Last month we reported on Pershing Square’s campaign to obtain one or more board seats at ADP. On November 7th it was announced that all of the current 10 directors had been reelected. Despite not getting a board seat, Pershing Square intends to remain a long term ADP shareholder and we believe that the proxy contest has been a positive for ADP shareholders, of which Pershing Square is the largest, as management can be held accountable for meeting the ambitious milestones they put out publicly during the campaign.
Bill Ackman discusses the outcome in this video and wrote an email to Pershing Square shareholders that you can read below.
Dear Pershing Square Investor,
Proxy contests are tools that activist investors use to effect change at public companies. Over the last 90 days, we have had the opportunity to inform ADP shareholders, the board, and management about the potential opportunities that exist to create enormous shareholder value. Compared with the ADP incumbent director with the fewest votes, Mr. Eric Fast, we received 31% of the FOR votes – thus nearly a third of shareholders supported us. This 31% does not include shareholders who withheld against Mr. Fast on the recommendation of ISS as its suggested mechanism for facilitating my election to the board. Including these votes, 45% of shareholders either directly supported my candidacy to the board or withheld on Mr. Fast to facilitate my election to the Board. Just 55% of shares voted supported the full board slate.
We received substantial minority support no matter how the votes are counted. Putting aside the percentage outcome, the message we and other shareholders delivered was clear. Furthermore, we believe that the substantial majority of shareholders who did not support us were convinced that the message we delivered was heard “loud and clear” by the company. These shareholders were willing to give the board and management another year to demonstrate progress on the opportunities that we had identified.
In order to win the contest, ADP’s management and board pivoted their message over the last few weeks from “just say no” to “we agree and we are already doing it.” The company made commitments to shareholders about margin improvement, accelerated revenue growth, and a new product launch to address market share losses in its Enterprise segment.
If ADP announces a credible plan and delivers, we and other shareholders will be happy. If management fails to deliver, we will be focused on next year’s annual meeting. The dynamic we have created by the proxy contest sets up a favorable risk-reward ratio for ADP shareholders over the next 12 months. It is a quintessential example of how shareholder activism is supposed to work.
I encourage you to watch the following two videos. The first is a Bloomberg interview of Lisa Ellis from Bernstein, one of the most highly regarded ADP analysts, on the proxy contest and its impact on the company and the stock price. The second is an interview I gave a few hours after the shareholder meeting.
Please call me or the IR team if you have further questions.