Carl Icahn criticizes McDonald’s for its animal welfare practices in fiery letter to investors

“McDonald’s Board … is failing shareholders and stakeholders by presiding over animal welfare violations, supply chain failures and what I perceive to be an environmental, social and governance agenda (“ESG”) void,” he wrote. “A company’s reluctance to improve its audit policies and methods poses a serious risk to a company, its bottom line and the world around us.”

In February, McDonald’s announced that Icahn had appointed two new directors to its board, saying at the time that the move “related to a narrow issue regarding the company’s commitment to pork.” That problem is the use of gestation crates — tiny stalls where pregnant sows are held, with their movement 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 checkouts. In February of this year, he said that by the end of 2022, 85% to 90% of his American pork would come from sows that are not housed in gestation crates, and that he expects to reach a goal of 100% by the end of 2024. The company also pushed back on Icahn’s proposal, saying he had “asked for new commitments,” including sourcing exclusively “crateless” pork .

“While the company looks forward to promoting increased industry collaboration on this issue, the current pork supply in the United States would make this type of engagement impractical,” McDonald’s said.

In Thursday’s letter, Icahn said that McDonald’s (MCD) the claim that most American pork comes from sows not housed in gestation crates was a “cynical fabrication”. In a proxy statement filed with the SEC on Thursday, Icahn and his two nominees for the board, Leslie Samuelrich and Maisie Lucia Ganzler, argued that to hit those numbers, McDonald’s is “simply reducing the time sows spend locked up.” in gestation crates and uses deceptive language to hide their failed engagement.”
In his letter, Icahn said some of the reasons McDonald’s gave for not meeting its 2022 target — such as pandemic challenges in the industry and a devastating swine fever — are “poor excuses.” He pointed to high executive compensation as proof that the company can achieve its goals whenever it wants. “You can look, but you won’t find similar failings in the salaries paid to McDonald’s directors and officers,” he said.

The letter set out clear demands, including a commitment to eliminate the use of gestation crates entirely from McDonald’s supply chain by the end of next year, among others.

Making the changes requested by Icahn would increase prices for customers, the company said in a statement in response to the filings.

“McDonald’s is paying a premium today to purchase group-housed pork consistent with our 2012 commitment,” the company said, noting that moving to a system that meets the standards Icahn described Thursday “would significantly increase those costs, which that would impose a burden on all aspects of our business, our supply chain and McDonald’s customers.”

From the company’s point of view, “what Mr. Icahn is asking … is totally unachievable,” he said.

McDonald’s added that it “cares about the health and welfare of animals in our supply chain and has long led the industry with its animal welfare commitments.”

“Hypocrisy” on Wall Street

Animal welfare has become a personal cause for Icahn. In a February interview with Bloomberg, he said he was shocked by the conditions the pigs are kept in. “I am truly moved by these animals and the unnecessary suffering,” he said.
Last month, he turned his attention to Kroger (KR) on the same issue, telling the company that he planned to appoint two directors to the company’s board. “Mr. Icahn has expressed concerns regarding animal welfare and the use of gestation crates in swine production,” the company said at the time.
Billionaire Carl Icahn targets McDonald's over pig welfare

For Icahn, it’s not just about pigs. His fight is also on Wall Street’s overall commitment to sustainable practices.

“I want to shine a light on what may be the greatest hypocrisy of our time,” Icahn wrote. “A lot of companies on Wall Street and their bankers and lawyers seem to be capitalizing on ESG to generate profits without doing enough to support tangible societal progress…clearly, the ESG status quo on Wall Street needs to change. ”

He added that “if the ESG movement is to be more than a marketing concept and a fundraising tool, the huge asset managers who are among the biggest owners of McDonald’s must back their words with actions.”

McDonald’s annual meeting of shareholders is scheduled for May 26. It will release its results next week, April 28.

— Julia Horowitz and Alicia Wallace of CNN Business contributed to this report.

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