Welcome to McDonald's annual shareholders meeting. In addition to everyone in this room today, we are joined by others in the Grand Oaks Ballroom, including students from Ariel Academy and, of course, those of you on our webcast. Welcome to all of you. If you're here in person, you have a copy of the agenda of our meeting and information about our procedures. With me on stage are Chief Executive Officer Jim Skinner, General Counsel and Corporate Secretary Gloria Santona, Chief Operating Officer Don Thompson, and Chief Financial Officer Peter Bensen. As we meet today, McDonald's continues to be a strong business and a sound investment. Our success continues to be global and holistic in its approach, with the entire system focused on driving our business and strengthening our relevance. Jim Skinner will detail McDonald's progress and plans in a few moments following the business portion of the meeting.
The board, in its oversight role, believes your management team is doing the right things with the right people on behalf of McDonald's customers and shareholders. You can be assured that your board continues its commitment to good corporate governance and management oversight. Like the rest of McDonald's, our board is comprised of a diverse, independent-minded, and experienced group of business leaders. The variety of perspectives and backgrounds we bring to the boardroom are consistently exercised on your behalf. We remain united in our determination to represent you, and enhancing shareholder value will continue to be a major goal. 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 introduced.
In addition to Jim Skinner, a director since 2004 and a nominee for the class of 2014, Don Thompson, a director since January of this year, and me, a director since 1991, your directors are Susan Arnold, a director since 2008 and a nominee for the class of 2014. Susan is a former president of the global business units of the Procter & Gamble Company. Bob Eckert, a director since 2003. Bob is Chairman and CEO of Mattel, Inc. Rick Hernandez, a director since 1996, is President and CEO of Intercon Security Systems and non-executive chairman of Nordstrom, Inc. Gene Jackson, a director since 1999, is president of Direct to Consumer for Nike, Inc. Rick Lenny, a director since 2005 and a nominee for the class of 2014, is an operating partner of Friedman, Fleischer & Lowe, LLC, a private equity firm.
Walter Massey, a director since 1998, is President of the School of the Art Institute of Chicago. Karen McMillan, a director since 2003 and a nominee for the class of 2014, is CEO of Two Partners Consulting. Sheila Penrose, a director since 2006 and a nominee for the class of 2014, was the non-executive Chairman of the Board of Jones Lang LaSalle Incorporated. John Rogers, a director since 2003, is the founder and CEO of Ariel Investments, LLC. Roger Stone, a director since 1989, is Chairman and CEO of KapStone Paper and Packaging Corporation. Miles White, a director since 2009, is Chairman and CEO of Abbott. I'd like all the directors to stand and be recognized. We all appreciate your service and commitment to McDonald's. We're also delighted that former directors Kathy Martin and Don Lubin have joined us at our meeting today.
I will now call the business portion of today's meeting to order. I will turn to Gloria Santona, our Corporate Secretary, to begin this session.
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 will close at the end of the business portion of the meeting. Our order of events will be as follows. The Chairman will introduce each proxy proposal and ask if anyone has a question or comment on it. If you have questions or comments on other McDonald's business matters, please save them for a general discussion period following Jim Skinner's remarks. So that as many shareholders as possible have an opportunity to speak, we ask that you limit any comment on a proxy proposal 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've not already voted your shares and need a ballot, please raise your hand and an usher will provide one to you. If you've 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'll 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 Susan Arnold, Rick Lenny, Karen McMillan, Sheila Penrose, and Jim Skinner as directors. Are there any questions or comments on this proposal? Our second proposal is the approval of Ernst & Young as the company's independent registered public accounting firm for 2011. Are there any questions or comments on this proposal? The third proposal is an advisory vote on executive compensation. Are there any questions or comments on this proposal? The fourth proposal is an advisory vote on the frequency of future advisory votes on executive compensation. Are there any questions or comments on this proposal? The fifth proposal is to eliminate the supermajority voting requirements in Article 12 of the Restated Certificate of Incorporation by repealing this article. Are there any questions or comments on this proposal?
The sixth proposal is to eliminate the supermajority voting requirements in Article 13 of the Restated Certificate of Incorporation. Are there any questions or comments on this proposal? The seventh proposal is to eliminate the supermajority voting requirement in Article 14 of the Restated Certificate of Incorporation. Are there any questions or comments on this proposal? The eighth order of business is an advisory vote on the shareholder proposal related to the company's classified board structure. I would like to call on Daniel Nielsen, who is here to present this proposal in two minutes or less, on behalf of the proponent, the State Board of Administration of Florida.
Good morning. Thank you very much. My name is Dan Nielsen, and I'm the Director of Socially Responsible Investing at Christian Brothers Investment Services, a firm with $4 billion in assets under management, investing on behalf of Catholic organizations. I am here to present proposal number eight on behalf of the Florida State Board of Administration, that calls on our board to change to the annual election of directors. The proposal reads as follows: Resolve that shareholders of McDonald's Corporation urge the board of directors to take all necessary steps, other than any steps that must be taken by shareholders, to eliminate the classification of the board of directors and to require that all directors elected at or after the annual meeting held in 2012 stand for elections on an annual basis.
Implementation of this proposal should not affect the unexpired terms of any directors elected to the board of directors at or prior to the annual meeting in 2011. This resolution, submitted by the Florida State Board of Administration with assistance from the American Corporate Governance Institute, urges our board of directors to facilitate a declassification of the board. Such a change would enable shareholders to register their views on the performance of all directors at each annual meeting. Having directors stand for elections annually makes directors more accountable and could thereby contribute to improving performance and increasing firm value. Christian Brothers Investment Services and Walden Asset Management will be voting in favor of this reform, having raised this issue with McDonald's for over five years.
While we appreciate the thoughtful study that the board has conducted and we value our robust engagement with the company, we call on the board to join the vast majority of companies that have annual elections. The influential proxy voting recommendation agency, ISS, states, "The ability to elect directors is the single most important use of the shareholder franchise, and all directors should be held accountable on an annual basis." For this reason, the average percent of votes cast in favor of proposals to declassify boards has exceeded 65% in each of the past five years, demonstrating significant shareholder support. We expect today's vote to be a strong one as well. We hope the board will be responsive to shareholders and will outline in the months ahead how it intends to implement this important reform. Thank you very much.
Thank you, Mr. Nielsen. Are there any questions or other comments on this proposal? The ninth order of business, excuse me.
Good morning, Mr. Chairman.
Would you please identify yourself?
I am Sister Barbara Gaul of the Sisters of Charity of the Blessed Virgin Mary. I am pleased to be here and to participate in these important discussions on McDonald's business, including environmental, social, and governance issues. The issue asking for all directors to be elected each year has been before our board for a number of years, so our Governance Committee and board are very familiar with the various aspects of the question. Walden Asset Management and Christian Brothers Investment Services have been involved in dialogue with McDonald's on annual elections. Walden is voting close to 300,000 shares in favor of this reform and has asked me to register their strong support as this vote goes forward.
Walden is hopeful that the board will receive the overwhelming vote of support this resolution will get, see it as a mandate for change for McDonald's shareholders, and make the change to have all our directors elected each year. Let me give one reason why annual elections of our board are so important for accountability. Just imagine that the board member who chairs the Audit or Compensation Committee and members of those committees become embroiled in a controversy or even a scandal, yet are only up for election every three years. How does an investor hold that director accountable since they can't vote for or against their election? Three-year terms lead to occasional accountability of a board, annual elections regularize that accountability.
In the last decade, accountability has become a watchword in discussion about how companies are governed. Investors elect the board and its members to represent their interests. We want those elections to be meaningful. Thus, companies increasingly require that a board member receive a vote over 50% to be elected, a common sense approach.
Sister , we're running a little past two minutes now.
Indeed, it's a general call for good governance and a change that we think is right for McDonald's at this time, and that is why investors like Walden Asset Management enthusiastically support this change. Thank you.
Thank you, Sister. Now, the ninth order of business is an advisory vote on a shareholder proposal related to the use of controlled atmospheric stunning. At this time, I call on Rose McCoy, who is here to present this proposal in two minutes or less on behalf of the proponent, People for the Ethical Treatment of Animals. Rose.
My name is Rose McCoy, and I'm here on behalf of PETA to seek in support of the shareholder resolution that would require McDonald's chicken suppliers to switch to a less corporate slaughter method. It would prevent birds from having their throats cut open while they are still conscious and being scalded to death in defeathering tanks. McDonald's own animal welfare experts have asked the company to switch over to a less cruel way of killing chickens, and many slaughterhouses here in the U.S. will soon be using it too. Because workers never handle the scared, struggling birds, slaughterhouses that have made the switch report less contamination, better working conditions, and lower labor costs. I'm here with 20,000 of the 125,000 signatures PETA has collected from kids around the country who are urging you to make this kind decision.
I will be taking these outside after the meeting and delivering them to the company. Kids like me love animals, and we don't want to see them suffer anymore from McNuggets. If McDonald's can spend $1 billion to make its restaurants look pretty, then can't it make this simple change? That's why I ask you to please vote for PETA's resolution. Thank you.
Thank you, Rose. Are there any questions or other comments on this proposal? The 10th order of business is an advisory vote on a shareholder proposal related to a report on children's nutrition. At this time, I call on Tom McKamey, who is here to present this proposal in two minutes or less on behalf of the Sisters of Saint Francis of Philadelphia, the proponent, and the co-founders. Mr. McKamey?
Good morning, Mr. Skinner, members of the board, fellow shareholders. My name is Tom McKamey, and I represent the Sisters of Saint Francis of Philadelphia. Along with several other religious investors, all members of the Interfaith Center on Corporate Responsibility, I wish to present shareholder proposal number 10. We are asking our company to assess its policy responses regarding fast food links to negative impacts on children's health, including childhood obesity and diet-related diseases. We congratulate McDonald's on the many initiatives and collaborations encouraging an active lifestyle, as well as the menu changes enacted over the past few years, offering a greater variety of food choices. It's clear from your many quoted statements that you understand the gravity of the problem in this country and around the world.
It's just as clear that although primary responsibility for the nutritional health of meals served to children lies with their parents, McDonald's acknowledges its role in this current epidemic. Our concerns center on the inconsistency of your actions. While at the same time touting that you're now the biggest purchaser of apples and include them as a healthy alternative to French fries in Happy Meals, a Center for Science in the Public Interest study found that 93% of the time they ordered Happy Meals, French fries were included without asking if the customers would prefer apple dippers. Although your fruit and maple oatmeal isn't necessarily designed for children, it once again illustrates the disconnect between the impression of a healthy menu item and the actual product.
Mark Fitman's February 22, 2011 New York Times story points out that while real oatmeal is easy to cook, inexpensive, and nourishing, quote, "McDonald's product contains more sugar than a Snickers bar and only 10 fewer calories than a McDonald's cheeseburger or egg McMuffin." We ask for an honest evaluation of our company's responses, including marketing strategies to this alarming and growing epidemic. We thank the company for productive dialogues we've had regarding this and several other issues and look forward to future engagements. Finally, we ask our fellow shareholders to support this resolution with affirmative votes. Thank you.
Thank you, Mr. McKamey. Are there any questions or other comments on this proposal?
Hi, good morning.
Good morning.
My name is Deborah Lapidus, and I'm from Corporate Accountability International, and I'd just like to say a few comments in favor of this resolution. Tens of thousands of people have joined our Value the Meal campaign, challenging McDonald's and its competitors to value public health over short-term corporate profits, a demand echoed by the 20,000 people who signed the petitions that we delivered to you yesterday. Mr. Skinner, our children are getting sick at alarming rates from the food they eat. Justifiable public concern and even outrage over the dangers of fast food and its marketing have prompted policymakers, public officials, and public health institutions to take coordinated action, a growing liability for the corporation and for shareholders. Your aggressive political interference as well puts both public health and your shareholders at significant risk.
I'm wondering, considering the growing body of evidence linking junk food marketing to disease rates, considering recent findings by the Yale Red Center that despite pledges to the contrary, kids' exposure to your marketing has in fact increased, and considering your so-called healthier menu options, such as oatmeal with the sugar content of a Snickers bar, are not in fact healthy. It is time for your corporation to stop with empty promises and attempts to neutralize your health footprint away and to instead conduct a thorough assessment of the corporation's impact on people's health, as called for in the resolution today. Thank you.
Thank you. Now, the final order of business is an advisory vote on the shareholder proposals related to a report on beverage container materials. At this time, I again call on Tom McKamey, who is here to present this proposal in two minutes or less on behalf of the proponent, Ruth Valera Ader. Mr. McKamey?
Thank you. I'm representing As You Sow, a McDonald's shareholder, Ruth Valera Ader, the filer of proposal number 11 on your proxy. As You Sow, a nonprofit group promoting corporate social responsibility, is concerned that nearly 20 years after phasing out polystyrene-based food containers, the company continues to use environmentally harmful foam beverage cups and has no plan or goals for recycling them. The proposal asks the company to consider stronger environmental policies for its beverage containers, including phasing out polystyrene beverage cups and setting recycled content and post-consumer cup recovery goals. Polystyrene is not environmentally friendly. It is rarely recycled, and post-consumer foam cups have become pervasive in the marine environment, carried through storm drains to the ocean. Polystyrene breaks down into small indigestible pellets, which animals perceive as food, resulting in the deaths of thousands of birds and marine mammals.
Production of styrene used to make polystyrene has been associated with an increased human occupational risk of leukemia and lymphoma. The International Agency for Research on Cancer determined that styrene is a possible human carcinogen. The California Office of Environmental Health Hazard Assessment has proposed that styrene be listed as a human carcinogen. 46 cities and counties in California have banned or restricted the use of polystyrene food packaging. We ask the company to explain how it can continue to use polystyrene cups in light of these significant occupational safety and environmental concerns.
By contrast, paper beverage cups do not persist in the environment for hundreds of years and are becoming readily recyclable. The company's competitor, Starbucks, uses 10% recycled paper fiber in its paper hot beverage cups. It is committed to recycle all post-consumer paper and plastic cups discarded in company-owned stores by 2015. It offers a discount for customers who bring reusable beverages.
Mr. McKamey, excuse me. We're running a little bit late, so if you can wrap it up.
Please, thank you. Please send a message to the company to switch to safer, more responsible materials for its beverage container materials by supporting proposal number 11 on your proxy. Thank you.
Thank you, Mr. McKamey. Are there any questions or other comments on this proposal? Is there a motion to move on all of the proposals? Your board of directors recommends a vote in favor of the election of all nominees for director and in favor of the appointment of Ernst & Young as auditors. Your board of directors also recommends a vote in favor of the five remaining management proposals and a vote against all four of the advisory shareholder proposals. The reasons for the board's recommendation on each proposal are outlined in the proxy statement. If you're voting at the meeting today, please complete and sign your ballot and motion to an usher to collect it. If you've already submitted your proxy, you do not need to vote by ballot. The business portion of this meeting is concluded, and the polls are now closed.
I now will turn the meeting over to Jim Skinner for remarks on McDonald's business results and to lead the general question and answer session. On behalf of your board, I'd like to congratulate Jim on another outstanding year and recognize him for his continued strong leadership of the company. Under Jim's direction, McDonald's sales continue to increase and grow stronger during what remains a challenging economic environment. It's with great pride that I introduce our Chief Executive Officer, Jim Skinner.
Thank you, Andy, and good morning, everyone. Thank you for being here today, and thanks so much for your investment in McDonald's. I'm pleased to report that McDonald's achieved another year of record sales and income in 2010. With the economy still challenging, we've stayed focused on our customers and how to be even more relevant and meaningful in their lives, and that's helped drive our continued success. We've remained committed to a proven business strategy known as our Plan to Win, and it's focused on the five P's: people, products, place, price, and promotion. Our results could not have been achieved without the exceptional performance of our people and the strong alignment of our system.
This includes our world-class franchisees who own and operate more than 80% of our restaurants around the world, our outstanding global suppliers who guarantee delivery of the highest quality and safest products to our nearly 33,000 restaurants every day, and the 1.7 million employees who support and work in our restaurants to deliver a superior customer experience. Now, I'd like to take a moment to recognize some of the people here today who work on behalf of our shareholders and our customers. You've already met our board of directors, and I want to thank Andy and all of our independent directors for their guidance and insight. They continue to deliver first-class governance and are a tremendous resource as we move our business forward.
I also want to recognize our senior management team, starting with Don Thompson, Gloria Santona, and Pete Bensen seated to my left, and Jose Mario, Group President of McDonald's Canada and Latin America, Steven Easterbrook, President of McDonald's Europe, Ti Fenton, President of McDonald's Asia Pacific, Middle East, and Africa, Janice Fields, President of McDonald's USA, Rick Flores, Chief Human Resources Officer, Douglas Goare, Head of Global Supply Chain and Restaurant Development, James Johannesen, Chief Operating Officer of McDonald's USA, Kevin Newell, Chief Brand Officer, and Jeffrey Stratton, Chief Restaurant Officer. I also want to recognize the fact that Karen King, our East Division President, is with us here today, and I ask all those members of the senior management team here today to stand and be recognized. I want to thank you for your leadership.
Now, looking at our latest results, McDonald's increased global comparable sales by 5% in 2010, marking our eighth consecutive year of same-store sales growth. Once again, every area of the world contributed. U.S. comparable sales increased 3.8%, Europe grew by 4.4%, and comp sales rose 6% in our combined region of Asia Pacific, Middle East, and Africa. Our African income grew 9%, and we increased our market share around the world. We also returned $5.1 billion to shareholders through share repurchases and dividends paid, and we delivered a 27% return to investors for the year, ranking us third among the companies comprising the Dow Jones Industrial Average while maintaining a number one position over the last five years. The strength of our business has driven continued growth in average guest counts, which translates into serving more than 64 million customers every day around the world.
We're continuing our momentum into 2011 with first quarter operating income around 7% in constant currencies, and earnings per share grew 12%. Year-to-date comparable sales through April increased 4.7% globally. We continue to follow a winning formula of building on the basics while maintaining our brand and making it more modern and relevant. As always, our first priority is running better restaurants, and we're achieving stronger customer satisfaction scores across the system. We're delivering improved service to our guests, and we're determined to get even better through a relentless focus on training, technology, and operations excellence. In addition, we continue to succeed with our menu of iconic offerings and greater choice, from our famous Big Macs, French fries, Egg McMuffin, to salads, chicken, fruit, and beverages. At the same time, we're modernizing our menus with relevant local offerings and new product lines that are delighting our customers.
McWraps in Europe, new chicken offerings across Asia, and the launch of smoothies and frappes here in the United States have all contributed to strong sales results. Earlier this year, the U.S. introduced fruit and maple oatmeal, it's oatmeal, people, which adds another great tasting, high-quality option to our menu. I hope all of you receive your Be Our Guest Card so you can enjoy this great new offering.
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Moving forward, we will continue to smartly and strategically strengthen our menus with new food and beverage offerings that consumers want from McDonald's. We have the benefit of being able to share learnings and concepts from markets around the world, which helps us continue to develop and deliver a strong menu pipeline for today and the future. We're also focusing on our restaurants and modernizing them through our goal and global reimaging effort. Around the world, we continue to redesign the look and feel of our stores to make them even more contemporary and relevant and a place that our customers want to be. Over time, we will touch all of our restaurants through reimaging, and we're making good progress with a growing number of great new look stores in Asia, Australia, Europe, Latin America, and of course, here in the United States.
With reimaging, we're making the kind of major investments in our business that help us to separate even further from the rest of the industry. Now, when it comes to modernizing our brand, we're also doing it through convenience and accessibility. Our business is built on ease and affordability, and we're delivering these attributes in more relevant ways for consumers. Around the world, we're making McDonald's more available more often with a growing number of stores and extended hours. In cities across Latin America and Asia, we're growing the business through our increasingly popular delivery service. In Europe, we're adding more self-order kiosks to our restaurants and touch-free payment options to make the customer visit even more convenient and enjoyable. We remain committed to delivering the very best value across our menu as consumers everywhere continue to count on McDonald's for everyday branded affordability.
I often like to say that consumers are being pinched everywhere. They should not suffer the same fate at McDonald's. Around the world, we're focused on delivering consistent and meaningful value from value lunch programs in Asia to fourth-tier products in Europe to savor menus across many markets. The iconic Dollar Menu remains highly popular here in the United States, and last year, we added the Dollar Menu at breakfast to strengthen our overall affordability. It was an immediate success and continues to provide us with strong sales and guest count growth during that very vital daypart. Now, here's a recent spot that reminds us about the popularity of breakfast at McDonald's.
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We never did see what was in the package. I don't know what it is, but we need to find that out. Finally, we continue to understand the importance of building greater trust in McDonald's as a way to ensure the long-term success of our company. As we build the business, we're also building our brand by continuing to act socially responsible toward our communities, our people, and our customers. We're proud of all we do in this area. Our countless community outreach efforts and continued support of Ronald McDonald House Charities are intense work across the broad spectrum of corporate responsibility, from environmental stewardship to animal welfare to sustainable sourcing. Our commitment to our people through significant investments and training and career opportunities and our menu evolution that continues to deliver greater balance and choice for consumers.
We're determined to keep moving forward on all of this work and become an even more respected and trusted brand around the world. With our whole system aligned around building our business and our brand, I'm extremely confident in our future. We've established incredible momentum, and we have the plans and resources in place to sustain it. We're determined to make McDonald's more successful and more valuable to the millions of customers we serve every day and to all of you who support us. Thank you again for your investment and confidence in McDonald's. Now I'll open the floor to questions, and please be reminded to try to make your comments within one minute or less. Let's start over here.
Good morning, Mr. Skinner. I have Mary here, and she has a question in regards to marketing to children. Good morning.
My name is Mary Ingen, and I have traveled here from Minnesota to share my concerns regarding McDonald's impact on our children's health. I am a mother and a grandmother who desperately wants to see this corporation do the right thing for the health of future generations. In my community in Minnesota, we have joined with voices of thousands of parents, educators, health professionals, and public officials who cannot stand by while our children and grandchildren suffer. We've been working in our community to speak directly with McDonald's franchise owners to share our concerns over the link between McDonald's style marketing and children's health. This predatory marketing makes it difficult for even the most diligent of parents to impart healthy eating habits to their children.
If McDonald's executives are not willing to stop marketing to children, franchise owners will need to be more responsive to addressing community concerns or risk losing patrons like me. Mr. Skinner, when will McDonald's stop substituting public relations for real action and take responsibility for the damage that your corporation inflicts?
Mary, you're well past one minute now, but go ahead and finish.
Inflicts upon children's health.
Thank you very much, Mary. I think this is probably a fundamental approach that's been taken by Corporate Accountability International that was here this morning. It sounds like you're sort of on that same track. I want to just respond to that now because I know I'm going to get this comment from them as well. This is all really about choice, and it is about protecting people's individual rights in this great democratic society that we live in. Just as we defended your right yesterday, right of free speech, in the ads and petitions that were placed in the newspaper, we would like you to defend and respect our rights to communicate effectively through our advertising with our people.
Just yesterday afternoon, as a result of your ads, I received overwhelming support from parents, customers, people who told me that they were not white customers of McDonald's pleading their case for McDonald's to defend their right to choose. I am responding to them now by telling you we will continue to communicate and advertise to our customers responsibly, which we do on menu and lifestyle choice, and leave the personal responsibility of choosing up to them. Let me go on to further say about responsible advertising. We take it very seriously. We were the first company to sign on in 2006 to support the U.S. Better Business Bureau's advertising guidelines for kids. We continue to follow system-wide guidelines on how we responsibly communicate with children about balanced food choices and being active, the passport to play, through Ronald McDonald.
In the United States, Happy Meal advertising features low-fat white milk, McNuggets, and apple dippers that fit well within the USDA recommended daily guidelines. It's the only advertising we do around the Happy Meal to children. Of course, we have a number of other varieties of Happy Meal choices. I just want to say all of that now in response and with the expectation that I might get that question again. Thank you.
Yes, Mr. Skinner, we have another question about marketing to children from Dr. Don Ziegler.
I'm Dr. Don Ziegler, PhD, Director of Prevention and Healthy Lifestyles at the American Medical Association and Adjunct in Preventive Medicine at Rush University. My comments are my own. I'm a concerned professional. Our doctor's offices, pediatric clinics, and hospitals are filled with patients suffering from conditions related to food. We face what the World Health Organization calls a slow-motion catastrophe of non-communicable diseases linked to consumption of fats, sodium, and sugars that are ubiquitous in fast foods. This epidemic is largely preventable, and one in which your marketing plays a significant role. WHO recommends reducing junk food marketing to children. Your marketing undermines parents' efforts to encourage healthy eating.
I joined over 600 health professionals and institutions from every state, including the American Academy of Child and Adolescent Psychiatry and the chairs of Nutrition at Harvard and Preventive Medicine at Northwestern, to call on McDonald's to retire Ronald and its marketing to junk food to children. Ending marketing to kids would improve McDonald's reputation and the health and well-being of generations to come throughout the world. Mr. Skinner, will you answer the call from health professionals to retire Ronald and end marketing of foods high in fat, sodium, and sugar to children? Thank you.
Thank you, Doctor. I think I answered the question in part in the beginning, but I'd like to respond to the issue of Ronald McDonald. Ronald McDonald is an ambassador for McDonald's, and he's an ambassador for good. He is the face of Ronald McDonald House. He does not advertise unhealthy food to children. McDonald's does not advertise unhealthy food choices to children. We provide many choices that fit within the balanced active lifestyle. It is up to them to choose and their parents to choose, and it is their responsibility to do so. Tonight and every night, 7,200 families around the world are going to stand in Ronald McDonald House close to a sick loved one. It saves them $265 million a year in housing costs, not to mention the emotional support that is garnered from the experience. Ronald McDonald is going nowhere.
Hi, Mr. Skinner. I have Philip here, and his question is in regards to revising old and expanding our restaurants at truck stops.
Yes. I'm a truck driver. I've been a truck driver for about six months, but I've done it before. I've seen a lot of truck stops have McDonald's, some don't. The basic interest is also to reuse the rest areas that are out here in the United States, too. If everybody has a McDonald's in that area, they can revise state or local rest areas and make them McDonald's on the side of the interstates also. I'd also like to ask that they can implement a frequent buyer's plan so everybody that goes out to McDonald's can also have a chance to get school awards programs, stuff like that. I went to the O'Hara truck stop or Travel Plaza, and they have a program for truck drivers and also for frequent buyers. I'd just like to get that point across for the expansion.
Thank you. Very good, Philip. Thanks for the comment. As you know, the promotional activity and certainly loyalty programs relative to truckers and our other customers are made by independent franchisee decisions. Don, do you want to comment a little bit about our experience around the truck stops and locations?
Absolutely, Jim. Philip, thanks so much for the question. As many of you know, we are reimaging, remodeling quite a few of our restaurants around the world. In the U.S. alone, and the President, Jan Fields, is here and also the Chief Operating Officer, Jim Johannesen. You can talk to him afterwards. It looks like we'll be reimaging over 6,000 restaurants across the U.S. over the next five-plus odd years. We will ultimately have all of our restaurants within the U.S. with a much more contemporary, more inviting look, and our franchisees support this tremendously. Hopefully, we'll get to those restaurants that you mentioned very soon.
I have a question here from the Grand Oaks that I'm not sure I can answer, but it says, "Why are we no longer serving hot mochas, lattes, or cappuccinos?" Don?
Say it, no. We still are serving hot mochas, lattes, and cappuccinos. I might ask the person to, again, text one of us afterwards, and we'll try to find out if there's a specific restaurant that may not be. I know that Jan and Jim would want to know about that if you have another one. Thank you.
Yes, ma'am.
Mr. Skinner, Deborah Lapidus is here to ask more about food policy.
Good morning, Mr. Skinner. I'm Deborah Lapidus with Corporate Accountability International. I just want to know, as I mentioned before, policymakers, public officials, and public health institutions are taking action to limit fast food's impact on local health. In San Francisco, we saw the passage of a measure to limit choice giveaways to children's meals that fail to meet basic nutritional standards. Now we see a similar measure being proposed in New York. McDonald's claims to advocate choice but spends hundreds of thousands of dollars on the best PR, lobbyists, and lawyers that money can buy to prevent communities from choosing to shut McDonald's junk food marketing out. Nowhere is this more visible than recent efforts by you and your trade association to preempt policies like San Francisco's in Arizona and in Florida.
You claim to care a lot about parental choice, but I think that's quite disingenuous when you direct hundreds of millions of dollars on marketing directed to and right at children, and that marketing is designed to undermine parental authority. My question is, when will McDonald's stop aggressively interfering in public health policy and opposing democratic efforts to create a local food environment that is free of junk food marketing for our children and future generations?
A very well-positioned question and comment. As I said earlier, this is about choice. We believe in the democratic process, and our government officials believe in the democratic process, and we plan the democratic process just like you do. If you have the right to be involved in the process, I think we have every right to also be involved in the process. This is about choice. This is about a personal, individual right to choose in the society we live in. That's where we play. That's where you play, and we have every right to do so.
I have George here, and he has some comments in favor of keeping Ronald.
I'm a fellow alumni of yours from Roosevelt, and my comments are that you should keep Ronald McDonald. If you go to McDonald's and see the kids, how they look at Ronald McDonald, want to take pictures with them, they have tears in their eyes. I am disappointed in you that the last three years you haven't had Ronald McDonald here at the meetings with the shareholders. My final question is, why don't you have delivery and catering in America for McDonald's?
I thank you for that. Ronald hasn't been here because he's out in the field busy doing work and fighting through the protesters. Don, can you take that?
Thanks, George. Relative to catering and delivery, delivery is very, very large, as you probably know, over in many of our Asian markets. We're beginning to do in some of our Latin American markets. There are certain areas within the U.S. where we have a tremendous amount of density that we want to take a look at it. One of the differences is that in many of those markets, they don't have the other scenarios of being able to deliver food. They don't have drive-thrus in many of those markets. As they get more drive-thrus, we'll see how delivery plays out. There are certain dense areas, you know, the downtown New Yorks, Manhattans, of those areas, downtown Chicago where we do take a look at it. In some instances, we do some delivery.
Thank you. Yes, ma'am.
Mr. Skinner, Paul Shapiro would like to ask a question about animal welfare and corporate social responsibility.
Good morning, Mr. Skinner.
Good morning, Paul.
Thank you. My name is Paul Shapiro with the Humane Society of the United States. Right now, all of the eggs that McDonald's is using in Europe come from cage-free hens, whereas currently, all of the eggs that McDonald's is using in the U.S. come from birds who are confined in cages that are so cramped that each one has less space than the piece of paper that all of your programs are printed on that you're holding in your hands right now. Admiral Guy, the company in the U.S., is going to start using some cage-free eggs in the very near future, although unfortunately, it's still at a volume of less than 1% of the company's total egg usage.
At the same time, many of McDonald's competitors in the U.S. are using cage-free eggs at far greater percentages, and some, like Subway, are committed to going to 100% cage-free eggs. Even former McDonald's executives like Mike Roberts and Mike Donahue are now beginning their own restaurant chain in the U.S. that will be using 100% cage-free eggs. My question today, Mr. Skinner, is when is McDonald's in the U.S. going to stop lagging behind McDonald's in Europe and its own U.S. competitors and switch to cage-free eggs?
Paul, thank you so much for coming again this year. As you know, we've had an ongoing dialogue with you and people I know have met with you over the course of this last year. You've even visited one of our plants.
I signed a confidentiality agreement on that with you. No, just kidding.
Our Chief Operating Officer, Don Thompson, who's accountable for all things food image, food execution relative to the delivery on these processes and oversees all of that, has spent time, I know, with Bob Langert and yourself in talking about this. Don, could you just talk a little bit about where we are?
Yeah. Hey, Paul. Good to see you again. You know, as Jim mentioned, I know you had—we talked last year, and you had a chance. One of the things I asked of you, and I thank you for it, I asked you, I said, "Paul, if you're going to speak about us, do me a favor and at least visit one of our facilities." You did that, and I appreciate that. There's a high priority that we have around humane care of animals, and we always have had it. You saw it yourself, as evident. Globally, our suppliers use both cage-free and cage systems. There is no scientific consensus, as you know, at this point, relative to the benefit of one being more humane versus the other.
As a result of that, what we did was we commissioned the research test that we started last year, and we announced this commercial housing test. It is a three-year study with a coalition of individuals from academia, scientists, NGOs, and yes, egg suppliers themselves. As a part of the test this summer, McDonald's USA—this is one year from when we had talked before—McDonald's USA will start purchasing eggs from cage-free and also enriched housing methods. We are going to go a step further than cage-free. We think there may be some other opportunities. We'll purchase about $1 million eggs per month of each type.
That's 2 million eggs.
Which, by the way, many of the folks that you mentioned are nowhere near that number of eggs. Percentages aren't always the most accurate. We'll purchase 2 million of the eggs. The other thing that we're going to do is we'll get a chance to see which one and which process seems to be a bit more beneficial, leveraging that coalition. Last thing, really important to note, only 5% of the eggs in the U.S. egg industry are cage-free. Even if we did attempt to buy all of the cage-free eggs, it wouldn't satisfy the needs that we had at McDonald's. We'll see from the test, and we'll update you guys along the way.
I have Michael, and he has some questions on needless alternatives and also how to be considered as a Board of Directors member.
Thanks. My name is Mike Servinskis. I've been a long-time shareholder, and I appreciate the work you do. My first question is, I enjoy the restaurants and the ever-expanding menu options. Is there any thought or has there been work done on a meatless burger patty alternative? My second question is, I'm a partner and a money manager for a local firm. I'm a big public advocate for healthy living and smart investing, and I'm wondering how I might get my hat in the ring to be considered eventually for a board of directors position. Thank you.
Okay. Thank you, Michael. There are two questions there. Andy, I'll have you respond to the second question, but Don, first, what are we doing about meatless sandwiches or patties?
Hi, Michael. We do have meatless sandwiches in some areas of the world, clearly in India, other areas where we use a soy-based patty. We have attempted on a number of occasions within the U.S. system to go to a veggie burger. Matter of fact, I think we introduced one in Southern California when I was out there in the early 2000s. The challenge is, Michael, we ended up serving four a day, and we can't maintain quality at that level. It doesn't mean we won't come back. As customer demands change, as customers say, "That's what we want," and we can sense that through the research, we'll definitely look at it again. I know that Jan and the menu teams in the U.S. and the chefs will continue to look at opportunities. As that market arises, we'll keep taking a look at it.
Michael, thank you for your interest in the company and its board. We're always interested in highly qualified candidates for the board, people who bring competence to the board, much like our current directors do. If you have that level of interest, please be in touch with us. Drop us a note, give us a proper resume and some reasons why you think you would be a good member of our board.
Thank you, Andy. Thank you, Don.
Thank you, Skinner. We have a question about recycling from Melissa Johnson.
Hi. I would like to know why McDonald's does not do more to recycle. Last year, we were told that McDonald's does recycle, but at all of the restaurants that they do recycle, my mom and I went to 22 different local McDonald's restaurants, including the one down the street. They all said that they do some recycling, but every single one said that they could do more. They said that they recycle the boxes that the food comes in, and there's limited plastic recycling, but all of the milk jugs, the salad containers, the cups, except for the polystyrene cups, etc., can all be recycled. McDonald's taught the world how to bust their own tables, and other companies have their customers recycle. Why is McDonald's not?
Thank you for the question. We do do a lot of recycling. I think what we said last year is that it really starts behind the counter. As you've mentioned, we recycle boxes of oil, which is more than one-third of the waste in the restaurant is back of the house. Most of our used cooking oil is recycled in Europe. Most of it's being used for biodiesel fuel, which a lot of people don't know. Our restaurants buy a lot of recycled material. We're committed to reducing, reusing, and recycling, which has a long history in our relationship with the Environmental Defense Fund more than 20 years ago, and where it all really sort of became formal. The problem that you have with recycling is it's really led by the municipalities.
If there aren't effective recycling programs in the communities where we do business, we're sort of at a full stop there because we don't have a resource and an opportunity to be able to have that. You don't have the separation in the lobbies of the restaurants. If you go to Germany, for example, there's 100% recycling of everything because it's mandated by the government, it's mandated by the municipalities, and customers are expected to recycle from their homes or recycle in the commercial businesses and the retail. It's all driven by the capability and the availability of recycling within the communities.
Until those are starting to fall more by the wayside because as these municipalities have less revenues and less opportunity to be able to spend money in that regard, it's become complicated. That's why we are at the level we're at. I would agree with what you were told in the store. We would like to do more, but we can't do it by ourselves. We have a question from the Grand Oaks. 24-hour service, why not sell hamburgers 24 hours a day? Don, can you handle that?
The team operating officer. We get asked this question quite a bit. The challenge for us is that whatever we do, we want to do well. Some have asked, "Can you sell hamburgers around the clock during the time where you sell breakfast even?" What it requires is it requires additional grill space, grill capacity in the restaurant. For us to be able to do both, we don't have enough capacity in the kitchens unless we began to just cook our food in a very, very, very different way and pre-cooked a lot more things or something like that.
That's not something we want to go towards. At this stage, we prefer to continue to sell hamburgers through a certain time of the day, and then we begin to sell breakfast. We are looking at that time and the time shift and when we can change that. That's the rationale for why we split the day parts.
Thank you. Yes, ma'am.
Mr. Skinner, Sister Barbara Gaul has a compliment.
Okay, we accept all compliments. Sister?
I represent the Sisters of Charity of the Blessed Virgin Mary. We were pleased to learn that McDonald's Corporation was honored in June by Heartland Alliance National Immigrant Justice Center at the 12th Annual Midwest Light of Human Rights Awards. Since 2000, the Midwest Light of Human Rights Awards has honored human rights workers and celebrated the contributions of business, civic, and philanthropic leaders in promoting human rights. We congratulate those who have earned this award and applaud our company's efforts to treat employees with dignity. Thank you.
Thank you. Thank you very myuch .
Do you have one over here?
No. Let's just kind of stack on this side. Let's go back here.
Mr. Skinner, Mr. Boyle has a question about coffee.
Get ready, Don.
My question is, about 10 years ago, I stood here and said, "How about McDonald's getting a good cup of coffee?" I was kind of shut down. Today we have, I think, one of the best cups of coffee on the street. My question is, will McDonald's ever consider retailing coffee?
I'll take it, Don. Fortunately, I wasn't here 10 years ago who gave you that response. I was instrumental, really, because I'm kind of a coffee guy at McDonald's. I go to McDonald's every day to get my coffee. I did so 10 years ago, and I did so in 2005 when we first started talking about first improving the drip coffee. We did a good job with that. Customers gave us permission to get into the specialty coffees and do the other kinds of beverage initiatives that you've seen in our restaurants today. We're proud of it.
I think our drip coffee is about as good as it gets. We have talked from time to time about licensing and retailing and selling it in the grocery stores, but to this point, we have decided that that's not our space. That's really not where we play in. We've decided not to do that at this point. Yes, ma'am.
Mary Ellen Reynolds has a question about food pantries.
Thank you. My name is Mary Ellen Reynolds. I'm a consultant. The positive thing I want to first say is that at least from a mediation point, McDonald's is addressing the issue with marketing to children. I appreciate that as well. At least you're addressing that. In collaborating that with the food pantry programs, our group does a lot of programs in conjunction with 501(c)s and organizations. We would love to see McDonald's also incorporate their charity program in collaboration with youth advocates for children and other programs in their specific store. When I'm speaking of Chairman, also other members of the Board, including the attorney, these pantry programs that we do actually are similar to what, let's say, dominant stores do throughout the nation, where these things would be available to those who can't afford to purchase things that would enhance the McDonald's image.
Thank you very much for that. I wouldn't be surprised if we do some of that around the country today through our local franchisees who are involved with their communities to a great extent around charitable and 501(c)s, as well as also being involved with the food pantries. They give back so much to their communities. If you have specific interest in a specific food pantry or a specific area, please get a hold of us, and we can see what's going on in that community. Thank you so much. We'll take two more.
Mr. Skinner, Ed Mosser has two questions, one about the impact of fuel costs and one about company stock split.
Mr. Skinner, good morning, and thank you for your service. I understand your reluctance to provide forward outlooks of the company, but what are your general feelings about the fuel costs? One of the major retailers in the discount retailers is indicating they're seeing some softness in their revenue. Will the higher fuel cost be a bump for you as far as your value menu and seeing more people coming in, or do you feel that it'll be a negative based on the fewer people driving and also the economics? Second, has there been any consideration to the splitting of the company into a REIT-type organization and also an operational restaurant-type organization? It appears that your real estate, your franchising ventures provide a much higher return on investment. I'd just like to know what your comments are on that.
Thank you. I'll take those. First of all, what was your first question?
How does fuel.
Oh, fuel cost.
Going in overall.
Fuel cost. Thank you. Thank you. I was thinking about the response to the REIT. The fuel cost issue, you know, we've gone through this in the past. The most recent occurrence was in 2008 when fuel prices got up over $4 a gallon, and not as high as they are today, but they were high in comparison to historic prices. We really didn't see an enormous impact on our store sales. We had some impact on our long-haul stops and our interstate sites where people were doing less driving. I said then, and I say it now, if you don't have far to go, you can get to McDonald's. That's number one. I'm not being flippant about that. I just think in terms of the communities and where McDonald's are located, we really didn't see any impact because we're nearby.
Where you do see an impact, and we, of course, were concerned about fuel costs like everybody else, is on the supply side where our suppliers have to absorb the cost of those, the fuel costs in terms of delivering of goods and services. On the commodity side, which you know has somewhat been inflated, we've communicated clearly about that in terms of what we expect that.
may be in the United States and around the world. In answer to the question on whether it's going to impact our Dollar Menu or our value orientation, as I said earlier, we don't expect our customers to get pinched at McDonald's because they're getting pinched everywhere else. I think the answer to that is no. We will continue to pursue value on behalf of our customers throughout our system. Relative to the REIT, yes, we've actually had people suggest that that's the best way to go. Our response to that is, and my response to that is that yes, our real estate is valuable, but the highest and best use of our real estate is for our franchisees and the businesses that they're in of selling hamburgers, for the long-term sustainability of the McDonald's brand.
Even though we might be able to extract a higher return in the short term, over the long term, it's not beneficial for us to have a different landlord or any relationship with our franchisees that would extract more from the real estate side than the hamburger side. Thank you very much. Any more questions? Very good. I'll call back our Chairman, Mr. Andrew McKenna. Andy.
Okay. Thank you, Jim. We now 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 nominees for director with the support of at least 97% of the shares voted. Shareholders have approved Ernst & Young as the company's independent registered public accounting firm for 2011 with the support of 99% of the shares voted. Shareholders have approved the proposal related to an advisory vote on executive compensation with the support of 95% of the shares voted. Shareholders have voted for an annual advisory vote on executive compensation with the support of 82% of the shares voted.
Shareholders have approved the proposal to eliminate the supermajority voting requirements in Article 12 of the Restated Certificate of Incorporation by repealing this article with the support of 81% of outstanding shares in McDonald's stock. Shareholders have approved the proposal to eliminate the supermajority voting requirements in Article 13 of the Restated Certificate of Incorporation with the support of 81% of the outstanding shares of McDonald's stock. Shareholders have approved the proposal to eliminate the supermajority voting requirement in Article 14 of the Restated Certificate of Incorporation with the support of 81% of the outstanding shares of McDonald's stock. Shareholders have agreed to advise the board of directors to consider declassifying the board structure, receiving the support of 77% of the shares voted. The advisory shareholder proposal related to the use of controlled atmospheric stunning has not been approved by shareholders, receiving the support of 3% of the shares voted.
The advisory shareholder proposal to report a report on children's nutrition has not been approved by shareholders, receiving the support of 6% of the shares voted. The advisory shareholder proposal related to a report on beverage containers has not been approved by shareholders, receiving the support of 23% of the shares voted. Thank all of you for attending this meeting this morning. We really do appreciate your investment, your support, and your interest in McDonald's. The meeting is now adjourned.