McDonald’s Not Loving Idea of Board Seat for Franchisees

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By Andrea Vittorio

McDonald’s is not loving the idea of letting the franchisees who own and operate the majority of its restaurants pick a board member.

The fast-food chain’s board is recommending investors vote against a proposal looking to add a “franchisee director.” The proposal is considered a long shot but is garnering attention for its novelty.

“The board is against any plan to give one group or constituency the right to elect its own director to represent limited interests, which could be contrary to the long-term, best interests of shareholders,” McDonald’s said in its proxy statement issued April 13. Such a director likely wouldn’t be independent either because of “the direct economic relationship” that exists between the company and franchisees, it said.

Communication Channels

About 85 percent of McDonald’s restaurants worldwide are owned and operated by independent franchisees, with a goal to be 95 percent franchised over the long term. There are “well-established lines of communication” that franchisees, shareholders and other stakeholders can use to share their views with the board, it said.

“McDonald’s has the ability to reach out to their franchisees and talk to them, but that’s a less direct line of communication than having someone who represents their views sitting in board meetings,” Maureen O’Brien, vice president and corporate governance director at Segal Marco Advisors, told Bloomberg BNA. The financial consulting firm, which submitted the resolution, is the sponsor of a trust that holds more than 5,000 McDonald’s shares.

Its proposal would give franchisees a new kind of preferred stock that lets them elect their own board member.

McDonald’s tried twice to prevent shareholders from voting on the idea at its annual meeting May 24. An initial request to the Securities and Exchange Commission to leave the shareholder proposal off its ballot was denied, as was another request seeking a review.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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