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Restaurant CEO pay rises with stocks

Led by the leaders of the biggest chains, chief executives got raises last year

With stock prices on the upswing, restaurant companies were feeling generous last year.

The typical restaurant industry CEO received a pay increase of 2.5 percent in 2016, according to a Nation’s Restaurant News analysis of pay packages for CEOs at publicly traded companies. 

Restaurant stocks finished up 2.8 percent in 2016, and the companies whose CEOs we analyzed for this story had a median increase of 6.8 percent.

Read more: How much did restaurant CEOs make last year?

But pay hikes in the corner office varied greatly — a reflection, perhaps, of a great divide in industry performance. Indeed, CEOs of the largest companies seemed to benefit the most last year.

Consider this: Yum! Brands Inc. CEO Greg Creed and McDonald’s Corp. CEO Steve Easterbrook received the two largest pay increases among CEOs in the job at least two years.

Creed’s pay more than doubled, to $15.4 million from $7.5 million. Easterbrook’s pay jumped more than 94 percent, to $15.4 million in 2016 from $7.9 million the year before — though Easterbrook was not CEO for the full year in 2015. 

The higher pay, especially for executives with the largest chains, followed overall business trends. Median pay for the executives at the 104 largest U.S. companies increased 6.8 percent last year, according to the Wall Street Journal.

This NRN list analyzes the pay packages of CEOs at 36 restaurant companies that did not make a change in the middle of the year in 2016, which factors out partial year pay packages.

So the list does not include a number of chains that struggled and made CEO changes, like Noodles & Co., Fiesta Restaurant Group Inc., and Famous Dave’s of America Inc. 

And this analysis does not include The Wendy’s Co. CEO Todd Penegor, who received more than $5.1 million, but was not the CEO for the full year. In addition, pay for the CEOs of Popeyes Louisiana Kitchen and Panera Bread Co were not available, because the companies have been purchased.

The average pay package for the 36 CEOs with their companies for at least two years was $5.6 million, up from $5.2 million a year ago.

Twenty of the 36 CEOs received raises. But the highest paid CEOs received the largest pay bumps. The 15 CEOs who received packages worth $5 million or more received an average pay increase of 21 percent.  For those who received less than $5 million, pay declined an average of 6 percent.

Salary makes up a small part of a typical CEO’s pay package — less than $900,000 of the $5.6 million was in the form of salary, on average. 

The rest of that $5.6 million comes in the form of stock, stock options and bonus and incentive pay. Only $1.3 million of Easterbrook’s $15.4 million package, is in the form of salary, for instance.

Five CEOs received total pay packages of $15 million or more, including both CEOs at Chipotle Mexican Grill Inc., Steve Ells and Monty Moran, who received more than $15 million apiece. Ells’ pay jumped 13 percent in 2016, while Moran’s pay increased 14 percent — even though Chipotle’s stock price fell by 21.5 percent in 2016. 

The highest paid CEO in the restaurant industry, once again, was Starbucks Corp. CEO Howard Schultz, whose pay increased 8.6 percent to $21.8 million in his final year overseeing day-to-day operations at the coffee giant.

Not included in the ranking, however, is Sardar Biglari, the CEO of Biglari Holdings and owner of Steak ‘n Shake. Biglari receives a $900,000 salary as CEO, but his private-equity firm, Biglari Capital, received a $31.6 million incentive from the company — a $32.5 million total package that would make Biglari the highest paid CEO in the industry.

We opted not to include Biglari, given that his company operates more like a private-equity group, and because of the complexities of his pay package.

On the other end are pay decreases for CEOs of struggling companies that have since made changes at the corner office.

That includes DineEquity Inc., the owner of Applebee’s and IHOP. Julia Stewart saw pay fall by 22 percent last year to $4.5 million, Ruby Tuesday Inc. CEO JJ Buettgen, meanwhile, received $2.3 million in the company’s 2016 fiscal year, down 40 percent from the year before. Buettgen has since left the company, which is up for sale.

Papa Murphy’s Holdings, meanwhile, let go of its CEO, Ken Calwell at the end of a difficult 2016 in which the chain’s sales had fallen steeply. His pay package fell by 23 percent.

To be sure, sometimes pay packages change for one-time reasons. At Ruth’s Hospitality Group Inc., CEO Michael O’Donnell in 2015 received one-time awards that he did not receive in 2016, and so his pay fell by 61.25 percent to $2.8 million. His pay in 2016 was more indicative of his historic pay package, than the $7.7 million he received in 2015. 

And Shake Shack Inc. CEO Randy Garutti’s pay package fell by 82 percent to $1.2 million. Garutti received $5.9 million in option awards in 2015 that he did not receive in 2016.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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