Procter & Gamble Co.'s board of directors named Nelson Peltz, Trian Fund Management's founding partner and CEO, a director, despite narrowly losing a shareholder vote for a board seat.
David S. Taylor, P&G's board chairman and CEO, said in a Dec. 15 letter to P&G shareholders that because the election results between Mr. Peltz and incumbent director Ernesto Zedillo "were so close" and because Mr. Peltz had the support of a large number of shareholders, the board appointed Mr. Peltz as a director, effective March 1.
An 8-K filed by P&G on Dec. 15 showed Mr. Peltz losing to Mr. Zedillo by approximately 500,000 votes. Those results are certified by the independent inspector of elections.
Mr. Peltz's appointment will be an addition to the board. He is not replacing anyone.
Leading up to the Oct. 10 shareholder meeting, 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 Mr. Taylor or a breakup of the company, Mr. Peltz did suggest reorganizing the maker of Tide and Pampers into three largely autonomous units.
Trian has a roughly $3.5 billion stake in P&G.
The $219.6 billion California State Teachers' Retirement System, $146 billion Texas Teacher Retirement System, $195.6 billion Florida State Board of Administration, C$328.2 billion ($255.2 billion) Canada Pension Plan Investment Board and C$180.5 billion Ontario Teachers' Pension Plan all supported Trian's proxy fight with P&G.
Proxy-advisory firms Institutional Shareholder Services and Glass Lewis had recommended that shareholders elect Mr. Peltz to P&G's board. Mr. Peltz currently serves as non-executive chairman of The Wendy's Co. He is also currently a director of Mondelez International Inc., Sysco Corp. and the Madison Square Garden Co. He has previously served as a director of H.J. Heinz Co., Legg Mason Inc. and Ingersoll-Rand PLC.
"I believe in the tremendous potential of P&G. I look forward to bringing fresh perspectives to the boardroom, and working collaboratively with David and the rest of the board to drive sustainable long-term shareholder value at P&G," Mr. Peltz said in an emailed statement Monday. "David Taylor and I have developed a strong relationship and I look forward to working with him and the rest of the board to drive market share growth and improve performance at this great company with tremendous potential."
Mr. Taylor also announced Dec. 15 that in response to "shareholder input about the need to refresh the board's composition," Joseph Jimenez, CEO of Novartis, was appointed a P&G director, effective March 1. Mr. Jimenez has extensive experience in consumer products, health care and international business, Mr. Taylor said. He currently serves on the board of General Motors Co. and previously served on the boards of the Colgate-Palmolive Co., Speedel Holding AG, Blue Nile Inc. and AstraZeneca PLC. Mr. Jimenez's appointment is also an addition to P&G's board.
Finally, in response to shareholders' call for stronger executive compensation practices, Mr. Taylor said that P&G's performance stock program is being modified "to include relative sales growth metrics and a total shareholder return modifier to ensure awards reflect performance vs. external competitive benchmarks." The changes are expected to be implemented in fiscal 2018/19. Additional modifications are still under review, Mr. Taylor said.
Bloomberg contributed to this story.