Carl Icahn Is a Valuable Ally for Pregnant Pigs

(Bloomberg Opinion) -- Proponents of animal rights don't tend to see Wall Street corporate raiders as natural allies. But in their struggles to influence some of America's biggest companies, they've gained a collaborator who might actually help make some progress: Carl Icahn, the takeover-artist-turned-activist-investor who made his name dismantling the airline TWA.

Lately, Icahn has been spending a lot of time talking about pigs. In late February, he announced a plan to nominate two candidates to the McDonald's Corp. board of directors — part of a broader effort to put pressure on the company, which he says has failed to fulfill a 2012 promise to eliminate restrictive gestation crates for pregnant sows within 10 years. The company insists it's honoring its commitment.

Last month, Icahn started a similar fight at Kroger Co., the Cincinnati-based grocery giant whose stores include Fred Meyer, Kroger and Ralphs – this time tying together the poor treatment of animals and workers, who he claimed were underpaid during the pandemic. “What has happened at Kroger with the issues of animal welfare and employee wages is an affront to the basic fibers of our society — that of decency and dignity,” Icahn wrote in a letter explaining his decision to nominate two directors to the company's board.

Animal-rights organizations have long tried to employ shareholder activism to advance their goals, with little success. Back in 2008, the U.S. Humane Society sought a shareholder resolution on phasing out the use of gestation crates at Tyson Foods Inc. The proposal failed spectacularly, as most shareholder proposals do. Even when one passes, companies aren't obligated to follow through and seldom do.

Icahn isn't a major investor in either McDonald's or Kroger: The companies have reported his holdings as 200 and 100 shares, respectively. Yet he has much that the typical small shareholder doesn't, including a bigger megaphone, a giant checkbook and a posse of lawyers at his disposal. Such resources matter. When activist investor Engine No. 1 nominated four directors to Exxon Mobil Corp. and ultimately won three board seats, the estimated cost for both parties was around $60 million. It's safe to say that proxy fights at McDonald's and Kroger will cost at least several million dollars, no matter what the outcome. Company executives are taking the challenge seriously: In recent months, McDonald's CEO Chris Kempczinski has participated in at least three phone calls with Icahn about gestation crates, according to the latter's proxy statement.

One big question is why someone as notoriously profit-focused as Icahn would devote himself to a battle over animal rights. Perhaps, given the rise of ESG investing, he thinks treating pigs and people better will actually boost stock prices — but with his tiny holdings, he wouldn't stand to gain much. He also has long demonstrated a passion for the issue, having gotten involved a decade ago, when the Humane Society tried to nominate its CEO at the time, Wayne Pacelle, to Tyson's board. Icahn served as an advisor in that effort, though the nomination was ultimately dropped.

McDonald's and Kroger typically hold their annual meetings in late May and late June, respectively, so there's still time for both sides to sharpen their swords. Icahn isn't known for giving up, and this time he's actually doing the nominating, rather than just advising. With his extensive experience waging proxy fights, not to mention shifting public opinion on the treatment of animals, he might be able to achieve much more than rights activists could have on their own.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Michelle Leder is an expert on SEC filings, having launched her site, Footnoted.com, in 2003 after writing the book "Financial Fineprint: Uncovering a Company's True Value."