As the proxy fight between activist investor Nelson Peltz and Procter & Gamble continues, P&G President and CEO David Taylor offered a rebuttal to some of Peltz’s suggestions on CNBC.
“He’s proposed some things that could be very dangerous to the short term, which is reorganize the company right now, and he’s proposed something very dangerous for the long-term future of this company, and that is eliminating our corporate R&D,” Taylor told “Mad Money” host Jim Cramer on Monday, referring to his consumer product company’s research and development.
Peltz’s firm, Trian Partners, released a long-awaited proposal last Wednesday detailing changes it would like to see at P&G, including a board shake-up and splitting the business into three smaller segments.
Taylor said the suggestion to remove the company’s corporate R&D, which would turn into three separate R&D departments within Peltz’s structure, would deprive P&G of lucrative opportunities.
“I can give you several examples: the sachets that are often used for samples in the U.S. and they’re sold by the hundreds of millions in developing markets — the process to make them faster than anybody can make them commercially, and at a lower cost, was developed using our liquids understanding from our liquids businesses and our converting capability that comes out of our paper businesses,” Taylor said. “If you had separate businesses with separate R&D, you wouldn’t have made that connection and would have missed the opportunity to take advantage of a real plus.”
The CEO also said that he and Peltz had spoken many times about the activist’s ideas, despite the fact that, according to Taylor, the data Peltz used was dated.
He said that Peltz was coordinating with a former P&G executive who left the company eight years ago and had lost touch with the organizational changes being made.
“I’ve listened to his ideas because I believe it’s important to listen to investors,” Taylor said of Peltz. “But in the first several meetings, he didn’t advance new ideas, and the few new ideas he did advance weren’t right for our company right now. We’ve already made many of the changes he advocates. A more focused company, we’re there. A company that has people empowered and accountable, we’re there today and we’re executing. The last thing we need right now is a reorganization.”
Taylor added that he was surprised by Peltz’s activism and the proxy fight as a whole, particularly because of the changes P&G has allegedly implemented.
“We didn’t ask for the proxy fight, but I’m absolutely committed, as is our board of directors and the people of P&G, to do what’s right for the short, mid and long term for the company. And for that reason, we’re fighting it,” he said.
While Taylor acknowledged the several-year period in which P&G’s business stalled and even lost share in some countries, he said the company responded with an overhaul that worked.
“We didn’t accept that we can’t improve. We made the changes to our portfolio. We made the changes in our organization. We’re leaner today than we were five years ago and especially 10 years ago. And we made the changes in our culture to be able to set ourselves up with a much more focused, empowered and accountable organization,” he said, echoing some of the changes Peltz called for in his 93-page proposal.
And when it came to considering Peltz, a 50-year veteran of the consumer goods space who says he doesn’t know how to spell “lose,” for P&G’s board, Taylor was not interested.
“We want the absolute best for our company, whether it’s a member of the board of directors or whether it’s our senior management. The standard is the best. And we’ve done our homework and he’s not the right person for P&G right now,” the CEO said. “Many people tell me, ‘Why not?’ ‘Why not’ is not the governance standard for our company. We want ‘Why?’ Who are the right people to bring to the company that would add value for the future?”
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Source: Investment Cnbc
P&G CEO calls Nelson Peltz's proposals 'very dangerous' in short and long term