McDonald's Corporation (NYSE:MCD) 2014 Annual Shareholders' Meeting Conference Call May 22, 2014 9:00 AM ET
Andy McKenna – Chairman
Don Thompson – CEO
Gloria Santona – EVP, General Counsel & Secretary
Pete Bensen – CFO
The information contained in this presentation contains certain forward-looking statements which reflect the management’s expectations regarding future events and operating performance and speak only as of May 22, 2014. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to differ materially from those expressed in or underlying are forward-looking statements is detailed in the Company's filings with the SEC, such as its annual and quarterly reports. Access our SEC filings by going to www.aboutMcDonald’s.com/mcd/investors. Our website also includes reconciliations of non-GAAP financial measures we mentioned in our presentation if any to its corresponding GAAP measures. Those reconciliations may be found at www.investor.McDonald’s.com.
Well, good morning. Good morning, and welcome to McDonald's Annual Shareholders Meeting. So I now call this meeting to order.
Call is order Mr. Chairman.
Do I hear your voice on the – on the right here?
Yes, it’s my voice.
Mr. Glotzer [Ph] is a great affricate for corporate governance and we respect that. And in fact, we are delighted that you are here and Mr. Glotzer [Ph] you are offering your proposals, the shareholder proposals which we will be bringing you to the microphone within the next few minutes, you’ll be the first one to recognize, so, thank you.
(Inaudible) Shareholders likely to have a meeting at 10 o’ clock, now the clock is (inaudible) Mr. Chairman.
You know, it’s my – ironically, it was my understanding that Mr. Glotzer really wants the meeting at 7 o’ clock and we happened by – by having at 8 ‘o clock, thank you Mr. Glotzer. We appreciate the rest of you here, patience and arriving to the meeting this morning. There may have been a little traffic, which perhaps was somewhat challenging.
So, in addition to everyone here, we are joined by those of you listening on our webcast. I am also pleased that students from Aerial Academy are here with us today. For those in the room, you have a copy of the agenda for our meeting today and information about our procedures.
With me on stage are President and Chief Executive Officer, Don Thompson; our General Counsel and Corporate Secretary, Gloria Santona and Chief Financial Officer, Pete Bensen.
Now Don Thompson will discuss McDonald’s performance and plans in a few moments, following the presentation of the proxy proposals.
The Board in its oversight role believes that Don and his leadership team are doing the right things to move McDonald's forward in today’s challenging environment. You can also be assured that your Board continues its commitment to good corporate governance and management oversight.
The Board is comprised of a diverse independent minded and experienced group of business leaders. All of whom remain committed to representing you and enhancing shareholder value.
So I am now pleased to introduce our Board of Directors. And as I introduce our individual members, please hold your response until everyone has been presented. In addition to Don Thompson and the Directors are, Susan Arnold, Operating Executive Global Consumer and Retail Group of the Carlyle Group and a nominee for election of this meeting.; Rob Eckert, Former Chairman and CEO of Mattel, Inc.; Rick Hernandez, President and CEO of Inter-Con Security Systems and non-executive Chairman of Nordstrom Inc.; Jeanne Jackson, President of Products and Merchandising for NIKE, Inc.; Rick Lenny, operating partner of Freidman, Fleischer & Lowe LLC, and a nominee for election at this meeting; Walter Massey, President of the School of the Art Institute of Chicago and a nominee for election at this meeting; Cary McMillan, CEO of True Partners Consulting and a nominee for election at this meeting; Sheila Penrose, Non-Executive Chairman of the Board of Jones Lang LaSalle, Incorporated and a nominee for election at this meeting; John Rogers, Chairman and CEO of Ariel Investments, LLC and a nominee for election at this meeting; Roger Stone, Chairman and CEO of KapStone Paper and Packaging Corporation and a nominee for election at this meeting and Miles White, Chairman and CEO of Abbott and a nominee for election at this meeting. I would like the directors to please stand and be recognized. We appreciate your service and your commitment.
Thanks to all of you. And we are also delighted to have with us today, retired Vice Chairman and CEO, Jim Skinner, Jim, we are so happy you are here today.
And I’ll now turn to Gloria Santona, our Corporate Secretary to describe our procedures.
Thank you, Andy. I can advise that a quorum of the company shares outstanding is present to conduct the meeting. The polls are open and we will close following the presentation of the proposals. Our order of events is as follows:
The Chairman will introduce each proxy proposal, and after all of the proposals have been presented; we will ask if anyone has any questions or comments on the proposals. So that as many shareholders as possible have an opportunity to speak, we ask that you limit any comments or questions to one proposal and to no more than one minute.
I also direct your attention to the rules of orders that are printed in your program. Following the presentation of all the proposals the Chairman will ask for a motion and a second on all the proposals at one time. If you have not already voted your shares and need a ballot please raise your hand and an usher will provide one to you. If you have already submitted your proxy, you do not need to vote by ballot. Broadridge Financial Solutions, the independent inspector of election receives and tallies all votes.
I will now turn the meeting back over to our Chairman for the presentation of the proposals.
Well, thank you, Gloria. So our first order of business is the election of Susan Arnold, Rick Lenny, Walter Massey, Cary McMillan, Sheila Penrose, John Rogers, Roger Stone and Miles White as directors.
The second proposal is an advisory vote on 2013 executive compensation. The third proposal is the Approval of Performance Goals for Awards under the McDonald’s Corporation 2009 cash incentive plan.
The fourth proposal is the approval of Ernst & Young as the company’s independent auditor for 2014. And the fifth proposal is an Advisory vote on the shareholder proposal.
So now, it is my pleasure to present Mr. Martin Glotzer who will present the proposals in two minutes or less, Mr. Glotzer?
Thank you, Mr. Chairman. Our proposal is on the Proxy Statement on Page 45. That record indicates that I read the proposal and I read the reason and I have a few comments and that to sign the proponents I have the final say after anybody else makes the comment. The number first thing we want to thank all the shareholders to take the time to vote on this proposal, but especially to ones who voted yes.
The second I made, that they make in a lot of shareholders meetings that proponents of shareholder proposals are the distinctive advantage, they don’t have the funds, people with lot of funds that the management uses to solicit those votes.
We believe that if the proponents had access to the management’s funds, company funds, the percentage of our votes will be more increased possibly voting for approval where the distinctive advantage and I believe in time the rules of the SEC will be changed so that proponents have access to company funds that make it an equal playing field. Thank you.
Thank you, Mr. Glotzer. Are there any questions or comments on any of these proposals?
My name is Sriram Madhusoodanan. I am with Corporate Accountability International. I have a question related to the advisory board on 2013 executive compensation. As you know, we work with thousands of parents, health professionals, educators and communities who demand an end to McDonald’s abusive practices that devastate children’s health and disregards social justice.
Year-after-year, you tried to deflect this growing concern with halfhearted – and year-after-year we are telling you it’s not enough. This corporation prioritizes profit over people whether it’s predatory marketing to kids and in communities that already see soaring rates of diet-related disease, undermining your workers are driving the slew of abuses throughout the food system.
For instance, while you choose to spend billions on athletic sponsorships and other marketing tactics to hook more kids on junk food, increase executive compensation, many of your employees can barely make a meat on poverty wages. When will this corporation commit to ending the on-flood of abuses that harm its workers, children, and our communities?
Thank you for your comments. Are there any further questions?
Yes, Mr. Chairman.
I was talking on the election of directors.
The question request to directors, actually since the shares are fortunately above $100, we make a request that the board of directors consider splitting the stock. Thank you.
Thank you, Mr. Glotzer.
Yes, I have a question. My name is Kacey Hynes [Ph] and I am a mother from Lexington, Kentucky. I am here to address proxy proposal number one. The election of director of nominees, with a family history of Type-2 diabetes, it’s an important to prevent my children from getting on fast food and sugary drinks.
We don’t eat at McDonald’s, but that’s not enough when Ronald McDonald is the Joe Camel of fast food. I can and I do turn off the ads at home that parents like me are undermined when we used to go to market with kids and reach them behind our backs. Fast food fundraisers and Ronald McDonald in migrates are examples of marketing massive than other ones that I’ve seen in my community.
There is a movement at all levels of government to make our classrooms and places where kids are bombarded by junk food brands. What will you do to stop undermining public health advocates, parents and elected officials who are working to make schools free at fast food marketing?
Okay, thanks. That question will be – you can direct during our business section.
I would like to know for the voting on the election of director nominees before we make that vote.
Don, would you like to respond to that?
Thanks for the question, Kacey. And hopefully we will get a chance to address some of these in the business session as well. And I’d like to maybe address the last two points, both together. At McDonald’s we are not as was mentioned predatory or out focused on marketing to kids alone.
As a matter of fact, if you look at all of our marketing, Ronald McDonald which will come up I’m sure, has been an ambassador for the Ronald McDonald House Charities for years and years. When it comes to the marketing that we do, if you watch our marketing, we have had a commitment with the food and beverage initiative, we’ve got a commitment with the Clinton Global initiative and what we were tempted to do is to try to make sure that we are including food within our meals and in our advertising that is enhancing fruits and vegetables, particularly fruits, particularly apples.
You’ll hear some more about this later with our yogurt penetration, relative to what we are trying to do. We have made some very substantial moves in this arena. As a parent, the other thing that I sometimes hear is, you guys are predatory – certain individuals. As a parent we wouldn’t do that, not only that, but we are people. We do have values at McDonald’s and all of us are parents.
And so, for those who have challenges with our menus or the choices, that we’d love to hear the feedbacks and we’ll do everything we can to try to address those as we look at the menu pipeline and portfolio, but we’ve been very, very responsible and actually if you look in a broader context.
We’ve been one of the strongest movers relative to moving forward nutrition whether it be dairy, whether it be relative to apples, whether it be relative to our actual happy meal advertising. And so we are going to continue to do those things and we will continue to market responsibly to whomever it is that we market to.
And everyone should understand and know that and that is the commitment by not only myself, it’s also by our entire Board. We discuss this and by our senior leadership team. So appreciate the questions, appreciate the concern and when it is a genuine concern as it has been stated, we want to have to be part of a solution. So those who might state in a slightly different way, you can have some dialogue with some of our folks post the meeting as well.
Don, thank you.
I have a question on for directed at the proposed board member, number one. I am a mother of three small children and professional blogger. I’d had a love at care with McDonald’s since I was a younger. My meal of choice was the cheese burger happy meals, I am sure guys get it.
But, when I was a little girl, I associated happy meal with happiness and as a child, that led me to an adult and I blew up all the way to a size 22 which is about 100 pounds heavier than I am today. The day I swore off McDonald’s and soda was my first step in retaining my health.
I did so, because I wanted my children to have a better healthier future. But my battle with McDonald’s didn’t stop at my refusal to eat at or feat it to my family. Don Thompson, Board Member, you are marketing to my children without my consent on websites with illegal characters and even with their school report cards.
My children are too young to understand what marketing is. So as you continue to bombard them through their peers, television, the internet, schools and public spaces, I fear eventually.
I am – I must interrupt you.
I am going to ask a question, I am right there in seconds and the reason of classroom marketing that would assume my question is…
Here is my question.
My question is, since I don’t have the upper hand, you guys do as backed up by research, why don’t you guys can shut down happymeal.com?
Thank you for your comment. Okay, if there are no further questions, is there a motion to move on all of the proposals? Your Board of Directors recommends the vote in favor of the election of all director nominees and in favor of the other management proposals. And the Board recommends the vote against the shareholder proposal.
The reasons for the Board’s recommendations are outlined in the Proxy Statement. If you are voting at the meeting, please complete and sign your ballot and motion for an usher to collect it. And if you have questions in the general Q&A session, with done and that you have not yet submitted please hand those to the ushers as well.
Again if you have already submitted your proxy, you will not need to vote by ballot. The polls are now closed. And I will now turn the meeting over to Don Thompson for remarks on McDonald’s’ business.
I also want to take this opportunity to thank Don for his strong leadership and his passion for the brand. Don is a tireless champion for McDonald’s who epitomizes integrity and always doing the right thing for our business, our people and our customers. Ladies and gentlemen, Don Thompson.
Well, thank you, Andy for that kind introduction. Since, we’ve already been off to a quieter start, Andy to you. You are just a true partner to me. So all of our senior leadership team to all of us McDonald’s, you are trusted advisor to us and I want to thank you.
I really, really want to thank you for all of your support. Also to our Board of independent directors for your outstanding guidance that you give us and the insight that you bring, you all are truly tremendous and you do that on behalf of this brand and our shareholders, and for that, we appreciate and salute you as well.
So all of our shareholders that are here with us today, I want to let you know how much we appreciate you for being here. I know that we have a few extra folks outside. Thank you for your patience. I also want to thank you for your investment and your confidence in McDonald’s.
I’d like to begin by recognizing our senior management team; please hold your response until everyone has been introduced. On stage with Andy and me are Pete Bensen and Gloria Santona. The team also includes Jose Armario, Executive Vice President of Global Supply Chain, Restaurant Development and Franchising; Bridget Coffing, Steve Easterbrook, Senior Executive Vice President and Chief Brand Officer, Rich Floersch, our Executive Vice President and Chief Human Resources Officer; Doug Goare, President of McDonald's Europe; J.C. Gonzalez-Mendez, Senior Vice President of Global Corporate Social Responsibility, Sustainability and Philanthropy; Erik Hess, Senior Vice President Consumer and Brand Strategy; Dave Hoffman, President of McDonald's Asia-Pacific, Middle East and Africa; Ken Koziol, our Executive Vice President and Chief Restaurant Officer; Adam Kriger, Senior Vice President of Corporate Strategy; Atif Rafiq Senior Vice President and Chief Digital Officer, Jim Sappington, our Senior Vice President and Chief Information Officer and Jeff Stratton, President of McDonald's USA. I would like to recognize, Tim Fenton who will be retiring after 41 years at McDonald’s. Tim has been a partner to me and to all of us. He started his crew and most recently served as the company’s Chief Operating Officer. McDonald’s has benefited tremendously Tim, from your experience, from your expertise, from your global knowledge and your proven track record of success. You will certainly be missed buddy, you will be missed.
So, if I could, I’d like to ask all of those members of the senior management who are here today to stand and please be recognized.
At McDonald's we are proud to serve about 70 million guests in 120 countries around the world every day. Everything that we do begins and ends with the customer. That’s why our system works together to serve great tasting food and beverages. To always be convenient and affordable. To provide opportunities that open doors and to be a good neighbor in our local communities around the world.
The McDonald’s system of owner operators and our supplier and agency partners and company employees is intensely focused on more intimately knowing, satisfying and connecting with our customers. Our owner operators are one of the world’s largest networks of independent businessmen and women. Collectively, they own and operate more than 80% of our restaurants around the world and about 90% of our restaurants here in the United States.
In addition to our owner operator our outstanding network of suppliers enables us to deliver safe, high quality products to more than 35,000 restaurants every day. And our communications and marketing agency partners help us to responsibly and appropriately share the McDonald’s story.
We are also proud of the approximately 1.8 million employees who make the difference on behalf of our brand every single day for the company and our franchisees. They are the ones who make those all-important connections with our customers the ones who create memorable experiences day in and day out. McDonald’s is often a first job for many that are entering the workforce. In our company-owned U.S. restaurants which is a microcosm of the overall McDonald’s landscape.
About one-third of our employees are ages 16 to 19. Nearly, 60% of our hourly employees are 24 years of age or younger. And about 70% of our workforce is part-time, many of whom are just getting started. We are proud that we and our franchisees provide training and resources that help open the doors of opportunity that many of us have been blessed to experience.
So whether through courses at our seven Hamburger University locations around the world that count to a transferable college credit, whether it’s our English Under the Arches Curriculum that has helped more than 2400 supervisors and managers gain proficiency in English and more importantly confidence in being a business leader or the efforts of McDonald’s and its franchisees to actively recruit veterans as part of our ongoing commitment to the Joining Forces Coalition led by First Lady Michelle Obama and Dr. Joe Biden.
There is no better testament to McDonald’s commitment to employees and the fact that in the U.S. alone, almost 50% of our general managers in our company-operated restaurants started as hourly employees. So did about 60% of our owner-operators some of whom are second or the third generation to work in their family businesses.
What’s more, we are consistently recognized as the best place to work in many countries around the world. Offering opportunity is a part of the McDonald’s heritage, it’s part of who we are and something that we are passionate about doing and something that I am very, very proud to share with all of you.
In 2013, we increased global comparable sales by 0.2% and improved system-wide sales by 3% both in constant currencies. We also grew operating income 3% and delivered 4% growth in diluted earnings per share, both in constant currencies. Additionally, we returned $4.9 billion to shareholders through dividends and share repurchases.
And while some results fell short of our expectations, amid challenging dynamics, we remain confident in the underlying strength of our system. Our long-term performance is truly a testament to our unique and resilient business model. Our talented and aligned system and our broad and deep experience is in many different operating environments around the world.
The potential to continue growing our brand and driving enduring profitable growth is significant, both in the short and in the long-term. We have evolved the framework for our client to win to even more strongly emphasize our commitment to leading with the customer as we strive to create experiences that our customers will notice, that our customers will appreciate and that they will feel good about rewarding us with their business.
We will continue to build on our core McDonald’s strengths. As we remain focused on those strategic growth priorities that support what our customers want most from us. And that’s providing their favorite food and drinks, creating memorable experiences for them, offering unparalleled convenience and being a trusted brand.
Our first strategic priority is about food and drinks and being our customers’ favorite. Our customers want to feel good about the great tasting food and beverages that they can get at McDonald’s. You see, we are a true restaurant at McDonald’s. Every day, we cook and prepare beverages.
Yes, we actually cook in our restaurants, burgers, chicken, fries, we crack eggs, we toast muffins, we make salads with fresh vegetables. When you are in our kitchens, you feel the energy. You smell the coffee brewing and the meat on the grill and whether it’s classic favorites like our Quarter Pounder or Egg McMuffin or fresh new choices like our McGrath or McCafe beverages, we are committed to providing choice and variety for every taste for our customers.
Our second strategic growth priority creating memorable experiences reflects that life truly does happen in McDonald’s. It’s about being easy, fast, accurate and friendly and delivering the consistent quality services and cleanliness along with the value that our customers are going to expect.
It’s also about a more relevant and meaningful way to engage with our customers and it’s about being an even greater part of their daily lives and sharing that warm personal experience that evokes our fun and youth of spirit at McDonald’s. You see that’s the essence of McDonald’s and it’s the heart and soul of our brand that always has been.
Our third strategic growth priority is offering unparalleled convenience. It’s about making an easy and affordable for our customers to enjoy McDonald’s their way, whatever that might be, that’s why our restaurants are open longer in more markets and while we continue to strategically open new restaurants while refreshing and re-imaging our existing restaurants.
Now, earlier this year, we opened our first restaurant in Vietnam and I have to tell you haven’t been there, it was electric. The passion that we have for the brand and our customers and the commitment we have to them there is nothing like it. You can feel it all over the system from our newest locations in markets as far away as Vietnam through our owner-operated in mature markets like the United States and across the globe.
Being convenient also means that we must engage with our customers wherever they are in the world. It’s the reason we created a global digital function last year led by Atif, and empower this team to develop a more cohesive approach to our digital strategy and execution across the system.
More than ever, we are leveraging the great digital work that’s already happening around the world in places like France, Australia, Denmark, and also in Sweden. For order kiosks, mobile ordering and one-to-one consumer engagement, we are creating increasingly more personal dialogues with our customers and making McDonald’s even more assessable in ways that already resonate with our customers.
And finally, our commitment to being a trusted brand. I am very proud of this one. We do more than serve delicious food at McDonald’s. We also stand for making a positive difference. We provide real jobs that lead to real careers and we stand for opportunities.
We make a difference in our communities and for the world at large and we know that our business and our brand are inextricably linked. And we believe that making a positive difference contributes to overall success. At McDonald’s, collaboration with a wide range of experts and NGOs has been and continues to be a key to our progress.
One prime example is our collaboration with the global round table on sustainable beef. Another one is the worldwide life fund and others in the industry to advance the sourcing of sustainable beef. Thank you all back there.
So, back on sustainable beef, few global companies have such an awesome opportunity and a responsibility as we do at McDonald’s. This fall, our charity of choice Ronald McDonald House Charities will be celebrating our 40th anniversary.
That is from one house in Philadelphia in 1974. Ronald McDonald’s has charities that grown to 336 Ronald McDonald’s houses, 200 Ronald McDonald’s family rooms, 51 Ronald McDonald’s care mobile, rest the non-profit organization that also focuses on the needs of children and scholarship to students across the United States.
Every year, Ronald McDonald House charities make the real difference in seven billion children and families around the world. And while our business maybe one of the more well-known ways in which McDonald’s supports communities, it’s not the only way.
Last year, we also announced a powerful global partnership as I mentioned earlier with the Alliance for a Healthier Generation, which is founded by the American Heart Association and the Clinton Foundation.
These are both organizations that have really taken the time to get to know our brand the truth about our brand and what we actually stand for in communities around the world. We are committed to increasing customers’ access to fruits and vegetables in 20 of our top markets which represent more than 85% of our global sales.
Combining forces with the Clinton Foundation means, we can make an even more substantial and positive impact on families and children while we continue to grow our business. To underscore the importance of this new relationship, let’s take a look at what former U.S. President Bill Clinton had to say about our commitments last fall.
At McDonald’s many people have seen the signs and say billions and billions served in the past. We don’t have those signs anymore. But today, we talk about billions and billions served in this no longer just hamburger, it’s about fruit, it’s about vegetables and other choices as well.
There are farmers and ranchers and fishermen and they are critical part of our success and our supply chain and as great chef will tell you good food starts with great ingredients. That’s why we are proud to buy many of our ingredients from the same family farmers and food suppliers that many of you do in the grocery store including beef, chicken, strawberries, potatoes, coffee and crisp Michigan apples.
In fact, with us here today are Mike and Lorraine Dietrich from Dietrich Orchards. This is the sixth generation family farm and one of several Michigan orchards that supply us more than 20 million pounds of apples for McDonald’s happy meals every single year. Mike and Lorraine, I know you are here. Thanks so much for all that you guys are doing.
In fact, since we began and made our commitment relative to happy meals, and we began automatically including apple slices in every happy meal and mighty kids meals, we provided at McDonald’s more than 1.1 billion bags of apple slices to our youngest guests. Again, thanks Mike and Lorraine, we appreciate you.
Our U.S. business also recently announced the beginning of this summer, we will offer a new choice in our happy meals and our mighty kid’s meals, Go-GURT low fat strawberry yogurt. Now this is made exclusively for McDonald’s and this tasty new offering on our menu has 25% less sugar than the leading kid’s yogurt.
In addition, McDonald’s new happy meal character happy and he really is a happy character. He is not scary, we meet every nine and chit chat a little bit, but happy does represents fun and wholesome food and beverages of choices.
Happy will promote the consumption of fruit, vegetables, low-fat dairy and water or juices. Happy is also a great advocate for fun fruits and vegetables everywhere from France to Latin America and he has been that way for several years now. So we are really glad that Happy is now coming to the United States as well to help us in our efforts.
Our commitment to being a trusted brand is all about knowing what’s important to our customers and understanding other priorities in line with those things that are most important to us and our shareholders. In fact, we launched our first global social responsibility and sustainability framework last month as well.
The framework is organized around five key pillars, food, sourcing, people, planet and communities. These five pillars are most important to our business and they matter most to our customers. We are determined to keep doing more at McDonald’s. We have an incredible iconic brand that we will continue to leverage as we accelerate our growth and deliver the most meaningful impact for our customers and our business and for our shareholders.
And we are committed to doing this in an even more focused way as we strive to achieve our brand ambitions of serving good food through good people and while being a good neighbor. So providing our customers’ favorite food and drinks, creating memorable experiences, offering unparalleled convenience and being embraced as a trusted brand.
These are McDonald’s top priorities. As I look forward, I am even more energized by our opportunities to become an increasingly relevant and memorable part of our customers’ daily lives.
And I am more confident than ever in our ability to grow our business as we continue to strengthen the connection that we have with our customers. I want to thank you all, all again for your investment and your confidence in McDonald’s. And now I’d like to bring our Board Chairman, Andy McKenna back to the podium.
Thank you, Don. We have received the preliminary voting results from an independent inspector of election. Final results will be posted on McDonald’s website after all the votes have been tallied and certified. The preliminary results are as follows: shareholders have elected each of the director nominees with the support of at least 96.4% of the shares voted. Shareholders have approved the management proposal related to an advisory vote on executive compensation with the support of 93.5% of the shares voted.
The shareholders have approved the Performance Goals Awards under the company’s 2009 cash incentive plan with the support of 96.9% of the shares voted. Shareholder have approved Ernst & Young as the company's independent auditor for 2014 with the support of 98.8% of the shares voted.
On the advisory shareholders proposal requesting the ability for shareholders to act by written consent has not been approved by shareholders receiving the support of 41.7% of the shares voted.
So thank you all again for your investment and support of McDonald’s. The Annual Meeting is now adjourned. And at this time, I would ask Don to come back up and lead a general question and answer session for the next 20 minutes. Don?
So we have quite a few questions and what we’ll do is, again, we are trying to make sure that we are going to do this in a straighter manner as possible. For the last several years, we’ve received feedback about the Q&A process. So we urge you – we understand it is not always easy to get everyone’s topic on the board.
So in an effort to hear from as many people as possible and cover as many topics as possible, we are trying a new approach this year. So I know you will give us feedback on it post the meeting. As you know, we have those of you interested in asking a question, complete a question card before the meeting began.
I have the cards, when I call your name, please proceed to your microphone to introduce yourself and ask your question. Please limit your question to one minute and one topic. Please do that out of respect all the shareholders. In the interest of time, questions on similar topics will be consolidated and we will try to give an answer on that one.
In addition, we will provide individual responses to shareholders whose questions are not addressed during the meeting. Our goal is to accommodate as many individuals and topics as possible during the next 20 minutes. So, our first question is going to be from Paul Shapiro.
And Paul, if you wouldn’t mind coming up to one of the mics here. Paul is from the Humane Society of the United States and also the second one – excuse me, if I mispronounce your name, Tom Wakowitz [ph] and it’s relative to a menu item for breakfast. And Tom, if you wouldn’t mind approaching the mic on the other side. Paul?
Good morning Don. Thanks so much for calling first. I appreciate it. Paul Shapiro with the Humane Society of the United States. Two years ago, McDonald’s made an announcement that it was helping its pork suppliers moving into the 21st century by phasing out a practice that many of divided as unsustainable including McDonald’s deriving it as such where they take mother pigs and confine them in cages for their entire life where they can’t even turnaround.
McDonald’s announcement ushered in a wave of announcements from other retailers in this sector with similar commitments to face this practice out. McDonald’s took a leadership position on that. My question for you on this particular topic is, in the last two years, what has McDonald’s done to meet its goals? Is the company is on track to meet its goals to phase out the inhumane and unsustainable practice?
And more generally speaking, Mr. Thompson, where does animal welfare rank in your priorities regarding corporate social response building and responsible business practice in general? I know that the topic that you guys released, your report on and I congratulate you for that. And so what progress does the company made on phasing out grades and two animal welfare as far as the CSR initiatives are concerned? Thank you.
Thanks, Paul. I know that – you know that we were very special we made the commitment. You and several others were part of that. We continue to move toward that. We’ve had quite a few sessions. We also – with, not only producers, but also with some of the NGOs that support the movement. One of the things we can do is, McDonald’s just try to facilitate bringing people together toward the middle because both ends have very specific needs that they like to have met.
As you know, this is supported by our Animal Health and Welfare Council and so that piece has started. We also know that through Bob Langer and through Joe Scanders, they’ve been giving you a bit of an update as to the progress we are making. We committed it by 2022, we like to be phased out and we are still moving in that direction.
So specific thesis on all the meetings, Jill could give you the updates on that, but we are very, very focused on continuing to move forward. Relative to where animal welfare sits in our overall sustainability commitment, clearly it’s right there to under the sourcing aspect of that.
And we were very, very specific about food and sourcing at the top of our list and it’s not – I will tell you, it’s not just the gestation talks, we talked about beef sustainability as well, we’ve also talked about some of the other things that we are doing and a lot of it’s outlined in the corporate social responsibility report. Thanks, Paul. Tom?
Thank you. My name is Tom (Inaudible) I have a food question. I know that McDonald’s and some of their carriers, they offer biscuits and gravy and other menu for the breakfast. I’d like to see it may be offered at all of the restaurants throughout the U.S.?
Thank you very much, Tom. This is, Jeff Stratton is here, I know, along with Greg Watson who had a menu in the U.S. they are sitting over on this side. I am actually looking right at them now. Frankly, I love our biscuits and gravy. One of the challenges is, whether or not in certain markets there is enough customers that will embrace the menu offering.
And so, that’s typically what happens, and it’s usually a local decision, there is 22 different regions in the U.S. We’ve kind of broken the U.S. apart and in those markets, they are going to do what we call certain products through shelf promotions or local promotions. So you will see in some of our southern markets like the chicken biscuits, which goes much better than it might go out in some of the west coast markets.
They go better in certain parts of the country than they do in other parts of the country not as well in the south, this gets much stronger in the south. So, what we will do, is I notice that, take that into consideration and we will continue to re-look at that. But thank you for being a supporter of the biscuits and gravy.
Sriram, you were up a little bit earlier and I am hoping you got your question in. So we are going to ask a couple of other people. Sally, and again I hope I get this right, Sally (Inaudible) and it’s relative to provincial authority and also Ricardo (Inaudible) Ricardo, would you mind taking the second mic?
Hello. My name is Sally (Inaudible) I am a mother of two, a blogger and a registered dietician. If McDonald’s advertising continues to target children you will lose the trust of mothers and dieticians no matter how much you try to report us. You claim you care about kids.
Your ads during Winter Olympics acquainted earning a gold medal with eating a Chicken McNugget. You say it’s about families, yet you continue to use Ronald McDonald to lure children. In my own neighborhood of Columbus, Ohio, my children pay no attention to McDonald’s until a giant balloon of Ronald McDonalds appeared on its roof one day.
Moms are watching and what we are seeing looks like what tobacco companies did a couple of years ago, using Joe Camel as a kid-friendly mascot for cigarettes. Mr. Thompson, you claim you have a commitment to moms and families. So how do you justify this marketing to children?
Thanks for the question, Sally. It’s amazing this alignment on Joe Camel between several of you. Are you all don’t know each other? Okay, the – this is what I would say Sally – the, and we said this quite a few times. Many people will say to McDonald’s, your predatory marketing to children.
I have to say it again. Every last one of the folks who are here as part of the senior team ahead of our menu team, all of our folks are parents as well. It would violate a person’s value set to go out and do something that we hurt children. I mean, it will be direct opposed to all of the things that we do in the broader set of our business also relative to whether it be Ronald McDonalds houses or kids – and fruits and vegetables, we want kids to have fun also.
I will say that and as a parent, my children ate at McDonald’s. They are here today. They are quite healthy. My daughter is a track star. I can’t run too much more because I’ve had six knee surgeries plan involved but she can do a lot of things. We are not predators. So, I just want to put the humane side, and it’s because often we say, with your said, you claim, you claim, you claim, it’s the truth.
We are not predators. So, it’s is not a claim, it’s just the truth. Relative to our marketing, we have been marketing responsibly and as I mentioned, whereas the children food and beverage initiative, if you look around the globe, the things that we do in our marketing, you don’t see Ronald McDonald eating food. You’ll see Ronald relative to two things. Ronald McDonald’s House Charities primarily and yes, kids are – and schools or in our restaurants, you never see Ronald because most of the schools at this point aren’t requesting Ronald, and we don’t put Ronald out in schools.
But you will see Ronald at our restaurants when someone calls that a parent who say, we’d like to have a birthday party at McDonald’s and we’d like to have Ronald McDonald there. And so, we try to make sure we do that. It’s fun for kids. But that’s it, it’s not intended to be anything other than fun for kids. And so we will continue to do that. We’ll continue to support our nutritional goals relative to more fruits and vegetables.
We’ll continue to take the feedbacks. We want the feedbacks especially from those who really want to help us get better at McDonald’s. That’s really important. If you really want to help us get better, I’ve spent the last 24 years in my life, trying to help McDonald’s and trying to get better and McDonald’s has been great to me as well. All of these folks have, all of our directors spend their time trying to help us be better.
So we are a company that has integrity. I wouldn’t be here if that was not the case. So I thank you for your question. We appreciate it. We will continue to take the feedbacks and we will continue to try to have more choice, more variety and we will be responsible as we market to whichever groups that we market to. Thank you. Ricardo?
My name is Ricardo (Inaudible) I came to the United States from El Salvador in 1993 and got my first job at McDonald’s in Los Angeles. McDonald’s gave me training and financial assistance to go to college and into graduate school as I acquired skills and experience, I was given opportunities to move up in the ranks and turned that first job into a career.
Today, I am an approved registered applicant ready to purchase my own McDonald’s restaurant. My story is not unique. I know many others who owe their success to McDonald’s. This is part of the company’s culture and history. And I am grateful – I am grateful to McDonald’s and optimistic about its future. Don, I ask you to continue offering the opportunities that were offered to me to current employees so that they could also grow and drive their existence. Thank you.
Thank you. Ricardo, thank you very much. I wish you absolutely the best in registered applicant program and you represent a lot of people who often their voices are unheard. So, very nice to hear from you. Thank you very much. We got questions from Fred Siba [ph] relative to the dollar menu and also from Eric Doworsky [Ph] relative to where do you see McDonald’s relative to veterans. So, if you guys wouldn’t mind, please.
Yes I am Fred Siba [ph].
We dine in the New York City and Manhattan for breakfast and we order of the dollar menu and nothing is a dollar. So why even have a dollar menu?
Fred, where are you from?
Columbus Circle, we have friends near Columbus Circle and everything is 149 to $3 on the dollar menu.
Fred, if you wouldn’t mind, immediately after would you find a gentlemen over here by the name of Jeff Straton and give him a little information on that. I will say this Fred, dependent upon, being a franchised organization, we can’t control the price of any franchisee.
We can’t control the prices. What happens is, there is a collective – body as to the administrative and the advertising body, they will get together and discuss what kinds of programs we should offer and they are up to individual franchisees to take that. We’ve been really happy that most of the franchisees have definitely supported dollar menu and dollar menu and more.
With the evolution of dollar menu and more, we know that there is tier pricing. So, yes, some dollar based products in there. There are certain areas I would tell you that based upon the real estate cost and the operating cost in certain areas, they may decide not to adhere to the dollar menu and more – most of the restaurants do but some may not. But if you wouldn’t mind, such places Jeff will be happy to see if there is anything that we can at least discuss and start to work with the franchisee but it is their decision.
Thanks, Fred. How about Langsten – oh, I’m sorry we got Eric Doworsky [ph] and Langsten Johnson up next. Yes Eric.
Good morning Mr. Thompson. So, I have had the pleasure of working to McDonald’s since I was 15, started as crew, worked my way up. I am now a Director of Operations for – and just eight stores. Through those 15 years, I also had the pleasure of joining the military when I was 17 having my parents’ permission of course.
So I had two tours, one in Iraq, one in Afghanistan and just finished my career there after 12 years. But, my question is, where do you see McDonald’s taking lead with regards to veteran employment now and into the future?
Thanks much for the question Eric and also thank you for your service to our country. I appreciate that. The – one of the things that we’ve done is, clearly at McDonald’s we have a great deal of respect for veterans. We have been a part of – as I mentioned, the White House joining forces coalition to create more jobs to veterans. And this is something that we are very proud as the U.S. company has made this commitment.
In 2013 I know the number was about 50,000 veterans that we had employed. We made a two year commitment to increase veteran employment or hire 100,0000 veterans which will be the most of anyone in the industry. So, we are very, very committed there and many people have asked what kind of jobs and so, they range, some come in who may have had experience and they may be accelerated in their developments to McDonald’s in the management positions and beyond.
Some may come in corporate level roles, others may come into hourly employee roles based upon their past experiences. So, we have a broad range, but we are working quite closely within that coalition and really, really very supportive to others. And Langsten? Hello Langsten are you from Ariel?
Very nice to see you Langsten. You look quite nice today.
Thank you. Being a vegetarian thank you for the current menu options. Are you considering more for vegetarian improvements such as Go-GURT?
It’s Greg Watson says, yes, we are, what’s the newest one? Yes, we will get a mic over to Greg Watson. Greg has the menu development for the U.S. while he is preparing the talk, I will say this, similar to the conversation on biscuits and gravy, what we’ll try to do is, it depends upon what customers want in certain areas.
So, we have markets and I have mentioned this like India, where we have 70% of our menu sales are vegetarian-based products. Clearly, no beef and in India, we have another big chunk is chicken. In the U.S., we will have to see whether or not customers will come to McDonald’s for the more vegetarian based offerings. We do have our salads and now you can the salads with or without the chicken.
We also have the wraps now, we brought those out you can get those with or without the chicken, actually it’s a really good wrap if you get it without the chicken with the base off. It really is very good, but great park phase and some of the other products that we have, but Greg can talk to you a little bit more.
As you pointed, thank you for your question, and you must be a really smart kid going to Ariel, great school. I think Don has already answered the question. But what I was going to say is we do have some great vegetarian options, we know that we need to add more. But you can our salads without the chicken and we have premium McGrath that we have developed where you can order those without the chicken and it’s a great vegetarian offer. And we are looking to add more in the future. So thank you.
We have a question from Tim (Inaudible) Pete, I think this was probably on beef, Tim you can if you wouldn’t mind come forward I think it’s relative to our stock price and then there is one from Gayle Johnson [ph relative to Styrofoam cup use. And Gayle [ph] if you wouldn’t mind coming forward as well. Gayle [ph], I think we will go to you first.
Thank you, first of all I want to say we are delighted, there is going to be a new ride on the downtown’s opening in Winfield we have groundbreaking in March and that was something to, that’s wonderful.
My family when we go to McDonald’s, we end up bringing home the meals, jugs and the salad things, and our cups, because there is no recyclable things right at the McDonald’s like I was here in the lobby, I noticed today that they have one that’s part for – parts for recycle ability.
Sweet tea comes in Styrofoam cups which are not recyclable and I know that coffee has to come with Styrofoam cups but – doesn’t. So I am requesting that, we don’t have Styrofoam cups and we don’t need them because you can have retained plastic cups that can be recyclable and I noticed McDonald’s does a great recycling – for boxes and everything else, but I think that we can do that.
Thank you, Gayle [ph] first of all, relative to the house, J.C. Gonzalez-Mendez is the President of Ronald McDonald House Charities and Linda is Susan Miller operate out of New York is our Chairperson for our RMH. So, glad to know there is a new house opening. On the cup piece, so, this is an interesting areas of the U.S. Just on the Styrofoam cup for sweet tea.
sweet tea originated from McDonald’s in the south. And in the south, particularly in areas where it came up, it started out in the Raleigh areas, in the Houston area, when they would take the paper cups and put them in the cup holders over the period of time in the humidity they would break down a bit and so, the franchisees there went with an – with a Styrofoam based cup to keep it cold and keep the cup together.
We are continuously looking at opportunities to change that. We did just change the – we call it a – polystyrene wrapped paper cup, we just changed that in the U.S. and we are going to all paper. So, we are eliminating the foam piece from the coffee cups. On the sweet tea ones, that’s a tougher one for us.
We will keep working on that and I am sure that Jeff and the team has taken in down and we’ll definitely look at that to see if there is a way to change that out. We do have the plastic cups as you all know. We are looking at ways to also make sure that that’s even more recyclable.
The plastic cups even sweat a little bit, so, we are trying to get those corrected a little bit better. The other thing that I’d offer is, in the U.S. one of the challenges we have unlike in some of the other countries, we need more recycling centers in the U.S. So, when you separate what you want to make sure is, you want to separate a restaurant, it’s separated throughout the rest of the recycle chain, and some countries want to separate it.
They have separate bins and everything that continues to be separated as it goes into a recoverability mode and recyclability mode. So one of the things we’ve got to work on to is partnering with others to create a more recycling center. So that when we do separate it’s done just get gets separated at the restaurant and then go back together because that will be recycled and it just be showing something and we want to make sure that we make the change.
Thank you very much.
Tim, I believe you had a question?
Hi, I am (Inaudible) and I’ve been stockholder for over 20 years. And I know the stock price has been right around the $100 – now a little bit over, and I was just wondering when the stock will get split if this is in the process?
Kim, thanks for the question and as Martin pointed out earlier, a decision like that is actually a Board decision. We talked about that periodically, But, at the end of the day, a split really doesn’t increase value. It takes the total value of the company and just divides it over more shares and actually when you add those more shares, you add additional costs.
So those are the different things we balance when we look at this and many in our industry are over $100 stock price and seem to be trading just fine. So, we periodically discuss it, but, I know, it’s a popular answer, but at this time, there is really nothing in the cards for that.
We have one from Bob Liking, on McDonald’s jobs and also from Reverent. Janet Wilson [ph]. If you all please approach to the mic.
How are you Bob?
Good, how about you?
I understand that McDonald’s is an entry job and there are opportunities to going through way up in the organization. And some day, I’d like to be considered for your job.
Bob, there are some days I am ready to give it to you buddy.
Thank you, Bob. I do believe and firstly, one of the things that we get to see that many people really just don’t get to see, and I think it’s a shame, but they don’t is that we travel around the world and so many of us do and is we are in the restaurants around the world. In the U.S. and other places, we see people will come in one time and you’ll see a person that was an hourly employed the last time you saw, this time as swing manager.
You come back a little later they moved into the management ranks. We happen to see them three or four years later and he maybe up here walking across the bridge they are up here for supervisors class, and later on, they may be coming in and they want to own their own restaurant.
I think that McDonald’s properly provides more opportunities than any place that I’ve ever seen in that regard. It doesn’t mean we don’t have opportunities. We’ve had people that have been outside, and you know what, we respect the fact that, they had some stay, they wanted challenges relative to wages. We continue to believe that we pay fair and competitive wages and we provide opportunities and we provide job opportunities and training for those entering the workforce and we are trying to be a really great employer. And McDonald’s has done this throughout a time and we will continue to do that.
That is a commitment from all of us. And so, Bob, hopefully, if you decide at some point, you would like to work at a McDonald’s down the road or something as you get a little older, right now you seem a little young in 16, but maybe you are, then please put in an application buddy, but I would tell you, Tim Fenton started as a crew person he is the Chief Operating Officer of the company.
Jeff Straton, started as a crew person, and hourly person, he is the President of U.S. business, J.C. Gonzalez started in Mexico as our first employee, all of us who are at management left certain roles, Doug left being an accountant to go in the restaurants to work, I left being an engineer to go in a restaurant to work.
We have so many of us, Kevin left being marketing to go back in the restaurants to work, Debbie Roberts is the number two person in the east division. She has left financial to go in to restaurants, Rick is the number one person in the east, he started in the restaurants from crew. McDonald’s has a great story and it’s the great story of diversity. So we will continue to try to make that possible. So, Bob, the spot will be ready for you. Yes, Dr. Wilson.
Let me first express our thanks to McDonald’s for our work of relationship across the years which encompasses, employment, management, development and investment in programs that support us used from employment to management and ownership. McLean was one of our founding board members with a major African American McDonald’s franchisee.
He modeled the McDonald’s process by hiring and mentoring hundreds of youth and young adults through the process. I also express sincere appreciation and thanks to the McDonald’s team including new downtown – for your unwavering support to our push for excellent college scholarships and collage run program.
That supports we’ve enabled to send several hundred energetic youth to college, many of these students have graduated and are presently in the workforce or they have completed graduate schools. Again, I have to thank you on behalf of our organization for your commitment to equity and fairness in education for minority students.
We will continue to work with you to reconcile any issues that affects your growth and capacity to serve, and one question I would have for you, are you planning to invest in stem education in the coming months and years, since stem is a very impactful part of our educational process in America and even around the world.
Thank you, Dr. Wilson, very, very much. And relative to what you all have done, push it has been impressive to see the students going to college and going on college visits many of them I know was the first time they’ve ever will have name who it’s like that to go our track.
So we will continue to support that. Relative to stem, there are some things that we are doing. We’ve got a much broader piece that you’d be hearing about in the near future, we call it arch wise opportunity and it’s going to be something that’s focusing on our existing employee base and how we might be able to help them. Some of them don’t have their high school diplomas yet.
Some of them don’t have the college degrees and so, we are going to try to do even more to be able to advance education in that way. We’ll take back the notion and we put a little more specific focus on the stem side of that as well.
Let’s see, we’ve got, – there is a question relative to – from the aspect of restaurant activity, not quite sure, Tim, I’d like you to come forward, I wouldn’t mind. And also, let’s see we’ve got, Sophie Stump, I think this is about the meeting time. So, Sophie, if you wouldn’t mind taking the other mic. Yes, Tim?
Just one quick comment, I was kind of hoping maybe next year, if you are going to have an 8 o’ clock meeting, is it something better than sugary pure cookies through breakfast down there, I mean, the apples are okay, we have nothing better choice than that, which you can come up with the rest of that.
We will take that into consideration, to try to maybe Egg McMuffins with something Egg White Delight or..,.
Something other than pure sugar cookies.
Yes, I have a business question, everybody else was talking about the company and the details, so I would – you are kind of a multi-national company and as an investor with my quality of life dependent on how my stock investors do.
I was kind of interested in how your perspective is against the international marketplace and then how you see this company growing in the world and the world growing around it? Is the economy coming back? Are we finding areas where there is more growth or less growth in the multi-national marketplace?
Thanks very much for the question. So, across McDonald’s right now, clearly, we are growing in a broad spectrum is one of the strengths of McDonald’s that we do have talented individuals and teams. One of the things that we’ve been able to do is, as we look at our development schedule for the future, a lot of this is skewed towards the Asia-Pacific, Middle East Africa area.
We’ve got two very large populations there being the Chinese population and the Indian population, also some other markets in Koreas and Malaysias of the world, Singapore, they are really strong markets for McDonald’s. Also, across the Europe, we still have growth in the major markets. There is potential growth further in the Eastern European markets.
The U.S. still has solid growth and we are still growing in Latin America. And so, we have more of a balanced approach across the globe. In the economy, there is still some consumer confidence, it’s a little challenging in some of the markets. I think Europe still has a high unemployment rate across Europe and the European countries.
We got a couple of markets that are very strong but a still high unemployment. In the U.S., I think we are starting to see, it’s kind of like you see a little bit coming back and then we saw retail sales a less soft here recently. But, I think by and large, we are seeing, it’s a little muted in terms of consumer confidence. But I am optimistic that it will come back. I think we have time for one more question. So, we’d love to take the question from at least, Sophie.
Sophie Stump, I am a shareholder. I live in South Holland Illinois. In the South Holland, McDonald’s is the greatest and I just want to know why you got the spectrum the leads for the – so early in the morning? And another question I had was, would you sort of being at our channels in South Holland did they started? So I was wondering why they’ve started because people used to enjoy that?
Thank you, Sophie, on that later one, Jeff Straton understands, is the one on a 159th Street?
Yes, 159 Cartage Road.
Okay, so they’ve got that one and they will check into that one.
We used to have really good times when nice people used to come in – we used to enjoy the afternoon.
Is the a company-operated restaurant or franchisee, do you know.
Well, I don’t know that too that we have breakfast there with coffee, we’ll take sometimes muffin rather than a cookie for us. So it wouldn’t be so sweet.
So, Sophie on that one, without giving away the menu pipeline, I think there is a couple of things that are coming down the pipe, but we will have to hold on for that one just a moment, but I think there may be some things coming down the pipe for you.
All right, and on the meeting time, I would definitely take that up with our Chairman and with the Board, and we will get back to you relative to the start of the meeting.
I really want to thank everyone for your participation today and for your investment in McDonald’s. I know that you will give us feedback on the way that this work for all of the shareholders. We thank you for that.
This does conclude today’s meeting and as I mentioned earlier, we will follow-up with any other questions that we didn’t get a change to address this morning. And so, thank you all very much. In addition, we do have a team in the back of the room available to talk, if you like to speak with someone today and you submitted a question there right in the back room waving their hands back there.
Thanks again everyone. Have a great day.