Bob Evans: Headed for a Peck of Trouble?

This article is part of our Rising Star Portfolio series.

Bob Evans (Nasdaq: BOBE  ) may cultivate a laid-back image of breakfast-time comfort food, but the company seems to have no qualms about trying to lock down both its chickens and its shareholders.

Earlier this week, the Securities & Exchange Commission sided with The Humane Society of the United States in its skirmish with Bob Evans. The company had attempted to exclude from its proxy statement a Humane Society shareholder proposal requesting that Bob Evans phase in cage-free eggs. Thanks to the SEC, the proposal must now be published in the proxy, so that shareholders can vote on the issue (as is their right).

Even if Bob Evans shareholders defeat the proposal, agitation from groups like the Humane Society has helped many egg-laying hens enjoy far roomier quarters elsewhere. In January, the Humane Society awarded well-known companies like Subway, Royal Caribbean (NYSE: RCL  ) , Burger King, and Unilever (NYSE: UL  ) kudos for their progress in phasing in cage-free eggs. One holdout, McDonald's (NYSE: MCD  ) , has just recently begun taking initial steps toward providing more cage-free eggs for its U.S. customers.

I'm tracking animal welfare issues like this because they tie into the social component of my Rising Stars portfolio. Animals rights also enjoy increasing mainstream attention; just a few weeks ago, Facebook's Mark Zuckerberg's dramatic announcement that he only eats meat that he slaughters himself helped draw attention to sustainable farming philosophies. If Bob Evans investors don't approve of the Humane Society's proposal, the company might risk falling out of favor amid changing consumer preferences.

Even if many investors aren't disturbed by factory farming's cruel conditions or inhumane profits, they should care about this incident's corporate governance ramifications. Bob Evans' attempt to block a legitimate shareholder proposal was unacceptable behavior, attempting to stifle shareholders' right to be heard. Unfortunately, it's just one of many corporate efforts to block shareholder proposals this year.

Between its anti-shareholder efforts and its resistance to diners' growing support for friendlier farming, Bob Evans' shares may be riskier than investors realize.

What do you think? Sound off on cage-free eggs or companies that try to silence shareholder proposals in the comments box below.

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