This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.theguardian.com/business/2015/may/19/mcdonalds-dinosaur-culture-board-sales
The article has changed 3 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| McDonald's must break 'dinosaur' culture to stop the rot, experts warn | McDonald's must break 'dinosaur' culture to stop the rot, experts warn |
| (about 3 hours later) | |
| McDonald’s “dinosaur” culture may be to blame for its declining sales and waning stature, shareholders and corporate governance experts have warned, as a Guardian analysis revealed the extent of the company’s tight-knit culture ahead of a tense meeting of the fast food giant’s shareholders. | McDonald’s “dinosaur” culture may be to blame for its declining sales and waning stature, shareholders and corporate governance experts have warned, as a Guardian analysis revealed the extent of the company’s tight-knit culture ahead of a tense meeting of the fast food giant’s shareholders. |
| According to an analysis of public records by the Guardian, the fast-food giant, which controls more than 35,000 restaurants in 119 countries, is run by a coterie of long-serving insiders whose relationships raise “very big red flags”, according to critics. | According to an analysis of public records by the Guardian, the fast-food giant, which controls more than 35,000 restaurants in 119 countries, is run by a coterie of long-serving insiders whose relationships raise “very big red flags”, according to critics. |
| Steve Easterbrook, McDonald’s newly appointed British-born chief executive, will preside over his first shareholder meeting Thursday in Chicago. The meeting comes as thousands of workers and union officials plan their largest ever protest over low wages at the chain. Media have been barred from attending, a move that has already raised the hackles of some shareholders. | Steve Easterbrook, McDonald’s newly appointed British-born chief executive, will preside over his first shareholder meeting Thursday in Chicago. The meeting comes as thousands of workers and union officials plan their largest ever protest over low wages at the chain. Media have been barred from attending, a move that has already raised the hackles of some shareholders. |
| The Guardian’s findings highlight the challenges for Easterbrook, who has promised to act as an “internal activist” and turn the struggling company into a “modern and progressive” burger chain. | The Guardian’s findings highlight the challenges for Easterbrook, who has promised to act as an “internal activist” and turn the struggling company into a “modern and progressive” burger chain. |
| The analysis of McDonald’s board, in advance of the company’s shareholder meeting on Thursday, reveals that: | The analysis of McDonald’s board, in advance of the company’s shareholder meeting on Thursday, reveals that: |
| Analysis of McDonald’s proxy statements reveals that the company’s three longest-serving directors – McKenna, Roger Stone and Enrique Hernandez – have been involved in more than $150m of related person transactions, in which McDonald’s paid companies linked to the directors. The payments were legal and publicly disclosed. | Analysis of McDonald’s proxy statements reveals that the company’s three longest-serving directors – McKenna, Roger Stone and Enrique Hernandez – have been involved in more than $150m of related person transactions, in which McDonald’s paid companies linked to the directors. The payments were legal and publicly disclosed. |
| Last year was the first year since joining McDonald’s in which McKenna did not declare a financial benefit from the company. In previous years, companies owned or partly owned by McKenna benefited to the tune of $81m from McDonald’s contracts. Most of the deals were with Schwarz Paper Company, which McKenna owned and chaired until last year. | Last year was the first year since joining McDonald’s in which McKenna did not declare a financial benefit from the company. In previous years, companies owned or partly owned by McKenna benefited to the tune of $81m from McDonald’s contracts. Most of the deals were with Schwarz Paper Company, which McKenna owned and chaired until last year. |
| McKenna, who has chaired Chicago’s White Sox and Cubs baseball teams and is on the board of the Chicago Bears football team, has been named the “bigwig other bigwigs seek out for advice” by Chicago Magazine. | |
| He was due to leave the McDonald’s board in 2003, when he reached the company’s mandatory director’s retirement age of 73 (which has subsequently been quietly dropped). He is still chairman today – four months shy of his 86th birthday. | He was due to leave the McDonald’s board in 2003, when he reached the company’s mandatory director’s retirement age of 73 (which has subsequently been quietly dropped). He is still chairman today – four months shy of his 86th birthday. |
| He has been at McDonald’s so long that he has overlapped with six different chief executives. He’s also not the only elderly director: Walter Massey is 77, and Roger Stone 79. Massey has been on the McDonald’s board since 1998, and Stone since 1989. | He has been at McDonald’s so long that he has overlapped with six different chief executives. He’s also not the only elderly director: Walter Massey is 77, and Roger Stone 79. Massey has been on the McDonald’s board since 1998, and Stone since 1989. |
| Companies linked to Stone have benefitted from about $64m of McDonald’s business, according to official company filings. McDonald’s dealings with Stone’s main companies (Stone Containers and its successor, Smurfit-Stone Containers) ended in 1999, the year Stone retired as CEO. However, in 2003, McDonald’s began buying supplies from Prairie Packaging, a company partly owned by Stone and his children. In 2007 the deals amounted to $29.7m. | |
| Since 2005, McDonald’s has had a contract with Inter-Con Security Systems, a company at which Hernandez is CEO, chairman and 26% shareholder. As of 2013 the deals totalled $9.2m. | Since 2005, McDonald’s has had a contract with Inter-Con Security Systems, a company at which Hernandez is CEO, chairman and 26% shareholder. As of 2013 the deals totalled $9.2m. |
| Every non-executive member of McDonald’s board is listed on past proxy statements as currently having or having had a relationship to a company with business ties to the global burger giant. | Every non-executive member of McDonald’s board is listed on past proxy statements as currently having or having had a relationship to a company with business ties to the global burger giant. |
| Heidi Barker, a spokeswoman for McDonald’s, said: “It is well within the norm for large public corporations to have routine transactions with companies with which their directors are somehow affiliated. Disclosure of these transactions is subject to securities laws and regulations with which we comply, and we’re fully transparent in our proxy filings.” | |
| For a truly international company, McDonald’s executives have a very tight focus on Chicago. Ten past and present directors are linked to Chicago’s failed 2016 Olympic bid; four directors sit on the civic committee of the Commercial Club of Chicago; and five serve (or have served) as trustees of the Museum of Science and Industry Chicago. | For a truly international company, McDonald’s executives have a very tight focus on Chicago. Ten past and present directors are linked to Chicago’s failed 2016 Olympic bid; four directors sit on the civic committee of the Commercial Club of Chicago; and five serve (or have served) as trustees of the Museum of Science and Industry Chicago. |
| Nell Minow, a co-founder of governance advisory firm GMI Ratings, who has been dubbed the “the queen of good corporate governance”, said McDonald’s should immediately move to shake up its “dinosaur” board. | Nell Minow, a co-founder of governance advisory firm GMI Ratings, who has been dubbed the “the queen of good corporate governance”, said McDonald’s should immediately move to shake up its “dinosaur” board. |
| “This board has been a serial offender in overpaying its top executives and inadequate strategic planning,” she said. “The McDonald’s board is long overdue for an overhaul. The first step should be sitting down with the company’s largest shareholders and, yes, its employees, to figure out what they need to do to find directors who are more in touch with today’s trends and challenges. | “This board has been a serial offender in overpaying its top executives and inadequate strategic planning,” she said. “The McDonald’s board is long overdue for an overhaul. The first step should be sitting down with the company’s largest shareholders and, yes, its employees, to figure out what they need to do to find directors who are more in touch with today’s trends and challenges. |
| “This sort of thing was prevalent in the 1960s; it was not surprising through the 90s. But there has been a lot of house-clearing post-Enron, the financial crisis, and the dotcom crash era. Not, it seems, at McDonald’s,” she said. “It raises very big red flags.” | |
| Minow said the 17-year tenure of the governance committee was particularly worrying, as it makes it less likely that outsiders will be appointed. “Generally speaking, 12 years is considered the maximum tenure. Any more than that and you begin to think of them [the non-executive directors] as insiders rather than outsiders.” | |
| Minow, who takes such a strong stance on good corporate governance that she once advised shareholders to vote against her father, former Federal Communications Commission (FCC) chairman Newton Minow, said that if McDonald’s were performing well the poor governance could perhaps be overlooked, but not with a company rapidly losing sales and customers. | Minow, who takes such a strong stance on good corporate governance that she once advised shareholders to vote against her father, former Federal Communications Commission (FCC) chairman Newton Minow, said that if McDonald’s were performing well the poor governance could perhaps be overlooked, but not with a company rapidly losing sales and customers. |
| She said the company must also bring the board’s average age “down at least a couple of decades”. | She said the company must also bring the board’s average age “down at least a couple of decades”. |
| Barker, the McDonald’s spokeswoman, said the “inference” of the Guardian’s inquiries about the company’s tight knit board was “quite puzzling”. | Barker, the McDonald’s spokeswoman, said the “inference” of the Guardian’s inquiries about the company’s tight knit board was “quite puzzling”. |
| “Our directors have wide-ranging professional and philanthropic affiliations, having served at the highest levels of major organizations from around the country. They offer a diversity of subject matter expertise, capabilities and perspectives. McDonald’s has a robust annual board evaluation process. | “Our directors have wide-ranging professional and philanthropic affiliations, having served at the highest levels of major organizations from around the country. They offer a diversity of subject matter expertise, capabilities and perspectives. McDonald’s has a robust annual board evaluation process. |
| “For example, there is a new chairman of the governance committee in 2014. This year, two directors retired and two new directors have been named. This year, we disclosed in our proxy that the board engaged a search firm to help identify prospective candidates from a diverse candidate pool,” she said. | “For example, there is a new chairman of the governance committee in 2014. This year, two directors retired and two new directors have been named. This year, we disclosed in our proxy that the board engaged a search firm to help identify prospective candidates from a diverse candidate pool,” she said. |
| However, the latest new recruit to the McDonald’s board – Margo Georgiadis, a Google executive – is also from the Chicago business community, having been named the highest-ranking woman in Chicago’s tech world. | However, the latest new recruit to the McDonald’s board – Margo Georgiadis, a Google executive – is also from the Chicago business community, having been named the highest-ranking woman in Chicago’s tech world. |
| Eleanor Bloxham, the chief executive of the Value Alliance and Corporate Governance Alliance, which advises many of the Fortune 500 companies on corporate governance issues, said it was “absolutely out of the norm” that a company of the size and importance of McDonald’s was drawing most of its directors from such a select pool of Chicago bigwigs. | Eleanor Bloxham, the chief executive of the Value Alliance and Corporate Governance Alliance, which advises many of the Fortune 500 companies on corporate governance issues, said it was “absolutely out of the norm” that a company of the size and importance of McDonald’s was drawing most of its directors from such a select pool of Chicago bigwigs. |
| “It is problematic when you have a global company trying to make major changes and trying to adjust to changing demands of consumers when you don’t have a diverse board, a board that’s fresh,” she said. | “It is problematic when you have a global company trying to make major changes and trying to adjust to changing demands of consumers when you don’t have a diverse board, a board that’s fresh,” she said. |
| “Having such long service board members can represent a real problem, as they’ve been around each other so long that they may be reluctant to challenge each other. Also, if they revolve around the same business and social circles, they may not want to challenge each other if they see each other at a gala the next day. | |
| “It really is very problematic, and absolutely out of the norm for such a large company,” she said. “The new CEO needs to change this. This is something that should have been changed decades ago and is well past due.” | “It really is very problematic, and absolutely out of the norm for such a large company,” she said. “The new CEO needs to change this. This is something that should have been changed decades ago and is well past due.” |
| The extremely tight-knit board is likely to come under intense scrutiny from shareholders at the meeting on Thursday. Some of McDonald’s biggest shareholders – who declined to comment on the record – told the Guardian they would publicly raise their concerns. | The extremely tight-knit board is likely to come under intense scrutiny from shareholders at the meeting on Thursday. Some of McDonald’s biggest shareholders – who declined to comment on the record – told the Guardian they would publicly raise their concerns. |
| The shareholders will on Thursday attempt to force through a vote on proxy access that would allow shareholders to nominate directors directly. The motion is supported by Glass Lewis and ISS, the two leading shareholder advisers. | The shareholders will on Thursday attempt to force through a vote on proxy access that would allow shareholders to nominate directors directly. The motion is supported by Glass Lewis and ISS, the two leading shareholder advisers. |