This post is part of the On the Margin blog.
McDonald’s Corp. ended 2015 on a strong note, particularly in its home U.S. market, where same-store sales rose 5.7 percent on the back of all-day breakfast and the chain was earning positive buzz for the first time in years.
That’s earned its new CEO, Steve Easterbrook, a nice bump in salary. Easterbrook’s base salary will increase 18.2 percent in 2016, to $1.3 million.
But, like all CEOs, his big payday comes from bonuses and awards. In this case, Easterbrook’s target incentive plan — or “TIP” — could equal 175 percent of his base salary, or nearly $2.3 million. The TIP payout will be based on the chain's operating income growth this year. McDonald's consolidated operating income in 2015 was $7.1 billion.
Easterbrook isn’t the only one getting a pay hike. Chief Financial Officer Kevin Ozan’s pay was bumped 16.7 percent to $700,000, and Doug Goare, president of the international lead markets, received a 10.2-percent increase to $650,000. Both, along with Chief Administrative Officer Pete Bensen and David Hoffman, president of the chain’s high growth markets, can earn TIP awards.
And all six executives can earn restricted stock units that vest in 2019 based on the chain’s performance.
Easterbrook took over McDonald’s in March amid weakening sales in the U.S. and many other markets. The chain under his watch has reorganized its operating structure, organizing based on markets’ state of evolution rather than geography, while cutting general and administrative expenses to reduce bureaucracy and speed decision making.
McDonald’s has also committed to franchising 95 percent of its store base, and in the U.S. it closed a few locations and gave different markets more autonomy to offer deals and market unique products.
Still, McDonald’s has a ways to go. Its traffic still fell 3 percent last year and is still down a cumulative 8.5 percent in the U.S. the past three years. At the very least, however, the company appears to be on the right track for the first time in a while.