The subject was a major topic of discussion at Thursday's annual shareholder meeting, which also served as a send-off for retiring Chief Executive Jim Skinner - whose nearly eight years at the helm will be remembered as a time when the price of McDonald's stock tripled.

The shareholder proposal, which also failed last year, returned amid growing concern over the social and financial costs of obesity in the United States and around the world - not only in terms of healthcare-related expenses but also lower worker productivity and diminished quality of life.

Nearly one-third of U.S. children are overweight or obese. America is one of the fattest nations on earth, and the Institute of Medicine, in a 2006 report requested by Congress, said junk food marketing contributes to an epidemic of childhood obesity that continues to rise. The institute is the health arm of the National Academy of Sciences.

McDonald's executives on Thursday defended the brand and its advertising.

"We're proud of the changes we've made to our menu. We've done more than anybody in the industry around fruits and vegetables and variety and choice," said Skinner, who will retire on June 30 and who received a standing ovation from investors.

McDONALD'S HEALTH FOOTPRINT

As one of the largest and most influential companies in the restaurant industry, McDonald's often bears the brunt of criticism from consumers, parents and healthcare professionals, who want it to serve healthier food and curb its marketing to children.

While the chain has added food like salads, oatmeal and smoothies to its menu, it has pulled ahead of rivals and delivered outsized returns for investors with help from its core lineup of fatty food and sugary drinks.

Corporate Accountability International, a business watchdog group, for the second year in a row backed the obesity proposal, which was endorsed by 2,500 pediatricians, cardiologists and other healthcare professionals.

It called on the company to issue a report on its "health footprint." The document would evaluate how diet-related illness would affect McDonald's profit.

In the time since the last shareholder vote, McDonald's has changed the contents of its popular Happy Meals for children - reducing the french fry portion by more than half and automatically including apples in every meal.

It also won the dismissal of a lawsuit that sought to stop the company from using free toys to promote its Happy Meals for children in California.

Dr Andrew Bremer, a pediatric endocrinologist and professor at Vanderbilt University School of Medicine in Nashville, presented the proposal at the meeting and said McDonald's has chosen to employ "countless new PR tactics" that create a perception of change while "unreasonably" exposing shareholders to significant risk.

"It is not enough to point to so-called healthier menu items when children are still the target of aggressive marketing of an overwhelming unhealthy brand," Bremer said.

McDonald's board of directors recommended a "no" vote on the proposal, calling it "unnecessary and redundant."

Shareholders heeded that call. The proposal received 6.4 percent of votes in support, up from 5.6 percent a year ago.

Incoming CEO Don Thompson, who said his two children eat at McDonald's, was forceful in his response to questions from Corporate Accountability representatives.

"I would never do anything to hurt them or any other children, nor would we as a corporation ... Do me the honor, and our entire organization, of not associating us with doing something that is damaging to children. We have been very responsible," Thompson said.

McDonald's stock was down 0.5 percent at $91.03 on Thursday afternoon on the New York Stock Exchange.

(Reporting By Lisa Baertlein; editing by Matthew Lewis)

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