Shareholder activists on Monday called for the board of McDonald’s to cut the wage of chief executive Donald Thomson, citing poor performance and the massive gap between his wages and the average fast-food worker.
The fast-food giant holds its annual meeting on 22 May and will be targeted by protesters calling for a higher wages for workers as well as shareholders disappointed with the company’s financial performance and Thomson’s remuneration. Change to Win (CtW) Investment Group is organising a vote against Thomson, who took over as CEO in 2012.
In a letter to shareholders due to be filed with the Securities and Exchange Commission on Monday, CTW wrote: “As you are no doubt aware, McDonald’s financial and operational performance has been disappointing for several years: its share price has trailed the S&P500 over each of the past 5-, 3-, and 1-year periods, by 45%, 20%, and 20% respectively.”
“At the same time, doubts about the company’s business model have mounted: McDonald’s restaurants have been the site of growing strikes and protests by food service employees, its long-standing disavowal of responsibility for workplace standards at its franchised restaurants faces a serious legal challenge, and the company itself acknowledges that growing public concern over income inequality poses a risk to its business,” writes CtW, which advises a federation of unions with investments worth $250bn.
As McDonald’s has struggled the company’s compensation committee has taken a “variety of ad-hoc steps” to increase Thomson’s already “considerable” remuneration, says CtW.
Thompson’s total compensation in 2013 fell by more than $4m, to nearly $9.5m. But CtW said the fall was related to the fact that last year included money from the expiration of a three-year bonus plan known as the cash performance unit plan (CPUP). Another CPUP is now in place so it will not be possible to make a true comparison of Thomson’s wages until that plan expires in 2015.
By all other measures Thomson’s compensation increased or stayed the same despite McDonald’s disappointing performance. His wages rose 13.6% to $1.25m from $1.1m. He received the same $1.4m annual bonus as he received in 2012 despite missing the company’s own performance targets by more than 50%, and he was granted $4.7m in restricted stock and $1.8m in stock options, up from $650,129 of restricted stock and $3.2m in stock options the year before.
After taking out the CPUP Thomson’s wages actually rose from $6.5m to $9.5m.
The protest comes after a Demos report found that the gap between wages of fast-food workers and the CEOs of their companies was the widest in any industry. In 2012, fast-food CEOs earned 1,200 times as much as the average employee, about twice as large as most other sectors. Fast-food workers are the lowest paid in the US with an average hourly wage of $9.09, or less than $19,000 per year for a full-time worker, though most fast-food workers do not get full-time hours.
Similar protests have been launched by shareholders at other restaurant groups including Domino’s and Chipotle. “What we are seeing is an unbalanced approach to human capital,” said
Richard Clayton, CtW’s director of research, said: “The compensation committees of these companies are typically charged with overseeing pay, benefits for the whole workforce. But what they actually focus on is the incentives for executives and ensuring that executives have all kinds of ways of making a lot of money.”
“They don’t pay any attention to making sure that the rest of the workers benefit from performance and that depresses performance over all. We know that companies that have disengaged workforces perform much less well than those with highly engaged workforces,” he said.
The company faces protests outside the meeting as well as inside when it meets later this month. Among the protesters will alliance of Chicago’s fast food and retail workers, Fight for 15, which is seeking a $15 an hour wage.
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