“McDonald’s board of directors … is failing shareholders and stakeholders by presiding over animal welfare violations, supply chain gaps and what I perceive as a hollow environmental, social and governance (“ESG”) agenda” , he wrote. “An organization’s reluctance to improve policies and verification methods poses serious risk to an organization, its bottom line, and the world around us.”
In February, McDonald’s reported that Icahn had nominated two new directors for its board, saying at the time that the move “relates to a close issue related to the company’s pork commitment.” That problem is the use of gestation crates — tiny stalls used to house pregnant sows whose movement is severely restricted — in McDonald’s pork supply chain.
Icahn said he only owned 200 shares of the company, McDonald’s noted at the time.
McDonald’s first promised in 2012 to phase out the use of the crates. In February of this year, it announced that by the end of 2022, 85% to 90% of its U.S. pork will come from sows not housed in gestation crates, and that it expects to hit a 100% target by the end of 2024. The company also rejected Icahn’s proposal, saying it had “requested new commitments,” including sourcing only “crate-free” pork.
“While the company looks forward to encouraging further industry-wide collaboration on this issue, the current supply of pork in the US would make this type of engagement impossible,” McDonald’s said.
In Thursday’s letter, Icahn said McDonald’s (MCD) claim that most US pork comes from sows not housed in gestation crates is a “cynical fabrication.” In a proxy statement filed Thursday with the SEC, Icahn and his two board nominees, Leslie Samuelrich and Maisie Lucia Ganzler, argued that in order to meet those numbers, McDonald’s “simply shortens the time sows spend in gestation crates and uses misleading language to convey their failed.” In his letter, Icahn said that some of the reasons McDonald’s cited for not meeting its 2022 target — like challenges posed by the pandemic across the industry and a devastating swine fever — were “poor excuses.” He Citing the high executive compensation as proof the company can achieve its goals if it wants to.”You can look but you won’t find similar pay gaps for McDonald’s directors and officers,” he said.
The letter contained clear demands, including a pledge to completely phase out the use of pregnancy crates from McDonald’s supply chain by the end of next year.
Making the changes requested by Icahn would increase prices for customers, the company said in a statement accompanying the filings.
“McDonald’s today pays a premium for purchasing batch-raised pork in accordance with our 2012 commitment,” the company said, noting that moving to a system that meets the standards outlined by Icahn Thursday “substantially increases those costs and all aspects of our business, our supply chain and McDonald’s customers.”
From the company’s perspective, “what Mr. Icahn is asking for is…completely impracticable,” it said.
McDonald’s added that it “cares about the health and welfare of the animals in our supply chain and has long led the industry in our commitments to animal welfare.”
“Hypocrisy” on Wall Street
Animal welfare has become a personal concern for Icahn. In a February interview with Bloomberg, he said he was upset with the conditions under which pigs are kept. “I’m really emotional about these animals and the needless suffering,” he said. Last month, he turned his attention to Kroger (KR) on the same matter, telling the company that he plans to appoint two directors to the company’s board. “Mr. Icahn has raised his concerns about animal welfare and the use of gestation crates in pork production,” the company said at the time.
For Icahn, it’s not just about pigs. His fight is also about Wall Street’s overall commitment to sustainable practices.
“I want to shed some light on perhaps the greatest hypocrisy of our time,” Icahn wrote. “A large number of Wall Street firms and their bankers and lawyers appear to be capitalizing on ESG for profit without doing anywhere near enough to support tangible societal progress… the ESG status quo at the Wall Street clearly needs to change.”
He added, “If the ESG movement is to be more than a marketing concept and a vehicle for raising funds, the massive money managers who are among the largest owners of McDonald’s must walk the talk.”
McDonald’s annual stockholders’ meeting is scheduled for May 26. Next week, on April 28th, the results will be published.
– Julia Horowitz and Alicia Wallace of CNN Business contributed to this report.