What may seem like the biggest election ever for a small electorate ends Tuesday morning as Procter & Gamble Co. shareholders vote on whether to give activist investor Nelson Peltz a seat on the board.
For all the fuss, there is actually not as much at stake as you might think. Peltz, who runs the hedge fund Trian Partners, says he'd move to reinstate the board member he's seeking to boot – former Mexican President Ernesto Zedillo – and doesn't want to fire P&G Chairman-CEO David Taylor or break up the company. Even if he wins, he won't have the votes to change things on a board he's lambasted for overseeing years of stagnation or declining market shares.
Yet investors have been bombarded with communication from both sides in the costliest proxy fight ever, with P&G having pegged its spending at $35 million and Trian at $25 million. Both sides have blanketed shareholders with big heaps of mail along with robo-calls and live calls, search and other digital ads. Trian even advertised on Sunday's NFL broadcasts in Cincinnati.
P&G alumni, generally disappointed with the performance of a stock that many counted on as the bulwark of their retirement plans, seem sick of ad glut from both sides.
But even many critics end up as loyalists. One former senior executive, while he sees the whole fight against Peltz as misguided and believes the company would have been better off just bringing him onto the board, ultimately cast the P&G-approved "blue" ballot. Still, he believes the proxy battle has been a big and unnecessary distraction both for Taylor and P&G Chief Brand Officer Marc Pritchard, who's leading the marketing effort against Peltz.
What Peltz says he'd do
Peltz in his September white paper called for reorganizing P&G into three largely autonomous units linked by a "lean corporate structure." He'd like those three units to go their own way on things that include hiring ad agencies and buying media. Peltz sees P&G falling behind in digital media and needing to hire a lot more executives from outside. And after the company shed around a 100 brands to focus on its biggest ones, Peltz believes P&G should stem the tide of share losses by acquiring or otherwise growing more startup and emerging brands.
What P&G says Peltz would do
P&G believes the reorg would waste money and is just a Trojan horse to position the company for later breakup. Pritchard points to a host of digital accomplishments and e-commerce growth, even as he uses the company's buying power to push for better accountability from digital players. P&G points to improving results since Taylor took charge in November 2015 and calls Peltz's criticisms outdated, fueled in part by former Chief Financial Officer Clayton Daley, who has joined Peltz as an advisor.
Taylor, in talks to investors and employees, has said adding Peltz, who often assembles a shadow team to second-guess management, could derail recent progress, which has seen P&G beating shareholder returns from most peers (Peltz says the share price has been fueled by news of him taking a stake). P&G says Peltz's experience comes in food, not household and personal care, and points to questionable results where he's been on boards, such as Mondelez, whose share price has lagged P&G's in recent years.
Why Peltz looks like he could win
Peltz has won widespread endorsements, including from the three largest proxy advisory firms and the large California State Teachers' Retirement System. Analysts say active investors are likely to vote for Peltz. P&G is counting on alums and other retail investors – heavily situated in Cincinnati – to go its way. The New York Times, in the most detailed vote analysis to date, believes the election will come down to managers of three big index funds – Vanguard, Black Rock and State Street advisors. The latter two generally go with corporate boards, but Vanguard, the biggest, has a slight tilt toward insurgents, and The Times believes P&G needs all three to win.
Why it's all a big circus
Making the whole thing a bit more bizarre is that it's part of a week of activities turning Cincinnati into a sort of a miniature South by Southwest, albeit with the unusual twist of being kicked off by a big corporate proxy fight and ending with a light show rather than a music festival. As P&G closes its annual meeting, the P&G Alumni Network is opening a reunion in Cincinnati expected to draw 1,500 of the company's far-flung and high-powered alums, including Hewlett Packard Enterprise CEO (and P&G board member) Meg Whitman and Clorox Co. CEO Benno Dorer, plus others who just want to rub elbows with them, such as VaynerMedia CEO Gary Vaynerchuk and Buzzfeed CEO Jonah Peretti.
The reunion runs alongside Brandemonium, a marketing "festival" from a local music-festival organizer featuring many of the same panelists as the P&G alums get. The whole thing closes with Blink Cincinnati, an art and light show across 20 city blocks. In short, it's a potentially a big showcase for the city, opened by a shareholder vote that one of its biggest employers believes could lead to it getting carved up by a hedge fund.