Activists Push for Big ESG Changes After Buying Small StakesCarl Icahn has stepped up his criticism of the McDonald’s board leading up to its annual meeting in May. In a letter to shareholders late last month, the activist claimed the board was “failing shareholders and stakeholders by presiding over animal welfare violations, supply chain lapses and what I perceive to be a hollow environmental, social and governance ... agenda.” 02 May 2022
Lindsay Frost of Agenda (Financial Times) pens an article on activists using ESG topics. Carl Icahn made waves during the last few months when he announced small stakes in McDonald’s and Kroger. Unlike his well-known financial-focused proxy campaigns of the past, Icahn expressed concerns about the companies’ involvement in suppliers’ placing pigs used in the companies’ products in allegedly inhumane gestation crates, wading into the increasingly popular ESG movement.
Experts say hedge fund activists will more frequently include environmental and social issues in campaign theses in order to win support from other investors, improve business operations and finances, and simply do the right thing. Plus, tools such as the universal proxy going into effect later this year will make it easier for single-issue-focused investors to get board nominees on contested ballots, sources say. “These campaigns are more focused on values rather than value” Ali Saribas of Squarewell Partners commented to Lindsay Frost at Agenda.
Between September 2019 and December 2021, 10% of the 20 activist campaigns at the largest global companies included environmental and/or social issues as a core component of the campaign, according to a January review from Squarewell Partners. One recent example of a values-driven campaign is Icahn’s proxy fight at fast-food giant McDonald’s. The company had pledged to stop sourcing pork from suppliers using gestation crates for their pigs by 2022, but this year said that while it has mostly met its targets, it will need until 2024 to weed out the use of the crates completely.
“The kind of campaign that Icahn is going for, he is trying to fix one issue,” said Andrew Brady, senior analyst at Squarewell Partners. “That one issue will invariably have a root cause that manifests in many other ways including a value way, but you have to craft the right story and weave it into a value argument.”
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Activist investors are expected to launch more and bolder campaigns for change among European companies in the year ahead, advisers told Reuters, after a record number in 2023.
AQTION, a subsidiary of SquareWell Partners, published its inaugural study – ‘Stewardship in AQTION’ – which details how the world’s largest 65 asset managers and owners steward their portfolio companies and how they incorporate extra-financial considerations into their investment decision-making processes.
Carl Icahn is preparing for a second board battle at gene-sequencing company Illumina after shareholders elected his candidate, Andrew Teno, to the company’s board and ousted the chairman, John Thompson, in May. Icahn then successfully pushed out former CEO Frances DeSouza in June.