ADP CEO on proxy battle: 'It's really about growing the top line'

Nicole Sinclair
Markets Correspondent

Hedge fund manager Bill Ackman’s proxy fight against the largest payroll processor in the world, Automatic Data Processing (ADP), has challenged the company to answer criticisms about its operational performance and particularly inflated costs.

ADP CEO Carlos Rodriguez told Yahoo Finance that the battle has focused a lot of talk on cost cutting when it should be about growing the top line.

“It’s really about growing the top line. The easiest way for a company to improve its margins and make itself stronger is to grow,” he said. “That’s unfortunately not a topic that’s come up a lot in these discussions — it’s all been about cost cutting and all about just margins per se. We believe the path to success for the company in terms of improving its margins is actually through topline growth, which is why we have this focus on innovation and on technology.”

It’s not apples to apples

ADP’s margins stand significantly below its closest peer, Paychex (PAYX), but Rodriguez emphasized it’s not an apples-to-apples comparison.

“We are unique in the sense that we span all the way from small companies to very large companies and we also span the entire globe, and we really don’t have any competitor that is an easy comparison,” he said. “Paychex, for example, competes with us in the small and midsize market. They don’t compete with us in the enterprise space, and they don’t compete outside the US. Those markets have structurally different margins.

“We feel very comfortable about how we compare against Paychex in that particular segment, and we also feel comfortable about what our margins are in the mid-market and also in the enterprise space and global market.”

ADP CEO Carlos Rodriguez discusses the company’s proxy battle with activist Bill Ackman.

Yet, with a shareholder vote coming up on November 7, the proxy contest has indeed taken up a lot of attention from the management team.

“It’s fair to say it’s a distraction. A proxy contest is very distracting to the management team,” Rodriguez said.

Nicole Sinclair is markets correspondent at Yahoo Finance

For more on Yahoo Finance’s interview with ADP’s CEO, please see:
ADP CEO: Bill Ackman is a few years late with his ideas for us

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