Carl Ichahn
Adam Jefferies | CNBC
Carl Icahn is extending his animal welfare campaign to the country’s largest supermarket chain, Kroger, after the famous activist investor initially targeted McDonald’s.
Icahn has presented a plan to nominate two candidates for Kroger’s board of directors, the Cincinnati-based company said in a press release Tuesday.
Kroger said he first heard about Icahn on Friday. The grocer said during the discussion the billionaire investor “raised its concerns about animal welfare and the use of gestation crates in pork production.”
In a letter to Kroger CEO Rodney McMullen, Icahn also targeted what he called the “outrageous pay gap” between McMullen and other employees at the company.
“The pay gap between the CEO and the average worker at Kroger is irresponsible,” Icahn wrote in the letter, seen by CNBC. “Our candidates will take seriously our concerns about the deplorable suffering of animals and these pay gaps (and other governance issues) at Kroger, and add appropriate oversight.”
Kroger’s announcement on Tuesday comes just over a month after Icahn started a proxy fight with McDonald’s focused on pig treatment. In an interview last Tuesday, Icahn addressed his involvement with the fast-food giant.
“I’m not doing this to make money,” Icahn told CNBC’s Scott Wapner on Closing Bell: Overtime.
Instead, Icahn described his efforts as a response to his feelings about animal rights. “Emotionally, when you read about what they are doing to these animals, the needless torture and cruelty, it really bothers me. Anytime I can do something about it, I try,” Icahn said.
Kroger said it will review Icahn’s proposed board nominees Alexis C. Fox and Margarita Palau-Hernandez as part of its standard governance guidelines. The company also addressed Icahn’s animal treatment issues.
“While Kroger is not directly involved in the raising or processing of animals, we are committed to protecting the welfare of animals in our supply chain,” the press release reads. “Kroger has an established responsible sourcing framework to clearly define our policies, requirements and practices, including our Animal Welfare Policy, which expresses our expectation that all suppliers will be away from gestation crates by 2025.”
McDonald’s has also defended its animal rights policy in the face of Icahn’s campaign. The company said last month that it expects to source between 85% and 90% of its U.S. pork volumes by the end of the year from sows not living in gestation crates during their gestation. McDonald’s expects that percentage to increase to 100% by the end of 2024.
Icahn’s stake in Kroger is small, as is his position at McDonald’s. Icahn told Kroger that he owned 100 shares of the company, according to a person familiar with the matter. According to FactSet, the grocer has about 746.8 million fully diluted shares outstanding.
Kroger shares closed down 1% at $56.39 on Tuesday. The stock is up about 25% year to date, taking its market value to $41.46 billion.
In his letter to McMullen, Icahn said his goal was not to profit from this proxy campaign, but to make a difference in the “blatant injustices” at Kroger. Icahn criticized the company’s board for what he described as a lack of oversight of supply chain policies and compensation. McMullen is chairman of the board and has been CEO since 2014.
Icahn notably blasted McMullen’s 2020 raise, while the company scrapped a $2-an-hour raise for store and warehouse workers that it had offered for a few months in the early days of the Covid pandemic.
“What happened at Kroger with the issues of animal welfare and employee wages is an affront to the basic elements of our society – decency and dignity,” Icahn wrote. “Your board has created an unnecessary situation and put your company at risk by signing off on unethical policies and breaking promises made to frontline workers during the pandemic.”
Kroger defended his employee compensation record. A spokesman told CNBC the grocer was “investing in wages more than ever before, both before and during the Covid pandemic.”
“Kroger has invested an additional $1.2 billion in employee benefits and training over the past four years,” the spokesman said. “This has increased our national average hourly wage from $13.66 to nearly $17, an increase of more than $3 per hour, or a 25% increase. When benefits like health care and pensions are factored in, our average hourly rate is now over $22.”
— CNBC’s Scott Wapner contributed to this report.