Welcome to McDonald's Annual Shareholders Meeting. In addition to everyone in this room, we are joined by others in the Grand Oaks ballroom and those of you on our webcast. I'm also pleased to announce that we have students from Ariel Academy and Epiphany Catholic School here with us today. Welcome to all of you. If you're here in person, you have a copy of the agenda for our meeting today and information about our procedures. With me on stage, our President and Chief Executive Officer, Don Thompson, General Counsel and Corporate Secretary, Gloria Santona, Chief Operating Officer, Tim Fenton, and Chief Financial Officer, Pete Bensen. Don Thompson will detail McDonald's performance and plans in a few moments following the business portion of the meeting.
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 environment, you can be assured that your board continues its commitment to good corporate governance and management oversight. Our 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. I'm now pleased to introduce the board of directors to you. As I introduce our individual members, please hold your response until everyone has been presented.
In addition to Don Thompson and me, your directors are Susan Arnold, former President of Global Business Units of the Procter & Gamble; Bob Eckert, former Chairman and CEO of Mattel, Inc.; Rich Hernandez, President and CEO of Inter-Con Security Systems and non-executive Chairman of Nordstrom, Inc.; Jeanne Jackson, President of Direct to Consumer for NIKE, Inc.; Rick Lenny, Operating Partner of Friedman Fleischer & Lowe LLC, a private equity firm; 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; Sheila Penrose, non-executive Chairman of the Board of Jones Lang LaSalle Incorporated; John Rogers, Founder, 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'd like the directors now to please stand and be recognized. We really do appreciate your service and commitment. We're also pleased to have with us today past directors Cap Adams, Don Lubin, and our recently retired Vice Chairman and CEO, Jim Skinner. I now call the business portion of today's meeting to order, and I will turn to Gloria Santona, our Corporate Secretary, to begin the session. Gloria?
Thank you, Andy. I can advise that a quorum of the company's shares outstanding is present to conduct the meeting. The polls are open and will close at the end of the business portion of the meeting. 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 questions or comments on the proposals. If you have questions or comments on other McDonald's business matters, please save them for the general discussion period later in the meeting. That as many shareholders as possible have an opportunity to speak, we ask that you limit any comments or questions to no more than one minute. I also direct your attention to the rules of order 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 to our chairman for the presentation of the proposals.
Thank you, Gloria. Our first order of business is the election of Walter Massey, John Rogers, Roger Stone, and Miles White as directors. The second proposal is an advisory vote on executive compensation. The third proposal is the approval of Ernst & Young as the company's independent auditors for 2013. The fourth item is an advisory vote on the shareholder proposal. At this time, I call on Maureen O'Brien, who is here to present the proposal in two minutes or less. Maureen? Apparently, Maureen is not here, so we will go forward, and she will have an opportunity before we take the vote. The fifth item is an advisory vote on the shareholder proposal. At this time, I call on Martin Glosser, who I know is here to present the proposal in two minutes or less. Mr. Glosser?
Thank you, Mr. Chairman. For the record, my name is Martin Glosser of Chicago, a longtime shareholder in the company. Point of order. We have a few proposals on the agenda presented by the management. We would like to discuss some of the proposals that the management has proposed, election of directors and auditors, et cetera. Are we going to have the opportunity to discuss those proposals?
I think Mr. Glosser, you're here to propose a certain proposal. Please go forward with that.
Yeah, I know. I'm going to propose it, but I asked for a point of order. Are we going to be able to discuss the management proposals, election of directors?
Do you care to say something?
Pardon?
Is there something you want to say about that?
Yes, I have two comments on the election of directors.
Go forward.
The first point is, it appears to me, since I've been the president of the Cincinnati Union Stock Yard Company since 1965. In my bylaws, we have the provision for Director Emeritus. It would appear to me that here at McDonald's, we do not have in our bylaws the position of Director Emeritus. You introduced a few of our former directors, and it appears that if we had amendment in our bylaws providing for Director Emeritus, we would still have the services of the three former directors who have retired. I have a request that the board of directors consider having the bylaws amended to provide for a Director Emeritus.
Thank you, Mr. Glosser.
The second point of order is the annual election of directors. I was a longtime shareholder of Midway Games, and I submitted a proposal to annual election of directors. The company was run by Mr. Sumner Redstone. Sumner Redstone agreed to the proposal. He had all the directors resign at one time and had all the directors at the same time elected on an annual basis. I say if it was good enough for Sumner Redstone who runs CBS and Viacom, it should be good enough here at McDonald's.
Mr. Glosser, please.
Yeah.
Our directors are elected on an annual basis.
Several of them are being elected at this time, and all the others aren't elected at this time.
As their terms expire. As you may know, last year we went away from a staggered board, so it will be all up to the annual elections henceforth. You have a very limited amount of time now on your proposal.
Okay. Thank you for your comments. Now about my proposal, which is found on the proxy statement. Let the record indicate that I read the proposal and the reasons, and I have one comment on the proposal. I use the time to refer to the recent shareholder proposal at JPMorgan Chase. One of the proponents then used the argument that they didn't have the funds available, the same amount of money that the company used to solicit no votes. If the proponents had the same amount of money to solicit yes votes, the results would be higher. I believe here at McDonald's, that the proponent of shareholder proposals got the same funds available to solicit proxies as the same amount that the management uses to solicit no votes, the results would be much higher. Thank you very much.
Thank you, Mr. Glosser. Okay. The sixth item is an advisory vote on a shareholder proposal. At this time, I call on Vasudha Desikan, who is here to present the proposal in two minutes or less. Vasudha?
My name is Vasudha Desikan. I'm representing the AFT Employees Pension Plan and the co-filer of the UAW Retiree Medical Benefits Trust. I hereby move stockholder proposal six, asking the company to issue a report detailing its human rights risk assessment process. Specifically, this process goes beyond asking a company to adopt a human rights policy and ask for information about how McDonald's assesses human rights risk. Our company points to its demonstrated commitment to human rights through various company policies as essential argument against implementing this proposal. The company's standards of business conduct are valuable for staff, but it's very different from what this proposal asks, which is how a human rights policy can be applied throughout the company.
A commitment to human rights in the form of principles is great, it leads to the question of how a company identifies human rights risks and incorporates that knowledge to improve its systems and practices. Companies must assess the risk to shareholder value posed by human rights practices in their operations and supply chain in order to effectively translate human rights principles into appropriate practices and manage that risk. We note that McDonald's has faced controversies over its human rights practices in its business operations in many countries. For example, McDonald's came under fire in 2000 when press reports indicated that underage workers were manufacturing toys used in the Happy Meal. More recently, company workers have participated in strikes and walkouts for better wages and working conditions across the country.
The company has acknowledged that boycotts or protests, labor strikes, and supply chain interruptions could adversely affect the company's ability to execute on strategic plan. All of this increases the company's exposure to human rights risk. We'd like to note that proxy advisor ISS recommends that its clients vote for this proposal. Finally, a human rights risk assessment reporting would enable McDonald's to identify and mitigate risk and would enable shareholders to understand the potential effects on shareholder value. We urge all stockholders to vote for this proposal. Thank you.
Thank you, Vasudha. The final order of business is an advisory vote on the shareholder proposal. At this time, I call on Tanya Fields, who is here to present the proposal in two minutes or less. Tanya?
Good morning.
Good morning.
Thank you. My name is Tanya Fields. I'm a single mother of four and the executive director of an organization called The BLK ProjeK. I'm here today to communicate the growing international concerns that have led today's resolution regarding how McDonald's continues to contribute to the global epidemic of diet-related disease. McDonald's avoidance of meaningful change continues to put the health of millions of children, like mine, worldwide at risk, while also risking the investment of shareholders. In the neighborhood of the Bronx, where I live, food options are limited. My community is a food swamp, filled with corner stores and fast food, and lacking fruits and vegetables. McDonald's happens to be the biggest alligator in that swamp. I have three McDonald's within walking distance of my home. It's not simply the saturation of fast food that is the problem.
It is the deluge of fast food marketing to my four children and people in my community who have children. McDonald's has long inundated children with marketing, seeking to hook kids on the brand at an early age and make them customers for life. Perhaps nowhere is McDonald's predatory marketing more pervasive than in communities of color, where Ronald McDonald's in my children's school, or the gymnast Gabby Douglas is on television, or the demeaning website 365black.com. This targeted marketing is everywhere, and it is a recipe, Mr. Thompson, for disproportionate disease rates that my community and community of colors can no longer stomach. I'm doing all that I can through my organization and my activism to feed my children healthy food, I'm tired of McDonald's targeting my children and my community at every possible turn with marketing designed to undermine my choice.
I'm here to tell you that I'm not loving it. As a growing movement of moms around the world call on the corporation to stop interfering in our children's health, as health professionals continue to urge you to stop driving a global epidemic of diet-related disease, as communities increasingly seek policies of solutions to limit fast food influence, I urge McDonald's for genuine action to address these increasing concerns about McDonald's unhealthy products and marketing practices. Sorry, four slices of apples in plastic packaging won't cut it.
Tanya-
In closing, McDonald's can mitigate its risk to shareholders and to long-term sustainability of the corporation by accepting the resolution and assessing whether the scope and scale of the corporation's response keep pace with the growing movement demanding McDonald's stop marketing to children. Thank you.
Thank you, Tanya. Has Maureen O'Connor arrived on the first proposal? Okay, if not, are there any questions or comments on any of these proposals? If not, is there a motion to move on all of these proposals?
moved.
I have a question, if I can. Since the proponent of the first proposal wasn't here, what action is the company going to take on that matter?
Well, we'll see. We're going to call for a vote.
Are we going to introduce that proposal even though the proponent isn't here?
It has been introduced.
Seconded?
We just called for a motion.
I'll call for a second on it.
Thank you.
We'll see. After all, the shareholders who voted on it took the time to vote on it, they should have an answer. Thank you.
Thank you, sir. You're very helpful. Your board of directors recommends a vote in favor of the election of all director nominees, in favor of the appointment of Ernst & Young as auditor, and in favor of management's advisory proposal related to executive compensation. The board recommends a vote against each of the shareholder proposals. The reasons for these recommendations on the shareholder proposal are outlined in the proxy statement. If you are voting at the meeting, please complete and sign your ballot and motion to an usher to collect it. Again, if you've already submitted your proxy, you do not need to vote by ballot. The business portion of this meeting is concluded. The polls are now closed. I will now turn the meeting over to Don Thompson for remarks on the McDonald's business and to lead the general question and answer session.
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 and our customers. Ladies and gentlemen, Don Thompson.
Good morning.
Good morning.
First off, Andy, thank you very much for that kind introduction, and to Jim, it's truly a pleasure, buddy, to have you here with us, and it's an honor. You were, and have been such a tremendous leader of this brand for eight years and a partner to so many of us over 41 years. We appreciate everything that you've done. No one has stood more proudly or fearlessly for this brand and the things that we've done and contributed to society as a whole, and we look so forward to building on that legacy. Thanks so much for being here. I also want to take this time to thank all of you for being here with us and for your investment in McDonald's.
It's truly a privilege to be part of brand McDonald's and to lead this great organization as we continue to work to become our customers' favorite place and way to eat and drink. For so many of us, this is truly a passion. This is what we do. This is our life. You've already met our Board of Directors, and I'd like to take this time also to personally thank Andy and all of our independent Directors for their outstanding guidance and your insight. It's truly appreciated. I also want to recognize our Senior Management Team, starting on stage with Gloria Santona and Tim Fenton and Pete Bensen. In addition, Jose Armario, our Executive Vice President of Global Supply Chain, Restaurant Development, and Franchising. Bridget Coffing, Senior Vice President and Chief Communications Officer. Rich Floersch, our Chief Human Resources Officer. Doug Goare, President of McDonald's Europe.
J.C. Gonzalez-Mendez, Senior Vice President of Corporate Social Responsibility, Sustainability, and Philanthropy. David Hoffmann, President of McDonald's Asia Pacific, Middle East, and Africa. Ken Koziol, Executive Vice President and Chief Restaurant Officer. Adam Kriger, our Senior Vice President of Corporate Strategy. Jim Sappington, our Chief Information Officer, and Jeff Stratton, President of McDonald's USA. I'd like to ask those members of Senior Management who are here today to please stand and be recognized. At McDonald's, we're proud to serve 69 million guests in more than 100 countries around the world every day. Our focus is singular. It's on satisfying our customers' needs around the world. We focus on operational excellence in our restaurants to deliver on the quality, the service, cleanliness, and the value our customers expect at McDonald's. At the same time, we're focused on remaining relevant as consumers' expectations continue to evolve.
We're developing great-tasting new products and working to create a modern and a contemporary restaurant experience. We're able to achieve this balance through our three-legged stool of owner-operators, our supplier partners, and company employees. Our world-class owner-operators, one of the world's largest networks of independent business people, own and operate 81% of our restaurants around the world. While McDonald's is a global brand, we're also a local brand. Most of our restaurants are owned and operated by businessmen and women who live in the communities that they serve. In the U.S., 89% of our restaurants are franchised, and nearly half of our U.S. franchisees, about 1,200 of them, started as hourly employees in our restaurants. Today with us here, we have owner-operators representing 10 countries from around the world. I'd like to ask all of you to please stand and be recognized.
In addition to our owner-operators, our outstanding network of suppliers around the world enable us to guarantee the delivery of safe, high-quality products to our more than 34,500 restaurants each day. Our communications and marketing agency partners help us responsibly and appropriately share our brand story and unique brand attributes with consumers globally. The third leg of our stool is the 1.8 million employees who support and work in McDonald's restaurants, helping us create connections with our customers and in their communities every day. They are tireless and passionate believers and ambassadors for brand McDonald's. Nearly 60 years ago, our founder, Ray Kroc, made a statement about how we operate our business that is as relevant today as it was back then. He said, "Take calculated risk. Act boldly and thoughtfully. Be an agile company." We continue to apply that same philosophy to our business and our operations today.
While the informal eating-out category was flat to declining throughout 2012, we continued to grow market share. We increased global comparable sales by 3.1% and improved system-wide sales by 5%, both in constant currencies. Every area of the world contributed to our performance, with comparable sales up across each segment. We also grew operating income 4% and delivered 5% growth in diluted earnings per share, both in constant currencies. Additionally, we returned $5.5 billion to shareholders through share repurchases and dividends. Our results are truly a testament to our resilient business model, our talented and aligned system, and our broad and deep experience in many different operating environments. Like you’ll see in this commercial from Canada, our customers have come to know us and to count on us all around the world.
The meeting will resume after this commercial break.
The potential to continue growing our brand and drive enduring and profitable growth is significant, both in the short and the long term. We will capture this potential by executing our Plan to Win and our three global growth priorities. Those priorities are optimizing our menu with delicious and relevant food and beverages that balance our classic core favorites with new taste. Also modernizing the customer experience by upgrading every aspect of our restaurants, from the look of our lobbies and our exteriors to improving the way we engage with our customers. By broadening accessibility to brand McDonald's and being available when and where our customers want us at a price they can afford. Let's start with optimizing our menu. We continue to balance the strength of our global core products with our efforts to remain locally relevant across all categories, day parts, and price points.
True to our values, our markets are continuously learning from each other. Proven menu solutions are scaled from market to market, especially in our four key growth categories of chicken, beef, breakfast, and beverages. Hopefully, you all received the Be Our Guest card for our new Premium McWrap when you checked in. This delicious new product, which originated in Poland, has already expanded to 33 countries around the world. Our beverage platform is another example of our learn, share, and scale philosophy. McCafé specialty beverages started in Australia. The U.S. then adapted this concept and built on it with real fruit smoothies and frappes. New flavors continue to be developed and shared, like Canada's Blueberry Pomegranate Smoothie, which was just introduced in the United States. Breakfast also remains a significant growth opportunity.
That's why the U.S. introduced the Egg White Delight McMuffin earlier this month, and why you can now order any breakfast sandwich with egg whites. While new menu news is very important, we remain highly committed to our core classics. Products like the Big Mac, our world-famous fries, hamburgers, cheeseburgers, and Chicken McNuggets are an important part of our menu that continue to account for about 25% of our total sales. Our second priority, modernizing the customer experience, is all about ensuring that we keep pace with our customers' expectations in our restaurants. We've already re-imaged more than 60% of our interiors around the world, and we expect to hit the 50% milestone for our exteriors by 2015. Modernization goes beyond re-imaging to include the many other ways that our customers engage and interact with our brand.
Ways like mobile ordering and delivery, self-order kiosks, just to name a few. Our third priority, broadening accessibility, is about being available to our customers when and where they want McDonald's, wherever they may be. That's why we're open longer in more restaurants and why we continue to strategically add new restaurants when and where appropriate. Last year, we opened more than 1,400 new restaurants around the world. This year, we plan to open between 1,500 and 1,600 restaurants in both established and emerging markets. We also continue to add multiple order points and cashless payment options, to name just a few of the solutions that are helping make McDonald's even more convenient around the world. Another major aspect, though, of accessibility is affordability. In today's environment, affordability is top of mind for consumers everywhere.
That's why offering great taste for great value across our menu board is an important part of our accessibility strategy. In France, for example, the Ca$h Croute sandwich and drink combination has enabled us to compete more aggressively with local bakeries. In Australia, our Loose Change Menu offers seven choices at various price points. Everything from an indulgently sweet creamy soft serve cone to a juicy, beefy McDouble hamburger. In the U.S., we remain committed to our Dollar Menu and keeping it relevant with new news like the Grilled Onion Cheddar burger or the Spicy McChicken sandwich. Let's take a look.
The meeting will resume after this commercial break.
The environment in which we're living and operating has changed, and we, as McDonald's, have continued to change along with it. The McDonald's of today and of tomorrow is an aggressive and an appealing leadership brand. While we continue to look to the future, we remain firmly rooted in our core values and in our commitment to making a meaningful difference in the communities that we serve. From the investments we make in developing today's workforce and tomorrow's leaders by providing training and career opportunities, to our community outreach efforts and continued support for Ronald McDonald House Charities, and our work across the broad spectrum of sustainability, from energy to animal health and welfare. We take pride in what we're doing in the areas of food, sourcing, people, community, and our planet. We are determined to keep doing more.
We have an incredible iconic brand that we can leverage to accelerate our growth and enrich the world. We're committed to doing this in a more focused and ambitious way as we serve good food through good people and by being a good neighbor. Optimizing our menu, modernizing the customer experience, broadening accessibility, and continuing to do good. These are the McDonald's top priorities. I'm energized by our opportunity to be a bright spot in our customers' days and confident in our ability to grow our business as we become even more relevant and trusted all around the world. Before we open it up for your questions, I want to acknowledge our honorary chairman and first grill man, Fred Turner, who passed away earlier this year.
We've been so fortunate that Fred chose to dedicate his talent and foresight to our brand, and we pay the greatest tribute to Fred as we deliver quality, service, cleanliness, and value to our 69 million customers each and every day.
The meeting will resume after this commercial break. The meeting will resume after this commercial break.
We have Fred's daughters, Teri and Paula, and two of Fred's grandsons, Jack and Steve Grasso, here with us today. Please stand and let us recognize you for all you've done. I'd like to thank all of you again for your investment and your confidence in McDonald's. We'll now open the meeting for questions both here in the room and from the Grand Oaks ballroom. Please remember to limit your questions to one minute. This will ensure that we can accommodate as many questions as possible.
Repeat your question.
With that, we'll take questions. I see on the left, Ms. Hannah.
Yes. We have a question regarding nutrition at McDonald's, and it's from Hannah Robertson.
Hi, Hannah.
My name's Hannah. I am nine years old. My mom has taught me that there are things in life that just aren't fair, like when your pet dies or you have to miss a special event because you have a cold. Something that I don't think is fair is when big companies try to trick kids into eating food that isn't good for them by using toys and cartoon characters. If parents haven't taught their kids about healthy eating, the kids probably believe that junk food is good for them because it might taste good. They will just keep bugging their parents to give them that food. It isn't fair that there are so many kids my age and younger that are getting really sick with diseases like diabetes and obesity. That is really sad.
It would be nice if you stopped trying to trick kids into wanting to eat your food all the time. I make cooking videos with my mom that show kids that eating healthy can be fun and yummy. We teach them that eating a rainbow of fruits and veggies makes kids healthier, smarter, and happier because that is the truth. Mr. Thompson, don't you want kids to be healthy so they can live a long and happy life?
Hannah, thank you very much for your question. By the way, it was good to meet you out front. A couple of things, Hannah. First off, we don't sell junk food, Hannah. My kids also eat McDonald's. When they were about your size, till my son who's with us today was a little bit bigger, was a football player. Also, they cook with me at home. I love to cook. We cook a lot of fruits and veggies at home. We sell a lot of fruits and veggies at McDonald's and are trying to sell even more. With the apples that we introduced into the Happy Meals, we sell different fruits and different varieties. I was telling you a little bit earlier about things we'd like to introduce even more if there's an affinity for them, like kiwi on a stick and pineapples.
We serve side salads, we serve those for a $1 on our Dollar Menu, and they're very affordable. There's a lot of things that we've done. Our Chicken McNuggets Happy Meals, fat-free milk. We also just changed to chocolate fat-free milk. We're making a lot of changes at McDonald's and we'll continue to. I think it's really great that you want to continue eating more fruits and more vegetables. I honestly hope even more kids do. I know that as my kids came up, sometimes I had to nudge them a little bit more to eat some more fruits and vegetables, but they did eat quite a bit of fruits and vegetables, and that's what we served in our household as well. Thanks so much for the question, Hannah. Next question.
I have a question here about McDonald's in the hospitals. This is Mr. Sriram. I'm sorry. I'm going to let him tell you his name. He's here by proxy.
Good morning.
Good morning.
I'm Sriram Madhusoodanan from Corporate Accountability International. Through our Value the Meal campaign, more than 3,000 health professionals have urged this corporation to stop marketing to kids and to address its role in driving diet-related disease. McDonald's has long placed stores in hospitals to create a false sense of healthfulness, using hospitals as part of McDonald's marketing strategy. Hospitals aren't buying it anymore. Most recently, Truman Medical Center kicked McDonald's out, specifically citing health reasons. Healthcare providers will no longer participate in sending such mixed messages. CEO Thompson, how will McDonald's address growing brand liability as hospital after hospital protect their patients' health and distance themselves from McDonald's?
Sriram, thank you very much for the question. Just to make sure that we're all on the same page, we have about 25 restaurants in hospitals out of the 14,000 in the United States. In many of those hospitals, actually there's many hospitals that have asked us to come back in or actually never to leave hospitals. There's a lot of places that we're in, and we're doing great business and have great relationships in those hospitals. In addition, there's about 100 Ronald Rooms, as we call them, in many of the hospitals around the U.S. and hospitals around the world. In those hospitals, we're also trying to take care of holistic family needs.
Not just the selling of food, but also through Ronald Rooms and through the things we can do to take care of a whole child when they're sick or ill, and their families can be there with them for treatment. We will look at hospital opportunities as they come up and if hospitals would like to engage with McDonald's, and we do have many of those that we're entertaining at this point in time. We won't always go if the business model doesn't seem right or if the relationship doesn't seem right, but we'll continue to look at that. In addition, we continue to migrate our menu. We've added a lot more fruits, a lot more vegetables. We talked about many of those things, talked about things like smoothies and salads and beverages. Believe me, we'd like to see even more.
What's rather interesting is in many of the places, even when we have all of those, as customers come in to choose, they may choose one day to have a burger, one day to have a chicken sandwich, one day to have it grilled, one day to have a salad. We think customers should have that choice. We'll continue to work with hospitals when and where appropriate and when the relationships and the business model merit it. Thank you. Next question.
Yes. Our next question is regarding restaurant expansion and customer service. It's from Kendall Pettis from Ariel Community Academy.
Hi, Kendall.
Hi. My name is Kendall. I go to Ariel Community Academy. I am in sixth grade. Here's my question. Are you planning on opening more McDonald's around the world? How do you think it will impact the budget allowed for customer service?
I'm going to ask Pete Bensen if he would speak to that one.
Yes. Kendall, thanks for the question. We're going to open between 1,500 and 1,600 restaurants this year around the world. A large percentage of those are in emerging markets, but also in our developed markets. You can be assured as we open these new markets or new restaurants, that we do a lot of training and recruiting of the staff so that when the restaurants open, we're delivering that exceptional McDonald's experience that everyone is expecting. Thanks.
Thank you.
Thanks, Kendall. Next up.
Yes. I have a question here on nutrition and children's health, and this is Dr. Andrew Brammers, and he is a proxy holder.
Hello again, Doc. How are you?
Thank you for having me back. My name is Dr. Andrew Brammers, and I'm a board-certified pediatric endocrinologist, pediatrician, and internist. I'm also an associate professor at Vanderbilt University School of Medicine, but I want to make clear that these are my own personal comments. I stand before you today, as I did last year, as a physician and now a father to reiterate the concerns about the impact McDonald's marketing is having on children's health. My medical and public health colleagues the world over have repeatedly acknowledged the science linking McDonald's style fast food and the fast food industry practices to the decline in children's health. Yet McDonald's has yet to make substantive changes, continuing to expose shareholders to considerable risk.
Don Thompson, last year you said, "Do me the honor of not associating us with doing something that is damaging to children." Well, with all due respect to the entire corporation, the corporation is doing just that. Given the highly visible and global backlash from health professionals, government officials, and now parents, isn't it time for McDonald's to finally stop marketing to children? Thank you.
Thank you for the question, Doctor. As we talked about last year, as you and I and others have talked about on the side, we provide high-quality food. We always have. It's real beef, it's real chicken, it's real tomatoes, real lettuce, real fruit, real smoothies, real dairy, real eggs, and we do it in a way that is also affordable. We are in many communities, and we take that responsibility quite seriously. Not only that, but I'll make the same comment I made last year. We have 1.8 million employees. Many of them are parents. Many of them have their children come to McDonald's. If any of us believe we were doing damage to our own children, we wouldn't work for McDonald's.
I say once again, just do us the honor of parenting the same way you do and believing the fact that we know when we take our children to McDonald's, I feel very safe and very confident that it's high-quality food. We appreciate your concerns. We'll continue to look at it and improve and sell even more fruits and vegetables. We moved that tremendously in the last four or five years, and we'll continue to do that. Thanks much. Next question.
Yes. The next question is on children's health, and it comes from proxy holder, Kia Robertson.
Hi, Kia.
Hi.
You're Hannah's mom, right?
I am Hannah's mom.
Okay. All right.
Thanks for meeting with us earlier.
No problem.
My name is Kia Robertson. I've been doing a lot of thinking about what I should say because not a lot of parents get this opportunity. This generation is in trouble, and we all need to come together to help them. Childhood obesity rates are skyrocketing, and one of the biggest factors is diet. I believe that parents are ultimately responsible for the food that we feed our children, and it is up to us to educate them and give them the skills to make healthy food choices for themselves. That said, I also believe that corporations like McDonald’s have a responsibility to stop undermining parents by directly marketing to our children in ways that you know are deceptive. Some parents think if you don't let your kids watch TV, they won't see your commercials.
What they may not realize is that you are getting around that by marketing your brand in our school systems. As a corporation, you might not have to think about the effects of your marketing, but as parents and grandparents, there must be a part of you that knows it's just not right. You are a leader in your industry, you are also very well aware that the fast food industry is changing, and in order to keep up, maybe it's time for some genuine change at McDonald’s. CEO Thompson, don't you think a good place to start would be to leave our children alone and let us parents decide what's best for them? Thank you.
Thank you for the question. Again, I'll state it, as a parent, I'm glad that McDonald’s allows me to make the choices I need to make as a parent, I know you do the same thing. Globally, we follow guidelines on how we responsibly communicate with children. We were part of the Children's Food and Beverage Advertising Initiative years ago and still remain as part of that initiative as we market our business broadly, we're very careful. If you've ever watched television, I'd ask all of you, watch television on Saturday. Watch Saturday morning. I've done this throughout the year. Especially after last year's meeting, I decided I want to watch TV on Saturday mornings, I've seen how our commercials come out, we're not marketing food to kids. Matter of fact, we're not even marketing Ronald the way we used to.
The interesting thing is Ronald's been an ambassador for Ronald McDonald House Charities. What we could do and what we've tried to do is sell even more apples and even more fat-free milk. For those who want to work with us to try to help us to continue to do that and do it even more, I'd love to see kids eat more fruits and more vegetables, we're trying to do that. Relative to schools, we're not marketing in schools. What's interesting is if you see some of the franchisees that are here, they may be doing a lot of things in their community, supporting schools and little leagues and things like that, and you'll see them doing that, but you won't see them in schools marketing McDonald’s food to children. We don't do that.
The average person, average McDonald’s customer, eats McDonald's three to four times a month. That's out of 90 meal occasions. If even we were at the point that some of you have surmised today, that would not be the cause of some of the issues that you all are talking about. I do agree we have some issues, and we can be part of the solution, and we are doing that and doing, I think, our part plus some. We are not the cause of obesity. We are not unjustly marketing, quote unquote, "to kids". Ronald is not a bad guy. He's about fun. He's a clown. I'd ask you all to let your kids have some fun, too. Next question, please.
I have a question here on animal welfare, and this is Mr. Paul Shapiro, and he's a proxy.
Morning, Paul.
Good morning, Mr. Thompson.
How are you?
I'm fantastic. How are you doing, sir?
Very good.
All right. Members of the senior management, board of directors, fellow shareholders, good morning. My name is Paul Shapiro with the Humane Society of the United States. I have been to this shareholder meeting every year for the past eight years, and often I have, similar to some of the other questioners today, encouraged the company to do better, in my case, to do better when it comes to the treatment of the animals used in the supply chains for McDonald's.
However, last year, after working together, McDonald's and the Humane Society of the U.S. jointly issued a press release in which McDonald's admirably called unsustainable the standard pork industry practice of confining pigs in cages barely larger than their bodies. These animals are unable even to turn around for essentially their entire lives. Further, again admirably, McDonald's announced that it was not just calling this practice unsustainable, but that it would require its pork suppliers to phase out this inhumane practice called gestation crate confinement of pigs. The company's announcement was welcomed by many, including us at the Humane Society, by an avalanche of positive publicity. I'm very proud to report that McDonald's leadership on this particular issue caused a cascade of similar policies in your industry. Nearly every one of your competitors followed your lead, Burger King, Wendy's, Denny's, Carl's Jr., Arby's, and more.
In fact, since McDonald's made this announcement in 2012, more than 50 other major pork buyers in the fast food industry, in the grocery chain business, in the food service business, all adopted the similar policy that McDonald's adopted last year, making it clearer than ever to the pork industry that this cruel and inhumane practice has no future in its industry.
Oh, well.
First-
I absolutely love the fact that you're giving us some accolades. I want to make sure I hold to that one-minute piece we talked about.
I got you. I got you. Thanks for having my back and letting me finish. Thank you.
Right.
I want to say thanks to McDonald's for its leadership in changing not just one supplier, but changing an entire industry with its announcement and leadership. I think the company, for that issue, deserves a round of applause. My question, Mr. Thompson, is for you, and I just want to ask, why is it, do you think, that these type of animal welfare initiatives are so important to McDonald's?
Well, Paul, first of all, thanks for the comments. The first comment, I'm going to turn this over to Tim Fenton because he can kind of give you an update on where we are. As I've said, we want to make sure that we're being responsible corporate citizen. We don't take our responsibility lightly. In areas that we can make a difference that also are effective for our customers, effective for the broader industry, we feel like these are things that we can look at doing. The other thing is it's much easier to work with somebody when they're not calling you out your name, when they want to sit at a table and talk to you rather than talk about you. You all modified a couple of your approaches as well, and we actually sat down and talked. So I appreciate that.
With that, I will turn it over to Tim Fenton. He'll give you a little update as to where we are.
Well, first of all, Paul, thank you for the acknowledgement. Why is it important? Well, we are industry leader. We take that responsibility very seriously. We are committed and have been committed to improving the health and welfare of animals in our supply chain. It's a journey. It's not a destination. We have been proactively involved with animal welfare since the mid 1990s. We continue to work on it. We continue to strive to be better. We take it very seriously because we are the leader, and to your point earlier, people look up to us and follow our lead.
Thank you. Next question, please.
The next question is regarding children's health, and it comes from Michelle Dyer, proxy holder.
Hello, Michelle.
Good morning. My name is Michelle Dyer. As a recent graduate, I am deeply concerned about the epidemic of diet-related disease and the role of McDonald's in driving it. As a millennial, one of an entire generation that McDonald's is fast losing brand appeal among, I have too often seen and often been the target of exploitative marketing designed to get kids hooked on unhealthy food at a young age to make them customers for life. Especially outrageous is McDonald's targeting children of color. Children of color are already more likely to live in environments where healthy food is less available. That they are more likely to develop diet-related disease than their white counterparts should be no surprise, considering how McDonald's overwhelmingly targets them with predatory marketing.
Not only does McDonald's use athletes of color, such as Gabby Douglas, Venus Williams, and LeBron James, it also invokes culturally inappropriate stereotypes and borrows liberally from hip hop culture to aggressively target children of color. Targeted commercials, toy giveaways, and culturally based partnerships are all employed to sell more fast food. CEO Thompson, I must ask, when is McDonald's going to end its aggressive marketing to communities of color?
Michelle, thank you for your comment. This one's kind of close to home. I wonder why that is. We do not, have not, will not try to target people of color with some kind of subversive, I don't know, you put a lot of stuff together there, hip hop and sports and a lot of things. We wouldn't do that. I've been here 23 years. I know we wouldn't do that, and we don't do that, and we won't do that under my leadership. I grew up in the neighborhood. Believe me, when I was growing up, we couldn't afford the McDonald's. My grandmother would take me by McDonald's, and she'd say, "I'll take you home to make you a McDonald's." I didn't eat the McDonald's. I do know what else I ate.
I will tell you that the epidemic of obesity, particularly relative to my neighborhoods and the ones I grew up in, is not about McDonald's. There needs to be more fresh foods, guaranteed. If we can help with side salads, parfaits, and smoothies and things, we'll do that. I still cook ham hocks with my greens at home. I grew up doing that. I still do that. It's not about McDonald's alone. We can be part of the solution. I think that for McDonald's and for leaders like us, we have to do that. We'll continue to do that. If you accuse us of doing things we don't do, having sat with LeBron and with the Williams sisters, they don't view us as the brand that you view us as.
We'll continue to try to work with them and continue to try to do things actually to even advance even further some of the changes that we can have and influence relative to eating habits. By the same token, we're very proud of a person every now and then having to order French fries or having burgers or having grilled chicken or having our salad. We have a broad array of menu items, and we'll continue to offer that and broaden that range as much as we can so that it still fits operationally. We do take the responsibility seriously. We'll continue to look at improving. We're not the brand that you described, and I hope that you will grow to see and understand that as you get to know McDonald's, at least the way that I've known it over the last 23 years.
Thank you. Angie.
Hi. We have a question here on marketing and health, and this is Ms. Hannah Freedberg, and she is a proxy holder.
Thank you.
Hello, Hannah.
Hello. I am Hannah Freedberg from Corporate Accountability International. Tens of thousands of people have joined our Value the Meal campaign, challenging you to put public health over short-term corporate profits, a demand echoed by moms around the world who've urged you to end McDonald's aggressive marketing of junk food to kids. For decades, McDonald's has profited richly at a staggering cost to our children's health. Its strategy has been to undermine the efforts of parents, whom the corporation called gatekeepers, and who are working each day to feed their kids healthy foods. Well, these so-called gatekeepers are not loving McDonald's marketing. This Mother's Day launched their call to you, CEO Thompson, to stop McDonald's predatory marketing to kids.
As a gift to parents everywhere, will you and McDonald's finally stop undermining parents' efforts to protect their children's health and stop marketing to kids a brand that is burdening a generation with chronic diet-related disease?
Hannah, thank you for your interest in McDonald's. I mentioned this. I think that the same point goes. The way you describe us is not who we are. We are not predatory. We've not done the things that you just mentioned. We'll continue to run our business responsibly, appropriately, effectively. We'll continue to reach out to try to always continuously improve. Thanks much for the question. We do have a couple questions, I think, from Grand Oaks. I don't know who has those. Oh, Angie, would you? Want to make sure we make the folks at Grand Oaks feel a little bit of love here. We don't want them to be left out.
Yeah. The question will be in regards to egg whites, and this is Carol Nagle, and she is a shareholder. "Mr. Thompson, your egg white McMuffin is yummy. Will you introduce more healthy choices to your menu, and when?
All right. Tim Fenton, you want to talk a little bit about what's happening with egg whites and menu?
Yeah. First of all, thank you for the question. Personally, I love the egg white Delight. What started out as something to try to appeal from a caloric and nutritional advantage on some of our products, turns out that it's selling so much, not because of that, because of the taste. It's doing quite well, and as you can tell, you can also get egg white Delight at any one of our carriers for breakfast, be it a biscuit or different muffins and so on. We are extending. We just launched our chicken McWraps that are doing quite well for us, that have a fresh array of different vegetables. You can get it in grilled. We will continue to look at what items I think resonate with our consumers, with our testing, not only in the U.S. but globally.
We get some of our best ideas on these products from the markets that we have in 118 countries.
Thank you. Next question.
Okay. I also have a question from the Grand Oaks Ballroom regarding our stock, and it's from a student at St. Ethelreda School.
Pete. I'm sorry, Pete, get ready.
I'm ready.
The question is: Do you feel our stock is currently undervalued, and why?
That's a great question. A lot of things go into the valuation of a stock, it's as much art as it is science. I think today, investors are looking at the opportunity for our sound dividend and our safe dividend and the growth potential that we have all around the world. I think today the stock is at a fair price, and there's an opportunity for it to continue to go higher as we continue to perform as a global business.
Thanks much. I know we have time for a couple of more questions, I know the gentleman over here has been standing there for a while. Sorry about that.
Okay. Excuse me. This question is on customer service, it's from shareholder Philip Johnson.
Hello, Philip.
Hi, how you doing?
Good.
Wondering if you're going to improve the status of the point-of-sale areas where they have kiosks in the stores where customers can go up and do their own orders instead of having the customer wait for the cashier to take the orders. That way, it eliminates the cashier from being up behind the counter and making the orders a lot better. Also, eliminate long lines where people can just go up, pay the cashier and get their orders and wait for that while they're waiting. Also, as far as McDonald's itself, I think that McDonald's food service is a lot better versus some restaurants where you go get loaded biscuits, or you get double patties of chicken and stuff like that.
I feel like the customer service as far as the food is good. The customer service for the employees to the customers should be a little bit more focused on.
Thank you, Philip. Thanks very much. Tim, you want to talk a little bit about service options?
Yeah. First of all, Philip, thank you.
Yeah.
A good student of our industry. What you're talking about is what we call a dual point service, which we're moving to in the U.S. and throughout many countries in the U.S. Fast and friendly service has always been a stable pillar for us at McDonald's. We continue to move forward and open new restaurants and migrate to what you described, our dual point, where you order and then move to the side, and somebody presents it. We find it more personal. We find that consumers find it faster. We find it's more accurate. We will continue that. We continue to strive and enhance our service, not only in the U.S. but globally on some of these great initiatives that we're implementing. Thanks.
Thanks much. We'll take two more questions because I see two guys.
I have a question on the good that McDonald's does, and this is Mr. Robert Liking, and he is a shareholder.
Hello, Robert.
Hi, Mr. Thompson.
How are you?
Good. Okay. I don't necessarily have a question, but I have a statement.
Yes, sir.
I know my school benefits off the McDonald's does because you guys donate the pancake batter, the sausage patties, and the orange drinks to our schools for the pancake breakfast, which my school makes money off of. Also, I know other schools benefit off McTeacher's Night, which you guys give a percentage of your profits to the schools. I know also that the Ronald McDonald House has benefited many families across the world so they can have shelter near the hospital where their child has been treating. I'm only listing some of the good McDonald's does. I just want to say thank you, McDonald's.
Thank you, Robert. Thank you very much, Robert. It's good to hear some good news about us. I think we do a lot of great things. Robert, thank you. One more question.
This question is on growth, and this is Mr. Maxwell Todd, and he is a shareholder.
Hello, Maxwell. How are you?
Hi. I'm good. Well, for the past 10 years, most companies have been strongly going after the Chinese market. Where does McDonald's see the next China-like opportunity to grow?
That's a great question. Tim?
Oh, sure. Having lived in Asia for six years. First of all, China's a great market for us. It's our fastest-growing country that we have. By this time next year, we'll have approximately about 2,000 restaurants. It's the second fastest country to get to 2,000. The first or the fastest was the U.S. Where's the next China? Well, we look at the BRIC countries. You get Brazil, Russia, India, China. Southeast Asia is a growth market for us. Eastern Europe is a big growth market for us. Saudi Arabia is a big growth market for us in the Middle East. We have plans to open in Vietnam in the fourth quarter of this year or first quarter of next year. There's a lot to do for us. We've got many countries.
I classify this, countries that have 100 restaurants or more that are opening on a pace of 20% on their base of units. Majority of our growth will be coming from international. Don had mentioned earlier that 1,500 to 1,600 new restaurants will open this year. Majority of those will be overseas in our growth markets and in our established markets. There's still a lot of growth in our established markets as well. Thanks for the question.
Thanks very much. I said two, we only have one person standing. Martin, you get the last call here.
Thank you, Mr. Chairman. On the shareholder proposals, we want to take the time to thank all the shareholders who took the time to participate on the voting, especially the ones who voted yes on our proposals. A lot of proponents that make proposals don't thank the people, the shareholders, who vote for the proposals. One of the benefits of having an annual shareholders meeting is to give the management an opportunity to give their views. You certainly have given us views, and I certainly appreciate coming to the meeting and hearing all the shareholders who came before me and asked questions because at many meetings, I'm the only one who gets up and talks. I really like to see other shareholders do the talking rather than myself. Thank you.
Martin, thank you very much. I really want to thank all of the folks who asked questions, and especially for your concerns, thoughts about our business. We take it all very seriously. With that, I'd like to bring our Chairman, Andy McKenna, back to the podium.
Well, thank you, Don. We have received the preliminary voting results from the independent inspector of election, final results will be posted on the 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 97% of the votes shares voted. Shareholders have approved the management proposal related to an advisory vote on executive compensation with the support of 95% of the shares voted. Shareholders have approved Ernst & Young as the company's independent auditor with the support of 98% of the shares voted. The advisory shareholder proposal requesting an annual report on executive compensation has not been approved by shareholders. It received the support of 7.3% of the shares voted. The advisory shareholder proposal requesting an executive stock retention policy has not been approved by shareholders.
It received the support of 31.3% of the shares voted. The advisory shareholder proposal requesting a human rights report has not been approved by shareholders. It received the support of 28.3% of the shares voted. The advisory shareholder proposal requesting a nutrition report has not been approved by shareholders. It received the support of 6.3% of the shares voted. We thank you all for attending the meeting, for your participation. We all certainly appreciate your investment and your support in McDonald's, the meeting is now adjourned.