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Governance

Pershing Square nominees defeated in ADP proxy fight

Pershing Square Capital Management lost its proxy fight with Automatic Data Processing Inc.

Despite support from a couple of large pension funds, none of the hedge fund manager's three nominees were elected to ADP's board of directors at the company's annual meeting Tuesday.

All 10 directors nominated by ADP, however, were re-elected, said a news release from the payroll and human resource outsourcer.

Pershing Square's nominees were Bill Ackman, founder, CEO and portfolio manager at Pershing Square; Veronica M. Hagen, former CEO of Polymer Group Inc. and currently a director at Southern Co., American Water Works Co. Inc. and Newmont Mining Corp.; and V. Paul Unruh, who previously held senior leadership positions at Bechtel Group and is currently a director at Symantec Corp. and Aconex Ltd.

According to their proxy-voting disclosures, the Florida State Board of Administration, Tallahassee, which oversees the money management of the $158.9 billion Florida Retirement System, supported Messrs. Ackman and Unruh's nominations, but withheld its vote on Ms. Hagen. The C$180.5 billion ($140.8 billion) Ontario Teachers' Pension Plan, Toronto, supported all three nominees.

According to ADP, each of Pershing Square's nominees received support from less than 20% of outstanding shares and less than 25% of the shares voted at Tuesday's meeting.

"This process has sharpened our focus on the importance of insightful, strategic engagement with our investors, which, over the past few months, has given us a greater appreciation of our owners' perspectives on our business and growth plans," said ADP's CEO Carlos Rodriguez, in the news release. "We plan to maintain an active and productive dialogue with shareholders as we continue to transform ADP's business."

Shares of ADP fell 1.1% in pre-market trading Tuesday.

Mr. Ackman has said he intends to be a long-term holder of ADP regardless of the final outcome, and that he would be willing to wage another proxy fight next year if the company doesn't dramatically improve its operations over the next 12 months.

ADP resisted Mr. Ackman's push for change, saying the proxy fight was a major distraction for the company and was based on inaccurate information. It said the pace and magnitude of changes Mr. Ackman was proposing were risky to the business and could potentially alienate its clients.

Mr. Ackman's slate of nominees garnered the support of two prominent shareholder advisory firms, Glass Lewis & Co. and Egan-Jones Proxy Services. A third advisory firm, Institutional Shareholder Services Inc., urged investors to withhold support for one of ADP's nominees, Eric Fast, in order to make room for Mr. Ackman on the board.

According to its proxy-voting disclosures, the $146 billion Texas Teacher Retirement System, Austin, supported nine of ADP's 10 nominated directors, and withheld its vote for Mr. Fast.

Pershing Square argued in its own news release Tuesday that had ADP been willing to use a universal proxy card, Mr. Ackman would have been elected. According to Pershing Square, Mr. Ackman received 31%, or 81 million, of the 259 million votes for Messrs. Ackman and Fast combined. Mr. Fast also received 62 million withhold votes in line with ISS' recommendation that shareholders support Mr. Ackman by withholding their votes for Mr. Fast, Pershing Square said. "Had these shareholders voted (on a universal proxy card) for Mr. Ackman rather than withholding for Mr. Fast, Mr. Ackman would have received 62 million more votes, or 143 million vs. 178 million for Mr. Fast, representing 45% of the votes cast," Pershing Square said.

Pershing Square's loss comes nearly a month after alternatives money manager Trian Fund Management lost its proxy battle with Procter & Gamble Co., despite support from the $215.3 billion California State Teachers' Retirement System, West Sacramento, C$326.5 billion Canada Pension Plan Investment Board, Toronto; Texas Teacher Retirement System; Florida SBA; and Ontario Teachers' Pension Plan.

Bloomberg contributed to this story