Patton, Leslie, and Scott Deveau
CNN.com
Posted 05/26/2022
Key words and Definitions
Non-binding shareholder vote – Votes cast by shareholders on shareholder-initiated proposals. Management is not obligated to follow through with the shareholder's wishes even if the majority supports the proposal.
Civil rights audit – An independent systemic investigation of an organization into issues of racial justice and equity as well as other possible biases.
Shareholder activism – Efforts of a group of shareholders to effect change in the firm's governance or management to protect the shareholders' best interests.
Summary: Key Points of the Article
McDonald's shareholders voted in favor of an independent civil-rights audit with a vote that went against the firm's recommendation. While these votes are nonbinding it would cast the fast-food giant in a bad light if the firm's board decided to ignore the recommendation. This proposal was the only shareholder proposal to pass.
The vote was close with 52% of the firm's shareholders voting to support the proposal and 47% voting against it. Ironically, the firm's second-largest shareholder, BlackRock Inc., voted against the proposal while in the midst of a similar racial-equity audit. The shareholders did vote to re-elect all twelve current board members.
McDonald's will likely begin gathering data from franchisees which represent about 95% of the firm's business. The fast-food chain has been attempting to increase diversity in its corporate offices and has "vowed to shift more spending to minority-owned suppliers." Despite these efforts a group of Black franchisees has demanded the firm do more to help them overcome "systemic barriers to their success."
News Topic
#05 Diversity
Exercise 1 Multiple Choice Questions
- Which of these outcomes should emerge from a civil-rights audit?
a. Racial composition of the workforce
b. Salary discrepancies across races
c. Gender differences in salary and management representation
d. all of these
Answer: All of these are facts that should emerge from a civil-rights audit. A civil rights audit investigates whether the company's policies, practices, products, or services violate any civil rights issues or discriminate against protected groups in any way. - Which of these is a type of illegal discrimination?
a. sexual harassment
b. exclusion
c. mockery
d. all of these
Answer: All of these are types of illegal discrimination. Illegal discrimination occurs when we treat someone differently based on a protected characteristic. - McDonald's will be required to conduct a civil rights audit after the shareholder vote.
True
False
Answer: The shareholder vote is nonbinding, but McDonald's will probably conduct the investigation because it would look bad on the firm's management if it ignored the issue.
Exercise 2 Critical Thinking Questions
- Why would it be bad for McDonald's to ignore the shareholder vote calling for a civil-rights audit?
Answer: For investors to support this audit there must be allegations of unfair treatment of protected classes. Therefore, not supporting this audit sends a signal the McDonald's does not care about equality, inclusion, and diversity. - What are some possible outcomes of this audit?
Answer: If the audit finds that McDonald's is discriminating then the company will need to implement plans to remedy the issue. This could involve higher pay, hiring quotas, promotions, and other forms of compensation to bring workers up to pay equality and to increase representation of protected groups. Since 95% of the firm's restaurants are franchisees that control hiring and pay in their stores McDonald's may have to subsidize these efforts. - How are activist shareholders reshaping corporate America?
Shareholders are no longer sitting on the sidelines and allowing firms to behave unethically. These votes may be nonbinding, but they bring pressure on the firm to change. They also focus a spotlight on the issue and consumers can elect to cast their dollar votes for or against the issue.
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