Bill Ackman suffers setback with rebuff from ADP investors

Billionaire activist investor Bill Ackman has lost his bid for three board seats at ADP, the US human resources and payroll outsourcing provider, dealing him another blow after a series of investment setbacks.

ADP shareholders voted on Tuesday to re-elect all 10 of its directors at its annual meeting, rejecting Mr Ackman and his other two nominees after a fractious battle between the activist and company management.

The trio received support from less than 20 per cent of ADP’s outstanding shares and less than a quarter of the shares that were voted at the meeting, the company said.

The vote marks the second time in two months that a high-profile activist has lost a proxy vote over board seats. Shareholders at Procter & Gamble also rebuffed a board seat bid by Nelson Peltz’s Trian Partners. That vote last month was much closer, with the tally going down to the wire.

Carlos Rodriguez, chief executive of ADP, said at the meeting: “Bill, despite your characterisation of the result as close, what I was told was this was an ‘ass whooping’.”

He said the battle with Mr Ackman had “sharpened our focus on the importance of insightful, strategic engagement with our investors, which, over the past few months, has given us a greater appreciation of our owners’ perspectives on our business and growth plans”.

Despite a testy battle with ADP, Mr Ackman said: “Let me first just say that we came in peace.

“When we invested in ADP, we did so because we believed that ADP was a great company with a wonderful legacy, but an uncertain future. We believed that the company had underachieved its potential, and that we could help ADP address the issues and shortcomings we had identified.”

Mr Ackman said that by his calculations he won 31 per cent of the votes of shareholders who voted either for him or director Eric Fast, who was the ADP nominee who won with the least votes.

The fight began in August when ADP disclosed that Mr Ackman’s Pershing Square Fund had taken a stake.

The ADP chief executive said he had “no disagreement with the themes” that Mr Ackman had raised, but that the company was already making large investments in technology and was focusing on data analytics and opportunities from changes to the way people were employed and paid. 

Mr Rodriguez then dubbed Mr Ackman a “spoiled brat” in a television interview and complained that the activist had sought an extension of time from the board to nominate directors because he was going on holiday and needed more time to finish his presentation.

The battle then grew even more testy as each side complained to the US Securities and Exchange Commission about the information that had been disclosed during the battle.

Mr Ackman’s proposals had received the full support of the independent proxy advisory firm Glass Lewis, but rival proxy adviser ISS recommended that ADP shareholders vote for Mr Ackman but not his other two nominees, Veronica Hagen and Paul Unruh.

That led Mr Ackman to write to ISS, alleging that ADP had disclosed non-public information to the adviser in order to curry favour. Both ISS and ADP denied the allegations.

The battle came at a time when Pershing Square had been struggling. After returning 36.9 per cent in 2014, it was down 16.2 per cent in 2015 and finished last year down 9.6 per cent.

In March this year, Mr Ackman apologised to investors over his disastrous backing of drugmaker Valeant, which lost about $4bn. The fund is flat this year.

During the proxy fight, Mr Ackman argued that ADP could boost its profit margins by improving software and services, reducing operating costs and offices, and becoming more efficient.

But Mr Rodriguez said Mr Ackman did not fully understand the company. Pershing Square holds an 8 per cent interest in ADP, with about 2 per cent in shares and the rest in derivatives. The fund has invested about 25 per cent of its money in ADP, making the company its largest investment.