McDonald's responds to Icahn's call for eliminating gestation cratesMcDonald's responds to Icahn's call for eliminating gestation crates
American financier asks firm to commit to sourcing its pork from suppliers that abide by Proposition 12's standards regardless of the law's status.
April 22, 2022
McDonald's Corporation has issued a statement in response to Carl Icahn's open letter to shareholders this week. Icahn contends the McDonald's Board of Directors is failing shareholders and stakeholders by presiding over animal welfare violations, supply chain lapses and what he perceives to be a hollow environmental, social and governance agenda. In its response, McDonald's says the firm cares about the health and welfare of the animals in their supply chain and has long led the industry with its animal welfare commitments.
"Our pioneering 2012 commitment regarding group housing for pregnant sows was shaped with input from industry experts and the American Association of Swine Veterinarians. It led to a step-change in the industry, with a commonly adopted approach to group housing.
"McDonald's only sources approximately 1% of U.S. pork production and does not own any sows, or produce or package pork. Despite McDonald's progress on our commitment to source from producers who do not use gestational crates for pregnant sows, Mr. Icahn has asked for new commitments. These include requiring all of McDonald's U.S. pork suppliers to move to 'crate-free' pork and set specific timeframes for doing so.
"The definition of 'crate-free,' conjured up by the Humane Society of the United States, is so obscure that it represents an extremely niche market comprising less than 0.1% of U.S. pork production. This presents a challenge of supply. What Mr. Icahn is demanding from McDonald's and other companies is completely unfeasible. Based on current estimates, McDonald's would require at least 300-400 times the animals housed today in 'crate-free' systems to keep our supply chain running. It also presents a cost challenge. McDonald's today pays a premium to purchase group-housed pork in accordance with our 2012 commitment. Sourcing from this niche market, as Mr. Icahn, his director nominees – Maisie Ganzler and Leslie Samuelrich – and HSUS suggest, would significantly increase those costs, placing a burden on all aspects of our business, our supply chain and McDonald's customers, while lacking the broad support of industry experts.
"Mr. Icahn asserts that McDonald's customers 'want food that is sourced ethically, responsibly, and humanely.' We agree, and we take our role in providing that seriously. Value and accessibility are also important, particularly as customers confront rising costs in all aspects of daily life. Lacking broad support from industry experts, his campaign would have one certain outcome: a greater financial burden on customers.
"In addition to the financial burden this would place on customers, Mr. Icahn has also failed to address the inherent hypocrisy of his campaign. Mr. Icahn is the majority owner of Viskase, a company that produces and supplies packaging for the pork and poultry industry. Viskase has no public commitments similar to those McDonald's championed in 2012 and does not limit its business to meat producers who raise their animals in the 'crate-free' housing systems espoused by HSUS.
"As we shared in our 2022 Proxy statement, under the current board's leadership, McDonald's has led the industry not only in animal welfare but across the most pressing ESG matters. Mr. Icahn has nominated two candidates to stand for election at McDonald's 2022 Annual Meeting and has made it clear that his nomination relates to the very narrow issue of his campaign.
"In so doing, Mr. Icahn would seek to remove valuable directors with strong track records from the McDonald's Board and replace them with single-platform nominees that not only lack public company board experience, but also the expertise and qualifications to add meaningful value to the majority of issues regularly faced by the McDonald's Board. McDonald's shareholders deserve better."
In Icahn's letter, in which he stated McDonald's has attempted to miscast some of his "demands," he noted that he would like to make clear exactly what actions he is calling on McDonald's to prioritize:
Commit to eliminating gestation crates (zero days in stalls) from its supply chain by the end of 2023, which he says has failed despite having a decade to do so.
Extend the company’s gestation crate elimination goal to its global supply chain by 2024, whereas the commitment previously applied only to the United States.
Commit to sourcing its pork from suppliers that abide by Proposition 12's standards regardless of the law's status, which he says some of America's largest pork producers have already publicly stated can be implemented.
Adhere to Sustainability Accounting Standards Board disclosures in accordance with the "Meat, Poultry & Dairy Industry" standard FB-MP-410a.1, which requests disclosure of the "percentage of pork produced without the use of gestation crates" (zero days in stalls).
Add two new directors to help the board effectively oversee leadership and ensure the company's commitments are upheld.
According to a recent blog post, the Humane Society of the United States is calling on the U.S. Securities and Exchange Commission to investigate and hold McDonald's accountable for "deceiving shareholders and the public about its animal confinement policies." HSUS says it confronted McDonald's with a shareholder proposal after "suspecting that the company was omitting critical information from its statements about gestation crates." HSUS says a few lines within the 136-page proxy statement from McDonald's proved that "HSUS's suspicions were right, and that's why we are withdrawing the proposal."
HSUS also filed a complaint, asking the SEC's Division of Enforcement to investigate McDonald's earlier statements about the pigs it uses. The organizations says the company's admission about the actual treatment of the pigs raises serious concerns about its shareholder communications over the last 10 years, including very recent statements to national media outlets. HSUS says they are asking the SEC to investigate, pursuant to the securities anti-deception laws.
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