P&G proxy fight over, but Nelson Peltz will haunt the Cincinnati giant

Procter & Gamble can't breathe easy.

Despite fending off activist investor Nelson Peltz's bid for a board seat, the consumer products giant will remain under intense pressure to complete its turnaround.

To ward off future challenges – possibly a future one by Peltz – P&G may still step up cost-cutting and job reductions even as CEO David Taylor pledged to stay the course.

The company will also have to avoid poor financial results that could shake investors' confidence.

Adding pressure: P&G's swooning shares that had been bid up 10 percent since this spring as a result of Peltz's involvement dropped immediately upon Peltz had come up short  – signalling the market doesn't think maker of Tide and Pampers is worth as much without Peltz. By day's end the stock closed at $91.62, down 0.5 percent, in heavy trading.

Taylor pledged to be "constructively dissatisfied" with P&G's turnaround until the company returned to generating financials amid the top third of peer companies. He also promised to continue listening to Peltz as a major shareholder.

"We're in an absolutely better place to deliver superior results," Taylor said following the vote at P&G's annual meeting. "If we're doing a good job, we'll have investor support."

Taylor brushed aside any suggestion the company might accelerate or alter its ongoing restructuring, which is supposed to deliver $10 billion worth of cost cuts by 2021.

'Doing the best you can isn't going to cut it' 

Peltz said even if his loss is confirmed, shareholders have voiced their frustration and company leaders are on notice.

"Doing the best you can isn't going to cut it," Peltz said afterward.

Bernstein analyst Ali Dibadj told investors in a Tuesday note P&G shouldn't congratulate itself too much.

"Given it was likely a close contest... we certainly hope the message to P&G was clear that the company can and should do better than it has done over the past several years—and investors expect it to do so," Dibadj wrote. "Now is the time for management to deliver on its promises."

Neither side offered much detail on their support, but Taylor said P&G received "strong support" from smaller "retail" investors that own an estimated 40 percent of shares.

Local shareholders leaving the meeting expressed a mix of reactions.

Jim Burger, of Clermont County, said he voted for P&G's existing board and wasn't surprised the company prevailed.

“The vote went as expected,” Burger said, but added pressure by Peltz could push the company to start new things.

But William James of Symmes Township, who retired after 36 years as a P&G researcher, said he thought the company has lost its ability to spawn new brands.

“We seem to have forsaken that part of the innovation process,” James said.

For Cincinnati employees, huge stakes

To win, Peltz needed a groundswell of support from dissatisfied investors. His firm, Trian Fund Management, owns 1.5 percent of P&G, which is worth about $3.5 billion. Peltz and Trian are veterans of other proxy fights at Heinz and DuPont.

Peltz blamed bruised "egos" for thwarting his bid for a board seat.

"They did not want me – I threatened the hallowed halls of that boardroom," Peltz said, adding P&G should still give him the seat given the close vote.

Taylor said P&G won't add Peltz to the board if a majority of shareholders rejected him.

Tuesday's vote marked the end to the largest-ever proxy fight in corporate history, according to activist tracker FactSet. Peltz wanted the board seat to have greater say over P&G executives and strategy. P&G leaders said his proposals were outdated and would be a distraction to a turnaround that is picking up speed.

Greater Cincinnati's 10,000 local employees at P&G are counting on a rebound. Many of their positions were in Peltz's crosshairs had he won a seat. The company employs 95,000 worldwide.

Several companies targeted by Peltz have cuts thousands of jobs through business unit sales or layoffs.

P&G investor Nelson Peltz's deals have cost 100K jobs at other companies

P&G has already cut 34,000 jobs or 26 percent of its employees since 2012 through buyouts and brand sales. The company has also sold or shuttered 17 plants in North America with plans to close another outside of Toronto in 2020 or 2021.

So far, P&G says it is saving $2.9 billion each year as a result of its cost-cutting, but back-of-the-envelope calculations suggest the company needs to generate another $1 billion in profits to push the stock price north of $100 a share.

How to get P&G's stock above $100 per share

In 2015, Peltz and his Trian Fund Management lost their bid for board seats at chemical giant DuPont, but still exerted outsize influence. DuPont warded off the activist investor, then delivered disappointing financials to Wall Street and the CEO resigned.

Peltz bought even more shares and Trian ended up working closely with the next DuPont CEO and played a role in the company's decision to merge with rival Dow. Merged DowDuPont confirmed plans this fall to split into three companies – a Peltz-blessed plan.

The P&G vote came a day after another company with a large Cincinnati footprint, General Electric, agreed to give Trian a seat on its board. GE announced Monday the addition of Trian co-founder Ed Garden to the board. The move came a week after the resignation of longtime chairman Jeff Immelt, a Finneytown native and former P&G employee.

In the latest of one of his famous "white papers," Peltz advocated cutting P&G five global business units to three and switching to a holding company structure that would allow those divisions to operate mostly autonomously. An unspecified number of corporate jobs would have been assigned to business units, while others presumeably would have been eliminated.

Peltz decried P&G's excessive layers of management and bureaucracy and advocated a flatter organization. He also advocated the company beef up acquisitions to help grow sales.

In comments before the voting results were announced, Peltz urged the boardroom to adopt an "ownership mentality," which he pledged to embody.

More:P&G proxy vote this week: Huge stakes for Cincinnati