Activist investor Bill Ackman, the CEO of $10 billion Pershing Square Capital Management, lost his three-month long proxy fight with Automatic Data Processing (ADP) on Tuesday.
Ackman, whose fund holds an 8.3% stake in ADP, had been waging a proxy contest against ADP management to get three new directors on the board, including himself. In his lengthy analysis, Ackman had characterized ADP as “one of the least efficient big companies and one that’s “vastly underperforming its potential.”
ADP had pushed back on Ackman and Pershing Square’s ideas. The company’s management had characterized the hedge fund manager’s views as “extreme and ever-changing” and said that they “would put the business at risk.” In an interview with CNBC early on in the fight, ADP CEO Carlos Rodriguez went as far as to call Ackman a “spoiled brat.”
“We were greatly disadvantaged”
At the company’s annual meeting on Tuesday, shareholders decided to re-elect all ten of ADP’s directors to the board. Pershing Square’s nominees garnered less than 20% of the votes from ADP’s outstanding shares and less than 25% of the votes at the meeting.
“We were greatly disadvantaged in this contest because ADP did not permit the use of a universal proxy card where each shareholder could choose which directors it wanted to represent them on one proxy card,” Ackman wrote in a statement shortly after.
Shareholders could vote a gold card to support Pershing Square or a white card to support ADP.
“As a result, while we received the support of all the proxy advisory firms, one chose to ‘facilitate’ my election by recommending a withhold vote for one director on the management proxy card. It did so in order to decrease the likelihood that our two other nominees would get elected. This likely cost us the election. Had there been a universal card, this firm would have simply recommended a vote for me and I would likely have been elected,” Ackman wrote. “It is incumbent upon all investors to insist that companies use a universal proxy card in each shareholder election to make sure that shareholders can easily select the directors they wish to represent them.”
This isn’t over
Ackman had previously told Yahoo Finance that even if the contest didn’t go in Pershing Square’s favor that they would remain a long-term shareholder.
“Over the last three months, we have helped ADP shareholders understand what the company’s associates already know very well. ADP needs to improve its technology, its enterprise product offerings, and its culture,” Ackman wrote on Tuesday. “A 90-day proxy contest is a wake up call for every management team, and our large investment of time and money in this contest has already benefited all ADP stakeholders not only because billions of dollars of shareholder value have been created.”
Shares of ADP are up about 4.5% since it was first reported in late July that Ackman was building a stake. Shares are down about 1.2% over the last three months.
“Our goal in this proxy contest was to help make ADP the best company it can be so its future will be as bright or brighter than its past,” Ackman wrote. “This is no small undertaking in light of the company’s illustrious history. Unfortunately, all of us have seen far too many great and dominant companies — think Kodak, Polaroid, IBM to name a few — disappear or fade away because of complacency, an unwillingness to take new competitors, seriously, resistance to change, and deteriorating cultures. As a result of this proxy contest, we believe these risks for ADP are meaningfully lower than they were 90 days ago.”
Ackman didn’t rule out a future proxy contest should management not deliver on its commitments.
“Here’s to hoping that the company delivers and we don’t need to run for election next year. Nothing could make me happier than seeing Carlos and the Board succeed in meeting their commitments. We intend to be a supportive shareholder who is not shy about sharing our ideas with the company. The bottom line is: we will do everything we can to help.”
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.