A group that advises union pension funds has called on McDonald's to shake-up its board, saying an upcoming CEO change will not be enough to lift it out its doldrums.
CtW Investment's letter to the restaurant chain's board Friday comes two weeks after the company announced Don Thompson would step down as CEO and be replaced in March by Steve Easterbrook, its chief brand officer who has been responsible for fixing the fast-food operator’s marketing and menu.
After years of growth, McDonald's has hit a rough patch: 2014 was the first year with a decline in same-store sales in more than a decade. Last quarter was also the fifth straight quarter of declining same-store sales in the United States, where it has lost many customers because of an overly complicated menu, changing tastes, and defections to fast casual chains like Chipotle Mexican Grill CMG .
The funds CtW advises own 2 million McDonald's shares, or $190 million at Friday's closing price and 0.2% of the company, and invest over $250 billion in the global capital markets.
"At this juncture, we believe it is critical for McDonald’s to have strong, independent board leadership," CtW Executive Director Dieter Waizenegger wrote in the letter. "Fresh eyes are essential to drive the overhaul of the board’s composition, form a productive partnership with CEO Easterbrook in tackling the company’s strategic challenges, and restore the trust of long-term shareholders."
CtW is calling on McDonald's (mcd) to come up with and publicly disclose plans to change the board's leadership, and set up a board succession plan. The group faulted the board for having members who've been directors for too long- the average tenure has been 13 years-- and for being to insular and tied to Chicago-area networks.
CtW made headlines last year with its opposition to the now concluded merger between Walgreen and Alliance Boots.
CtW said McDonald's has been "complacent in not refreshing its membership earlier" given how much restaurant-going habits have changed, and pointed to how Coca-Cola (ko), Starbucks Coffee (sbux) and PepsiCo (pep) have been better at refreshing their board composition in the last few years.
"We respect and take seriously the views of all of our shareholders. The Board of Directors recently added a highly qualified new Director, appointed a new Chair of the Governance Committee and has made several senior management changes. Our Board is experienced, independent and committed to maximizing shareholder value," McDonald's said in a statement.