CINCINNATI -- Procter & Gamble Co. kept activist investor Nelson Peltz off its board Tuesday in the most expensive corporate election ever held in the U.S.
The three-month fight cost at least $65 million. Peltz and P&G traded accusations and lobbied shareholders to support their point of view. Trian Fund Management L.P. claimed an “overly complex organizational structure” stymied growth and discouraged innovation at the Cincinnati-based maker of Tide detergent, Pampers diapers, Gillette razors and Crest toothpaste.
P&G claimed Peltz had a “fundamental misunderstanding” about how the company has changed in the last five years, during which a massive restructuring prepared the company for a new wave of sustainable growth.
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Had he joined the board, Peltz was expected to push for a lean holding company structure with three autonomous operating units led by presidents who have more operating control than existing managers and greater accountability to boost sales and profits.
The three divisions would have been:
- Beauty, grooming and health care, with $26 billion in sales and $6.4 billion in operating profits.
- Fabric & home care, with $21 billion in revenue and $4.2 billion in operating profit.
- Baby, feminine and family care, with $18 billion in sales and $3.8 billion in profit.
P&G argued Peltz’s plan brought new layers of complexity to the company, making it harder to grow profitably. P&G also expressed concern Peltz would disrupt its board of directors, a diverse and collaborative group with a variety of experts in technology, retail and global economies.
Peltz tried to disarm that criticism in a September conference call with Wall Street analysts.
“I know how to act,” he quipped. “I know my fork is on my left.”
But in the end, concerns about how Peltz might change the company trumped investor anxiety about its ability to grow faster than its peers.
But the P&G win doesn’t necessarily mean the matter is closed, said Josh Black, editor in chief for Activist Insight, a monthly magazine that tracks proxy contests.
“Things like separating the individual units, pushing accountability down the chain, that will resonate with analysts for a while,” Black said. “Peltz has now put it out there. That is going to hang over the situation and if results don’t improve, they’re going to ask, ‘Is it worth going back to this?’