which I'm not sure they did, think of what a Pyrrhic victory is it. Think about it. I mean everybody but the current employees voted for us up and down the line.” 

Citing the “dissatisfaction among the retirees and old-time shareholders” he heard at the meeting, Peltz tells Eisen, “you look at their 10K and all five market segments have lost market share this year and last year.” 

Yesterday’s vote “must be certified by the inspector of election for P&G's annual meeting — Wilmington, Del.-based IVS Associates Inc.,” reports Randy Tucker for the Cincinnati Enquirer. “The final results won't be known for several weeks, according to a P&G spokesman. The company will file results with the Securities and Exchange Commission when the vote is finalized.”

“For Peltz, the P&G meeting’s overarching message was first, that shareholders are really, really unhappy, and second, that management is stuck in a kind of alternative reality,” writes Shawn Tully for Fortune, who interviewed him by phone after the tally was announced. ‘We sat at the meeting, and retiree after retiree came up to grouse about what the company is doing, and the complaints kept on until the comments were cut off after 30 minutes,’” Peltz tells Tully.

“Peltz advocates emptying the towers and sending the managers into the field, in the midst of the throngs who buy Tide, Pampers and Crest,” Tully continues. “‘I say, “Go sell toothpaste,”’ says Peltz. For P&G’s future, the best outcome is a now long-shot victory for Peltz. The second best is for management to pretend it’s their idea, and do just what he says,” Tully concludes.

Among other issues, “Peltz had campaigned on the idea that P&G’s insular management relied too much on its traditional brands, which include household names such as Tide and Pampers, and should be courting the millennial population with small, niche products, writes Thomas Heath for the Washington Post

Trian Fund Management detailed what it called P&G’s “track record of underperformance” in a white paper released last month. P&G management has a different perspective, of course.

“… Taylor said the company would continue to listen to Peltz, but said the close vote was an affirmation of his strategy that emphasizes product research and a simplification of P&G’s corporate structure,” Heath continues.

“Far from settling the challenge, the close vote promises to keep P&G on the spot to show its big brands can grow. Even if the company can keep Mr. Peltz out of the boardroom, P&G’s divided shareholder base will be attuned to any corporate slip-up or missed promise, while Mr. Taylor tries to address the bigger issues Mr. Peltz threw into focus —costs, hipper brands and nimbler management,” observe Sharon Terlep and David Benoit for the Wall Street Journal.

“Mr. Peltz and Mr. Taylor shook hands after Tuesday’s meeting. Mr. Peltz congratulated the CEO. ‘We’ll talk,’ Mr. Taylor said.”

“‘We’ll talk but we don’t listen,’ Mr. Peltz replied. Mr. Taylor responded, ‘No, no, no, that’s not true,’” report Terlep and Benoit.

“Peltz was widely expected to be voted on to the consumer goods group’s board, having won the support of influential proxy advisers ISS and Glass Lewis, and from P&G shareholders including Yacktman Asset Management and Calstrs. Even Marty Lipton of the law firm Wachtell Lipton, which has built its reputation on defending companies from activists, paid Mr. Peltz a compliment during the campaign, calling him ‘a well-known, successful activist with a history of long-term investment,’” Lindsay Fortado and Anna Nicolaou report for Financial Times.

More than $3 billion says he’ll continue to have his sway, whether it’s on the board or off. 

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