Uncle, Nelson: Victorious P&G Still Gives Peltz a Board Seat

Close votes breed compromise—sometimes. After both sides became certain that he’d won the confidence of shareholders by a razor-thin margin in October, Nelson Peltz of Trian Partners was welcomed to take a seat on the board of Procter & Gamble by none other than CEO David Taylor, his sparring partner for the better part of two years during the biggest proxy contest in U.S. corporate history.

After counting and then recounting the votes of 2 billion shares at P&G’s annual meeting in October showed in the end that Peltz had lost his bid for a seat on the board by about 500,000 shares, P&G has invited the activist chief of Trian Fund Management to take a seat at the boardroom table with other P&G directors on March 1.

As P&G noted in a press release following the vote recount,

Because the election results were so close, and because a large number of shareholders voted for Nelson Peltz to be a Director, the Board has engaged in numerous discussions with Mr. Peltz regarding a Board seat. That has included constructive engagements to get more closely aligned on strategic choices to transform P&G and deliver better results.

For example, we agree that we are NOT predisposed to taking on excessive leverage, or substantially reducing R&D spending, or advocating for a break-up of the Company, or moving the Company out of Cincinnati. As a result, we have committed to work together with Mr. Peltz for the best interests of all shareholders, and the Board has appointed Nelson Peltz as a P&G Director, effective March 1, 2018. We look forward to his contributions as a member of P&G’s Board.

So is it just a case of keeping your friends close and your enemies closer? P&G’s Taylor argues that Peltz’s ideas are welcome as the world’s biggest consumer packaged goods company keeps evolving for a new era of CPG branding, evolving customer expectations and marketing communications to engage them.

“I found him, in the conversations we’ve had in the last many weeks, to be constructive and forward-looking,” Taylor commented the Wall Street Journal. “We’ve both tried to find a way to build a bridge to move forward.”

Whatever the strength of that bridge initially, it’s spanning a mighty big chasm and some contentious jockeying back and forth that led to a proxy vote at P&G’s 2017 annual general meeting over how the two sides see P&G’s progress toward revitalization after several sluggish years.

Trian has invested about $3.5 billion in P&G with the hope of prodding Taylor and the board to streamline its businesses, bring in fresh outside talent and invest in—and nurture—more small brands to seed future revenues and keep up with innovation and trends in the fast-shifting CPG universe.

Meanwhile, P&G management has steadfastly insisted that a turnaround already has been underway and that the best way to build on progress is to refine, extend and reconfigure existing mammoth brands including Tide and Crest.

As part of their deal, P&G and Peltz agreed that the company won’t take on excessive leverage, substantially reduce R&D spending or break up the company.

Taylor told WSJ that he has listened to shareholder sentiment that demonstrated support for giving Peltz a podium—or at least a seat at the table. “The shareholders,” Taylor said, “did communicate a pretty strong message advocating for Nelson.”

For his part, Peltz graciously stated that “David Taylor and I have developed a strong relationship and I look forward to working with him and the rest of the board.”

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