An activist investor is an individual or group that purchases large numbers of a public company’s shares and/or tries to obtain seats on the company’s board with the goal of effecting a major change in the company, according to Investopedia. In the case of Trian Partners’ Nelson Peltz, his desire to gain a seat on the Cincinnati giant Proctor and Gamble’s (P&G) board in hope of giving P&G a much-needed kick as the company, in his view, has fallen behind competition. In doing so, he would push for the implementation of new, more aggressive strategies, reversing P&G’s economic and product complacency. P&G, however, is satisfied with the steady growth that has occurred in recent years and believes that the addition of Peltz to the board would stir the pot in a detrimental way.
Now that P&G shareholders have made the decision: stick to the status quo instead of shake up the management (for better or for worse). Let us take a look back at the arguments from both sides.
Peltz’s Proposals for Change:
- Increase digitally savvy marketers.
- A new plan for long-term, profit-producing innovation.
- A change in compensation plans.
- Increased focus on earnings.
- Bigger returns for shareholders.
P&G’s Concerns:
- Peltz has history of hidden agendas and bad records on other company boards.
- CEOs report wasting 25% of their time addressing Peltz’s questions or debating his misinformed ideas.
- Many large shareholders hold conservative values that differ from Mr. Peltz’s.
