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Governance

Procter & Gamble says Trian loses vote for board spot; Nelson Peltz disputes results

Nelson Peltz, Trian Fund Management CEO
Nelson Peltz

Despite support from several large pension funds, Nelson Peltz, Trian Fund Management's founding partner and CEO, was not elected to Procter & Gamble Co.'s board of directors, according to a webcast of Tuesday's annual shareholder meeting.

All 11 directors nominated by P&G , however, were elected, according to the webcast.

The results are preliminary. Exact vote tallies were not immediately available.

In a statement Tuesday, Trian argued that the results are still too close to call. "According to our proxy solicitors, today's vote is too close to call and it will take more time to determine the outcome. We await the certified election results by the independent inspector of election," said Trian. "Regardless of the final voting results, Trian believes management and the board have been put on notice by shareholders — a continuation of the past decade's underperformance is simply unacceptable. Trian is confident that P&G shareholders will hold the board and management accountable and will be far less tolerant of lackluster performance going forward."

The $213.7 billion California State Teachers' Retirement System, the $139.7 billion Texas Teacher Retirement System, $195.4 billion Florida State Board of Administration, C$326.5 billion ($261.6 billion) Canada Pension Plan Investment Board and the C$180.5 billion Ontario Teachers' Pension Plan, Toronto, all supported Trian's proxy fight with the consumer goods manufacturer, according to their proxy-voting disclosures,. Along with Mr. Peltz, all five entities also supported the election of eight or more other directors nominated by Procter & Gamble and supported by Trian.​ P&G is the biggest company to ever be targeted by an activist in a proxy fight.

On Oct. 6, P&G issued a statement against Mr. Peltz's election, arguing that his timing was late because the company was already "in the middle of a successful transformation that is delivering results" and that his suggestions lacked substance.

Specifically, Mr. Peltz argued that P&G suffered from a bloated structure and a lack of new brands favored by younger shoppers. While he didn't call for the replacement of CEO David Taylor or a breakup of the company, Mr. Peltz did suggest reorganizing the maker of Tide and Pampers into three largely autonomous units.

CalSTRS holds about 5.6 million shares of P&G stock valued at about $508 million and has been an investor with Trian since April 2011. Trian has a roughly $3.5 billion stake in P&G.

"CalSTRS believes that win or lose, today's vote at Proctor & Gamble sends a strong message to the board, management and the CEO — shareholders want change!" said Christopher J. Ailman, CalSTRS' chief investment officer, in an emailed statement. "Nearly 50% of shareholders — including large traditional passive asset managers — made it clear that they are looking for the company to change direction. As long-term shareholders — passive investors, but definitely active owners — CalSTRS supported Mr. Peltz's board candidacy. As an active shareholder he would be a constructive voice and push for the change that's needed for Proctor & Gamble to start performing the way we know is possible.

P&G said in a news release following the voting results: "P&G's board and management team thank P&G shareholders for their support, input and participation throughout the proxy contest. We are encouraged that shareholders recognize P&G is a profoundly different, much stronger, more profitable company than just a few years ago. The changes the company has made are broad based and delivering results."

Proxy-advisory firms Institutional Shareholder Services and Glass Lewis had recommended that shareholders elect Mr. Peltz to P&G's board.

Bloomberg contributed to this story.