McDonald’s could soon find itself in a proxy fight against one of the world’s most famous activist investors, all because of the treatment of pigs.
Carl Icahn, who made his fame in part for taking control of Trans World Airlines and then stripping it for parts, this week told Bloomberg TV that he is “90% there” in preparing a slate of nominees for the burger giant’s board. The reason is the company’s apparent willingness to buy pork from suppliers that use gestation crates.
Icahn is not much of a shareholder in the Chicago-based chain—he only owns about 100 shares, or $25,200 worth of the stock, based on today’s trading price. Your parents probably own more McDonald’s stock than that. “I don’t own the stock to make a profit,” he said.
Icahn said his complaints about McDonald’s date back a decade. He said he contacted McDonald’s about its purchase of supplies from companies that use gestation crates. The Humane Society—for which his daughter works—has long pushed the food industry to stop using the crates, enclosures that keep sows as they produce more pigs.
The pork industry, however, argues that the crates are more humane than other alternatives and that it also keeps down the price of pork.
Icahn said McDonald’s agreed to phase out the purchase of pork from suppliers that use such crates within a decade. He said the company has broken that promise.
“They did a little something but never delivered,” Icahn said. “I was really teed off.”
As such, he is ready to take the matter directly to shareholders through a proxy fight. Icahn said he will nominate a slate of directors to the McDonald’s board. “We are probably 90% there for putting up a slate,” he said. “We’re not going to fool around with them anymore.”
Icahn has made numerous efforts to take over companies and gain seats on corporate boards and says that will be his primary job going forward. But he also admitted to a soft spot for animals and their treatment and appears willing to push the world’s biggest restaurant chain on this specific issue.
It is not an insignificant issue. McDonald’s is a massive buyer of pork for its breakfast sandwiches and has a major influence on how animals are treated. Its move years ago on cage-free eggs helped push the industry in that direction. Its vow to buy antibiotic-free chicken also proved to be a major influence on the poultry industry. There’s a reason advocates target McDonald’s on topics such as this.
Yet it’s difficult to imagine a proxy fight over gestation crates getting much traction from investors, who tend to concern themselves mostly with stock price and shareholder value. Though McDonald's stock price is down 6% this year, it is up 19% over the past year. Its overall performance has been strong in recent years despite numerous challenges.
And it’s not as if McDonald’s hasn’t faced threats to its board of late. Last year, shareholders of the burger giant re-elected Chairman Enrique Hernandez and Director Richard Lenny over the severance payment initially given to fired CEO Steve Easterbrook.
Icahn is not a pushover. He has fought dozens of proxy fights over the decades, with companies ranging from Blockbuster to Trans World Airlines. McDonald’s is probably not relishing the idea of a fight for board seats with him, regardless of the topic, and especially given the burger giant’s numerous critics and opponents on a wide range of issues. Proxy fights are also not cheap.
Ultimately, we’d guess the company and the investor reach some sort of settlement. But it would be a notable event if McDonald’s ends up fending off an activist investor over pigs.