McDonald’s ESG Practices Called Into Question

In February 2022, Icahn launches a proxy fight against McDonald’s, specifically citing the company’s alleged mistreatment of pigs when he lobbied for two new Board members who Icahn felt would strengthen McDonald’s ESG practices focused on animal welfare and sustainability. In April, Icahn directly targeted McDonald’s ESG practices when he stated that the company’s ESG promises were “hollow” when compared to corporate practices. Icahn focused attention on the use of gestational crates for pigs that were part of the McDonald’s supply chain, which he stated amounted to torture since allegations surfaced that the pigs were not able to move at all for six weeks due to the crate conditions.

In response, McDonald’s stood by its ESG related practices and commitments to fulfilling its ESG goals, while at the same time noting that Icahn’s call for having all pigs in the supply chain was unrealistic and virtually impossible to achieve.

Icahn’s two nominees were unsuccessful in obtaining Board seats as a result of the elections.

ESG Lessons For All Companies

McDonald’s is not the first, nor will it be the last, company to face criticism during Board elections over ESG practices. With the media, SEC, and citizens alike focused so much on ESG related issues, companies must understand that there are risks in overstating ESG related efforts, goals, and metrics. Similarly, having Board members of others in leadership positions who are not properly equipped to understand or make educated decisions on ESG related issues will draw undesired attention on companies of all sizes. Any statements, disclosures, prospectus materials, or even marketing materials must be scrutinized closely for accuracy, while sound and reasonable marketing statements that touch on ESG factors must be the standard for companies to follow.