McDonald's shareholders to vote on proxy fight with Carl Icahn over animal welfare practices

1 month ago

Signage extracurricular a McDonald's Corp. accelerated nutrient edifice successful Louisville, Kentucky, U.S., connected Friday, Oct. 22, 2021.

Luke Sharrett | Bloomberg | Getty Images

McDonald's shareholders gathering connected Thursday greeting volition people the climax of a proxy combat waged by activistic capitalist Carl Icahn, who is pushing for 2 seats connected the fast-food giant's committee amid a conflict implicit its carnal payment practices.

Tallies of aboriginal votes amusement McDonald's volition apt triumph, the Wall Street Journal reported Tuesday. Shareholders tin support voting until the gathering concludes, but radical acquainted with the substance told the paper those ballots are improbable to alteration the result.

Icahn has publically criticized McDonald's for failing to conscionable its archetypal deadline for eliminating gestation crates for large pigs, a signifier carnal rights activists accidental is cruel. He has besides argued that the institution was expected to prohibition the usage of crates wholly but has since changed the scope of its commitment.

For its part, the Chicago-based institution has blamed the Covid-19 pandemic and African swine fever outbreaks for pushing backmost its archetypal deadline of 2022 acceptable a decennary ago. By the extremity of this year, McDonald's present expects 85% to 90% of its U.S. pork proviso to travel from pigs that aren't kept successful gestation crates if they're confirmed to beryllium pregnant. McDonald's has besides said that wholly eliminating the usage of the crates would rise its costs and effect successful customers paying more.

In his propulsion connected the attraction of pigs, Icahn has besides taken swipes astatine McDonald's broader commitments to tackle environmental, societal and firm governance issues.

"We judge determination is simply a transportation betwixt carnal payment issues and inadequate governance, and therefore, different related ESG risks that the Company is not adequately attending to," helium wrote successful his missive to chap McDonald's shareholders.

Icahn nominated Leslie Samuelrich, a sustainability-focused investor, and Maisie Ganzler, an enforcement astatine Bon Appétit Management, to regenerate existing committee members Sheila Penrose and Richard Lenny. In total, McDonald's has 12 seats connected its board.

"Two seats connected a ample committee similar McDonald's is not huge, but I deliberation it's the connection that it would nonstop to others successful the manufacture that they request to bash much to marque definite their committee has practice from experts successful this area, alternatively than conscionable giving idiosyncratic a rubric that oversees ESG," Barclays expert Jeffrey Bernstein said.

Because of McDonald's size and the monolithic volumes of ingredients it uses, changes to the company's proviso concatenation thin to person a ripple effect passim the industry. McDonald's says its McRib sandwiches and the bacon for its burgers and meal sandwiches relationship for astir 1% of U.S. pork supply.

Icahn is waging a akin proxy combat astatine Kroger, the largest U.S. supermarket concatenation relation successful the U.S. Kroger's yearly gathering is scheduled for June 23.

Securing votes

Icahn lone owns astir 200 McDonald's shares, a comparatively tiny involvement that doesn't springiness him overmuch sway successful voting.

"Two 100 shares is truthful acold distant from having immoderate power connected a company," said Bruce Kogut, a prof of firm governance and morals astatine Columbia Business School. "My conjecture is that it's astir publicity, and helium present cares astir a sustainable situation oregon ESG targeting, and he's announcing himself arsenic an activistic successful that space."

In lobbying for much votes, Icahn called retired ample Wall Street firms for "hypocrisy" and said they're capitalizing connected ESG investing for the profits without supporting "tangible societal progress." McDonald's apical 3 shareholders are The Vanguard Group, the plus absorption limb of State Street, and BlackRock, according to FactSet.

Icahn has besides fallen abbreviated of winning implicit the apical 2 proxy advisory firms, Institutional Shareholder Services and Glass Lewis, which marque recommendations to thousands of funds connected however to ballot successful shareholder meetings.

ISS lone offered "cautionary support" to Icahn's nominees, saying that shareholders should see whether the existent committee is focused capable connected ESG issues. But the steadfast noted the proxy combat is notable due to the fact that Icahn has focused it connected issues specified arsenic carnal welfare, macromolecule diversification and wage gap, alternatively than looking astatine operational issues.

"It whitethorn good beryllium remembered arsenic the archetypal existent 'ESG contest,'" ISS said.

Glass Lewis, by contrast, advised against voting for the caller committee members. It said that Icahn's propulsion to amended carnal payment conditions is simply a "worthy and noble," but that it takes a "simplistic" presumption of the issue. And it noted the efforts don't springiness substantive respect to the company's financials.

The Humane Society of the United States has enactment distant a shareholder connection echoing Icahn's criticisms, asking the institution to corroborate that it volition scope its erstwhile extremity of eliminating the confinement of gestating pigs by 2022. If the institution can't scope that target, it's requesting much disclosure astir its pork proviso chain. Icahn has teamed up with the enactment successful the past, and his daughter, Michelle Icahn Nevin, utilized to enactment with the group.

Such shareholder proposals are nonbinding but tin nonstop a connection to firm boards astir nationalist enactment for institution practices. McDonald's is facing six different shareholder proposals addressing issues including plastics use, antibiotics and lobbying activities.