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BlackRock and other ESG-focused investors should support his McDonald’s campaign, says Icahn

Carl Icahn urges BlackRock inc

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and other major index fund managers focused on socially conscious investing to support his proxy fight at McDonald‘s

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corp for better treatment of pregnant pigs.

The billionaire activist investor, who owns a roughly $50,000 stake in McDonald’s, nominated two directors for the fast-food chain’s board of directors as part of his campaign in February, a departure from his typical struggles for changes in financial strategy and the same.

McDonald’s stockholders will decide whether to support Mr. Icahn’s nominees or the company’s list at the annual meeting scheduled for May 26. He says that while BlackRock and others are at the forefront of the environmental, social and governance investing movement, they have subjectively chosen which principles they care about animal welfare and place too little emphasis on.

“They have tremendous power to do good or evil,” he said in an interview on Wednesday, referring to major index fund providers like BlackRock, which has around $10 trillion under management. “What surprises me is how often they don’t step in and let the boards think they’re going to protect them in a competition.”

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Mr. Icahn, who owns a small stake in McDonald’s, nominated two directors for the fast-food chain’s board of directors in February.


Photo:

Brendan Mcdermid/Reuters

It’s about how McDonald’s suppliers peddle pigs or sows. Mr. Icahn wants McDonald’s to require suppliers to stop keeping animals in small boxes — typically 7 feet long and 2 feet wide — under all circumstances. Many McDonald’s suppliers currently use so-called gestation crates for the first four to six weeks of a sow’s gestation and sometimes longer. Suppliers have said they make breeding more efficient, while Mr. Icahn and his nominees say they are inhumane.

In a letter Mr. Icahn plans to send to McDonald’s shareholders Thursday, and seen by The Wall Street Journal, he criticized McDonald’s for spending $16 million defending against its proxy competition rather than the money spend to spare pigs from the crates.

“It would have been better — much better — than spending that money defending McDonald’s directors who failed in this area,” he wrote.

McDonald’s did not immediately respond to a request for comment.

Mr. Icahn is hoping for a similar surprise to young activist Engine No. 1’s unlikely victory. 1 LLC, acquired from Exxon Mobil Corp. last year. pulled through as it won three seats on the oil giant’s board with just a fraction of the company’s stock. What sealed the deal: backing from powerful money managers like BlackRock, Vanguard Group and State Street corp

The top five money managers collectively control an average of 30% of most S&P 500 companies, a 2018 report by JPMorgan Chase & Co. found, so garnering their support is crucial.

With Exxon pushing for clean energy, Engine #1 also argued why the actions would improve stock performance. Mr Icahn has said he does not expect to make money from his campaign, although one of his nominees, Maisie Ganzler, said removing the boxes would be good for business.

“McDonald’s needs customers, and every time the US public has had a chance to vote on these issues, they’ve always voted for the animals,” she said.

Alongside Ms. Ganzler, an executive at food services company Bon Appétit Management Co., Mr. Icahn nominated Leslie Samuelrich, president of Boston-based investment fund Green Century Capital Management.

Mr. Icahn, at the behest of his daughter, Michelle Icahn Nevin, began urging McDonald’s to get rid of the boxes about a decade ago, then working on the issue at the Humane Society of the United States. McDonald’s pledged in 2012 to stop buying pork from suppliers that use the crates by 2022.

The two sides are now at odds over where that goal stands. McDonald’s says it’s lagged behind due to Covid-19 and other factors, but that by the end of 2022 it expects to source 85% to 90% of its U.S. pork volumes from “confirmed” pregnant sows not in pregnancy pregnancy boxes are housed. This means that sows can spend the first four to six weeks of their pregnancy in gestation stalls before they are confirmed.

Mr. Icahn says the original intent of the pledge was to end the use of pregnancy crates entirely.

“They simply shorten the time sows spend cooped up in gestation crates and use misleading language to hide their failed engagement,” Mr Icahn’s group said.

Ms Samuelrich said the board needs people like her and Ms Ganzler to oversee commitments to ensure they are met.

write to Cara Lombardo at cara.lombardo@wsj.com

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https://www.wsj.com/articles/blackrock-other-esg-minded-investors-should-back-his-mcdonald-s-campaign-icahn-says-11650503034?mod=rss_markets_main BlackRock and other ESG-focused investors should support his McDonald’s campaign, says Icahn

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