McDonald's alters key ingredient in executive pay
The fast-food chain no longer compares its top-level salaries to those at Costco -- possibly because the discount retailer's CEO isn’t paid as generously.
Call it McDonald's (MCD) secret sauce for executive pay, if you will. It's the list of peers the fast-food chain compares itself with when setting executive pay.
The list provides a glimpse into the black box of executive compensation, which has come under fire from shareholders and Americans for growing ever more distant from that of the common worker.
McDonald's noted in its proxy that it considers nearly two dozen major American companies as its peer group when it comes to setting executive pay, ranging from Walt Disney (DIS) to FedEx (FDX). Not all of those companies directly compete with McDonald's, but the burger giant said it competes with them "for talent."
Yet hidden in the regulatory filing was an eye-opening nugget. The compensation committee last year banished Costco (COST) from its peer group.
Why? Costco was exiled "as a result of general differences in compensation structure and philosophy." The filing doesn't specify what those differences are, but a quick gander at some numbers may provide some insight.
McDonald's last year paid chief executive James Skinner $27.7 million in total compensation, including a $10.2 million payment as part of his retirement, according to the proxy. Incoming CEO Donald Thompson earned $13.8 million, no small potatoes either. (The average fast-food worker, by comparison, earns about $18,500 per year, according to Bloomberg.)
Meanwhile, Costco chief executive W. Craig Jelinek earned $4.8 million last year. That's just 17% of Skinner's pay and about one-third of Thompson's compensation.
As the Huffington Post notes, relying on peer groups to set compensation has come under fire, with some critics charging that companies were hand-picking the lists so that their CEO pay would look reasonable. A recent study suggested that such benchmarking tends to drive up executive pay.
One thing's for sure: While most Americans suffer from stagnating pay, many executives are reaping ever bigger rewards.
Follow Aimee Picchi on Twitter at @aimeepicchi.
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my disgusting management team now thanks us for doing a wonderful, wonderful job, each and every phone call........no raise in 3 years, each year the medical increases, which I canceled...for food, rent, elec....indefinite wage freeze....they call it
Executive employment contracts and exorbitant executive compensation would both be very different things if subjected to an approval by majority shareholder vote each year in Fortune 1000 companies! And I believe it is also the reason executive management usually protests and resists such a positive step.
From experience as President and Chief Executive Officer it's my personal belief that an egregious conflict of interest exists whenever the Chief Executive Officer (or any other executive officer whose active in the business) serves as Chairman of the Board of directors. For that very reason I've refused nomination as Chairman during my long tenure as President and Chief Executive yet had no similar problems in remaining constructively on the board of directors as a voting director. Compensation has become so out of control and ridiculous in large companies today that some companies actually reward the CEO with more in salary, bonus and deferred compensation than the largest stock holders realize in increased stock value and in most of those cases the CEO has little to none of the downside risks of ownership shouldered by those same stockholders.
Almost forgot. I got a raise this year and then the increase in insurance had me taking home less. I guess the upside, is that without the raise I'd be taking home even less. Damn, I knew there was a silver lining in there somewhere.
Wolphi....Is in the "process of azz-kissing" his way into the Club...
You don't have to use fancy words like "aspire" Wollfy...We know you are bending over...
Here it comes Whoopy....Guess who's driving??
IN MY 'HUMBLE OPINION' I THINK THE BOARDS OF DIRECTORS ARE MORE INTERESTED IN SELF SERVING RATHER THAN WHAT'S BEST FOR THE COMPANY AND THE 'OTHER' EMPLOYEES. THE BOARD MEMBERS ARE EMPLOYEES ARE THEY NOT? THE bOARDS OF DIRECTORS HAVE BECOME AN 'ENTITLEMENT' CULTURE OF 'GOOD 'OLE BOYS.' I FIRMLY BELIEVE THAT EXECUTIVE SALARIES SHOULD BE BASED ON PERFORMANCE. EXECS SHOULD BE GIVEN A LIST OF OBJECTIVES EACH YEAR, AND ANY INCREASES IN COMPENSATION SHOULD BE BASED ON THEIR MEETING THOSE OBJECTIVES.
SOME OF THOSE OBJECTIVES SHOULD HAVE TO DO WITH SUCCESS IN THE MARKETPLACE, STOCK STABILITY, EMPLOYEE COMPENSATION AND WORK STABILITY AND ASSURING STABILITY OF COMMUNITY BUSINESSES THAT DEPEND ON THE COMPANIES LOCATION IN THE COMMUNITY FOR MAINTAINING VIABLE BUSINESS SUCCESSES.
WISHING YOU ALL SUCCESS IN YOUR LIVES.
It's funny how so many people think an executives pay has an affect on theirs. If you're cleaning the toilets at mcdonalds for $7/hr, and the ceo cuts his pay to $7/hr, you're still going to get $7/hr. If you have a problem with that, nobody is forcing anybody to work there.
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