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McDonald’s urged to conduct civil-rights audit amid racial allegations

Chicago-based McDonald’s Corporation should have an independent firm conduct a civil rights audit to help determine whether its current policies are creating social and economic inequality among its franchisees and employees.

That’s what SOC Investment Group, an adviser to union pension funds, is urging McDonald’s Corporation to do amid mounting racial allegations in its ranks and among franchise owners.

The SOC Investment Group says the restaurant chain should oversee a third-party audit that takes input from franchisees, corporate employees, suppliers and customers. The recommendation by SOC Investment Group was made in a shareholder proposal sent Monday, December 6, to McDonald’s board.

McDonald’s already reports diversity data for corporate staff and company-owned stores, but those reports exclude an estimated 660,000 U.S. franchise workers, making it unclear how the company is addressing racial inequality, according to the proposal, which was seen by Bloomberg News.

“A civil-rights audit will help McDonald’s identify, remedy and avoid adverse impacts on its stakeholders,” SOC said. The firm, formerly known as CtW Investment Group, works with union-sponsored pension funds that hold about 2.5 million McDonald’s shares.

According to its website, the SOC Investment Group was founded in 2006 as the CtW Investment Group. The group says it holds corporations and their leadership accountable for irresponsible and unethical corporate behavior and excessive executive pay, reflecting the long-term interests of workers and their families invested in union pension funds.

The SOC Investment Group supports regulatory and shareholder initiatives to ensure independent and accountable directors, reasonable executive compensation practices, and sound environmental, human capital and other business policies.

In response to the SOC’s recommendation, McDonald’s told Bloomberg News that its “focus will remain on continued action to accelerate meaningful and overdue societal change.”

The company also said that it already holds its leaders accountable for maintaining equal pay for women and minorities, and for ramping up investments in diverse-owned suppliers.

“McDonald’s is serious about holding ourselves accountable to our public commitments to drive equitable opportunity for all,” the restaurant company said.

McDonald’s has said it will increase minority representation in its U.S. leadership roles to 35 percent by the end of 2025 from 29.1 percent last year, and this year it tied some executive pay to diversity targets.

It’s also revamping its domestic supply chain, shifting more spending to women and minorities. This goal includes spending by franchisees, who own and operate about 93 percent of restaurants globally.

Citing data filed with the Equal Employment Opportunity Commission, Bloomberg reported that McDonald’s meets or exceeds the makeup of the U.S. population in representation of Black, Hispanic and Asian workers at the management level, and for Black and Asian workers in professional categories.

However, those figures only include company employees and not those who work at franchises in the U.S.

Still, McDonald’s has been criticized at times for its handling of race and social justice issues. Chief Executive Officer Chris Kempczinski is facing backlash from some community groups for comments he made earlier this year casting blame on the parents of one Black and one Latino child who were killed in shootings. Kempczinski apologized in a video to employees, saying he would do “more listening and learning from more people whose life experiences are different from my own.”

Earlier this year, companies controlled by media mogul Byron Allen sued McDonald’s, claiming the fast-food chain is discriminating against Black-owned businesses. At the time, McDonald’s said it would more than double its national advertising spending with minority- and women-owned media businesses.

A class-action lawsuit filed by 52 Black McDonald’s franchise owners in 2020 has grown to 77 plaintiffs.

It alleges that McDonald’s steered Black franchisees toward certain neighborhoods where sales are lower while costs are higher, leaving them with less money and yet higher scrutiny from corporate headquarters. The franchisees, who ran a total of more than 200 restaurants in the past decade, are seeking up to $1 billion in damages.

Also last year, two senior McDonald’s executives sued the company for racial discrimination. Under former CEO Steve Easterbrook, the suit alleges the chain “became overtly hostile to African Americans in both words and deeds.”

The lawsuit also claims that as a result of that discrimination, McDonald’s fired and demoted Black leadership, pushed out Black franchisees and lost African American customers.

In 2019, McDonald’s fired Easterbrook for alleged sexual misconduct after they learned he lied about his relationship with subordinate employees.

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