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Activism and the P&G Proxy Fight: A Sign of Changing Times?

On October 10, Procter & Gamble (“P&G”) announced the results of the board of directors election at its most recent meeting of shareholders.1 The company’s shareholders re-elected all eleven incumbent members of the board.2 This victory over challenger Nelson Peltz of Trian Partners (“Trian”) ended the most expensive proxy fight in history.3 The nearly four-month struggle led to over $100 million in combined costs between management and the insurgent Peltz.4 P&G figures suggest a marginal victory of 6.15 million votes or 0.2% of the company’s 2.65 billion outstanding shares.5 Put another way, management received 48.9% of the vote and Peltz received 48.6%.6 Trian has argued that the vote was too close to call because the company announced totals based on estimates and incomplete information.7

I. A Background on Procter & Gamble

P&G is an American consumer goods behemoth with an enviable portfolio that includes well-known brands like Gillette, Tide, Oral-B, and Olay.8 The company, ranked at thirty-sixth on the Fortune 500 list,9 employs 95,000 people around the world and saw net sales of $65 billion during the 2017 fiscal year.10 Its securities are among the most widely held of any corporation.11 and the company is the largest to have ever faced a proxy battle.12

Despite this, however, shareholder returns have been found wanting. This fact provided ammunition for Peltz’s proxy challenge. In the last decade, P&G’s total stock return has been about half of that for peers like Kimberly-Clark and Colgate-Palmolive.13 In response, since 2012, the company has cut 34,000 jobs and has sold or shut down seventeen factories in North America.14 This has resulted in savings of almost $3 billion per year.15

David Taylor was appointed CEO in 2015 and was charged with reversing P&G’s diminishing market share and sliding sales. Taylor has simplified the company’s corporate structure, streamlined its portfolio, and increased R&D funding.16 Indeed, since Taylor took control, P&G’s stock performance has surpassed many of its peers.17 Yet, in the last year, shares of P&G have risen 4%, far lower than the 18% growth seen by the Standard & Poor’s 500 Index.18

II. A Background on Nelson Peltz

Billionaire Peltz is the founding and managing partner of Trian Fund Management, an activist investing firm. Trian invests in under-performing and undervalued public companies. Peltz has continuously been recognized by industry associations as one of the most influential people in the arena of corporate governance.19 He currently serves on the board of Wendy’s and the Madison Square Garden Company.

Peltz and Trian have an established track record of assertively facing management of large multinationals. The fund’s M.O. involves first amassing large stakes in companies, then attempting to work behind the scenes to affect change. If this doesn’t work, it will then negotiate for board seats to create internal change. These methods netted Trian seats at firms like Bank of New York Mellon Corp. and Legg Mason Inc.20 Since its formation in 2005, Trian has only waged two proxy battles, as it is generally viewed as a strategy of last resort for activist investors.21 However, both of those endeavors were against formidable, blue chip opponents: Heinz and Dupont.22

In 2005, Trian and Heinz faced each other in a combative and bitter shareholder election. The hedge fund originally bought a 5.5% stake in the company, becoming its second largest shareholder.23  An opportunity became apparent when Heinz’s stock had fallen 38% over the eight years prior to the fund’s initial investment.24 Trian sought five seats on the twelve-person board.25 Before the actual election, management acquiesced to some of Trian’s demands, namely cutting costs, increasing dividends, and engaging in a greater amount of share buybacks.26  Proxy advisory firms differed in their suggestions, but most advocated a “split the baby approach” where Peltz would receive some seats, but fewer than he requested. Other advisory firms backed management, who vehemently fought against Peltz’s inclusion on the board.27 Nonetheless, Trian secured two of the five seats it sought.28 In the years after the proxy fight, Heinz’s sales and stock rebounded – sales increased by 33% and profits increased by more than 50%.29 Heinz later merged with Kraft Foods in a $28 billion deal.30

Trian’s fortunes reversed in its 2015 proxy fight against Dupont. Trian was the company’s fifth largest shareholder with a 2.7% stake when it began its insurgent campaign.31 The hedge fund sought four board seats, including one for Peltz himself.32 Peltz urged the company to more aggressively split its businesses and create more shareholder value.33 Around the time that Trian announced its alternate slate, Dupont had suffered its worst sales decline in five quarters.34 Dupont even offered Trian one board seat to resolve the proxy fight, but the offer was rejected.35

Somewhat surprisingly to analysts, shareholders backed the entire management slate.36 Dupont’s three largest shareholders (which were index funds) all supported the company even though Trian had the support of certain proxy advisory firms.37 Peltz acknowledged the need to spend more time campaigning for retail investor votes and index funds.38 He suffered a narrow loss with 46% of the votes.39 This particular experience seems to have influenced how Trian has proceeded in its fight against P&G.

III. The P&G Proxy Fight

On February 14, 2017, Trian disclosed a $529 million stake in P&G.40 The fund later increased its stake to $3.3 billion worth of shares, approximately 1.5% of the company’s market capitalization.41 On July 17, Peltz nominated himself for P&G’s board and began his proxy campaign in the name of ending “suffocating bureaucracy.”42 Unlike in the Heinz or Dupont affairs, Peltz only sought one board seat, a deviation from his typical activist slate. Trian argued that it would then expand the board to twelve members to avoid Peltz having to replace a sitting director.43 This move came after the breakdown of behind-the-scenes discussions between the two parties,44 and precipitated the bitterness and politicking that would afflict the campaign. P&G dismissed Peltz’s business strategies for the company as a “cookie-cutter activist plan” and lambasted his potential inclusion on the board.45

The SEC cleared Trian’s proxy materials before P&G’s, so the fund chose to use a white proxy card, which is a color traditionally reserved for management.46 This was done in an attempt to appeal to retail investors, who traditionally side with current directors and comprise a comparatively large percentage of P&G stockholders (40%).47 P&G’s larger base of retail investors is due to its long-running employee stock plans and well-known brand names that appeal to individual purchasers. Trian also hired former P&G CFO Clatyon Daley as an advisor.48 Ultimately, Trian ran a very modern campaign and used social media to reach retail shareholders.49

Before the end of the voting period, major shareholder advisory firms like Glass Lewis backed Peltz.50 However, P&G emerged victorious with its announcement of the election results. Institutional investors split their vote, with two of the three largest groups – State Street Global Advisors and Blackrock – supporting Peltz and the other – Vanguard – supporting management.51

One added wrinkle is the basis for P&G’s victory. The company’s tally was not based solely on the number of votes counted, but was also predicated on votes that it has yet to receive.52 P&G’s 8-K filing shows that the company relied on estimates for six groups of investors, including individual investors who own stock through brokers and custody accounts administered by banks.53 In the election, each side only sees proxy cards sent to its own camp. This means that they could infer from the number of outstanding shares how many votes were cast for their opponent. However, neither side could know with certainty the number of ballots that were cast, the number of ballots that were cast at the shareholder’s meeting, and whether or not people voted multiple times (with the most recent vote revoking prior votes).

In the end, the result of the election did not change, but it is highly unusual for a corporation to employ such language in its SEC filing. In Peltz’s challenge against Dupont, the chemical company’s management team never used the term “estimate,” but rather announced a tally “based on information available to” its proxy solicitors.54 Part of this may have been due to the enormous pressure that the board faced as a result of the proxy challenge.

IV. Ramifications of the Proxy Fight

Management’s victory notwithstanding, Peltz will still affect change in P&G. After spending so much time and money fighting off the insurgent threat, the board members will need to deliver results. Meanwhile, Peltz and Trian will not disappear silently, as they will remain vocal and active in shaping the future of the company. The campaign showcased their leverage. Management cannot afford to ignore the massive number of shareholders who supported Peltz.

Peltz’s loss in the Dupont proxy campaign exposes the lingering effects of activist investors. Even after losing in 2015, he threatened to return in 2016. Dupont’s stock subsequently dropped and the company replaced its CEO. With Peltz acting as an outside advisor, the company merged with Dow Chemical in a $150 billion deal.55 Similarly, P&G’s shares dropped by 2% with the announcement of the election results.56

Scholarly opinion of whether activism is beneficial for shareholders remains divided.57 Regardless of the academic debate, the practice will not cease. Managers cannot rest easy. The proxy fight involving Peltz and P&G might serve as a mechanism for change in terms of activist strategies. That is, P&G was the largest company ever targeted for a proxy fight. This reality cannot be explained away as the result of the actions of a single emboldened fund manager. Rather, it should be seen as a warning to other Fortune 500 giants that they too can become a target. No company will be off limits because of its size, industry, structural complexity, or stock performance.58 This new reality differs from past practices, where activists traditionally targeted smaller companies because it was easier for them to buy shares that could impact the vote.59

  1. P&G Shareholders Elect All Eleven P&G Directors at 2017 Annual Meeting, P&G (Oct. 10, 2017),

  2. Id.; P&G, Current Report (Form 8-K) (Oct. 16, 2017), available at

  3. Chris Isidore & David Goldman, Procter & Gamble Declares Victory in Expensive Proxy Fight, Cnn (Oct. 10, 2017),

  4. Id. 

  5. Shawn Tully, P&G Did Something Odd in Declaring Victory Against Nelson Peltz, Fortune (Oct. 18, 2017),; see Form 8-K, supra note 2. 

  6. Tully, supra note 5. 

  7. Id. 

  8. Our Brands, P&G, (last visited Oct. 22, 2017). 

  9. Fortune 500, Fortune, (last visited Oct. 22, 2017). 

  10. P&G, 2017 Annual Report (last visited Oct. 22, 2017). 

  11. Isidore & Goldman, supra note 3. 

  12. Julie Creswell, Procter & Gamble Declares Victory in Proxy Battle; Peltz Says, Not so Fast, N.Y. Times (Oct. 10, 2017),

  13. Cecilia Kang & Julie Creswell, Procter & Gamble’s Count Shows How Close Proxy Vote Was, N.Y. Times (Oct. 16, 2017),

  14. Alexander Coolidge, P&G Proxy Fight Over, but Pressure Stays on Cincinnati Giant to Complete Turnaround, USA Today (Oct. 10, 2017, 2:42 PM),

  15. Id. 

  16. Lauren Hirsch, P&G Says Shareholders Reject Peltz’s Bid for Board Seat by Slim Margin, Activist Says Vote a Dead Heat, CNBC (Oct. 10, 2017, 5:14 PM),

  17. Id. 

  18. Isidore & Goldman, supra note 3. 

  19. Nelson Peltz, CNBC,–peltz/ (last visited Oct. 22, 2017). 

  20. Tom Hals, DuPont Wins Board Proxy Fight Against Activist Investor Peltz, Reuters (May 13, 2015),

  21. David Benoit, Proxy Fights Are a Rarity for Peltz’s Trian, Wall St. J. (July 17, 2017),

  22. Id. 

  23. Dan Burrows, Heinz Proxy Fight Comes Down to the Wire, Market Watch (Aug. 14, 2006),

  24. Id. 

  25. Id. 

  26. Id. 

  27. Id. 

  28. Alexander Coolidge, Ex-Heinz CEO Lost a P&G-Style Fight. Here’s What Happened, Cincinnati Enquirer (Sept. 25, 2017),

  29. Id. 

  30. Sophia Yan, Kraft and Heinz Merger to Create Food Giant, CNN (Mar. 25, 2015),

  31. Hals, supra note 20. 

  32. Id. 

  33. Id. 

  34. Id. 

  35. Id. 

  36. Id. 

  37. Id. 

  38. Id. 

  39. Creswell, supra note 12. 

  40. Gabriel Kinder, Timeline: A Blow-By-Blow Guide to Procter & Gamble vs. Nelson Peltz, TheStreet (Oct. 10, 2017),

  41. The Procter & Gamble Company, Yahoo Fin.,, (last visited Oct. 22, 2017). 

  42. Kinder, supra note 40; Ronald Orol, Nelson Peltz: Vote on Procter & Gamble Proxy War is ‘Too Close to Call’, TheStreet (Oct. 10, 2017),

  43. Michael Flaherty & Sruthi Ramakrishnan, Trian Takes Off the Gloves, Aiming to Put Peltz on P&G’s Board, Reuters (July 17, 2017),

  44. Id. 

  45. P&G, Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Schedule 14A) (Sept. 28, 2017), available at

  46. Michael Flaherty, P&G, Peltz Vie for Small Investor Votes in Biggest-Ever Proxy Fight, Reuters (Sept. 25, 2017),

  47. See id. 

  48. Kinder, supra note 40. 

  49. See Revitalize P&G Together, Trian Partners,; see also Vote the Blue Proxy Card, P&G,

  50. Kinder, supra note 40. 

  51. Hirsch, supra note 16. 

  52. Tully, supra note 5. 

  53. Form 8-K, supra note 2. 

  54. Tully, supra note 5. 

  55. Orol, supra note 42. 

  56. Id. 

  57. E.g. Edward Swanson & Glenn Young, Are Activist Investors Good for Targeted Companies?, CLS Blue Sky Blog (Sept. 22, 2016),

  58. Julie Creswell, An Epic, and Costly, Boardroom Battle at Procter & Gamble, N.Y. Times (Oct. 8, 2017),

  59. Hirsch, supra note 16.