Even Meg Whitman Doesn’t Think Nelson Peltz Is Right Fit for P&G (PG)

Procter & Gamble Co. (PG)  is on the right “transformation journey” and needs to “stay the course” by voting down Trian Partners activist investor Nelson Peltz’s bid to gain a seat on the company’s board, P&G CEO David Taylor, finance chief Jon Moeller and board member Meg Whitman said in a question-and-answer session with investors Tuesday, Oct. 3. 

Activist investor Nelson Peltz of Trian Partners has been gunning for a seat on P&G’s board for weeks, and the culmination of the nasty proxy battle happens Oct. 10 as P&G shareholders cast their votes.

In his push to join P&G’s board, Peltz has proposed broad changes including a company restructuring into three global business units. In September, Peltz released a 93-page white paper outlining his argument against P&G’s “insular” culture that has failed to acquire small-, mid-sized and local brands that could serve to boost P&G market share.

While the proxy battle has been highly dramatic since it began in mid-June, the back-and-forth has intensified in the last month. Peltz has said he “doesn’t know how to spell lose,” and asked P&G to “step into this century.” Former P&G CEO A.G. Lafley said Peltz is “just plain wrong,” while current CEO David Taylor “couldn’t disagree more” with some of Peltz’s proposals, which are “flawed suggestions and outdated views.”

“I respect Mr. Peltz as an investor, but after extensive due diligence we do not think the choice to add Mr. Peltz to this board is the right one,” Taylor said Tuesday. “We need to stay focused and balanced.”

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Taylor, Moeller and Whitman struck an optimistic tone Tuesday in their pleas to vote down Peltz. While Taylor and Moeller reiterated P&G’s strong performance over the last few years on what was repeatedly referred to as a “transformation journey,” Whitman offered her perspective on who might be a better choice to join P&G’s board in the future.

“Every board seat is a precious commodity,” Whitman said. “I think we have built a world-class board.”

“The board is not against activists,” Whitman said. But Whitman said boards must consider the timeline of the activist entry, noting now isn’t the right time for an activist investor as P&G is already deep into its transformation journey. “It’s not about activists. It’s about the right board member at the right time,” Whitman said.

In his six in-person meetings with Peltz, Taylor said the investor spoke mostly about his experience at food companies. “What he most of the time talked about was food examples that are very different from the business we’re in,” Taylor said. 

Among Peltz’s chief concerns was P&G’s “insular” culture, but the three were quick to strike the notion down.

“That may have been true of the company maybe 20 years ago,” Whitman said. But she said “P&G Think” has transformed into a global, business-savvy system of thought.

“We need and want best available. It’s not about inside or outside. It’s about best available,” Moeller said of hiring at P&G.

As for the consumer goods manufacturer’s market performance Peltz has criticized, the leaders highlighted P&G’s gains in ecommerce, including deals with Amazon.com Inc. (AMZN) , Alibaba Group Holdings Ltd. (BABA) and Tencent Holdings Ltd. (TCEHY) . P&G has also increased market leadership with millennials and “pivoted hard” to digital advertising, Taylor added. 

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P&G has near-similar market shares in both brick-and-mortar and online sales of its wide array of consumer goods. “This is a field that’s changing at lightning speed, but…from where I sit in Silicon Valley … they’re doing a remarkable job here,” Whitman said.

“We are a profoundly different company, much stronger and more profitable than we were just a few years ago,” Taylor said. “We strongly recommend you give us the opportunity to finish this transformation.”

Following the session, P&G shares traded up 0.49% to $92.22 late Tuesday afternoon.

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