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PETA’s Shareholder Influence
By talking directly to quick-serve’s shareholders, the People for the Ethical Treatment of Animals hopes to influence how the industry does business.
PETA buys stock in restaurant companies to submit shareholder resolutions furthering its mission.

Chipotle Mexican Grill announced it will give purchasing preference to poultry suppliers who employ the most humane slaughter methods available. The decision was sparked, in part, by discussions with the People for the Ethical Treatment of Animals (PETA) and fueled by a U.S. Securities Exchange Commission (SEC)-backed shareholders resolution that has since been withdrawn by the activist group.

“This is an issue that we have reevaluated for several months,” says Chris Arnold, a spokesperson for the Denver, Colorado-based Chipotle. “We realized that the language of our supplier protocols, specifically dealing with slaughter could be vague to anyone who is not familiar with our company or does not have a knowledge of the care we take when selecting and monitoring our suppliers. We have rectified that.”

In a March 7 letter to the Norfolk, Virginia–based PETA, Monty Moran, Chipotle’s president and chief operating officer, wrote that his company will add the following statement to its supplier protocols: “We will give purchasing preference to suppliers that utilize the most humane method of slaughter available, including new and emerging technologies such as controlled-atmosphere killing (CAK), where the suppliers also meet our naturally-raised meat protocols, offer a stable of supply of food meeting our high quality standards, and in a way that is economically feasible.”

Chipotle, which operates 700 restaurants in 30 states, unsuccessfully petitioned the SEC to exclude a measure that would allow shareholders to decide if the company should give purchasing preference to chicken suppliers using less-cruel-slaughter- methods, like CAK, which uses inert gases to anesthetize birds quickly and painlessly.

In light of Chipotle’s decision to amend its supplier protocol, PETA withdrew its resolution, but the group is sticking to its guns on another SEC-backed ruling that says Wendy’s (Dublin, Ohio) must allow shareholders to decide if the burger chain should purchase a percentage of its eggs from suppliers that do not confine hens to cages.

Shareholder resolution is something quite common for PETA, which owns at least $2,000 of stock in more than 80 companies, with the primary focus of its portfolio being quick-serves restaurants and grocery store chains, says Matt Prescott, PETA’s assistant director of corporate affairs.

“We purchase small amounts of stock; just enough to be able to submit shareholder resolutions,” Prescott says. “The resolution is a last resort for us, the last little nudge. Our resolution called upon Chipotle to buy chicken from suppliers that used less cruel methods. They agreed to do just that in exchange for us withdrawing the resolution. We value our relationship with Chipotle; this was all very amicable.”

Wendy’s, however, has not done what PETA has asked. The advocacy group’s resolution will be printed in Wendy’s 2008 proxy because of the SEC ruling.

“PETA only has 120 shares, and they only own shares to promote its activist agenda,” says Bob Bertini, a Wendy’s spokesperson. “We certainly care about the humane treatment of animals, and we have a detailed animal program in place. We audit all of our beef and poultry suppliers, and if supplier does not meet our requirements or standards, they no longer do business with Wendy’s. We have a positive story to tell when it comes to this.”

In fact, PETA indicates that Wendy’s already gives purchasing preference or consideration to suppliers employing less-cruel slaughtering methods, but argues that fast-feeder s needs to keep pace with competitors by purchasing cage-free eggs. According to PETA, the eggs used by Wendy’s come from chickens that are confined to cages that are so crowded that the birds cannot stretch a wing. Carcasses of dead hens often litter the tiny cages, and many chickens, the group maintains, suffer broken bones and atrophied muscles, with almost all of their natural instincts being thwarted.

We purchase small amounts of stock; just enough to be able to submit shareholder resolutions. The resolution is a last resort for us, the last little nudge.”

Officials at Wendy’s disagree. A December 20, 2007, letter to the SEC from Leon M. McCorkle, Jr., executive vice president and general counsel and secretary for Wendy’s, says the burger chain can properly exclude the proposal under Rule 14a-8(i)(7) for ordinary business operations. Under this rule, a proposal may be excluded if it deals with a matter relating to the conduct of the ordinary business operations, provided it does not have inherent significant policy, economic, or other implications.

“Not only does the subject matter of the proposal relate to tasks that are fundamental to management’s ability to run the company on a day-to-day basis, but the proposal also seeks to micromanage the affairs of the company by seeking to impose specific and complex requirements and limitations on its business operations,” McCorkle wrote.

Susan L. Hall, counsel for PETA, disagreed in a January 4 letter to the SEC, arguing that the proposal calling for Wendy’s to buy cage-free eggs “embraces a significant social and public policy issue and involves ameliorating the mistreatment of animals.”

William A. Hines, special counsel to the SEC, apparently agreed, telling McCorkle in a February 19 letter that the commission does not concur that Wendy’s can exclude the proposal under Rule 14a-8(i)(7).

“Accordingly,” Hines wrote, “we do not believe that Wendy’s may omit the proposal from its proxy material in reliance on Rule 14a-8(i)(7).”

“We hope Wendy’s will get with the times, but it would appear they are more interested in dragging their feet,” PETA’s Prescott says. Chipotle, he says, joins Burger King, Wendy’s, Carl’s Jr., Hardee's, Popeyes, and Safeway in giving purchasing preference or consideration to suppliers employing more humane slaughter methods. Burger King purchases 5 percent of its eggs from suppliers that do not use cages. Carl’s and Hardee’s obtain 2 percent of their eggs from such suppliers, while Safeway recently agreed to double the amount of cage-free eggs its sells.