Crashing McDonald’s annual meeting
Franchise Times had assigned me to cover McDonald’s May 21st annual meeting, so I sent an email request for a press pass in early April, expecting a reply in a few weeks. Thirteen minutes later this arrived:
“Is Franchise Times looking to cover this meeting to inspire more ‘poetry?’” the email said, referring to a poem published in the January issue of Franchise Times. “As we’ve previously conveyed, this was beyond unprofessional. Thanks for your inquiry; it is under consideration.”
It was signed Heidi, for Heidi Barker, McDonald’s vice president of global media relations and issues management. Regular readers will remember the poem by Franchise Times President John Hamburger, titled “McDonald’s headless, Thompson a goner.” The poem was originally published on our sister website of the Restaurant Finance Monitor.
The poem had used couplets to predict the firing of then-CEO Don Thompson, further declines in same-store sales and franchisee morale, the selling of company stores and the board of directors’ capitulation to investors. No wonder McDonald’s eventually banned all press from its annual meeting, because the poet had foreseen everything but the helicopters.
A lone media member
All press save one, because a handful of McDonald’s shares I had purchased in the 1980s allowed me to receive a shareholder’s pass that I clutched in one hand as I drove past police cars and under television news helicopters toward McDonald’s Oak Brook, Illinois, headquarters the morning of May 21. Local media had been filled with stories of thousands of McDonald’s employees who had traveled there by bus to protest their wages and working conditions, but police held them back so far that we shareholders could barely see their signs.
Another 20 armed officers guarded the entrance to McDonald’s campus and one of them carefully compared the names on my pass and driver’s license before allowing me to enter.
Although McDonald’s University includes an auditorium big enough to hold all interested shareholders, the press and most of the protesters, the annual meeting was in part of the ballroom of an on-campus Hyatt hotel. A retinue of greeters checked my IDs again, handed me a coupon for a single McDonald’s meal and a nametag on an orange lanyard and pointed to a downstairs room “for refreshments.”
I was hoping for an Egg McMuffin, but the only offerings were apple slices in Happy Meal cellophane, chocolate chip cookies, coffee and Cokes. Doesn’t McDonald’s want to show off their food to the people they made rich with their stock? I wondered.
The other stockholders skewed to older couples in windbreakers and small groups of retired employees reminiscing about more relaxed times. I joined a group and said, “I feel lucky I mailed my reservation in early enough to be here.” A man whose blue jacket bore a country club crest responded, “Mailed? I’ve been buying shares since they were $6 and I telephoned. When I told the girl my numbers, she said she’d send me a pass right away.”
When shareholders started lining up at 8:30 a.m. for the 9 a.m. meeting, I joined them, and once inside I understood why. The room was long and narrow, with microphones and undercover cops spoiling the sightlines. The only seat near the front was between a shareholder couple and a young man in a suit.
“How did you get here?” I asked him. “I represent the Restaurant Opportunities Center United and I’m here to express their concerns,” he said. “Maybe you saw me at the National Restaurant Show? I was the one who interrupted Dawn Sweeney and Arianna Huffington.” The former is National Restaurant Show CEO and the latter the famed founder of the Huffington Post.
The McDonald’s meeting, called to order by Andrew McKenna, the 85-year-old chairman of the board, had no interruptions at all. McKenna and the other 12 board members, nine of them 60 or older, were re-elected and two board-backed proposals, on executive compensation and the hiring of an audit firm, passed easily.
Despite impassioned statements from audience members who supported them—my seatmate asked McDonald’s to drop its membership in the National Restaurant Association, which “lobbies to keep restaurant wages at the poverty level”—five shareholder proposals were soundly defeated. A sixth, requiring McDonald’s to include in its proxy materials information on people nominated to the board by qualified shareholders, did pass.
By now, as that poem had stated, CEO Thompson was “a goner,” although he had gone away with a $20 million severance package; same-store sales were still slipping and “franchisee discontent” had been quantified as the worst in over a decade by a well-publicized analyst’s survey.
New CEO Stephen Easterbrook told us McDonald’s 2014 results “were disappointing, but despite the challenges, we still returned $6.4 billion to shareholders, in dividends and stock buybacks.”
Easterbrook pledged to cut costs further by, you guessed it, selling 3,500 corporate stores to franchisees. And no wonder. According to McDonald’s annual report, franchisees paid $3.85 billion in royalties in 2014, and $6.1 billion in rent, income that McDonald’s does not collect from its company stores. And by selling thousands of stores, McDonald’s will save $300 million annually, Easterbrook said, and be able to return even more money to shareholders.
When Easterbrook opened the meeting to preapproved questions from shareholders, the CEO countered questions about worker pay by saying, “We are proud of our efforts to raise hourly wages in our corporate stores to $1 an hour over the local minimum.” When the 72,000 eligible workers “get their checks in July, they’ll all have smiles on their faces.”
But when McKenna adjourned the meeting at 10:15 a.m., only a few of the shareholders were smiling. Despite the rich dividends, the stock price has been stuck at about $96 since 2012. A man behind me asked everyone in sight, “Would you buy more stock at this price?”
When I admitted I was a reporter, another shareholder introduced himself as Ralph Weimer, “the guy who invented the French fry bagging scoop.” In a later phone interview, Weimer said he had worked for McDonald’s for 32 years, retiring as the home office director of engineering.
“When I started, we all knew each other. I helped design equipment so that everything would taste the same throughout the U.S. and the world. That was a big accomplishment. But now the company is so large, Easterbrook will have a tough time turning it around.”
That’s a good image. Perhaps someone could use it in a poem.