Risk Reward Basis Of The Compensation Essay example

924 Words 4 Pages
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 claims seriously when they did not even hire anyone outside of their own organization. While it certainly is not impossible for Easterbrook to nudge earnings upward, one is left wondering if a 20-year employee is really the best person to help achieve a fresh perspective and improved earnings. A few months after his arrival, Easterbrook released a rather lengthy video statement underscoring how he plans to overhaul the business. However, it was mostly a superficial commentary filled with buzzwords that in no way helped the viewers understand what the goals of the company were. If anything, the video only served as another reminder that the board made a safe hire, instead of an assertive hire. Larry Light, McDonald’s former chief…

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