Axios Pro: Retail Deals

February 18, 2022

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Good morning, Retail Readers, and here we are again, another week in the bag.

What are you thankful for this Friday? I would hazard to say activist investors, as they give all of us plenty to chew on, and that's literally the case today.

🚨Situational awareness: There will not be a Retail Deals newsletter on Monday, as we honor Presidents Day. We'll be back in your inbox Tuesday.

1 big thing: Icahn's pig peeve and the era of ESG activism

A sow is confined to a farrowing crate, with bars to prevent the pig from turning around.

A sow is being held in a farrowing crate, which prevents the animal from turning. Photo: Christian Adam/ullstein bild via Getty Images

ESG investor activism is off to a hot start this year across the consumer and retail sectors, with Carl Icahn's move on McDonald's the latest example.

Why it matters: Environmental, social and governance issues spurred an increase in activist efforts in 2021 versus 2020. Separate reports from corporate law firms Skadden, Arps, Slate, Meagher & Flom and Sullivan & Cromwell project that 2022 will be higher still.

Catch up fast: When it comes to ESG activism, oil companies (to their own chagrin) have garnered most of the headlines.

  • Engine No. 1's bid last year to add three climate-conscious directors to the board of Exxon Mobil is touted as the most successful to date.

Driving the news: Icahn is preparing a proxy fight at McDonald's if the burger flipper doesn't stop using pork suppliers that allegedly house pregnant sows in small metal crates, Bloomberg reported.

  • In a twist, this time it's not about money for Icahn, as he only holds $25,000 worth of shares — it's about the humane treatment of pigs. McDonald's did not immediately respond to my request for comment.

What's happening: Activists have their eyes on a number of situations ranging the full spectrum of ESG.

  • In January, shareholders at Costco approved a proposal asking the company to increase emission reduction targets.
  • In early February, Legion Partners Asset Management called on Guess' independent directors to oust brothers Paul and Maurice Marciano over sexual assault and harassment allegations. Guess refuted those claims.
  • Unilever has dual issues. The company is being criticized by Fundsmith, its ninth-largest shareholder led by CEO Terry Smith. That claim is focused on sustainability to the detriment of business fundamentals, as Reuters reports. Unilever has also attracted the attention of activist investor Nelson Peltz, whose Trian Fund Management now owns a stake.

By the numbers: In all, 39 E&S proposals gained support in 2021, nearly double the 21 notched during a record 2020, and more than triple the 12 recorded in 2019.

  • 15 proposals were related to the environment.
  • 13 were focused on board and workforce diversity, as well as other employee-related matters.
  • 10 were tied to a company's political contributions or lobbying efforts and 1 fell in "other."

The big picture: Since the beginning of the pandemic issues from climate change to diversity, equity and inclusion have taken center stage, and are now puncturing U.S. board rooms via activist campaigns.

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