Bill Ackman has blamed a lot of people for his defeat at Automatic Data Processing (ADP), while saying the company’s description of the result is inaccurate. The Pershing Square Capital Management CEO received under 25% of the votes cast at the meeting, according to a statement from ADP, while his fellow nominees may have performed worse.

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To Ackman, the defeat was narrower and at least partly technical in nature. He believes votes withheld from incumbent director Eric Fast by shareholders voting on management’s card should be counted as effective votes for him, given that Institutional Shareholder Services (ISS) recommended this as a way to elect him to the board without risking greater upheaval. That would take Ackman to 45% of combined votes for him and Fast, just one large voting block away from victory.

These are all big counterfactuals. For one thing, assuming that all withheld votes were necessarily an endorsement of Ackman is a push regardless of the ISS verdict.

“It doesn’t translate vote-for-vote,” Bruce Goldfarb, a proxy solicitor not involved in the fight said in an interview – a view shared by other proxy solicitors who preferred not to be quoted. The withheld votes could have been a protest against ADP’s governance or operations but a deliberate non-endorsement of Ackman at the same time. Investors who really wanted to support Pershing Square had the option to split their vote by attending the meeting in person – a cumbersome option, but one within the reach of large investors. “It happens, but it’s not the norm,” Schulte Roth & Zabel Partner Ele Klein told me.

Ackman’s other big gripe is ADP’s refusal to allow him to use a universal ballot, which allows both management and dissident nominees to be put on the same card so that investors can choose freely from each side.

Few activists have engaged politically in favor of the universal ballot. Carl Icahn has called publicly for it to be mandated, Trian Partners has requested it in the past, and Pershing Square used it at Canadian Pacific Railway in 2012. But Pershing Square made a mistake in asking for it to be used at ADP only after the company had sent out its proxy materials, just as its efforts to find common ground with management before launching a proxy contest seemed hurried. A refusal was too easy in those circumstances, even if it would have created a more level playing field.

It will be interesting to see whether BlackRock, which Ackman says voted for his election, split its vote by attending the meeting or withheld on Pershing Square’s other nominees. That would give some idea of the appetite of large investors for the universal ballot.

For now, a mandatory universal ballot is “deeply buried” in the work load of the incoming Securities and Exchange Commission, according to one advocate. Others see it emerging in a few years but few think this proxy fight will affect its adoption. The lobby group activists set up in anticipation of a Clinton victory in last year’s presidential election might have played a role. But the Council for Investor Rights and Corporate Accountability has been allowed to languish quietly while activists have sucked up to President Donald Trump. Activists could have been laying the groundwork for an expansion of shareholder rights in an administration not always certain where its loyalties lie, but instead turned inward. Those who want a universal ballot have found activists to be fickle allies.

All seem to agree that Ackman is damaged by the fight. But let’s not rule him out too soon. Painful as the result is, he reportedly raised $500 million for this investment alone after years of underperformance. His misses have in the past been more frequent than his successes – just slightly smaller. The perception is that he is in a hole and still digging, but he could still find a way of blasting out.


If you want to see what real hardship for investors looks like, turn to Asia. Aristeia Capital has described a move by proxy fight target Sina to issue preferred shares to a company owned by its chairman and CEO in the immediate aftermath of its annual meeting as "a blatant corporate governance failure designed to further entrench Sina’s board and management." Just four days after the company narrowly won a proxy contest in which one dissident nominee claimed 45% of the vote, Sina issued shares that increase CEO Charles Chao's voting power to 55.5%, up from 11.1%.

The Cayman Island-incorporated company, which owns several online media ventures in China including a partial stake in the Weibo messaging platform, said future proxy contests could be “costly, time consuming and disruptive,” and “…may materially and adversely affect the company's stability and its ability to execute business strategies for shareholder value enhancement over the long term.”

Robert Lynch, an Aristeia partner who played a leading role in the campaign says the activist is "actively and thoroughly reviewing all options available to address this injustice and to protect [its] substantial investment in Sina.”

Article by Activist Insight