Mcdonalds Case Analysis

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90% of Easterbrook’s compensation is at risk, being based on performance. In 2014, 93% of shareholders supported the approach for executive compensation. In the appendix, a pie chart provides the detail of CEO compensation. The five sections are salary, STIP (operating income growth), LTIP (return on incremental invested capital), options (share price), and RSUs (earning per share). We believe the risk-reward basis of the compensation structure is appropriate. With 90% of Easterbrook’s compensation driven by results, he will be more likely to incentivize himself to improve earnings in the company (Appendix A). McDonald’s claims they want to change their image so that they will appeal to a younger crowd. However, it’s difficult to take these …show more content…
With all of these inter-locking relationships, it’s clear that the company is potentially at risk for some conflicts of interest. The proxy statement highlights several related-party transactions between board members and their own companies. Over the years, McDonald’s has paid more than $250 million to companies linked to the three longest-serving directors. Enrique Hernandez is President and CEO of Inter-Con Security Systems. He also holds a 26% stake in that company. Inter-Con has held a contract with McDonald’s to maintain and install its securities systems since 2005. Also, according to Neate (2015), in previous years, Andrew McKenna’s benefited approximately $81 million from contracts supplied by McDonald’s. The majority of these deals were with Schwarz Paper Company, which McKenna both owned and served as chair up until 2014. Neate further explains that every non-executive member of the company has benefited from a relationship with the company either currently or in the past. A spokesman of McDonald’s stated that it was normal for a company as large as McDonald’s to have routine transactions with companies that are affiliated with their directors. While it is not inherently wrong to have so many related-party transactions, these types of transactions are generally viewed in a negative light by the

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