If you can’t take the heat, take Wendy’s private?…

During a performance of a popular theater skit in front of Trian Partners’ hedge fund offices in Manhattan last month, an actor portraying Trian CEO Nelson Peltz carries Wendy’s through a field where workers harvest unprotected by the Fair Food Program’s best-in-class human rights standards and monitoring.

Plot twist in Wendy’s Boycott: Nelson Peltz and Trian Partners “may take the chain private”;

Move would avoid growing shareholder scrutiny…

As readers of this site know, the past several months have seen an unprecedented surge in shareholder — and consumer — scrutiny of Wendy’s stubborn refusal to follow its fast-food competitors’ lead and sign a Fair Food agreement to bring the Fair Food Program’s gold standard human rights protections to farmworkers in its supply chain. 

The first half of 2022 has not been kind to Mr. Peltz and his hedge fund colleagues. A shareholder movement to remove Wendy’s Board Chair Nelson Peltz and three other key, Trian-connected directors from the company’s board of directors was organized in response to the board’s failure to adequately address last year’s shareholder resolution calling for transparency into the burger giant’s social responsibility practices (a resolution that won over 95% of the vote). April also saw a huge march in Palm Beach, the billionaire enclave that serves as home to Trian’s new Florida offices as well as Nelson Peltz’s own massive southern mansion. Then, just last month, an action outside of Trian’s Manhattan offices brought workers from Immokalee and NYC allies together in a colorful, day-long protest that caught the attention of some of the world’s most important financial press.  

Two key shareholder organizations, Investor Advocates for Social Justice (IASJ) together with leading boardroom accountability advocates Majority Action, have led the charge on the shareholder front over the past several months. In April they announced the wide-ranging effort to convince Wendy’s shareholders to vote against the reelection of four members of Wendy’s board at the company’s 2022 shareholder meeting, including Nelson Peltz, Chair of the Board, and Peter Rothschild, Chair of the Board’s Nominating and Governance Committee.  

Leading up to the shareholder vote, IASJ and Majority Action made great strides with some of the most important players in Wall Street. Glass Lewis and Institutional Shareholder Services (ISS), two of the most influential proxy advisory services (companies that advise important financial clients on how to vote on shareholder issues),  were moved by the advocates’ arguments. Glass Lewis recommended a vote against Board Chair Nelson Peltz, and ISS flagged “caution” on all four named board members.  And in news that surely reverberated inside the marbled board rooms of NYC’s financial district, New York City’s own public employee pension funds — which as of March 2022 managed over $263 billion in assets— cast their votes against the same four board members in advance of the vote… and made their vote public with a rousing speech in front of Trian’s Park Avenue offices by the New York City Comptroller.  

Indeed, the “No Vote” campaign to recall Peltz and his colleagues from the Wendy’s board gained so much momentum that Wendy’s felt compelled to make an 11th-hour filing with the SEC to convince their shareholders not to waiver.

Farmworkers and their NYC allies arrive in a delegation to Wendy’s shareholder and key investment leader JP Morgan Chase during last month’s big action in Manhattan.

Shareholder vote sends a message…

And when all was said and done, and the votes were counted at Wendy’s annual shareholder meeting on May 18th, it was clear that the shareholders’ message — that farmworkers’ concerns about Wendy’s supply chain are real and must be given urgent consideration — was heard, loud and clear. 

Despite Wendy’s best efforts, Peter Rothschild received only 86.9% support, and Nelson Peltz only 92.6%.

While to the casual observer these numbers may seem like a strong result in Wendy’s favor, to Wall Street insiders they send a powerful message of dissent.  In public company boardrooms, as it turns out, most elections are akin to coronations, with the overwhelming majority of candidates at comparable companies typically receiving somewhere between 95%-100% of the vote.  In fact, as explained by IASJ and Majority Action, the results place Rothschild in the bottom 10% of board members at comparable companies, and Peltz’s in the bottom 18%.   And that is without taking into account that more than 19% of the votes at Wendy’s were controlled by Peltz and Trian.  Indeed, when the votes controlled by Trian and Wendy’s own board members, which were clearly never in question, are removed from the count, those numbers fall even further, to 82% and 90%, respectively.

In other words, millions of shareholder votes called for Peltz and Rothschild to be removed from Wendy’s board, letting the financial world know that Wendy’s shareholders are paying close attention to the company’s human rights track record and, with the momentum for real change growing by the month, they would not be backing down anytime soon.

Plot twist: Peltz and Trian taking Wendy’s private?…

Given the intense build-up to last month’s vote, both on this site and in the financial press more broadly, you might be surprised that we didn’t announce those encouraging results earlier.  And that’s for one simple reason: just as we were preparing to share the outcome of this pivotal shareholder movement, a story broke that— while still unclear in its details, even to this day— far eclipsed the news from Wendy’s annual meeting.  And as it turns out, that news just might have something to do with the growing shareholder revolt.

From the industry journal, Restaurant Business:



Wendy's Nelson Peltz
Photograph: Shutterstock

Nelson Peltz may take control of Wendy’s.

Peltz’s Trian Partners disclosed in a federal securities filing that it has approached the board about a potential acquisition that could “enhance shareholder value.”

The filing strongly suggested that Peltz, whose fund controls nearly one-fifth of Wendy’s stock, could take the company private. “Such a potential transaction could include an acquisition, business combination (such as a merger, consolidation, tender offer or similar transaction) or other transaction that would result in the acquisition of control of the company by” Trian, the filing says…

… Peltz could theoretically take Wendy’s private more easily than anyone else, simply because he already owns more than 19% of the company’s stock, and the company is trading at a nadir. Wendy’s shares ended Tuesday down more than 30% on the year. The company has a market cap of about $3.5 billion and an enterprise value of $6.2 billion, according to the financial service site Sentieo.

But Wendy’s stock has languished when compared with its peers among the largest restaurant chains. McDonald’s, for instance, is down just 9% on the year. Restaurant Brands International, owner of Burger King, is down 16.5%, as is KFC and Taco Bell owner Yum Brands. Wendy’s, however, is the smallest and least global of those names, relying mostly on the performance of its U.S. Wendy’s business for its revenues and profits. (read more)

The story made headlines across the financial press, and the news provided a temporary bump in Wendy’s lagging share price.  It also caught the attention of shareholder democracy and human rights advocates IASJ and Majority Action.

While it remains unclear exactly what type of transaction Trian may be proposing at Wendy’s, IASJ and Majority Action acted quickly, issuing a joint press release to remind shareholders about the critical issues raised at the board vote in May when assessing any moves by Wendy’s board with regard to the company going private.  In the words of Majority Action Executive Director Eli Kasargod-Staub:

“Both in composition and in leadership, the Wendy’s Company board of directors is deeply interlocked with Trian Partners, raising significant questions about the ability of the board to independently evaluate any proposal from Trian Partners… Coupled with the inadequate responsiveness of Wendy’s board to the concerns of major investors and a majority vote on a 2021 shareholder proposal, Wendy’s shareholders will need to carefully scrutinize the details of any proposed transaction in order to ensure that the board’s recommendation is in their best interests.”

Beyond the immediate concerns around a possible shareholder vote on any sale of Wendy’s to private investors, the essential function of shareholder oversight around the company’s human rights policies has been thrown into question by the unexpected announcement (not a breath of which, it bears noting, was spoken at the shareholder meeting by company leaders less than a week earlier).  Indeed, if Wendy’s were to go private, that would mean that the tools shareholders have used thus far to hold Wendy’s accountable as a public company for its record on human rights — tools including the 2021 shareholder resolution and the 2022 Vote No campaign — would no longer be available to them to demand change.  As noted by IASJ Executive Director Courtney Wicks:

“The existing board structure at Wendy’s, heavily influenced by Trian Partners leadership, has already proven ineffective at responding to shareholder concerns about human rights risk management in the supply chain and broader governance issues.  Shareholders concerned about these critical ESG matters should approach any proposed transaction from Trian Partners with heightened scrutiny and alert.”

As we publish this post today, the road ahead for Wendy’s as a public company, answerable to its shareholders and their concerns about human rights protections in the fast-food giant’s supply chain, is shrouded in mystery.  But a recent, similar move by another billionaire investor provides what seems to be a clear cautionary tale.  From the online journal, jnews:

Energy billionaire Harold Hamm launches bid to take Continental Resources private

Energy billionaire Harold Hamm has launched a takeover bid for Continental Resources, in a move that would bring the US oil producer under the full ownership of its founder.

Hamm, one of the pioneers of the US shale revolution of the past two decades, on Tuesday launched an all-cash offer of $ 70 a share for the 17 per cent of Continental that his family does not already own…

… “We have determined that the opportunity today is with private companies who have the freedom to operate and aren’t limited by public markets, similar to the way we operated approximately 15 years ago,” Hamm wrote in an email to employees on Tuesday…

… Hamm has railed against the “religion” of climate change and constraints of the environmental, social and governance movement on Wall Street, and once said the efforts of European supermajors such as BP to green operations would “basically cut their throats”.

Analysts said Hamm’s move to take the company private reflected his view that fossil fuel operators should be unshackled to produce more oil.

“This offer completely aligns with Mr Hamm’s long-held belief that the world’s thirst for hydrocarbons will not be quenched by ESG,” said Andrew Gillick, a strategist at consultancy Enverus. (read more)

The parallels are obvious: beyond the superficial similarity of a billionaire shareholder offering to buy the company outright and take it private, the deeper parallels — growing scrutiny from shareholders over their legitimate environmental and social concerns driving powerful, wealthy men to seize control in a move that would eliminate the essential oversight that public company shareholders can provide — are real cause for concern. 

Whether the concern is for our environment in the case of rapacious energy companies ignoring rising seas and soaring temperatures, or for fundamental human rights in the case of food companies turning a blind eye to surging modern-day slavery in the fields, this latest news is deeply troubling, and it is essential that we approach the months ahead with, in the words of IASJ Executive Director Courtney Wicks, “heightened scrutiny and alert.”  Stay tuned in the weeks to come, as the details of Wendy’s possible future come into greater focus.  You will hear all the news and analysis of any further moves to take Wendy’s private here just as soon as we have it ourselves.