UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
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Automatic Data Processing, Inc.
(Name of Registrant as Specified In Its Charter)
William A. Ackman
Veronica M. Hagen
V. Paul Unruh
Pershing Square Capital Management, L.P.
PS Management GP, LLC
Pershing Square, L.P.
Pershing Square II, L.P.
Pershing Square International, Ltd.
Pershing Square Holdings, Ltd.
Pershing Square VI Master, L.P.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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On October 27, 2017, Pershing Square Capital Management, L.P. and certain affiliates issued the following letter to shareholders of Automatic Data Processing, Inc., which was also posted on www.ADPascending.com:
October 27, 2017 Dear Fellow Shareholder: Pershing Square is one of the largest shareholders of ADP. We made a $2.3 billion investment in ADP because we believe it is a good business that can be substantially improved. This week, Glass Lewis and Egan Jones, two independent proxy advisory firms, recommended that shareholders vote for all three of Pershing Square’s Nominees for ADP’s Transformation, and a third proxy advisory firm, Institutional Shareholder Services, supported our views and the election of Bill Ackman to the board. A VOTE FOR GOLD IS A VOTE THAT ADP CAN DO BETTER Shareholders face an important decision in the upcoming election. The alternatives are clear: Stale perspectives S Fresh perspectives Lack business transformation and operating S A major shareholder’s voice efficiency expertise S Relevant expertise in business Committed to status quo transformation and operating efficiency Only one director has purchased stock in 13 S Directors who are ADP shareholders with years significant “skin in the game” Lowest company rankings by employees as S Recognize ADP’s current compared to competitors underperformance and commitment to Margins below competitors’ and potential strive for best-in-class performance Operating Efficiency * Labor efficiency 28% below competitors’ S Have a transformation plan to address the & Margins * Inefficient and bloated organization with no efficiency opportunity meaningful progress addressing inefficiency S Plan to increase Employer Services margins Minimal projected improvement in margins: from 19% to 35%+ by year five, driving 20% to just 21-22% in three years total ADP margins from 20% to 32% Losing market share particularly in S Will build a world-class technology Enterprise segment, with no plan to address organization and address ADP’s product competitive position deficiencies, including in Enterprise Com etitive Position * Employer Services growth of 4% in FY ‘17 S Improve Employer Services revenue & Revenue Growth and estimate of 2-3% in FY ‘18 substantially growth to 7%+, at or above industry levels trailing competitors and the industry S Drive technology leadership to unlock Recent unexplained increase in projected significant growth opportunities from big growth to 7-9% in FY ‘19-‘20 announced data and other ancillary product offerings during proxy contest Message from , , ,, * Commitment to Status Quo â– * Transformation to Fulfill ADP’s Potential Shareholders ADP has refused to respond to shareholder questions about its margins, CDK’s outperformance, weak labor productivity, competitive challenges, and the overstatement of its total shareholder returns, and has consistently responded by saying that it can’t do any better. This is unacceptable. ADP can do better. ADP can be greatly improved through greater efficiency and by becoming a technology leader in the HCM industry. y Please vote FOR the election of all nominees
© Please Vote the Proxy Card Today ADP IS UNDERPERFORMING ITS POTENTIAL ADP’s total shareholder return significantly trails its direct competitors’. ADP participates in an attractive industry with robust secular growth, which has helped drive ADP’s shareholder returns over time. Notwithstanding this favorable industry backdrop, ADP has significantly underperformed its competitors and its potential. During this proxy contest, ADP has attempted to hide this underperformance by overstating its total shareholder returns and unfairly comparing its performance to largely unrelated companies. ADP’s underperformance can be seen clearly when evaluating its financial performance relative to competitors, but is also evident when looking at non-financial indicators which will drive ADP’s performance for decades to come. “I look at the non-financial indicators to judge the health of a business. Look at the employees, look at their engagement..Look at the customers...What’s your market share? How are all of those things going? And you better pay a lot of attention to where you are in on those metrics...you need to move with a lot of urgency once those things do start to deteriorate.” - Veronica “Ronee” Hagen, Independent Director Nominee for ADP’s Transformation ADP is last amongst its competitors in nearly every employee satisfaction metric according to Glassdoor, a website on which employees rate their employers: Approve of Senior Recommend Positive Business Overall Rating Approval of CEO Management Culture & Values to a Friend Outlook Source: Glassdoor rankings. Competitors include Paychex, Workday, Ultimate Software, Ceridian, Kronos, Intuit, Cornerstone OnDemand, Paycom, and Paylocity. Weak employee morale and dissatisfaction with senior leadership must be addressed as ADP’s long-term success depends on the company’s thousands of dedicated and hard-working associates and their engagement. ADP’s culture is insular and bureaucratic. Senior management has an average tenure at ADP of 20 years and effectively no outside experience or perspectives. ADP’s current culture, operating inefficiency, and technology deficiencies are responsible for the company’s suboptimal performance and are key drivers of ADP’s poor employee satisfaction. ADP should not be content with the status quo and its continued underperformance versus competitors, yet it has announced a plan which calls for no material improvement. OUR PLAN TO HELP ADP REALIZE ITS FULL POTENTIAL If ADP’s shareholders vote to elect The Nominees for ADP’s Transformation, our Nominees will work collaboratively with the remaining incumbent directors to help ADP realize its full potential. “I would recommend treating [the transformation] as a project...that reports to the CEO and the board with close board oversight; engaging a consultant to help in the identification of the various work streams and the tasks that are necessary and prioritizing them; and then engage the organization, across-the-board, in their piece of the project to actually get them going, focused and execute.” - V. Paul Unruh, Independent Director Nominee for ADP’s Transformation Our proposed operational transformation of ADP is best understood by analogy to the business transformation of CDK, which was launched by the new CDK board shortly after it was spun off by ADP. The CDK transformation has delivered meaningful and consistently positive results—notably, a more than 60% increase in operating margins in three years without additional risk. ADP’s characterization of our approach as “aggressive” and “risky” is a common activist defense tactic. ADP’s vague and alarming assertions are not, however, supported by the facts. ADP’s status quo—with poor employee engagement, loss of market share, and operating inefficiency—is risky. Improving ADP and fulfilling its long-term potential is not. ADPascending.com
Q Please Vote the Proxy Card Today THE NOMINEES FOR ADP’S TRANSFORMATION ARE THE DIRECTORS ADP NEEDS To execute on a transformation plan and help ADP fulfill its potential, ADP’s board needs expertise in both (i) business transformation and operating efficiency, and (ii) technology and the Human Capital Management (“HCM”) industry. ADP’s board already has relevant technology and HCM experience, and we are not seeking to replace any directors with technology or HCM industry experience. Instead we are seeking to replace ADP’s longest-tenured directors who have presided over ADP for years as it has underachieved its potential. John Paul Jones Board Chairman William A. Ackman CEO of Pershing Square Capital Management x Director since 2005 (12 years) v’ Investor in HCM industry for over a decade x Industrial CEO; no technology or HCM experience v’ Investor and director in successful business x Former CEO of Air Products; underperformed 1 transformations similar to ADP ^competition during his tenure ^ One of the largest owners of ADP, with long- x Has overseen ADP’s HCM underperformance term outlook x Divested ADP assets which doubled margins v’ Supported by all three proxy advisors x Not supported by two proxy advisors Glenn Hubbard Chair, Nominating & Governance Committee Veronica Hagen Former CEO, Polymer Group x Director since 2004 (13 years) I I S Extensive global executive leadership x Business school dean with no operating experience in competitive industries with ^experience; no technology or HCM experience focus on operational efficiency x Has overseen ADP’s HCM underperformance S Personally invested over $300,000 in ADP x Divested ADP assets which doubled margins stock, more than any current director x Not supported by two proxy advisors S Supported by two proxy advisors Eric Fast Chair, Audit Committee V. Paul Unruh Former Vice Chairman, Bechtel x Director since 2007 (10 years) S Member of Symantec board subcommittee x Industrial CEO; no technology or HCM experience which oversaw its business transformation, x Audit chair as ADP has reduced disclosures delivering significant savings above plan ^x Has overseen ADP’s HCM underperformance S Personally invested over $300,000 in ADP x Divested ADP assets which doubled margins stock, more than any current director x Not supported by any of the three proxy advisors S Supported by two proxy advisors PERSHING SQUARE HAS EXTENSIVE EXPERIENCE WITH SUCCESSFUL TRANSFORMATIONS Pershing Square has extensive experience identifying and helping to drive operational transformations as an engaged shareholder with Board representation. Railroad Margins % TSR % Industrial Gas Margins % TSR % Animal Health Margins % TSR % CP 19% 39% 327% PRODUCTS15% -» 23% 97% ZQetis 25% ^ 35% 58% In each of these investments, we identified a good business with substantial underperformance relative to its competitors and its potential, and we worked closely with the board and management teams of each company to deliver substantial improvements in profitability, growth, and long-term value creation, which were above our original conservative estimates. ELECTING THE NOMINEES FOR ADP’S TRANSFORMATION WILL REFRESH ADP’S BOARD If elected, we will comprehensively assess ADP’s operational efficiency, corporate culture, product and service offerings, and competitive position, and work with the board and management to execute a detailed and comprehensive plan for improvement. By doing so, we believe ADP can reach its full potential and greatly enhance value for all stakeholders. The election of the Nominees for ADP’s Transformation would add to the Board: •/ Fresh perspectives •/ A major shareholder’s voice •/ Relevant expertise in business transformation and operating efficiency S Directors who are ADP shareholders with significant “skin in the game” These are precisely the perspectives and experience ADP is missing. ADP’s long-standing directors, including the three we are seeking to replace, chair the board and all board committees. Replacing these directors would allow the reconstituted board to elevate some of the incumbent, more recent additions to the board to leadership positions where they can help drive ADP’s needed transformation. ADPascending.com
© Please Vote the Proxy Card Today ALL THREE INDEPENDENT PROXY ADVISORY FIRMS SUPPORT OUR VIEWS “[R]ather than supporting the status quo, we believe investors have an opportunity to convey their discontent with the board’s continuation of a potentially sub-optimal business plan, and to encourage fresh perspectives, analysis and discussion in the boardroom of the best path forward for ADP, through the election of qualified director candidates, including a well-established shareholder representative, supported by what we believe to be convincing, well-framed arguments outlining the substantial opportunity for ADP and its shareholders to realize superior returns and value in the long term. Based on these factors and the considerations discussed above, we believe shareholders would be best served by supporting the election of all three of Pershing Square’s nominees as well as the re-election of the seven uncontested incumbent nominees. Accordingly, we recommend that shareholders vote FOR all nominees on the GOLD proxy card.” - Glass Lewis (October 23, 2017) VOTE GOLD TO HELP ADP ACHIEVE ITS FULL POTENTIAL At ADP’s annual meeting on November 7, 2017, shareholders will have the opportunity to vote for transformational change at ADP by electing three highly-qualified and experienced independent director nominees. With a strong mandate from shareholders, we look forward to working constructively with members of management and the newly reconstituted board for the benefit of all ADP shareholders. By voting FOR The Nominees for ADP’s Transformation on the GOLD Proxy Card or GOLD Voting Instruction Form, you can help drive this needed improvement. Sincerely, William A. Ackman 9 I I n ^ Please vote FOR — ** TIME is SHORT: the election Of all YOU CAN VOTE If sent by mail, your vote . „ must be received no later than nominees on the by internet 11:59 pm (Eastern) on GC L proxy card today or telephone Monday, November 6, 2017 Shareholders are urged NOT to use any white proxy card received from ADP and are strongly encouraged to discard the white proxy card. If you previously voted ADP’s white proxy card you may change your vote by voting a later-dated GOLD Proxy Card or GOLD Voting Instruction Form. Only your last-dated proxy card will count. â–¡ EF * Voia GOLD Proxy JBf Vrjca/d WJ-JJ’fi P/aJy. I_© KH Additional information regarding the proxy contest, as well as Pershing Square’s materials for ADP shareholders is available atwww.ADPascending.com. For questions about how to vote your shares, please contact our proxy solicitor, D.F. King & Co., Inc., at (866) 342-1635. ADPascending.com