The news just broke that corporate raider Carl Icahn is launching a campaign to elect two new McDonald’s board members in an effort to change the way the company buys pork. McDonald’s had promised to require pork suppliers to end the use of gestation crates by this year, but has been unable to meet that goal first set in 2012.

Icahn thus joins the list of ESG activists, which is probably as much of a surprise to him as it is to stock market observers. ESG stands for Environmental, Social, and Corporate Governance, and many large investment funds have adopted ESG requirements for the companies in which they invest. Most recently, a small fund elected two directors to the Exxon board, directors who have promised to end Exxon’s involvement in the production and refining of fossil fuels. Public pension funds and Black Rock, one of the world’s largest money managers, backed the dissident board members in the Exxon election, and they were successful.

I expect that the enthusiasm for the transition from oil wells to windmills and solar panels at Exxon will be somewhat tempered by $100 a barrel oil. In fact, one might argue that the economic and social dislocation caused by the present high oil prices would have favored increased investment in the exploration for and production of hydrocarbons by Exxon. We can look forward to a carbon neutral future, but we aren’t there yet. A bit more investment in oil and gas over the past decade might have served a social and economic purpose, as well as increased the value of Exxon shareholder’s investment. 

The argument over corporate responsibility to various stakeholders outside their shareholder base is not a new one, but a corporation’s primary responsibility is to increase the value of the shareholder’s investment. That won’t happen without respect for the interests of all stakeholders, but making capital allocation decisions solely on the basis of some notion of social responsibility will be bad for the economy and harmful to the pocketbooks of investors who prioritize a social conscience over good business decisions.

Having said all that, I’m going to enjoy the pig proxy fight at McDonald’s. Icahn owns only two hundred shares of McDonald’s, and he says he can’t remember the last time he ate there. Which is a nice way of saying he’s never darkened the doors of a McDonald’s. I, on the other hand, have not only frequented McDonald’s many times, but have had the pleasure of visiting their corporate headquarters, along with a bunch of other farmers, to complain about their decade-old announcement concerning gestation crates, battery cages and other farming practices. We visited with the executive in charge of banning the use of present production practices by McDonald’s suppliers, a fellow with the impressive title of “Senior Director, Supply Chain Management, Quality Systems for McDonald’s." 

We pointed out that the changes required of farmers couldn’t be completed in the time allotted. We further pointed out that there were costs to those changes, and that farmers weren’t in a financial position to absorb those costs. Our reservations fell upon deaf ears, as the company looked forward to vastly increased sales from customers who appreciated their attempts to improve the food chain. 

I also complained that, at least in my recent experience of the chain, cleanliness and customer service were often less what I’d come to expect from McDonald’s. Their customers came to them for speed, consistency, and price, and that rather than add millions of dollars of costs to their suppliers, they might look to their own performance to improve their sales. Suffice it to say that I won’t be invited back to any more confabs with execs from the Supply Chain Management department at McDonald’s.

So, to see McDonald’s criticized and their business challenged because they haven’t kept their promises when it was clear to a bunch of farmers a half a decade ago that they couldn’t keep those promises provides a certain satisfaction. McDonald’s has answered Icahn by promising to meet their goals by 2024, although those goals have changed somewhat since the original announcement. Icahn won’t be satisfied by that promise, and it will be interesting to see if ESG minded index funds and retirement plans will back Icahn’s raid on Sausage McMuffins.

It won’t surprise me to see Icahn’s maneuver repeated across the food chain, and farmers should prepare to find themselves squarely in the sights of billionaires with a social conscience. 

Blake Hurst is a farmer and greenhouse grower in Northwest Missouri.

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