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P&G Concedes Proxy Fight, Adds Nelson Peltz to Its Board

Procter & Gamble Co. said Friday it would add activist investor Nelson Peltz to its board, ending weeks of intrigue after the biggest and most expensive proxy battle ever fought essentially finished with a tie.

The consumer-products giant said an official vote tally showed its 11 directors were re-elected but Mr. Peltz won nearly 50% of the votes cast by shareholders. Following discussions with the billionaire, the company agreed to add him to the board starting March 1.

After months of debate and furious campaigning by both sides, shareholders sent a message that the company needed to move faster to improve its results but were evenly split on whether it needed the activist in the boardroom. The winning side kept flipping with each count because of the razor-thin difference.

At an October shareholder meeting, the company had initially claimed victory in the high-profile proxy fight. An independent tally in November showed the activist had won about 42,000 more votes than a P&G director, a margin of 0.0016% of the total shares outstanding.

P&G said Friday that a certified vote count showed the results were “extremely close” and because so many shareholders had voted for Mr. Peltz, it decided to add him to the board. According to the certified tally released Friday, Mr. Peltz lost by nearly 500,000 shares. Nearly 2 billion votes were cast.

Mr. Peltz, whose Trian Fund Management has invested about $ 3.5 billion in P&G, had called upon the company to end the dispute and appoint him to its 11-person board. The company spent several weeks reviewing the ballots before deciding whether to contest the results.

The two sides have battled about the best structure and strategy for the world’s biggest consumer-products company. Mr. Peltz argued it needs to streamline it businesses and bring in outside talent.

P&G Chief Executive David Taylor countered that Mr. Peltz would disrupt a turnaround that is under way at the maker of Tide detergent and Gillette razors after a decade of market-share losses and stagnating profits.

In an interview, Mr. Taylor said Mr. Peltz took on a more cooperative tone following the proxy vote, which led P&G to drop its vigorous opposition to his candidacy.

“I found him, in the conversations we’ve had in the last many weeks, to be constructive and forward-looking,” Mr. Taylor said. “We’ve both tried to find a way to build a bridge to move forward.”

Strong shareholder support for Mr. Peltz was a key factor in adding him and changing executive compensation metrics, the CEO said. “The shareholders did communicate a pretty strong message advocating for Nelson,” he said.

P&G said it and Mr. Peltz have agreed the company wouldn’t take on excessive leverage, substantially reduce R&D spending or break up the company. From the outset, Mr. Peltz had said he wouldn’t seek a breakup of the company.

P&G also will change its stock performance program to dole out awards based on sales growth and shareholder returns so that incentives are based on the company’s performance overall and not how it fares relative to peers, something Mr. Peltz argued for throughout the fight. The company is considering further changes.

“David Taylor and I have developed a strong relationship and I look forward to working with him and the rest of the board,” Mr. Peltz said.

P&G also said it would add Novartis AG Chief Executive Joseph Jimenez to its board on March 1. The changes will increase the size of the board to 13 members.

P&G is the biggest U.S. company by market value to face a proxy contest. The two sides spent at least $ 60 million and crisscrossed the country for weeks to win support from shareholders, major index fund managers and thousands of P&G retirees. At the end of the campaign, the company’s shareholders were essentially evenly split.

Mr. Peltz, 75 years old, usually has sought a board seat at companies in which he invests. He personally joined Mondelez International Inc., the maker of Oreos, and H.J. Heinz Co.

P&G is the second blue-chip company at which Trian has taken a board seat this year.

In October, co-founder Ed Garden was added to the board of General Electric Co., which has been struggling with a painful restructuring and recently slashed its dividend.

Write to Sharon Terlep at sharon.terlep@wsj.com and David Benoit at david.benoit@wsj.com

Appeared in the December 16, 2017, print edition as ‘P&G Concedes Defeat, Gives Peltz Board Seat.’

WSJ.com: US Business

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