Procter & Gamble Company said that it has appointed activist investor Nelson Peltz to its board of directors, despite Peltz narrowly losing his seat in the biggest corporate proxy battle ever involving a U.S. company. His appointment is effective March 1, 2018.

Nearly two billion shareholder votes had to be counted, said P&G Chairman David Taylor in an open letter to shareholders announcing the certified results of its 2017 Annual Meeting of Shareholders. “A significant number of votes were submitted through paper ballots given P&G’s large retail shareholder base, requiring a substantial part of the vote to be counted manually by IVS, the Independent Inspector of Elections,” Taylor said. “Following the review process, a final certified count has been issued by IVS.”

That final vote tally, released Dec. 15, showed that Peltz, chief executive officer of hedge fund Trian Fund Management, lost his bid for a board seat by a vote of 498,312 shares. “Because the election results were so close, and because a large number of shareholders voted for Nelson Peltz to be a director,” Taylor said, the board has engaged in “numerous discussions” with Peltz regarding a board seat.

Such discussions have included “constructive engagements to get more closely aligned on strategic choices to transform P&G and deliver better results,” Taylor added. “For example, we agree that we are not predisposed to taking on excessive leverage, or substantially reducing R&D spending, or advocating for a break-up of the company, or moving the company out of Cincinnati.”

The months-long battle with Peltz began in February 2017, when Trian Fund Management took a roughly $3.5 billion stake in the company. Then in July 2017, the hedge fund nominated Peltz to P&G’s board of directors.

Other matters

Throughout the proxy contest, the board also listened to shareholder input about the need to refresh the board’s composition. “Based on that input, a search has been conducted for a director with extensive experience in consumer products, health care, and international business,” Taylor said. As a result, the board has appointed Novartis Chief Executive Officer Joseph Jimenez as P&G director, also effective March 1, 2018.

Additionally, the board heard shareholder views about the need to strengthen executive compensation practices. “Based on that input, the board’s compensation and leadership development committee has approved modifications to its Performance Stock Program to include relative sales growth metrics and a Total Shareholder Return modifier to ensure awards reflect performance versus external competitive benchmarks,” Taylor added. “The changes will be implemented in fiscal 2018/19, with additional modifications still under review.”

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