Expensive proxy fight is now headed to a weekslong recount to
determine outcome
By David Benoit and Sharon Terlep
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 17, 2017).
Procter & Gamble Co. said it beat Nelson Peltz by 6.15
million votes, only about 0.2% of its shares outstanding, a slim
difference that is now headed to a weekslong recount to determine
the final outcome of the most-expensive proxy fight in history.
The consumer giant had announced at its annual meeting in
Cincinnati last week that its preliminary tally of votes showed the
11 board nominees were elected. The announcement surprised the
activist camp whose own tally seemed too close to call.
The company hadn't released the actual preliminary tally until
Monday, when it disclosed in a securities filing that Mr. Peltz
received 973 million shares and that the P&G director with the
least number of votes, Ernesto Zedillo, won 979.2 million. Mr.
Peltz's campaign had sought to replace Mr. Zedillo, the former
president of Mexico, though the activist investor pledged to
attempt to add him back if Mr. Peltz won.
Mr. Zedillo got 48.9% of the shares voted at the meeting, while
Mr. Peltz received 48.6% of the vote, according to P&G's
preliminary tally.
"Trian continues to believe that the election is too close to
call," Mr. Peltz's Trian Fund Management said on Monday, adding
that the initial results are based "on estimates and incomplete
information." For its tally, the company had to estimate votes by
individuals that supported Mr. Peltz and cast their ballots
directly to his fund.
P&G said Monday that it could take several weeks for an
independent inspector to confirm the results. "P&G shareholders
have spoken," a company spokesman said. "Our focus continues to be
on delivering the results shareholders expect of us and we expect
of ourselves -- and we're on the right track."
"We are confident in the conclusion that we reached last week,"
he said.
Trian said last week it wouldn't concede until an independent
arbiter had a chance to certify the votes, a process that now
looms.
Mr. Peltz said last week that, by Trian's count, his side was
ahead by 175 million votes on the morning of the shareholder
meeting. It was aware some big shares, including the roughly 7.5%
that was controlled by employee plans, hadn't yet been counted.
"Whether we won or lost, it will be by less than 1%," he said.
P&G executives were subdued in their response immediately
after the vote. "The preliminary proxy results is all I had,"
P&G Chief Executive David Taylor said when asked last week
about Trian's contention that he declared victory too soon. Mr.
Taylor won re-election with 1.93 billion shares voted for him.
Shareholder voting is already a complicated and opaque process
but the uncertainty of the P&G vote was increased by an unusual
amount of shares held by small investors, leaving both sides
scrambling for support from some 2.5 million shareholders instead
of just a few dozen. About 40% of P&G stock is owned by retail
investors, compared with an average of about 12% in the S&P
500, according to S&P Global Market Intelligence.
On top of that, a significant chunk of the shares were also
owned in the actual name of the investors, instead of just
brokerage names, which is far more typical. The votes from those
shares are only sent to the side who they are voting for, meaning
both P&G and Trian had blind spots as they tried to determine
the outcome. The P&G disclosure Monday still didn't include
such votes that went to Trian, though it estimated what it believed
Trian won.
All of the votes are now in the hands of an independent firm,
which will issue its own preliminary tally in coming weeks. After
that, begins a certification process that will check if
shareholders had the authority to vote, signed and marked ballots
correctly and to verify that no one voted more than once.
Errors have been caught in the past, such as in 2008 at Yahoo
Inc. when the company declared then-chairman Jerry Yang had
received support from 85.4% of the shares, despite Carl Icahn
campaigning against him. Fund manager Capital Research &
Management quickly questioned the vote given its entities owned
about 16% and had withheld support. It turned out the Capital vote
was mostly missed, which was attributed to an unusual technical
glitch.
Mr. Yang was still elected, but such a change at P&G could
swing the vote.
In the 11 activist-forced elections this year over a minority
board change, like P&G, the average margin of victory was 29%
of share outstanding, with boards winning seven, according to Proxy
Insight, which tracks votes. The closest margin was 1.3%, when
Wayne Savings Bancshares Inc. defeated Stilwell Value LLC.
Some have questioned how accurate any counting of ballots can
be, especially in large votes. In a speech last year to investors,
Delaware Vice Chancellor J. Travis Laster said the current system
"makes precision impossible" and suggested turning to blockchain
technology that is the basis of Bitcoin to revamp traditional
voting.
Write to David Benoit at david.benoit@wsj.com and Sharon Terlep
at sharon.terlep@wsj.com
(END) Dow Jones Newswires
October 17, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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