McDonald’s Investors to Vote This Spring on Civil-Rights Audit, SEC Says

(Bloomberg) -- McDonald's Corp. shareholders will vote this spring on whether or not the company should conduct a civil-rights audit.

In a letter dated April 5, the U.S. Securities and Exchange Commission said it won't let McDonald's exclude a shareholder proposal that urges its board to oversee a third-party audit that would analyze its civil-rights impact and recommend improvements. The restaurant chain had previously asked the SEC to let it omit the proposal from its annual proxy, saying it would interfere with lawsuits brought by Black franchisees and employees.

“We are unable to concur in your view that the company may exclude the proposal,” the SEC said in the letter viewed by Bloomberg News. “In our view, the proposal transcends ordinary business matters.”

A spokesman for Chicago-based McDonald's didn't immediately comment.

Late last year, an adviser to union pension funds called on the fast-food giant to inspect how its policies may be contributing to social and economic inequality. At the time, SOC Investment Group said McDonald's should oversee a third-party audit with input from restaurant owners, corporate employees, suppliers and customers. The company's existing disclosures on diversity exclude hundreds of thousands of staff at franchised locations, according to the advisory organization, which was previously known as CtW Investment Group.

“McDonald's shareholders will have their rightful opportunity to urge the fast-food chain to conduct a third party assessment of its commitments to civil rights,” Dieter Waizenegger, SOC Investment's executive director, said in a statement Wednesday. “This audit would encompass a review of policies on racial justice and sexual harassment -- issues that are front-and-center for workers, consumers, and shareholders alike.”

McDonald's did include the proposal in its preliminary proxy statement dated March 28, while saying it opposes the the plan. “Our Board has determined that shareholders would be better served by our vigilant focus on the robust strategies, assessments and reporting processes that are currently underway, as well as our additional plans to better understand and address our impact on civil rights and gender and racial equity,” McDonald's said.

The restaurant chain also is facing pressure from billionaire investor Carl Icahn, who's planning to nominate two new directors to McDonald's board over the issue of gestation crates in its pork supply. In its proxy, McDonald's says it doesn't endorse these director candidates and that shareholders should disregard the materials from the Icahn Group, which owns just 200 shares of McDonald's stock.

While some companies have argued that civil-rights audits aren't necessary, they're becoming more common after the Black Lives Matter movement that built in 2020. Just last month, JPMorgan Chase & Co. said it plans to do a third-party inspection of its $30 billion racial-equity commitment, following similar moves by Citigroup Inc. and BlackRock Inc.

McDonald's has made promises regarding diversity, saying it will increase minority representation in U.S. leadership roles to 35% by the end of 2025 from 30% last year, and it has also tied some executive pay to diversity goals. The company is changing its domestic supply chain as well, shifting more spending to women and minorities. Meanwhile, the chain has also pledged to do more to recruit, train and invest in new minority-owned restaurant owners, including offering them loan assistance.