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Icahn’s Board Fight at McDonald’s Pivots on Pigs in Tight Crates

McDonald’s, which has more than 14,200 domestic restaurants, has been streamlining its menu and offering more customizable options, aiming to compete with fast-casual chains like Chipotle Mexican Grill Inc.

(Bloomberg) —

With Carl Icahn teaming up with the Humane Society of the United States, McDonald’s Corp. is now facing the most high-profile attack on its animal-welfare policies to date.

Over the weekend, the activist investor proposed two new board members for McDonald’s, escalating his demands that the company force its pork suppliers to stop keeping sows in individual pens so small they can’t lie down or turn around. The burger chain’s board responded that it expects that, by the end of the year, 85% to 90% of its U.S. pork will come from “sows not housed in gestation crates during pregnancy.”

While that’s progress from when McDonald’s announced a move away from crated sows in May 2012, a caveat earlier in the statement specifies that the policy applies to “confirmed pregnant sows,” leaving some wiggle room for the chain and its suppliers. The animal-welfare statement on its website also says McDonald’s is guided by an industry standard that moves sows into so-called group housing after they’re confirmed as pregnant. What’s not explicit is that sows can be crated from the time of their insemination until the pregnancies are confirmed, or about five weeks of their 16-week gestation period.

McDonald’s, which doesn’t own the pigs at issue, says it’s holding true to its decadelong pledge and that Icahn’s push to be completely crate-free is a new demand that’s currently impossible for suppliers to meet. “We disagree with this inaccurate characterization of our industry-leading pledge and subsequent progress we’ve seen the industry make at scale, including that an estimated 30-35% of U.S. pork production has moved to group housing systems,” the company told Bloomberg News in an emailed statement. It didn’t respond to direct questions about whether gestation crates are still used early in the sows’ pregnancies.

‘Unnecessary Suffering’

Icahn charges that crates engender “unnecessary suffering,” justifying a push into the boardroom, and his cause is drawing support from some other investors who look at its environmental, social and governance policies. Beef, easily McDonald’s most important product, is a major source of global greenhouse-gas emissions. Restaurant workers have demanded higher wages and sued over sexual harassment and discrimination. Animal-welfare advocates want it to wield its huge buying power to end gestation crates, just as it helped galvanize the restaurant industry in 2015 to transition toward cage-free eggs.

“Many global investors will welcome this move,” said Jeremy Coller, chairman of FAIRR, an investor network that focuses on ESG issues in the food industry. With California and the European Union considering bans on the practice, “slow progress to phase out gestation crates is as much an investment risk as it is an animal-welfare issue.”

Kiran Aziz, head of responsible investment at Norway’s largest pension fund, Kommunal Landspensjonskasse, said Monday he considers it “appalling” that McDonald’s hasn’t fully ended the practice. “We strongly welcome this renewed attention and we strongly urge other shareholders to look into this very closely,” he said. “The welfare of livestock is rising up the ESG agenda at a rapid pace and we hope to help accelerate this.”

Yes, it’s important that McDonald’s pigs be treated humanely. But maybe it’s more important that we take care of the humans who work there by paying them a living wage and making it easier to form a union, instead of spending $15 billion on stock buybacks to enrich the wealthy. https://t.co/WM3dYgDbts— Bernie Sanders (@SenSanders) February 22, 2022

The pork industry has traditionally used gestation stalls to help ensure sows have been successfully inseminated, keeping the pregnant pigs in narrow, individual stalls without enough space to turn around. For 16 weeks after artificial insemination, the sows are fed on the front end, and often have slats on the back end for their manure to fall through. Industry representatives defend the practice as in the animal’s best interest because it allows for easier monitoring of individual health.

But critics, including animal-welfare activists and animal-health experts, have long deplored these crates as cruel, citing both mental and physical anguish for the animals.

Group Housing

Since 2012, the year that McDonald’s announced a goal to “source all pork for its U.S. business from producers that do not house pregnant sows in gestation stalls by the end of 2022,” the term “group housing” has increasingly shown up in conversations about alternatives to the the crates.

Under a definition from the American Association of Swine Veterinarians, approved within months of the McDonald’s commitment, group housing is an environment that keeps multiple pigs living together only “after confirmed pregnant.” McDonald’s added a direct reference to this definition to its website on Jan. 27, saying, “Our commitment is guided by the industry- and American Association of Swine Veterinarians (AASV)-endorsed definition for group housing for pregnant sows.”

That’s not enough for the Humane Society of the United States, or Icahn, because that means pigs can still be crated for weeks from artificial insemination until their pregnancies are confirmed.

“This is the very cruelty that McDonald’s promised to end and no corporate wordsmithing can change the fact that it didn’t,” said Josh Balk, the society’s vice president of farm-animal protection. “In McDonald’s so-called group-housing system, mother pigs still suffer over a quarter of each pregnancy locked inside solitary-confinement cages so tight they can’t even turn around.”

Smithfield Foods Inc., the world’s largest pork producer and one of the suppliers McDonald’s lauded in 2012 as “adopting commercially viable alternatives’’ to gestation stalls, says sows still need to be individually confined in the early weeks after insemination to keep them healthy and from being injured in squabbles with other expectant mothers — potentially jeopardizing the pregnancies. Smithfield outlined sows’ transition from crate to group housing, once their pregnancies are confirmed by ultrasound, in a 2013 video.

“What the science tells us is that animals — pregnant sows — who are housed in stalls at the beginning of their pregnancy, they have less lesions, less injuries and they have less stress. And their pregnancies are more successful,” Stewart Leeth, Smithfield’s chief sustainability officer, said in an interview Tuesday. He said that unlike other producers who crate sows for the entire pregnancy, Smithfield moves them into group housing after 35 to 40 days, depending on the farm and when the pregnancies can be confirmed with ultrasound. On average it takes two weeks just for the egg to implant in the uterus.

Critics are basing their opposition to the stalls on emotions and optics instead of the science, Leeth said. “There are folks that will never accept what we do,’’ he said. “What we do is raise animals for food.”

Beyond McDonald’s, the rise of the group-housing system is evident as well in other companies’ statements on gestation crates. For example, Aramark, one of the country’s largest foodservice providers, acknowledges the difference between crate-free and crate-reduced in its policies, saying it is aiming for complete elimination of the stalls in the long-term but for now is settling for reduction. Dine Brands Global Inc. and Panera Bread Co. both refer to group housing in their animal-welfare commitments, too.

Icahn and some ESG investors want to see more.

“Until these practices are banned, it is a duty for a global and enormously wealthy corporation like McDonald’s to outlaw this with immediate effect,” said Aziz, of Norway’s KLP, which holds a total of $72 million in McDonald’s stock and bonds.(Updates with interview with Smithfield executive Leeth.)

–With assistance from Tasneem Brogger.

To contact the authors of this story:
Deena Shanker in New York at dshanker@bloomberg.net
Leslie Patton in Chicago at lpatton5@bloomberg.net

© 2022 Bloomberg L.P.

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