CEOs need to smarten up about perception. One would think that Abercrombie & Fitch's CEO's experience—we "go after the cool kids," not the unattractive ones—would have made the point. But the new CEO of McDonald's (NYSE:MCD) on Thursday (May 23), running his first annual shareholders meeting, needs another lesson in being a bit more McPolitic.
Pushed by some health advocates at the meeting—specifically the folks from Corporate Accountability International, which is the kind of nonprofit corporate watchdog that Wall Street just loves—CEO Don Thompson found himself defending Ronald McDonald, the longtime mascot of the chain. He was accused of continuing McDonald's practice of "contributing to the country's obesity problem by targeting children, particularly minorities," according to an account of the exchange in The Wall Street Journal.
That apparently struck a nerve for Thompson, who also happens to be the chain's first African-American CEO. "We are not the cause of obesity. Ronald is not a bad guy," Thompson said. "He's about fun. He's a clown. I'd urge you all to let your kids have fun, too."
Let's dissect this train wreck of a defense. It starts out well. "We are not the cause of obesity." But he veers off that point, into dangerous waters. (Note: He later returned to the point, noting the addition of skim milk and apple slices for kids' meals, along with breakfast sandwiches made with egg whites and no yolks. Outside the U.S., the chain is selling skewers of kiwis and pineapples, Thompson said.)
It's the Ronald comments that are the problem. "Ronald is not a bad guy. He's about fun. He's a clown." The reality is that that is exactly the point that the health advocates are making. Just like the legendary Cool Joe Camel (which tried making the idea of smoking cigarettes cool and fun), the objection is that Ronald McDonald is a fun, happy clown, and that's why he appeals to kids. (OK, the portion of kids who are not deathly afraid of clowns, but I digress.)
The coup de grâce that killed the CEO's intended point was "I'd urge you all to let your kids have fun, too." On its own, it's a fine sentiment. But in the context of this healthy food discussion, it seems to be suggesting, "Go ahead and let them eat junk. They'll only be young once." It also strongly suggests a correlation between "healthy food" and "not having fun." The point of the Corporate Accountability people, which the CEO unintentionally helped, is that healthy food can be delicious and popular.
Financial realism time: The implied point of the Corporate Accountability folks was also that healthy foods can be profitable. And there is the debate and it's also Thompson's second-strongest point. Beyond arguing that McDonald's didn't cause obesity (although it's hard to argue that it didn't help a little), McDonald's is a business, and nowhere is that more obvious than at a shareholders' meeting. The McElephant in the room: Will consumers—especially Americans—buy healthy food from McDonald's? Let's hold off for the moment the bigger question of whether healthy food will sell. Even if Americans will buy skim milk, whole-wheat bread and tofu in large numbers, will they go to McDonald's for it?
McDonald's for years has peppered its menus with healthier fare, but it's the burgers, fries and shakes that overwhelmingly sell the most. Thompson has a job to do, and he needs to boost McDonald's sales, and he will do that by honestly understanding what Americans will buy from his stores and not what he would like them to buy. And that's an appropriate point to make. Just don't lose the audience by defending your mascot by saying that he's only a clown. First, I am pretty sure they already knew that. Second, when that's the best argument you can make at your first investor's meeting, if I were you, "clown" is the last word I'd want to say out loud.
- See the Wall Street Journal story
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