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As You Sow Flies The Flag Of Victory Over McDonald’s

McDonald’s is testing double-walled paper coffee cups at 2,000 of its restaurants, primarily on the West Coast, to replace the expandable polystyrene cups it currently uses. McDonald’s says it testing market acceptance, performance, and operational impact of the new cups.

The advocacy group As You Sow, which organizes shareholder resolutions at companies to improve environmental performance, is claiming victory, noting that this comes “in response” to a shareholder resolution it put in McDonald’s 2011 proxy. The resolution asks the board to issue a report on more “environmentally beneficial beverage containers” and the like.

When I asked McDonald’s if the action was because of As You Sow’s efforts, a spokeswoman responded, “This test is a result of our efforts as a company to continually seek more environmentally sustainable solutions.”

According to As You Sow’s press release, the measure received the “support of nearly 30% of total company shares voted.” That is technically true, but a somewhat flattering way of putting it. The measure received 23% “FOR” votes, 55.44% “AGAINST” votes, 21.57% abstentions. As You Sow’s 30% throws out the abstentions.

As You Sow says the 30% result is great for an environmental resolution. Perhaps. Its website also has advice on how shareholder proposals ought to be interpreted:

In most cases, an investor with 3% ownership in a company would be one of the top shareholders and thus even single digit votes may gain considerable attention from a company. Social proposal votes more than 10% are difficult to ignore and often result in some action by the company to address the shareholders area of concern. Votes that receive 20-30% or more have garnered strong support from mainstream institutional investors and send a clear cut single to management. Only the least responsive of companies is willing to ignore one out of every three or four of its shareholders.

I can go both ways on this. More than two thirds of the votes cast for the cup proposal didn’t even want McDonald’s to study paper cups. Would ignoring them somehow make McDonald’s super responsive to the wishes of its shareholders? On the other hand, it could be that some institutional shareholders reflexively vote these down because they see the shareholder proposal as a subversive tactic. These same shareholders might not object, or even notice, if McDonald’s management did a trial run of paper cups without proxy prompting.

If I were a McDonald’s shareholder, I might have voted for the measure as stated (why object to a study?), but I wouldn’t think that a major rollout of paper coffee cups would have much chance of success. We must remember that McDonald’s coffee is hotter than a thousand suns. (That might not be a scientifically precise statement.) Remember that lawsuit? This is probably why the company still uses EPS when it gave up on plastic packaging for burgers a couple of decades ago. A McDLT won’t burn you; the coffee will. I doubt a paper cup, even a “double walled” one, will contain the extreme heat quite like plastic. International Paper’s Hold & Go cup either is or is something like the cup McDonald’s will use. If the cup performed as well as plastic, the press release introducing the product probably would say so. It doesn’t.

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