McDonald's Corp shareholders will vote Thursday on a proposal that would make it easier to nominate directors to the board of the fast-food chain, which is in turnaround mode after losing customers and sales to competition and after internal missteps.
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Investor support for such new director nomination rules, referred to as "proxy access," is growing.
The California Public Employees' Retirement System (Calpers) and the New York City Pension Funds have urged shareholders to vote for proxy access at McDonald's, and influential proxy advisory firms Institutional Investor Services and Glass Lewis & Co have recommended that their clients support it.
Vanguard Group and BlackRock Inc, major investors that hold significant stakes in McDonald's, have publicly backed proxy access.
McDonald's opposes the proposal, which was filed by the UAW Retiree Medical Benefits Trust.
"We believe that making McDonald's leadership at the board level more accountable to shareholders ensures that the board is the strongest it can be to usher in a new chapter of prosperity for the benefit of the company, its employees, and shareholders," said Meredith Miller, chief corporate governance officer, UAW Retiree Medical Benefits Trust.
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New York City Comptroller Scott Stringer and three other officials who are fiduciaries to public pension funds with a total of $860 billion in assets are challenging McDonald's and other companies on stock buybacks.
Stringer called proxy access at McDonald's "the perfect antidote for a board whose turnaround plan prioritizes share buybacks over long-term value creation."
The proxy access thresholds proposed at McDonald's would allow groups of shareholders holding at least three percent of company stock for at least three years to be able to list director candidates on company proxy materials. That would give longer-term shareholders with limited resources more power to hold directors accountable, Miller said.
McDonald's encouraged shareholders to reject the proposal, which it said is "unnecessary and potentially harmful to the company at this time."
McDonald's said it has robust corporate governance practices that provide shareholders with the ability to effectively voice their views with the board and vote on critical matters.
The vote on the proposal comes shortly after activist hedge fund investors such as Jana Partners LLC and Corvex Management LP disclosed new stakes in McDonald's.
Among other things, experts said activists are unlikely to benefit from the proposal because they tend to be short-term investors. (Reporting by Lisa Baertlein in Los Angeles; Editing by Ken Wills)