Activist Nelson Peltz is trying to elbow his way onto Procter & Gamble’s board, but Wall Street, at least for now, isn’t looking for big changes.
The company’s stock inched up just 0.5 percent to $87.55 Monday as investors digested news of a proxy challenge from Peltz’s Trian Fund Management LP.
Trian, which owns $3.3 billion in P&G stock, filed a proxy statement with the U.S. Securities and Exchange Commission saying it wants to help P&G “address the challenges it is facing.”
Trian contends that P&G has underperformed its peers and the S&P 500 over a 10-year period, is losing market share and is too bureaucratic. The business is also looking for Peltz, the firm’s chief executive officer and founding partner, to join the P&G board of directors, and has nominated him for election at the 2017 annual meeting.
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“As a member of the board, it would be my goal to help improve performance by increasing sales and profits and regaining lost market share,” Peltz said in a statement. “I also believe the board must address the company’s structure and culture. I can add far more value operating within the P&G boardroom than by merely looking in from the outside.”
P&G issued a statement noting: “While the board is always willing to consider new ideas that may help drive profitable growth and enhance shareholder value, the board notes that Trian has not provided any new or actionable ideas to drive additional value for P&G shareholders beyond the continued successful execution of the strategic plan that is in place.”
In a filing with the SEC, Trian said P&G’s organic sales growth has decelerated and the business has lost market share across most of its categories.
“Disruptive and existential threats are impacting the entire consumer packaged goods industry, including changes in technology and consumer behavior, and P&G must act with the greatest possible urgency to address the market share it is losing to both its peers and smaller local competitors, who are adapting to industry changes more effectively than P&G,” Trian wrote in the statement.
The fund also noted that of the $10 billion P&G saved in its cost-cutting program, $7 billion was lost to foreign currency exchange and the other $3 billion didn’t drive sales profits. Additionally, the organization has an “overly complex organizational structure and slow-moving and insular culture.”
Trian contends that adding Peltz to the board could help rectify some of those problems. The fund noted that it has had several meetings with P&G over the past four months, but that P&G rejected its request to add Peltz to the board. Peltz’s career history includes time as a director at Mondelez International Inc., Sysco Corp., Madison Square Garden Co., and the Wendy’s Co. He’s also served on the boards at Ingersoll-Rand plc, H.J. Heinz Co., Legg Mason Inc. and National Propane Corp.
P&G noted that over the past two years it has executed a significant portfolio transformation, divesting more than 100 brands and narrowing its product portfolio into 10 categories from 16. The company said it is reinvesting savings from its $10 billion cost-cutting plan into things like improving product formulations and packaging, sales coverage and media programs, product sampling and in-store and online demand creation.
“P&G will also invest in consumer value equations, correcting value gaps and quickly responding to competitive challenges as they emerge throughout the year,” the company said.