Procter & Gamble CEO: Why activist investor Nelson Peltz is wrong for our board
Procter & Gamble (PG), the biggest household and personal care company in the world, has spent the past five years cutting $10 billion in costs and shedding more than half of its brand portfolio. But that’s not enough change for Nelson Peltz’s hedge fund Trian Management, which initiated a proxy fight for a board seat in July, with an upcoming shareholder vote on Oct. 10.
P&G CEO David Taylor, who took the helm in 2015, told Yahoo Finance that Peltz is wrong for the board, saying the company’s brands — including Pampers, Tide, Crest, and Gillette — are already undergoing an important transformation.
“I respect Nelson as a successful investor and he may be the right board member for some food companies that are in the start of a transition,” Taylor said. “P&G is deep into a transformation that is working and when it’s working you want to stay the course and execute it. You don’t want to start over and go on a different track.”
‘He’s advocated we need a lot of small brands … That’s just not the case’
Taylor added that Peltz’s track record doesn’t align with P&G.
In the past, Peltz has held successful activist campaigns at Kraft, Heinz, and Cadbury. And his most recent push at Pepsi (PEP) did result in a board seat (with no proxy battle) though the company did not pursue his initial proposal (a spin-off of its snacks division).
However, Taylor said that some of the ideas Peltz advances — including proposing a holding company with no corporate research & development (R&D) — is a mistake. Taylor emphasized that Peltz’s proposal to break P&G into three separate operating units would be unproductive.
“We want to see the share price go up, but it’s very important how you do it and it’s very important that whatever actions you take are good for the short, mid and long term,” Taylor said.
Peltz, whose $3.5 billion outstanding shares amount to about 1.5% ownership in P&G, also advocated for more emphasis on small brands. But Taylor says this is misplaced. “What’s growing fastest for us in e-commerce is the big brands because consumers trust them,” he said.
When it comes to corporate R&D, Peltz has accused the company of not innovating quickly enough —contending the company has developed no new brands since Swiffer 20 years ago. This is particularly pointed, considering the growing prominence of small brands like Dollar Shave Club.
But Taylor said innovation has happened within brands, pointing to “Always Discreet” in the adult incontinence area and “Unstoppables” under the Downy banner.
“You can go category by category and you see P&G innovations growing categories and delighting consumers, often done under the parent brand name because the brands are trusted by consumers,” Taylor said. “What you want is innovation that matters, that makes a difference in consumers’ lives, grows the category profitably. P&G does that every year.”