Peltz, P&G Board Must Find Common Ground After Recount

Proctor & Gamble shareholders wanted Trian Fund Management CEO Nelson Peltz on the company’s board of directors after all, with a recount of the votes cast last month showing the activist investor won a seat on the board by a very slim margin.

The critical first step for Peltz will be getting the high-profile proxy battle story out of the headlines and finding some common ground between its members and CEO David Taylor.

“Nelson’s job at this point is to go in, try and have other directors understand what’s trying to be accomplished and hope that both sides’ egos can be put aside for the benefit of P&G’s shareholders,” says TK Kerstetter, CEO of Board Resources LLC, and editor at large of Corporate Board Member.

It would be beneficial for both Peltz and the board to allow the dust to settle, make their peace and then get to work on improving the company.

“Nelson doesn’t want to see things get too disruptive, he’d like to make sure that they both agree that change is needed. The best thing now is to try and take the battle out of the news and start to get down to very logical discussions.”

“There’s obviously an awkward period of time as you get through your first couple of board meetings, and there will be meetings with [P&G CEO] David Taylor and Nelson Peltz and Trian,” Kerstetter says. “Nelson doesn’t want to see things get too disruptive, he’d like to make sure that they both agree that change is needed. The best thing now is to try and take the battle out of the news and start to get down to very logical discussions.”

The disruption caused by the situation isn’t necessarily permanent, however, and looking back to the proxy battle between Peltz and Heinz in 2006 that gave Peltz a seat on that company’s board could actually yield positive results for all involved.

“The directors on [the Heinz] board, over time, felt that Nelson Peltz was a very contributive director,” Kerstetter says. “In fact, [Former Heinz CEO Bill] Johnson, who ended up losing to Peltz in that battle, ended up on Trian’s advisory board.”

While the possibility exists that the rest of the P&G board decides to dig in and make things very difficult for Peltz, a move in that direction likely wouldn’t serve the company’s shareholders best.

“Trian is trying to bring their knowledge of improving companies into other organizations, because, frankly, they have very large positions,” Kerstetter says. “Typically, anybody that’s a shareholder of these companies is not disappointed to see Trian in, because they are always pushing for positive change.”

For Taylor, who took over as CEO in 2015, the first few meetings with Peltz and the board will be extremely important as all parties begin work on mapping out the next steps for the company. With shareholders electing him to the board, however narrowly, his voice will have to be considered moving forward.

“From [Taylor’s] perspective, it is ‘How can we best function in a constructive way so as not to magnify the problems, but rather correct the problems?’” Kerstetter says. “There’s no question that there’s a lot of ego in this—there may even be ego on some of the other directors’ parts. But all shareholders want that to be put aside at this point, because the task at hand now, which both sides wholeheartedly agree, is that there needs to be change.”

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Patrick Gorman
Patrick Gorman is managing editor at Corporate Board Member magazine, based in Stamford, CT. His business journalism background includes 12 years covering the C-level marketing and technology spaces.