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McDonald’s Corporation (MCD), Chevron Corporation (CVX): Are Activist Shareholders Good for Your Stock?

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Shareholder meetings are getting exciting again. Just last week a nine-year-old challenged CEO Don Thompson of McDonald’s Corporation (NYSE:MCD) with an impassioned plea to stop marketing to kids. At Chevron Corporation (NYSE:CVX) environmental and shareholder activists joined in an uncommon cause to ban company monies for political influence. Last fall employees disrupted the Darden Restaurants (NYSE:DRI) shareholder meeting to decry working conditions.

McDonald's Corporation (NYSE:MCD)

You almost feel sorry for CEOs as they face the pitchforks and torches. At McDonald’s these issues of nutrition and marketing to kids come up annually although a cute and articulate fourth grader, Hannah Robertson, attracted media interest this time. However, thisis small potatoes (pun intended) compared to some major shareholder propositions.

A case study of shareholder activism

A most interesting shareholder proposition was at Chevron Corporation (NYSE:CVX). Boston based environmentally responsible investment firm, Green Century Capital Management, aligned its interests with Richmond CA local environmental activists to ban Chevron from using company funds to influence political outcomes.

In question was Chevron’s record $2.5 million contribution to the Congressional Leadership Fund, a GOP SuperPac, during the last national election cycle. By no means is Chevron Corporation (NYSE:CVX) the only company to be challenged on political spending: rival Exxon Mobil Corporation (NYSE:XOM), Bank of America Corp (NYSE:BAC), and 3M Co (NYSE:MMM) are also facing shareholder ire over political spending.

Possibly the most controversial use of Chevron Corporation (NYSE:CVX) funds to influence an election was the $1.2 million spent on the Richmond CA mayoral election in hopes of ejecting Green Party mayor Gayle McLaughlin from office. (She still won). Her biography on the city website reads, “Gayle helped facilitate grassroots efforts calling for fair taxation that led to an historic settlement in which Chevron has agreed to pay an additional $114 million into the City’s general fund over the next 15 years (an average of $7.6 million more per year).” Ouch, no wonder she’s a thorn in their side.

A Chevron refinery fire there last August sent 15,000 to seek medical treatment, according to the Richmond CA city website. Recalling “Erin Brockovich” one resident claimed he would challenge CEO John Watson to drink a glass of the town’s water which he believes to be contaminated by Chevron Corporation (NYSE:CVX).

At the end of the day on May 29, it was all over and approximately 96% of shareholders voted against a ban on company funds used for political influence. Shareholders voted overwhelmingly against other shareholder proposals and voted for the company’s recommendation on all 13 proposals up for a vote. The status quo prevailed.

The status quo

When it comes to issues on social responsibility or corporate governance shareholder proposals (except those from big guns like Icahn, Loeb, Ackman, and Einhorn) rarely prevail. Investors may greet this with mixed emotions. On the one hand, shareholders had their say and the majority ruled but on the other, a company continues to do business in a manner distasteful to a socially responsible investor.

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