McDonald's Corp.
Summary:
So the McDonald's compensation program looks pretty good. Although it's not perfect, it's definitely far from the worst we've seen. If the decoder key were included with the annual proxy sent out every year, shareholders might even understand it!
Analysis:
Fast food is the industry to be in right now. Much of the discretionary spending on restaurants is shifting from mid-level restaurants to cheaper, "value-oriented" restaurants, like McDonald's. In addition to their success and positive outlook domestically, McDonald's has seen tremendous growth internationally. Look for their performance ot increase as they work to extend store hours and expanding menu options, further increasing convenience and product options for customers.
This success is mirrored by the performance of the company's stock price. The stock price has steadily risen since 2003, going from a low of $12.10 at the beginning of that year to a recent high of $63.70 at the end of 2007. Let's see if the company's success is further mirrored by their executive compensation program.
So… What Are They Paid?
The good news concerns the categories of salary, stocks, and options. Salaries are at normal levels; the CEO is getting a little over $1 million while the NEO average is just under $700,000. Stock and option awards are below or well below average, which is surprising because of the company's performance combined with the increasing stock price in 2007.
The not-so-good news came from the non-equity incentives, perquisites, and termination sections. Although not terrible, there are some areas for concern. The non-equity incentives, for instance, were high to very high compared to the rest of the DOW 30 list. The CEO was awarded $8.8 million while the NEOs averaged $2.7 million in non-equity incentives. This was expected because of the company's performance, but it still may be a little too high. The perquisites and termination clause sections looked OK as far as total numbers, but were not itemized very well on the Proxy Statement. It's hard to decipher where the money is going.
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $1,262,500 | $693,189 |
| Bonus | $3,500,000 | $1,084,939 |
| Stock | $3,185,835 | $1,011,244 |
| Options | $1,351,267 | $677,705 |
| non-Equity Incentives | $8,833,195 | $2,718,880 |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report