McDonald's Shareholders Defeat Proposal to Weigh Impact on Obesity

Chain Stresses Its Actions To Improve Nutrition, Add Healthful Menu Options

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McDonald's Corp. today voted down a proposal to assess its impact on public health, particularly childhood obesity.

The proposal was brought by consumer watchdog group Corporate Accountability International. It requested that McDonald's board "issue a report, at reasonable expense and excluding proprietary information, within six months of the 2012 annual meeting, assessing the company's policy responses to growing evidence of linkages between fast food and childhood obesity, diet-related diseases and other impacts on children's health," according to the McDonald's proxy statement, which recommended shareholders vote against the proposal.

"McDonald's can no longer ignore the spiraling costs of its business practices on our children's health and on our health-care system," said Andrew Bremer, a pediatric endocrinologist and professor of pediatrics at Vanderbilt University in a statement, who spoke on behalf of a shareholder, John Harrington. Dr. Bremer also spoke in support of the resolution at the annual meeting, saying that there's a growing concern about how McDonald's and chains of its ilk are contributing to obesity and diet-related disease. He added that by not changing marketing and the food it offers, shareholders are unreasonably exposed to risk, and the tactics are "doing the brand no favors."

Jim Skinner
Jim Skinner

Outgoing CEO Jim Skinner said during the meeting that McDonald's advertises responsibly to kids and families. He said the company is proud of its food and the nutritional changes it's made to the menu, and that McDonald's, which serves 68 million people a day globally, has done more than anyone else in the fast food industry to improve nutrition and offer healthier food options. The proposal was voted down; only 6.4% voted in favor.

"While these are global issues that require actions that go well beyond what our company or any other provider of prepared foods can take on its own, we are committed to being part of the effort to address the relevant issues underlying these concerns," said the company in its opposition statement. "We offer a variety of food choices to our customers; provide nutrition information about our menu items in a variety of accessible ways so that families can make informed decisions; communicate with children in a responsible manner through age appropriate marketing and promotional activities; and encourage children and families to live balanced, active lifestyles."

Aside from the kids' debate, Mr. Skinner, who is retiring at the end of June and will be replaced by Don Thompson, also talked about the company's improved sustainability tactics, as well as operational improvements such as store remodels.

Mr. Thompson said the chain's top priorities include continuously innovating its menu globally, including more fruits, vegetables and grains, such as it's done with apples in Happy Meals. He also the chain has a continued investment in promoting core menu items in new ads, such as one by DDB that touts fries. He added that the chain aims to open about 1,300 restaurants this year globally, and noted that around the world the chain has already remodeled 45% of store interiors.

The CAI proposal is essentially an extension of one CAI made last year, when the group CAI worked with, the Sisters of St. Francis of Philadelphia, who are also McDonald's shareholders, to propose a similar measure. That proposal included an assessment "of the potential impacts of public concerns and evolving public policy on the company's finances and operations."

The proposal last year got a 6% vote. The prior year, CAI launched an initiative calling for the retirement of Ronald McDonald. And just last month, CAI urged hospitals to end their contracts with on-site McDonald's.

At today's meeting, CAI also addressed the issue with hospitals, and Mr. Skinner said that McDonald's is only in 26 hospitals in the U.S.

Animal welfare was also discussed at the meeting by groups like the Humane Society, which recognized McDonald's for saying that it would work with suppliers to phase out gestation crates. But the group noted that the chain still had more work to do on the animal-welfare front.

Obesity, especially among children, has become an increasingly major concern. Fast-food chains and the restaurant industry on the whole relatively recently began announcing changes to menus in an effort to offer more-healthful fare. The National Restaurant Association, the industry's biggest lobbyist, in July announced Kids LiveWell, a voluntary initiative by the restaurant industry to spur chains to offer and promote healthful kids-meal options.

McDonald's the same month announced revamped Happy Meals that included a reduction in sodium and calories, and has refocused it marketing of the Happy Meal to highlight apples and milk, now automatically included in the meals. Its messaging illustrates the importance of nutrition, and in the case of its messaging around the Olympics, physical activity.

McDonald's, according to Kantar, has reduced its measured-media spending on Happy Meals. Last year spent about $92 million on the product -- close to 10% of its total U.S. measured-media budget, but down from $115.2 million in 2010. By far the nation's top restaurant ad spender, McDonald's spent $963 million on measured media in 2011, up 8.6% from 2010. Sales of kids meals at U.S. fast-food restaurants have been declining since 2007, according to NPD Group, with visits last year dropping 5% over the previous year.

Just last month, a California state court dismissed a lawsuit against McDonald's that looked to stop the chain from using toys in Happy Meals to market directly to kids. The suit was filed by consumer group Center for the Science in the Public Interest on behalf of Monet Parham, a Sacramento mother who said she was concerned about McDonald's "getting into my kids' heads without my permission and actually changing what my kids want to eat."

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