9-29-17 3:48 PM EDT | Email Article
By Sharon Terlep 

The largest proxy-advisory firm is recommending Procter & Gamble Co. shareholders put activist investor Nelson Peltz on the board over the company's protests.

Institutional Shareholder Services Inc. on Friday said Mr. Peltz's extensive consumer-products experience could help P&G's board. Another proxy adviser, Glass Lewis & Co., came out in favor of Mr. Peltz last week.

"While management undoubtedly deserves a longer runway to demonstrate durable results, there are several signs that the board could benefit from additional shareholder perspective and outside [consumer products goods] experience," ISS wrote in its report.

The two sides have traded barbs for weeks about whether Mr. Peltz deserves a seat on the consumer-products giant's board. Mr. Peltz's Trian Fund Management, which is one of the company's biggest shareholders with a 1.5% stake valued at $3.5 billion, has been amassing support.

Another top shareholder, Yacktman Asset Management, which owns about 15 million shares of P&G or a 0.6% stake, said earlier this month it is backing Mr. Peltz. Five former board members of H.J. Heinz Co. wrote a letter to P&G's board in support of Mr. Peltz, who won a seat on the ketchup-maker's board in 2006 after a proxy fight.

ISS can influence how institutional shareholders such as index-fund managers and mutual funds vote, though its recommendation isn't seen as insurmountable to the losing side.

Both ISS and Glass Lewis sided with Mr. Peltz in his failed attempt in 2015 to win a seat on the DuPont Co. board. In that contest, the three largest shareholders -- index-fund managers Vanguard Group, BlackRock Inc. and State Street Corp. -- all voted in favor of the company, despite the proxy advisers' recommendations. The three firms are also the largest holders of P&G stock.

A survey of 70 institutional investors conducted in September by Sanford C. Bernstein & Co. showed strong support for Mr. Peltz, with nearly three-quarters of respondents saying the activist should win a seat on the board.

"Even this level of support from active managers alone may not be enough to win the vote," wrote Bernstein analyst Ali Dibadj in a research note. "Support would need to come from other constituents as well."

Working against Trian is the fact that P&G is the largest company to face a proxy fight and among the most widely held stocks, with 2.55 billion shares outstanding. An estimated 40% of those shares are held by individual, retail investors who are more likely to favor the company.

P&G's 10 biggest shareholders hold about 28% of the company's shares, while the top 10 investors in S&P 500 companies on average control 45% of those companies, according to data from S&P Global Market Intelligence.

P&G has rejected Mr. Peltz's attempt to get a board seat, saying his ideas are either ill-informed or retreads of work that is already under way. Its executives have warned that adding the outsider to the board could disrupt the company's progress.

Mr. Peltz has said the company should organize itself into just three business units, down from 10, by combining businesses, such as beauty, grooming and health care. The units would operate autonomously and have total control over sales, marketing, manufacturing and other major functions.

Shareholders are set to vote on Oct. 10.

Write to Sharon Terlep at sharon.terlep@wsj.com


(END) Dow Jones Newswires

September 29, 2017 15:48 ET (19:48 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
Add a Comment

Try Premium Membership today. Your first 14 days are free of charge. Start my Premium Membership Trial.
Sponsored Links
Buy a Link Now
Sponsor Center
Content Partners