Procter & Gamble Co. (PG) proxy fight brings return of former CFO

Activist investor retains Clayton Daley Jr.
P&G Headquarters
Posted at 9:01 AM, Jul 18, 2017
and last updated 2017-07-22 08:33:03-04

CINCINNATI - Procter & Gamble Co. has already invited former CEO A.G. Lafley to come back to the company to fashion a new growth strategy. Now, activist investor Nelson Peltz has hired former Chief Financial Officer Clayton Daley Jr. do the same.

Daley retired from P&G in 2009 after 35 years, including 11 as CFO. Last week, he joined the Trian Group of activist investors as a shareholder and paid consultant in their proxy fight against the company. Daley did not return WCPO's calls and P&G declined to comment on his involvement.

Trian Fund Management L.P. is asking P&G shareholders to elect Nelson Peltz as a 12th board member so he can push for reduced bureaucracy at P&G. The company says it already has a “best-in-class board of directors that is fully supportive of and actively engaged in overseeing the company’s transformation,” including the sale of 100 brands and cost reductions of $10 billion in the last five years.

Trian told shareholders Monday that Daley helped P&G achieve the kind of growth that shareholders want today.

 “The Trian Group has engaged Mr. Daley at its own expense because of his deep background in the consumer products industry and track record of overseeing strong organic volume increases, sustained earnings growth and total shareholder return (TSR) outperformance during his tenure as chief financial officer of the company,” Trian said in a securities filing Monday. “As a significant shareholder of the Company, Mr. Daley also brings an ownership mentality and a commitment to addressing the challenges it faces in order to improve long-term performance.”

Trian’s filing said Daley’s family foundation will be paid $250,000 for “strategic advice and analysis” and for lobbying shareholders to support its reforms.

Trian argues P&G’s “global business units” do not have enough operating authority to respond to industry changes – causing the company to lose market share and miss opportunities for new products.

“We believe GBUs are ‘allocated’ significant costs from functions and corporate over which they have little or no control," Trian’s proxy said. "In our experience, when there is not clear control over (profits and losses) there is excessive cost and bureaucracy."

Daley’s inclusion in the proxy fight gives Trian “an insider’s point of view,” said Tim Meyer, a former P&G business analyst who now runs his own money management firm, Meyer Capital Management, in Anderson Township.

“Clayton Daley was there a long time and knows how things work or don’t work, as the case may be,” Meyer said. “Peltz is a credible guy to begin with. The involvement of a guy like Clayton Daley would only augment that.”

Daley’s hiring is also a sign that P&G’s proxy fight will not be cheap. In addition to its new consultant, Trian has launched its own website to update investors on its reform ideas for the company. P&G has retained the New York public relations firm Joel Frank Wilkinson Brimmer Katcher. It’s a specialty firm that’s helped other companies battle activist investors and operates with the motto, “We help our clients take control.”

P&G declined to estimate the cost of its proxy fight against Trian. The research firm, FactSet, said the median cost of 101 proxy fights 2016 was $1 million. The most expensive proxy contest involved the women’s retailer, Chico’s FAS, which told shareholders it spent $5.9 million to defend itself against forced reforms by Barington Companies Investors LLC.

Chico’s is tiny, compared to P&G, with a market value of all stock at $1.4 billion. P&G stock is worth $220 billion. The Wall Street Journal says it’s the largest company ever to face a proxy contest.

The last time Trian staged a proxy fight, the chemical company Dupont spent $15 million to keep Trian candidates off its board. Dupont is about one third the size of P&G, with market capitalization of $73 billion.