Carl Icahn has made billions of dollars taking bold risks and criticizing corporate boards. Now, he’s using that experience to make a societal impact, setting his sights on an obscure corner of the ESG space – animal welfare.

Icahn is disappointed with McDonald’s failure to live up to a decade-old promise not to procure pork from suppliers that use sow gestation stalls, which are used in the farming industry to store pregnant sows but have been subject to criticism from animal rights activists for preventing pigs from being able to move or lie down.

Icahn’s tactics are familiar. In addition to leveling sharply-worded criticism at the “unnecessary suffering” McDonald’s permits in its supply chain, the activist has nominated two directors to the board, Leslie Samuelrich, president of Green Century Capital Management, and Maisie Ganzler, chief strategy officer at restaurant company Bon Appétit Management, for this year’s board elections.

But he has made clear that the campaign does not hold a financial motivation, with Icahn owning only 100 McDonald’s shares. “That’s a situation that is just horrible. It’s obscene. You got these companies making all this money and the animals are just suffering for no reason,” he told Bloomberg.

Tough spot
Despite having pledged a decade ago to walk away from suppliers that use the practice by 2022, McDonald’s continues to source pork from suppliers using gestation stalls. The company said it does not agree with Icahn’s criticism, noting an estimated 30%-35% of its U.S. pork production has moved to group housing systems.

The fast-food giant also said it would be “impossible” to fulfill Icahn’s request, arguing the change would go against “veterinary science used for large-scale production throughout the industry” and potentially lead to an increase in prices.

But Icahn has supporters. The Humane Society of the United States backs his campaign and has coordinated the filing of a resolution asking McDonald’s to confirm that the confinement of gestating pigs will be ended in its U.S. pork supply chain by 2022.

In an interview with Insightia, the Humane Society said it is confident that, “rather than eliminating the practice, McDonald’s is actually now just planning to reduce how long it lets suppliers lock gestating pigs in stalls,” making McDonald’s reporting of its commitments inherently “deceptive.”

No interest
Shareholder engagements regarding animal welfare have been few and far between and have typically failed to win the favor of investors. The one animal welfare proposal subject to a vote in 2021, asking TJX Companies to report on animal testing, won 9.3% support.

In 2020, proposals asking Kohl’s and TJX to report on animal welfare in their supply chains won 5.1% and 7.6% support, respectively, according to Proxy Insight Online data.

Voting rationales provided by major investors suggest that corporations with animal welfare policies in place are assumed to be exercising appropriate oversight and that further reporting is unnecessary. If a company lacks an animal welfare policy, investors will push for change.

But with companies such as Aramark, Seaboard, and Tyson Foods setting targets to eliminate the use of gestation crates in their supply chains, Icahn wants McDonald’s to follow suit.

The involvement of Carl Icahn, an experienced and rich activist investor, has suddenly raised the profile of the issue, in the same way that Engine No. 1 did for the energy transition in its proxy contest at Exxon Mobil last year.

“[Icahn’s] concerns are shared by many consumers and some investors,” Alexandra Higgins, managing director at Okapi Partners, told Insightia in an interview. “When large institutional investors think about social issues, such as animal welfare, they think about them in the context of risk. In this situation, they would ask questions around whether the issue would pose a long-term risk to the company, either reputationally, legally, or economically.”