Peltz had campaigned on the idea that P&G's insular management relied too much on its traditional brands, which include household names such as Tide and Pampers, and should be courting the millennial population with small, niche products. Procter & Gamble chief executive David Taylor said the company would continue to listen to Pentz, but said the close vote was an affirmation of his strategy that emphasizes product research and a simplification of P&G's corporate structure.
"Certainly, there's a desire to see us move faster, and I take the feedback from all investors . . . but, frankly, I know talking to many investors, they support the strategy," Taylor told CNBC following the vote.
The two sides claimed to have spent a total of $60 million fighting for shareholder votes.
Peltz — whose firm Trian Fund Management owns about 1.5 percent of P&G's stock — announced last August that he was seeking a board seat on the giant, Cincinnati-based consumer goods company. And he did not appear ready to concede Tuesday.
"I threatened the hallowed halls of that boardroom," Peltz said in an interview with CNBC following the vote. He said P&G's motivation to deny him a board seat could be summed up in one word: "ego."
"There may be arrows in my back today," he said.
But his months-long effort shook up the P&G hierarchy. In fighting Peltz, the board of directors argued that the hedge fund manager would disrupt management's plans to streamline the organization, including selling off some product lines and reducing expenses by $10 billion over the next five years.
"It's at least a temporary victory for Procter & Gamble, assuming the vote is not reversed," said David Kass, a finance professor at the University of Maryland. "For the time being, it keeps Nelson Peltz off the board and permits P&G to proceed with its own plan to turn the company around."
Taylor said in the CNBC interview that Tuesday's vote was a message to him, the board and Procter & Gamble to "do the right things, do them faster and the right way."
In recent years, as the company's stock price has been lagging competitors, it sold its battery business to Berkshire Hathaway and its beauty products to Coty.
The close vote involving one of the largest, oldest and most prominent companies in America emphasized the role that corporate activists play.
"Activism is alive and well," said Thomas Lys, a professor at Kellogg School of Management at Northwestern University and former faculty director of Corporate Governance Executive Program. "I hope we see more of it. In the end, these activists are the only counterforce to the management of the board. It's the shareholders' company, not management's."
Peltz, 75, is a billionaire with a long history of corporate activism, notably involving consumer brands such as Kraft, Wendy's and PepsiCo. He may be best known for his turnaround of beverage maker Snapple, which he bought from Quaker Oats and sold less than three years later to Cadbury Schweppes for a $1 billion-plus profit. The Snapple case is a Harvard Business School case study.
"He is trying to change the way the company is run," Lys said of Peltz's boardroom battle with P&G. "In fact, the market believes he is on the right side because the stock price went down on the news that he may have lost. "
Either way, Lys said, "he's not going to go away."
The 11-member P&G board includes American Express Chairman Kenneth Chenault, retired Boeing Company chairman W. James McNerney and Hewlett-Packard Enterprise President Meg Whitman.
The 179-year-old company has a market value of more than $230 billion; it is the biggest company ever to be involved in a proxy fight. Among the biggest shareholders are BlackRock with 5.8 percent of shares and Vanguard Group with 6.6 percent.
But 40 percent of the company's shares are held by individuals, many of whom are P&G employee families and longtime shareholders in the Cincinnati area. Both sides have assiduously courted those shareholders to win their votes, which are often voted by proxy.
The voter turnout effort had the hallmarks of a major political campaign. Consultants were hired and hundreds of people tracked down every retail shareholder.
The P&G vote came a day after Trian took a seat on another iconic American company, General Electric.
Trian's ascension to the GE board comes just as that company has undergone some major changes. In recent days, GE has scrubbed its corporate air force, canceled its corporate cars for senior executives and saw several of its top executives, including the chief financial officer, leave. Former chief executive Jeffrey Immelt also left the chairmanship of the GE board two weeks ago, three months before he was due to leave.