Definitive Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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McDonalds Corporation
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PROXY SUMMARY
This summary contains highlights about our Company and the upcoming 2012 Annual Shareholders Meeting. This summary does not contain all of the information that you should consider in advance of the
meeting, and we encourage you to read the entire Proxy Statement carefully before voting.
GOVERNANCE HIGHLIGHTS
McDonalds governance is guided
by values that have been part of our business for more than 50 yearsintegrity, fairness, respect and ethical behavior. The strength of our governance is key to our success, and we continually review our practices to ensure effective
collaboration of management and our Board to yield value for shareholders. Highlights of our governance include:
Board of Directors
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14 Directors; 12 are independent |
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50% of Directors are women or minorities |
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Committee members (except Executive Committee) are independent |
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60% of Audit Committee members are financial experts |
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Executive sessions at each regularly-scheduled meeting |
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All Directors attended over 90% of all Board and Committee meetings in 2011 |
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Limited membership on other public company boards |
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Regular succession planning |
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Regular Board self-assessments and Director peer review |
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Management proposal to declassify our Board (see pages 36-37) |
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No former employees serve as Directors |
Shareholder Interests
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Majority voting standard for uncontested Director elections |
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No super-majority voting requirements |
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No shareholder rights plan |
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No exclusive forum selection clause |
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Annual advisory vote to approve executive compensation (see page 31) |
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Annual advisory vote to ratify independent auditor (see page 37) |
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Management proposal to allow shareholders to call special meetings (see page 37) |
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Confidential voting policy |
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Publicly disclose corporate political contributions under Boards policy |
FINANCIAL HIGHLIGHTS
McDonalds continues its strong performance. We were the number-one performing company in the Dow Jones Industrial Average for the one- and five-year periods ending in 2011. McDonalds cumulative
five-year total shareholder return was 263%. The charts below illustrate elements of our strong success:
McDonalds
Corporation 2012 i
EXECUTIVE COMPENSATION PROGRAM HIGHLIGHTS
We believe our compensation program provides an appropriate mix of elements to incentivize our executives to drive the business forward. Currently, approximately 85% of our CEOs direct compensation
opportunity is performance-based.
Below is a chart that summarizes the significant elements of our executive compensation program:
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Direct compensation elements |
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Performance-
based |
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Primary metric(s) |
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Terms |
Salary |
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n/a |
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Evaluated annually, based on
such factors as competitive benchmarks and individual performance |
Annual Cash Incentive (TIP) |
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X |
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Operating
income |
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Based primarily upon financial
performance measures Includes an individual qualitative factor
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Three-Year Cash Incentive (CPUP) |
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X |
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Operating income Return on Total Assets (ROTA)
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Based solely upon financial
performance measures Non-overlapping three-year cycles
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Restricted Stock Units (RSUs) |
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X |
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Earnings per share (EPS) Stock price
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Cliff vesting at end of
three-year service period Vesting subject to financial performance measures |
Stock options |
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X |
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Stock price |
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Vest 25% per year
Ten-year term |
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Indirect compensation elements include retirement programs with matching contributions and other limited, personal benefits. |
Best practices associated with our executive compensation program include:
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Strong pay-for-performance connection; variety of quantitative metrics, including total shareholder return relative to S&P 500 Index in our long-term plan, CPUP
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Significant stock ownership requirements; CEO is required to own six times his salary |
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Incentive plans require growth in operating income to yield payments |
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Capped incentive payments |
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No employment agreements |
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No intention to enter into new change in control agreements; existing agreements are double-trigger |
ii McDonalds Corporation 2012
VOTING MATTERS
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Board vote
recommendation |
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Page reference
(for more detail) |
Management proposals: |
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Election of five Directors, each for a three-year term expiring in 2015 |
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FOR EACH DIRECTOR NOMINEE |
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2 |
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Advisory vote to approve executive compensation |
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FOR |
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31 |
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Vote to approve the 2012 Omnibus Stock Ownership Plan |
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FOR |
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32 |
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Vote to approve declassification of the Board of Directors |
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FOR |
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36 |
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Vote to approve shareholders right to call special meetings |
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FOR |
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37 |
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Advisory vote to approve the appointment of Ernst & Young LLP as independent
auditor for 2012 |
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FOR |
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37 |
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Shareholder proposal: |
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Advisory vote requesting a nutrition report, if presented |
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AGAINST |
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40 |
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
The following table provides summary information
about our nominees for election to the Board of Directors. Additional information for all of our Directors, including the nominees, may be found beginning on page 2.
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Name |
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Director
since |
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Occupation |
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Independent |
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Other company
boards |
Robert A. Eckert |
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2003 |
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Chairman, Mattel |
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X |
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Mattel
Levi Strauss |
Enrique Hernandez, Jr. |
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1996 |
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President & CEO,
Inter-Con Security
Systems |
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X |
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Chevron
Nordstrom
Wells Fargo |
Jeanne P. Jackson |
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1999 |
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President of Direct
to Consumer,
Nike |
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X |
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Motorola Mobility
Holdings |
Andrew J. McKenna |
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1991 |
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Chairman, McDonalds
Chairman, Schwarz
Supply Source |
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X |
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Aon
Skyline |
Donald Thompson |
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2011 |
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President & COO,
McDonalds
President & CEO,
McDonalds
(effective July 1, 2012) |
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Exelon |
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (PROPOSAL NO. 2)
We are asking shareholders to cast an advisory,
nonbinding vote to approve compensation awarded to our named executive officers. The key objectives of our executive compensation program are to motivate our executives to increase profitability and shareholder returns, to pay compensation that
varies based on performance and to compete for and retain managerial talent. Additional information regarding our executive compensation may be found elsewhere in this Proxy Statement.
McDonalds
Corporation 2012 iii
VOTE TO APPROVE THE 2012 OMNIBUS STOCK OWNERSHIP PLAN (PROPOSAL NO. 3)
We are asking shareholders to approve the proposed
2012 Omnibus Stock Ownership Plan, which the Compensation Committee has adopted, subject to shareholder approval, to enable the Company to continue making equity awards to executives and other employees. The 2012 Plan is an important part of our
pay-for-performance philosophy as it allows the Company to award compensation that is tied to performance and aligned with the interests of our shareholders.
VOTE TO APPROVE DECLASSIFICATION OF THE BOARD OF DIRECTORS (PROPOSAL NO. 4)
We are asking shareholders to approve amendments to
our Restated Certificate of Incorporation to eliminate the classification of the Board of Directors. If the amendments are approved by shareholders, then Directors would be subject to annual election for one-year terms once their current terms
expire, beginning at the 2013 Annual Shareholders Meeting.
VOTE TO APPROVE SHAREHOLDERS RIGHT TO CALL SPECIAL
MEETINGS (PROPOSAL NO. 5)
We are
asking shareholders to approve amendments to our Restated Certificate of Incorporation to enable shareholders of at least 25% of our outstanding shares of common stock (excluding derivatives) to call a special meeting of shareholders. Currently,
only our Board may call a special meeting of shareholders.
ADVISORY VOTE TO APPROVE THE APPOINTMENT OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITOR FOR 2012 (PROPOSAL NO. 6)
We are asking shareholders to approve the appointment of Ernst & Young LLP as independent auditor for 2012.
ADVISORY VOTE REQUESTING A NUTRITION REPORT (PROPOSAL NO. 7)
Shareholders will be asked to vote on an advisory shareholder proposal requesting the Board to issue a nutrition report, if presented at the meeting. We do
not support this request and ask shareholders to vote against this proposal.
MEETING INFORMATION
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Date and time |
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May 24, 2012, 9:00 a.m. Central Time |
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Place |
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McDonalds Office Campus, The Lodge, Prairie Ballroom |
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2815 Jorie Boulevard |
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Oak Brook, Illinois 60523 |
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Record date |
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March 27, 2012 |
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Voting |
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Shareholders at the close of business on the record date may vote at the Annual Shareholders Meeting. Each share is entitled to one vote on each matter to be voted
upon. |
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Attendance |
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We encourage shareholders to listen to the meeting via live webcast as seating in the Prairie Ballroom is limited. If you decide to attend in person, please follow the
pre-registration instructions on page 56. |
iv McDonalds Corporation 2012
Contents
McDonalds Corporation 2012
Notice of the Annual Shareholders Meeting
To McDonalds Corporation
Shareholders:
McDonalds Corporation will hold its 2012 Annual Shareholders Meeting on Thursday, May 24, 2012, at 9:00 a.m.
Central Time in the Prairie Ballroom at The Lodge at McDonalds Office Campus, Oak Brook, Illinois. The registration desk will open at 7:30 a.m. At the meeting, shareholders will be asked to:
1. |
Elect five Directors, each for a three-year term expiring in 2015; |
2. |
Cast an advisory vote to approve executive compensation; |
3. |
Cast a vote to approve the 2012 Omnibus Stock Ownership Plan; |
4. |
Cast a vote to approve declassification of the Board of Directors; |
5. |
Cast a vote to approve shareholders right to call special meetings; |
6. |
Cast an advisory vote to approve the appointment of Ernst & Young LLP as independent auditor for 2012; |
7. |
Cast an advisory vote on a shareholder proposal requesting a nutrition report, if presented; and |
8. |
Transact other business properly presented at the meeting, including any adjournment or postponement thereof, by or at the direction of the Board of Directors.
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Your Board of Directors recommends that you vote FOR the Boards nominees for Director,
FOR the approval of our executive compensation, FOR the approval of the 2012 Omnibus Stock Ownership Plan, FOR the declassification of the Board of Directors,
FOR the approval of shareholders right to call special meetings, FOR the approval of the independent auditor and AGAINST the shareholder proposal.
Your vote is important. Please consider the issues presented in this Proxy Statement and vote your shares as promptly as possible.
If you plan to attend the meeting in person, please be aware that you must pre-register with McDonalds Shareholder Services prior to the
meeting. See page 56 for information about how to pre-register.
As an alternative to attending the meeting in person, you may listen to
a live webcast by going to www.investor.mcdonalds.com and selecting the Webcasts and Podcasts icon and clicking on the appropriate link. The Annual Shareholders Meeting webcast will be available for a limited time after the
meeting.
Thank you.
By order of the
Board of Directors,
Gloria Santona
Corporate Secretary
Oak Brook, Illinois
April 13, 2012
McDonalds
Corporation 2012 1
Election of Directors
PROPOSAL NO. 1.
ELECTION OF DIRECTORS
The nominees for Director are: Robert A. Eckert, Enrique Hernandez, Jr., Jeanne P. Jackson, Andrew J. McKenna and Donald Thompson.
The Board is currently divided into three classes, each having three-year terms that expire in successive years. The five
nominees are standing for election as Directors to hold office for three-year terms expiring in 2015.
Information about the
voting standard for this proposal appears on page 53. Each of the incumbent Directors who is nominated for re-election tendered an irrevocable resignation for the 2012 Annual Shareholders Meeting that will be effective if (i) the nominee
is not re-elected; and (ii) the Board accepts the resignation following the meeting. The Governance Committee will determine whether to recommend that the Board accept the resignation.
The Board of Directors expects all five nominees to be available for election. If any of them should become unavailable to serve as a
Director for any reason prior to the Annual Shareholders Meeting, the Board may substitute another person as a nominee. In that case, your shares will be voted for that other person.
The Board of Directors recommends that shareholders vote FOR all five nominees.
DIRECTOR QUALIFICATIONS AND BIOGRAPHICAL INFORMATION
Our Board of Directors currently consists of 14
Directors, 12 of whom are independent. Mr. Skinner will retire from the Company and the Board on June 30, 2012 and, as a result of his retirement, the Board reduced the size of the Board to a total of 13 Directors. Our Directors have
qualifications, skills and experience relevant to our business as the leading branded global quick service restaurant retailer. Each Director has senior executive experience in large organizations, many of which have significant global operations,
and has held directorships at other U.S. public companies and at not-for-profit organizations. In these positions, our Directors have demonstrated leadership, intellectual and analytical skills and gained deep experience in management and corporate
governance.
For information about our Director selection process, please see page 43.
Biographical information for our Directors is set forth below, including the qualifications, skills and experiences considered by the
Governance Committee when recommending them for election.
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Susan E. Arnold, 58
Director since 2008 Class 2014 Other current directorships: The Walt Disney
Company |
Career highlights
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The Procter & Gamble Company, a manufacturer and marketer of consumer goods |
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Special assignment reporting to Chief Executive Officer (2009) |
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PresidentGlobal Business Units (20072009) |
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Vice Chair, P&G Beauty and Health (20062007) |
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Vice Chair, P&G Beauty (20042006) |
Experience and qualifications: Ms. Arnold was a senior executive responsible for major consumer brands in a large, global brand management
company. She has knowledge of product development, strategy and business development, finance, marketing and consumer insights and sustainability.
2 McDonalds Corporation 2012
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Robert A. Eckert, 57 Director since 2003 Class 2012(Nominee) Other current directorships: Mattel, Inc. and Levi Strauss & Co. |
Career highlights
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Mattel, Inc., a designer, manufacturer and marketer of toy products |
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Chairman of the Board (2000Present) |
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Chief Executive Officer (20002011) |
Experience and qualifications: Having served as chief executive officer of large, global branded companies (consumer branded and food products),
Mr. Eckert has knowledge of product development, marketing and consumer insights, corporate governance, leadership development and succession planning, finance, risk assessment, supply chain management and distribution, and strategy and
business development.
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Enrique Hernandez, Jr., 56
Director since 1996 Class 2012 (Nominee) Other current directorships:
Chevron Corporation, Nordstrom, Inc. and Wells Fargo & Company Former directorships (within past five years): Tribune
Company |
Career highlights
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Inter-Con Security Systems, Inc., a provider of high-end security and facility support services to government, utilities and industrial customers |
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President and Chief Executive Officer (1986Present) |
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Non-executive Chairman (2006Present) |
Experience and qualifications: Mr. Hernandez is the chief executive officer of a global security company and has been a director of several large
public companies in various industries. He has knowledge of strategy and business development, corporate governance, finance, risk assessment, and leadership development and succession planning.
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Jeanne P. Jackson, 60 Director since 1999 Class 2012 (Nominee) Other current directorships: Motorola Mobility Holdings, Inc. Former directorships (within
past five years): Harrahs Entertainment, Inc., NIKE, Inc., Nordstrom, Inc. and Williams Sonoma, Inc. |
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Career highlights
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NIKE, Inc., a designer, marketer and distributor of athletic footwear, equipment and accessories |
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President, Direct to Consumer (2009Present) |
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MSP Capital, a private investment company |
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Chief Executive Officer (20022009) |
Experience and qualifications: Ms. Jackson is a senior executive for a major consumer retailer and has experience as a senior executive in global
brand management with several other major consumer retailers. She also has been a director of several large, public companies, primarily involved in consumer goods and services. She has knowledge of product development, strategy and business
development, leadership development and succession planning, finance, and marketing and consumer insights.
McDonalds
Corporation 2012 3
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Richard H. Lenny, 60 Director since 2005 Class 2014
Other current directorships: ConAgra Foods, Inc. and Discover Financial Services
Former directorships (within past five years): The Hershey Company |
Career highlights
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Friedman, Fleischer & Lowe, LLC, a private equity firm |
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Operating partner (2011Present) |
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The Hershey Company, a manufacturer, distributor and marketer of candy, snacks and candy-related grocery products |
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Chairman, President and Chief Executive Officer (20022007) |
Experience and qualifications: Mr. Lenny has experience as a chief executive officer for a global retail food company that is a major consumer brand. He has knowledge of strategy and business
development, finance, marketing and consumer insights, supply chain management and distribution, risk assessment and sustainability.
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Walter E. Massey, 74
Director since 1998 Class 2013 Former directorships (within past five
years): Bank of America Corporation, BP p.l.c. and Delta Airlines, Inc. |
Career highlights
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School of the Art Institute of Chicago |
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President (2010Present) |
Experience and
qualifications: Dr. Massey has experience in chief executive roles of several large academic organizations and as a director of multiple large, global public companies in various industries. He has knowledge of strategy, policy and
government relations matters, sustainability, leadership development and succession planning, risk assessment, finance and shareholder relations.
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Andrew J. McKenna, 82
Director since 1991 Non-Executive Chairman Since 2004 Class 2012
(Nominee) Other current directorships: Skyline Corporation
Former directorships (within past five years): Aon Corporation |
Career highlights
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Schwarz Supply Source, a printer, converter, producer and distributor of packaging and promotional material |
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Chairman (1992Present) |
Experience and
qualifications: Mr. McKenna has experience as the chief executive officer of a large global provider of paper-based goods. He has knowledge of strategy and business development, corporate governance, risk assessment, leadership development
and succession planning, shareholder relations and finance. He also has experience as a director of multiple large public companies, charities and civic organizations.
4 McDonalds Corporation 2012
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Cary D. McMillan, 54
Director since 2003 Class 2014 Other current directorships: American Eagle
Outfitters, Inc. Former directorships (within past five years): Hewitt Associates,
Inc. |
Career highlights
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True Partners Consulting LLC, a professional services firm providing tax and other financial services |
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Chief Executive Officer (2005Present) |
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Sara Lee Branded Apparel, a branded apparel company |
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Chief Executive Officer (20012004) |
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Sara Lee Corporation, a branded packaged goods company |
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Executive Vice President (20002004) |
Experience and qualifications: In addition to serving as chief executive officer of a professional services firm, Mr. McMillan has experience as
a senior executive of a large, globally branded consumer and food products company. He is also a certified public accountant. He has knowledge of strategy and business development, finance and accounting, risk assessment, product development,
leadership development and succession planning, and supply chain management and distribution.
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Sheila Penrose, 66
Director since 2006 Class 2014 Other current directorships: Jones Lang
LaSalle Incorporated Former directorships (within past five years): eFunds |
Career highlights
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Jones Lang LaSalle Incorporated, a global real estate services and investment management firm |
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Non-executive Chairman (2005Present) |
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Penrose Group, a provider of strategic advisory services on financial and organizational strategies |
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Boston Consulting Group, a global management consulting firm |
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Executive Advisor (20012008) |
Experience and
qualifications: Ms. Penrose has experience as a senior executive of a large investment services and banking company, as executive advisor to a leading global consulting firm, and as a Chairman of a large, global real estate services and
investment management firm. She has knowledge of strategy and business development, finance, risk assessment, real estate, leadership development and succession planning, and sustainability.
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John W. Rogers, Jr., 54
Director since 2003 Class 2013 Other current directorships: Aon Corporation,
Ariel Investment Trust and Exelon Corporation Former directorships (within past five years):
Commonwealth Edison Company |
Career highlights
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Ariel Investments, LLC, a privately held institutional money management firm |
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Founder, Chairman of the Board and Chief Executive Officer (1983Present) |
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Trustee (19861993; 2000Present) |
Mr. Rogers biography is continued on next page
McDonalds
Corporation 2012 5
Mr. Rogers biography continued
Experience and qualifications: Mr. Rogers is the chief executive officer of an institutional money management firm. He has knowledge of finance, shareholder relations, risk assessment, leadership
development and succession planning, corporate responsibility, and strategy and business development. He also has experience as a director of multiple public companies, charities and civic organizations.
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James A. Skinner, 67
Director since 2004 Class 2014 (retiring as a Director on June 30, 2012)
Other current directorships: Illinois Tool Works Inc. and Walgreen Co. |
Career highlights
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> |
Vice Chairman and Chief Executive Officer (2004June 30, 2012) |
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Vice Chairman (20032004) |
Experience and
qualifications: Mr. Skinner provides a Company perspective in Board discussions about the business, relationships with key constituencies and stakeholders, competitive landscape, finance, senior leadership and strategic opportunities and
challenges for the Company. In addition, as an independent director of two other public companies, Mr. Skinner has gained additional perspectives, including on governance and operational matters relevant to the Company.
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Roger W. Stone, 77
Director since 1989 Class 2013 Other current directorships: KapStone Paper
and Packaging Corporation |
Career highlights
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KapStone Paper and Packaging Corporation, formerly Stone Arcade Acquisition Corporation, a producer of paper, packaging and forest products |
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Chairman and Chief Executive Officer (2005Present) |
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Stone Tan China Holding Corporation, an investment holding company |
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Chairman (2010Present) |
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Stone Tan China Acquisition (Hong Kong) Co. Ltd. |
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Chairman (2010Present) |
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Stone-Kaplan Investment, LLC |
Experience and
qualifications: Mr. Stone is the chief executive officer of a large, global paper and packaging business. He has experience in the sourcing and sale of product packaging and related commodities, supply chain management and distribution,
sustainability, strategy and business development, finance, leadership development and succession planning, and risk assessment.
6 McDonalds Corporation 2012
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Donald Thompson, 49
Director since 2011 Class 2012 (Nominee) Other current directorships:
Exelon Corporation |
Career highlights
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> |
President and Chief Executive Officer (effective July 1, 2012) |
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President and Chief Operating Officer (2010Present) |
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President, McDonalds USA (20062010) |
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Executive Vice President and Chief Operations Officer, McDonalds USA (20052006) |
Experience and qualifications: Mr. Thompson provides a Company perspective in Board discussions about the business, particularly with respect to worldwide operations, competitive landscape,
senior leadership and strategic opportunities and challenges for the Company. In addition, as an independent director of another public company, Mr. Thompson has gained additional perspectives, including on governance and operational matters
relevant to the Company.
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Miles D. White, 57
Director since 2009 Class 2013 Other current directorships: Abbott
Laboratories and Caterpillar, Inc. Former directorships (within past five years): Motorola, Inc.
and Tribune Company |
Career highlights
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Abbott Laboratories, a global pharmaceuticals and biotechnology company |
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> |
Chairman and Chief Executive Officer (1999Present) |
Experience and qualifications: Mr. White is the chief executive officer of a large pharmaceutical, biotechnology and nutritional health products company. He has knowledge of strategy and business
development, risk assessment, finance, leadership development and succession planning, and corporate governance.
McDonalds
Corporation 2012 7
Executive compensation
COMPENSATION COMMITTEE REPORT
Dear Fellow Shareholders:
The Compensation Committee reviewed and discussed the Companys Compensation Discussion and Analysis with McDonalds management. Based on this
review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2011.
Respectfully submitted,
The Compensation Committee
Robert A. Eckert, Chairman
Susan E. Arnold
Richard H. Lenny
John W. Rogers, Jr.
Miles D. White
COMPENSATION DISCUSSION AND ANALYSIS
Executive summary
McDonalds executive compensation program supports our long-term business plan, the Plan to Win, which is customer-focused and concentrates on being
better, not just bigger. The key objectives of our executive compensation program are to motivate our executives to increase profitability and shareholder returns, to pay compensation that varies based on performance and to compete for and retain
managerial talent.
PERFORMANCE HIGHLIGHTS
McDonalds 2011 performance was very strong both on an absolute basis and in comparison to our peers performance. Our total return to shareholders for the fiscal year ended December 31, 2011
was 35%, which was the highest among the 30 companies that comprise the Dow Jones Industrial Average (DJIA) and the second highest among our peer group. The following graph shows McDonalds TSR against our peer groups average TSR; against
the TSR for the Standard & Poors 500 Stock Index and against the TSR for the DJIA for the period from December 31, 2006December 31, 2011 (based on $100 investment and reinvestment of all dividends).
Source: S&P Capital IQ
8 McDonalds Corporation 2012
We performed well in the performance measures that we use to determine executive compensation, including:
> |
Operating income increased by 14% (10% in constant currencies)* to $8.5 billion. |
> |
Earnings per share was $5.27, an increase of 15% (11% in constant currencies).* |
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* |
See page 14 of 2011 Annual Report on Form 10-K for reconciliation. |
Further highlights of our 2011 performance:
> |
2011 was McDonalds eighth consecutive year of positive comparable sales growth in every geographic segment, with a global increase of 5.6% over 2010.
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> |
We returned $6 billion to our shareholders through share repurchases and dividends paid in 2011. |
Over the last five years, we have produced consistent year-over-year growth in operating income (excluding one-time charges in 2007
associated with the sale of our Latin American business) despite an exceptionally challenging global economic and operating environment. During this period, our operating income increased significantly each year for a total increase of more than $4
billion. For the five-year period ending December 31, 2011, our total return to shareholders was 263%.
PAY FOR PERFORMANCE
Our total direct compensation package includes salary, our annual bonus plan, which we refer to as TIP, our long-term cash incentive plan, which
we refer to as CPUP, stock options and restricted stock units, each as described below. The following table lists the quantitative performance measures the Company uses in its executive compensation program. The rationale for the use of each primary
measure is explained below in the detailed discussions of each element of compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIP |
|
CPUP |
|
|
Stock options |
|
RSUs |
|
|
|
|
|
|
|
|
Primary performance measure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
X |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
ROTA |
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
Share price |
|
|
|
|
|
|
|
X |
|
X |
|
|
|
|
|
|
|
|
Secondary performance measure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR |
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Guest Counts |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Satisfaction Opportunity |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G&A Expense Control |
|
X |
|
|
|
|
|
|
|
|
|
|
We
believe that our executive compensation program has been effective at incentivizing strong results by appropriately aligning pay and performance. We seek to utilize metrics and a mix of incentives under our compensation program that further our main
objective of long-term sustainable growth and that are designed to mitigate risk.
In addition to the quantitative factors,
determinations of TIP payouts and the grants of annual equity-based compensation take into account qualitative aspects of individual performance as well as potential for future performance. For example, Mr. Skinners individual performance
results were focused on delivering long-term sustainable growth, talent management and leadership development, and encouraging innovation around balanced active lifestyles. For TIP, a multiplier based on the assessment of individual performance is
used in calculating final awards, as described on page 21.
McDonalds
Corporation 2012 9
The pie chart below illustrates the composition of Mr. Skinners 2011 total direct
compensation opportunity, using his target TIP award and annualized target CPUP award (one-third of three-year opportunity). This chart highlights that 85% of his total direct compensation opportunity is directly influenced by Company performance.
BEST PRACTICES
In 2011, we provided shareholders with an advisory vote on executive compensation (Say on Pay vote). Our executive compensation program was approved by over 95% of the votes. These results demonstrate strong
shareholder support for our executive compensation program. In addition, we continued our shareholder outreach program, which provides our principal shareholders an opportunity to engage in dialogue with us about aspects of our executive
compensation program.
We evaluate our executive compensation program at least annually, and this year, we have taken into account
the outcome of our 2011 Say on Pay vote when considering 2012s executive compensation program. Based on our evaluation and shareholder feedback, we have not made any significant changes to our executive compensation program for 2012.
The following policies and practices are important elements of our executive compensation program:
> |
Pay for Performance. The vast majority of total direct compensation is tied to performance. |
> |
Stock Ownership. We have stock ownership requirements for our senior management, including requiring our CEO to own stock equal in value to at least six times his
annual salary. |
> |
Bonuses. TIP and CPUP both require growth in operating income to yield a payout and utilize caps on potential payments. |
> |
Clawbacks. TIP and CPUP contain clawback provisions. |
> |
Change in Control. We do not intend to enter into any new change in control agreements and our current agreements are double-trigger. |
> |
Independent Consultant. The Committee benefits from its utilization of an independent compensation consultant and the compensation consultant acts at the sole
direction of the Board or Committee. |
Key terms
We use the following terms in describing our compensation plans, measures of Company performance and other aspects of our executive compensation program.
COMPANY COMPENSATION PLANS
> |
TIP. Target Incentive Plan. Our annual cash incentive plan. |
> |
CPUP. Cash Performance Unit Plan. Our long-term cash incentive plan which operates on three-year non-overlapping cycles. |
> |
RSUs. Restricted stock units. An RSU provides the right to receive a share of McDonalds stock. RSUs granted to executives generally have both service and
performance-based vesting requirements. |
10 McDonalds Corporation 2012
QUANTITATIVE MEASURES OF COMPANY PERFORMANCE
Operating income, ROTA and EPS are based on the corresponding measures reported in our financial statements and are adjusted for purposes of our compensation program. For more information about adjustments
in measuring performance, see page 14.
> |
Operating income. Profit attributed to the operations. |
> |
ROTA. Return on total assets (operating income divided by average assets). |
> |
EPS. Earnings per share (net income divided by diluted weighted-average shares). Diluted weighted-average shares include weighted-average shares outstanding plus
the dilutive effect of share-based compensation. |
> |
Comparable guest counts. Represents the percent change in transactions from the same period for the prior year for all restaurants in operation at least 13 months.
|
> |
Customer satisfaction opportunity. Represents the percentage of times that Quality, Service or Cleanliness critical drivers are missed in a customer visit.
|
> |
G&A expense control. Represents a way that the corporate function can contribute to operating income. If spending is at or below plan, this modifier has no
impact on the Corporate TIP team factor, but if spending is above plan, it will have a negative impact on the Corporate TIP team factor. |
> |
TSR. Total shareholder return. The total return on our shares over a specified period, assuming reinvestment of dividends. |
GROUPS OF COMPANY EMPLOYEES
> |
Staff. Company employees, including home office, divisional office and regional office employees. |
> |
Senior management. Employees at the level of senior vice president and above; about 52 employees. |
> |
Executives. The 11 most senior executives of the Company. |
> |
Named executive officers (NEOs). The following five executives whose compensation is described in this Proxy Statement, pursuant to requirements of the Securities
and Exchange Commission (SEC). |
|
|
James A. Skinner, Vice Chairman and Chief Executive Officer or CEO (retiring, effective June 30, 2012) |
|
|
Peter J. Bensen, Chief Financial Officer or CFO |
|
|
Donald Thompson, President and Chief Operating Officer or President/COO (appointed President and CEO, effective July 1, 2012) |
|
|
Timothy J. Fenton, President of McDonalds Asia/Pacific, Middle East and Africa, or APMEA |
|
|
Janice L. Fields, President of McDonalds USA |
OTHER
> |
Total direct compensation. The aggregate value of salary, TIP, CPUP, stock options and RSUs. |
> |
Total direct compensation opportunity for 2011. The targeted value of total direct compensation that the NEOs had an opportunity to earn in 2011 for target
performance. |
> |
Committee. The Compensation Committee of the Companys Board of Directors. |
> |
AOWs. The Companys geographic business units, namely the U.S., Europe and APMEA. |
McDonalds Executive Compensation Program
ELEMENTS OF McDONALDS EXECUTIVE
COMPENSATION
ALLOCATION OF TOTAL DIRECT COMPENSATION AMONG THE ELEMENTS
Approximately 81% of the NEOs total direct compensation opportunity for 2011 was allocated to variable compensation that is at-risk based on performance, including short-term and long-term incentive
compensation.
Short-term incentive compensation is provided under our TIP program and long-term incentive compensation is
allocated approximately two thirds to equity-based compensation (stock options and RSUs) and one-third to long-term cash incentive compensation under the CPUP.
McDonalds
Corporation 2012 11
DETAILED INFORMATION ABOUT ELEMENTS OF COMPENSATION
In setting
annual salary levels, we take into account competitive considerations, individual performance, tenure in position, internal pay equity, and the effect on our general and administrative expenses. For 2011, decisions regarding executive salaries were
initially informed by a review of external salary information at our stated objective of the 50th percentile of our peer group. However, executives salaries vary based on individual circumstances and may be above or below the 50th percentile.
For example, in 2011, our CEOs salary was at approximately the 70th percentile due to his long tenure and strong contributions to the success of the Company. In 2011, NEOs salaries were increased by between 2.8% and 4.4% over 2010
levels.
Our TIP is designed
primarily to reward growth in annual operating income, which measures the success of the most important elements of our business strategy. If there is no growth in operating income, the TIP formula results in no payouts. Operating income growth
requires the Company to balance increases in revenue with financial discipline to produce strong margins and a high level of cash flow. The individual performance of our executives is also an important factor in determining their TIP award.
For purposes of determining an executives TIP payout, operating income growth is measured on a consolidated
(referred to as Corporate) basis or an AOW basis, or a combination of the two, depending on the executives responsibilities. In addition to operating income growth, final TIP payouts take into account pre-established modifiers
reflecting other measures of Corporate and/or AOW performance (for example, for 2011, comparable guest count increases, customer service improvements and G&A expense control). In addition to Company performance, TIP payouts are adjusted based on
the application of an individual performance factor (IPF) (from 0 up to 150% in 2011) which acts as a multiplier and can have a significant effect, whether positive or negative, in determining the final payout. Final payouts are capped at 250% of
target. Additional details on how each element of performance affects actual 2011 TIP payouts can be found in the description following the Grants of Plan Based Awards table on pages 21 and 22.
Our executives 2011 target awards were set at approximately the 60-65th percentile of our peer group.
In 2011, operating income growth exceeded the targets under the TIP for each AOW as well as Corporate. Further, TIP results
for each AOW and Corporate benefitted by the cumulative performance against the pre-established targets for the modifiers.
The
operating income targets and results under the 2011 TIP are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
Target 2011 operating income* |
|
|
2011 operating income* |
|
|
Target 2011 operating income growth over 2010* |
|
|
2011 operating income growth over 2010* |
|
Corporate |
|
|
$8,140 |
|
|
|
$8,229 |
|
|
|
8.5 |
% |
|
|
9.7 |
% |
U.S. |
|
|
3,625 |
|
|
|
3,666 |
|
|
|
5.2 |
|
|
|
6.4 |
|
Europe |
|
|
3,010 |
|
|
|
3,070 |
|
|
|
7.6 |
|
|
|
9.7 |
|
APMEA |
|
|
1,398 |
|
|
|
1,415 |
|
|
|
12.0 |
|
|
|
13.3 |
|
* |
Adjusted for compensation purposes as described on page 14. |
In addition (as reflected in the table on page 22), the IPF for each NEO was above 100%.
Consistent with our 2011 results and our executives individual performance, TIP awards were above target.
The target awards and final TIP payouts for the NEOs are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Named
executive officer |
|
2011
target TIP award |
|
|
2011
TIP final payout |
|
|
TIP final payment as percentage of
target |
|
James A. Skinner |
|
|
$2,220,000 |
|
|
|
$3,300,000 |
|
|
|
149 |
% |
Peter J. Bensen |
|
|
675,000 |
|
|
|
987,000 |
|
|
|
146 |
|
Donald Thompson |
|
|
1,043,750 |
|
|
|
1,526,000 |
|
|
|
146 |
|
Timothy J. Fenton |
|
|
514,250 |
|
|
|
667,000 |
|
|
|
130 |
|
Janice L. Fields |
|
|
507,450 |
|
|
|
679,000 |
|
|
|
134 |
|
Additional detail about the NEOs 2011 TIP awards begins on page 21.
12 McDonalds Corporation 2012
We believe it is
important to have a long-term component based on measures that are not limited to stock price. As operating income focuses on the key elements associated with driving our business and ROTA measures the efficiency of our capital investments, we
believe these strike an appropriate balance as the primary measures for our long-term cash incentive plan. CPUP also incorporates a TSR multiplier that rewards strong shareholder returns relative to the S&P 500 Index, while holding senior
management accountable for below-market performance.
Every three years, senior management is eligible for a
long-term cash incentive award under CPUP, which provides for a cumulative payout at the end of the three-year cycle. CPUP awards do not overlap and were granted most recently in 2010. These awards are scheduled to be paid (if performance targets
are met) in 2013 following completion of the current three-year performance cycle ending on December 31, 2012. The maximum award allowed under the 20102012 CPUP is 230% of the target award. Based upon performance through 2011, we
currently expect the 20102012 CPUP payout factor to be in the range of 170%190% of target awards. As a result of these awards, we expect 2012 compensation for all members of senior management to be significantly higher than 2011.
Final payouts will be determined based on the following three quantitative measures over the 20102012
performance period: (i) consolidated compound annual growth in operating income, (ii) average ROTA and (iii) TSR relative to the S&P 500 Index which functions as a multiplier (either positive or negative). Detailed information
about the calculation of the 20102012 CPUP awards was included in our 2011 proxy statement.
Options align
executives compensation to the return earned by shareholders, thereby incentivizing executives to increase shareholder value. Options, including those granted in 2011, have an exercise price equal to the closing price of our common stock on
the grant date, a term of ten years and vest ratably over four years. The Companys policies and practices regarding option grants, including the timing of grants and the determination of the exercise price, are described on page 17.
The value of RSUs is
linked to our stock price. The performance-based vesting conditions based upon EPS growth require the executives to achieve the Companys strategic objectives in order to vest in the awards. The Company believes that EPS growth is a strong
indicator of profitability.
The RSUs granted to executives in 2011 are scheduled to vest in full at the end of a
three-year service period, subject to the Companys achievement of EPS growth targets over that period. The target performance level for the RSUs granted to executives in 2011 is 6% compounded annual growth in EPS on a cumulative basis over
baseline 2010 EPS of $4.60. If target performance is achieved (cumulative EPS of $15.53), the full number of RSUs covered by the 2011 awards will vest. Achievement of below target performance reduces the number of RSUs that will vest, but above
target performance does not increase the number of RSUs earned.
All of the RSUs granted to the NEOs in 2008
vested in 2011 based on the achievement of 16.6% compounded annual EPS growth over the performance period, which exceeded the target of 7%.
> |
Retirement savings plans |
The
NEOs participate in our tax-qualified defined contribution retirement savings plan and a supplemental non-qualified deferred compensation retirement plan. We believe a competitive retirement program aligns with market practices, and thereby
contributes to the recruitment and retention of top executive talent.
> |
Retirement of Mr. Skinner |
Mr. Skinner participates in the Executive Retention Replacement Plan or ERRP. In connection with his June 30, 2012 retirement,
Mr. Skinner qualifies for certain benefits, including a cash payment, under the ERRP as he has satisfied the applicable retention period and the retirement age under that plan. The amount of this cash payment will be calculated upon his
retirement and paid on December 31, 2012. We expect this cash payment will be approximately $10 million. Following his retirement, all of his outstanding options will continue to become exercisable on their originally scheduled dates and his
outstanding RSUs will be paid out on the originally scheduled dates, based on the Companys achievement of the applicable performance goals. Mr. Skinners receipt of these benefits under the ERRP is subject to the execution of an
agreement that includes covenants not to compete and not to solicit employees, nondisparagement and nondisclosure covenants as well as a release of claims.
In addition, pursuant to the terms of TIP and CPUP (including the respective clawback provisions), Mr. Skinner will be entitled to a prorated award under each such plan for the current performance
cycles. These prorated awards will be based upon actual performance for the full applicable performance cycle and will be payable in early 2013. Please refer to page 29 for more details on the payments Mr. Skinner will receive following his
retirement.
McDonalds
Corporation 2012 13
> |
Severance and change in control arrangements |
Severance plan. Messrs. Bensen, Fenton and Thompson and Ms. Fields participate in our broad-based U.S. severance plan. Benefits under the severance plan are described under Potential
Payments Upon Termination of Employment or Change in Control beginning on page 26.
Change in control employment
agreements. The Company has change in control employment agreements with its NEOs. Benefits under the change in control employment agreements are described under Potential Payments Upon Termination of Employment or Change in Control
beginning on page 26. The Company does not intend to enter into new change in control agreements.
> |
Perquisites and other fringe benefits |
McDonalds provides the following perquisites to executives: company-provided cars or a car allowance, financial planning, annual physical examinations (which are also available for the executives
spouses), executive security, matching charitable donations, limited personal items and, generally in the case of the CEO only, personal use of the Companys aircraft. The Company does not provide any tax gross-ups with respect to perquisites.
See footnote 5 to the Summary Compensation Table on page 19 for a discussion of perquisites received by NEOs in 2011. Executives also participate in all of the broad-based benefit and welfare plans and perquisites available to McDonalds staff
in general.
CERTAIN ADJUSTMENTS IN MEASURING PERFORMANCE
In measuring financial performance the Committee focuses on the fundamentals of the underlying business performance and adjusts for items that are not indicative of ongoing results. For example, operating
income and EPS are expressed in constant currencies (i.e., excluding the effects of foreign currency translation), since we believe that period-to-period changes in foreign exchange rates can cause our reported results to appear more or less
favorable than business fundamentals indicate. The Committees approach to other types of adjustments is subject to pre-established guidelines, including materiality, to provide clarity and consistency on how it views the business when
evaluating performance. Charges/credits that may be excluded from operating income include: strategic items (such as restructurings, acquisitions and divestitures); regulatory items (changes in tax or accounting rules); and
external items (extraordinary, non-recurring events such as natural disasters). Similar principles apply to exclusions from EPS and when calculating ROTA.
There were no significant items excluded in calculating adjusted operating income for 2011 TIP except for adjustments resulting from certain natural disasters in APMEA that only impacted APMEA TIP results.
Significant items excluded from base EPS (2010 EPS) for the RSUs granted to the executives in 2011 were:
> |
impairment charges, net of taxes. |
Significant
items excluded from base EPS (2007 EPS) for RSUs that were granted in 2008 and vested in 2011 were:
> |
impairment charges, net of taxes; |
> |
the net tax benefit from an IRS audit settlement; and |
> |
income from discontinued operations. |
THE PROCESS
FOR SETTING COMPENSATION
The Committee is responsible for reviewing and approving senior managements compensation. The Chairmen of the
Governance and Compensation Committees lead the Boards independent Directors in the evaluation of the CEOs performance. Based upon the results of this performance evaluation, the Committee determines the CEOs compensation.
THE ROLE OF MANAGEMENT
Management
recommends compensation for executives other than the CEO to the Committee. The CEO recommends compensation packages for the NEOs who report directly to him: Messrs. Bensen and Thompson. The President/COO does the same for the NEOs who report
directly to him: Mr. Fenton and Ms. Fields. The head of human resources also provides input on compensation for each of the executives. In 2011, prior to each Committee meeting, the CEO and the CFO provided input on the materials prepared
by management and presented to the Committee (except with respect to their own compensation).
14 McDonalds Corporation 2012
THE ROLE OF COMPENSATION CONSULTANTS
The Committee has adopted a policy under which it has the sole authority to select, evaluate, retain and dismiss an independent compensation consultant.
Management may not engage the consultant.
Frederic W. Cook & Co., Inc. (Fred Cook) is the Committees independent
compensation consultant. Fred Cook advises the Committee regarding (i) trends in executive compensation; (ii) specific compensation recommendations for the CEO, CFO and COO; (iii) applicable legislative developments; and
(iv) other matters as requested by the Committee from time to time. Fred Cook also provided assistance to the Board in carrying out certain routine functions (compiling and summarizing the results of certain Board and Director evaluations) and
advice on Director fees.
Management considers survey data and similar information about compensation programs that it obtains
from various sources, including Aon Hewitt, which also provides significant benefit plan administration services to McDonalds, and Towers Watson & Co. and Equilar. From time to time, data obtained from these other sources is provided
to the Committee to provide information about compensation trends and practices generally.
COMPANIES IN OUR PEER GROUP IN 2011
Consistent with our goal of providing competitive compensation, we benchmark our executives compensation compared to executive compensation
at a peer group of companies. The companies in the peer group are companies with which we compete for talent, including our direct competitors, major retailers, producers of consumer branded goods and companies with a significant global presence.
The Committee reviews our peer group annually. The peer group was selected based on the following criteria: industry, comparable
size based on revenue and market capitalization; global presence; high performing companies that compete with us for talent; and availability of data. The table below shows market capitalization and revenues for each of our peer group companies for
2011 (except for Burger King, Nestlé and Unilever, for which such information is not available). McDonalds market capitalization as of the end of 2011 was $102.5 billion (at the 78th percentile of our comparator group) and revenue was
$27.0 billion (at the 35th percentile of our comparator group).
McDONALDS 2011 PEER GROUP COMPANIES
(Dollars In billions)
|
|
|
|
|
|
|
|
|
|
|
Peer |
|
Market capitalization ($)(1) |
|
|
Revenues (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Branded Consumer Products: |
|
|
|
|
|
|
|
|
|
|
3M Company |
|
|
$57.3 |
|
|
|
$29.6 |
|
|
|
The Coca-Cola Company |
|
|
159.0 |
|
|
|
46.5 |
|
|
|
Colgate-Palmolive Company |
|
|
44.7 |
|
|
|
16.7 |
|
|
|
The Walt Disney Company |
|
|
67.4 |
|
|
|
40.9 |
|
|
|
General Mills, Inc. |
|
|
26.1 |
|
|
|
14.9 |
|
|
|
Johnson & Johnson |
|
|
179.1 |
|
|
|
65.0 |
|
|
|
Kellogg Company |
|
|
18.2 |
|
|
|
13.2 |
|
|
|
Kraft Foods, Inc. |
|
|
66.0 |
|
|
|
54.4 |
|
|
|
Nestlé (United States) (3) |
|
|
|
|
|
|
|
|
|
|
NIKE, Inc. |
|
|
44.7 |
|
|
|
20.9 |
|
|
|
PepsiCo, Inc. |
|
|
103.7 |
|
|
|
66.5 |
|
|
|
The Procter & Gamble Company |
|
|
183.5 |
|
|
|
82.6 |
|
|
|
Sara Lee |
|
|
11.2 |
|
|
|
8.7 |
|
|
|
Unilever (United States) (3) |
|
|
|
|
|
|
|
|
|
|
Table continued on next page
McDonalds
Corporation 2012 15
Table continued from previous page
|
|
|
|
|
|
|
|
|
|
|
Peer |
|
Market capitalization ($) |
|
|
Revenues |
|
|
|
|
|
|
|
Major Retailers/Services: |
|
|
|
|
|
|
|
|
|
|
Best Buy Co., Inc. |
|
|
$8.5 |
|
|
|
$50.3 |
|
|
|
Costco Wholesale Corporation |
|
|
36.2 |
|
|
|
87.0 |
|
|
|
The Home Depot, Inc. |
|
|
64.8 |
|
|
|
68.0 |
|
|
|
Lowes Companies Inc. |
|
|
31.8 |
|
|
|
48.8 |
|
|
|
Sears Holding Corporation |
|
|
3.4 |
|
|
|
43.3 |
|
|
|
Target Corporation |
|
|
34.4 |
|
|
|
67.4 |
|
|
|
Walgreen Co. |
|
|
29.8 |
|
|
|
72.2 |
|
|
|
Wal-Mart Stores, Inc. |
|
|
204.7 |
|
|
|
419.0 |
|
|
|
|
|
|
|
Key Competitors: |
|
|
|
|
|
|
|
|
|
|
Burger King Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
Starbucks Corporation |
|
|
34.3 |
|
|
|
11.7 |
|
|
|
Wendys Company |
|
|
2.1 |
|
|
|
2.4 |
|
|
|
Yum! Brands, Inc. |
|
|
27.2 |
|
|
|
12.6 |
|
|
|
(1) |
Source for market capitalization: Bloomberg.com. Data as of December 31, 2011. |
(2) |
Reflects revenues, sales or comparable data as publicly disclosed by the applicable company in its annual report filed with the SEC for its most recently completed fiscal
year. |
(3) |
Unlisted U.S. division of non-U.S. company. |
Compensation Policies And Practices
POLICY
REGARDING STOCK OWNERSHIP OF MANAGEMENT
The Company has adopted stock ownership requirements for senior management because we believe they
will more effectively pursue the long-term interests of shareholders if they are shareholders themselves. The following table provides our current stock ownership requirements, by level.
|
|
|
|
|
|
|
Level |
|
Stock ownership requirements (multiple of salary) |
|
|
|
Vice Chairman & CEO |
|
|
6 X |
|
|
|
President/COO |
|
|
5 X |
|
|
|
CFO |
|
|
4 X |
|
|
|
President U.S./Europe/APMEA |
|
|
4 X |
|
|
|
Executive Management (EVP) |
|
|
4 X |
|
|
|
Division President U.S. paid |
|
|
4 X |
|
|
|
Division President non-U.S. paid |
|
|
3 X |
|
|
|
Senior Management (SVP) U.S. paid |
|
|
3 X |
|
|
|
Senior Management (SVP) non-U.S. paid |
|
|
2 X |
|
|
|
The Committee reviews share ownership requirements and where members of senior management stand against their
respective requirements annually. Once a member of senior management becomes subject to the stock ownership requirements, he/she has five years to satisfy the requirements. Currently, all executives meet or are on track to meet their respective
stock ownership requirements.
Further, the Company has adopted restrictions that prohibit certain employees, including all of
senior management, from engaging in derivative transactions to hedge the risk associated with their stock ownership. These restrictions also require approval in order to hold Company shares in a margin account.
16 McDonalds Corporation 2012
CLAWBACK
The Companys compensation plans contain clawback provisions that apply to senior management.
Senior management may be required to repay compensation previously awarded under TIP and CPUP in certain circumstances (for example, the commission of fraud) and to the extent permitted under applicable law.
Payments under the ERRP, including some stock option gains and RSU payouts, are also subject to forfeiture and repayment in
certain circumstances, such as violation of an applicable restrictive covenant or the commission of an act that would have resulted in termination for cause.
Under our severance plan, the Company may cease payment of any future benefits and require repayment of any previously paid severance amounts upon violation of an applicable restrictive covenant or
commission of an act that would have resulted in termination for cause.
Unexercised stock options and unpaid RSUs are
subject to forfeiture if the Company determines that any employee committed an act or acts involving dishonesty, fraud, illegality or moral turpitude. Further, if an executive violates a restrictive covenant, the Company has the right to cancel
outstanding awards.
POLICY REGARDING FUTURE SEVERANCE PAYMENTS
The Company has a policy under which we will seek shareholder approval for severance payments to a NEO if such payments would exceed 2.99 times the sum of (i) the NEOs annual base salary as in
effect immediately prior to termination of employment; and (ii) the highest annual bonus awarded to the NEO by the Company in any of the three full fiscal years immediately preceding the fiscal year in which termination of employment occurs.
Certain types of payments are excluded from this policy, such as amounts payable under arrangements that apply to classes of employees other than the NEOs or that predate the implementation of the policy, as well as any payment that the Committee
determines is a reasonable settlement of a claim that could be made by the NEO.
RISK AND COMPENSATION PROGRAMS
In considering the risks to the Company and its business that may be implied by our compensation plans and programs, the Committee focuses primarily on
senior management, but also considers the design, operation and mix of the plans and programs at all levels of the Company. Our compensation program is designed to mitigate the potential to reward risk-taking that may produce short-term results that
appear in isolation to be favorable, but that may undermine the successful execution of our long-term business strategy and erode shareholder value.
INTERNAL PAY EQUITY
Compensation opportunities reflect our executives positions,
responsibilities and tenure in a given position and are generally similar for executives who have comparable levels of responsibility (although actual compensation delivered may differ depending on relative performance). Mr. Skinner has
ultimate responsibility for the strategic direction of the Company, and therefore is the most highly paid.
POLICY WITH RESPECT TO
DEDUCTIBILITY OF COMPENSATION
We generally design our compensation programs to allow the Company to deduct compensation expense under
Section 162(m) of the Internal Revenue Code (Code), which limits to $1 million the tax deductibility of annual compensation paid to NEOs unless the compensation is performance-based. However, the Company reserves the discretion to pay
compensation that does not qualify as performance-based compensation under Section 162(m) of the Code.
POLICIES AND PRACTICES REGARDING
EQUITY AWARDS
Equity awards cannot be granted when the Company possesses material non-public information. The Company generally makes
broad-based equity grants at approximately the same time each year following our release of financial information; however, the Company may choose to make equity awards outside of the annual broad-based grant (i.e., for new hires). Stock options may
be granted only with an exercise price at or above the closing market price of the Companys stock on the date of grant.
McDonalds
Corporation 2012 17
COMPENSATION TABLES
Summary Compensation Table
The table below summarizes the total compensation earned by or paid to our NEOs in 2009, 2010 and 2011.
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Name and principal position (a) |
|
Year (b) |
|
|
Salary (1) ($)(c) |
|
|
Stock
awards (2) ($)(e) |
|
|
Option awards (3) ($)(f) |
|
|
Non-equity incentive
plan compensation (4)
($)(g) |
|
|
All other compensation (5) ($)(i) |
|
|
Total
($)(j) |
|
James A. Skinner |
|
|
2011 |
|
|
$ |
1,473,333 |
|
|
$ |
1,429,035 |
|
|
$ |
1,796,501 |
|
|
Annual: |
|
$ |
3,300,000 |
|
|
$ |
752,024 |
|
|
$ |
8,750,893 |
|
Vice Chairman and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
Chief Executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
3,300,000 |
|
|
|
|
|
|
|
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(retiring, effective |
|
|
2010 |
|
|
|
1,433,333 |
|
|
|
1,415,255 |
|
|
|
1,752,389 |
|
|
Annual: |
|
|
4,500,000 |
|
|
|
631,641 |
|
|
|
9,732,618 |
|
June 30, 2012) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
4,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
1,391,667 |
|
|
|
1,670,500 |
|
|
|
2,238,608 |
|
|
Annual: |
|
|
3,250,000 |
|
|
|
743,350 |
|
|
|
17,574,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
8,280,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
11,530,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter J. Bensen |
|
|
2011 |
|
|
|
670,833 |
|
|
|
446,730 |
|
|
|
561,559 |
|
|
Annual: |
|
|
987,000 |
|
|
|
226,504 |
|
|
|
2,892,626 |
|
Corporate Executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
Vice President and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
987,000 |
|
|
|
|
|
|
|
|
|
Chief Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer |
|
|
2010 |
|
|
|
641,667 |
|
|
|
398,084 |
|
|
|
492,891 |
|
|
Annual: |
|
|
1,296,000 |
|
|
|
198,800 |
|
|
|
3,027,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
1,296,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
554,167 |
|
|
|
291,702 |
|
|
|
390,873 |
|
|
Annual: |
|
|
956,000 |
|
|
|
177,514 |
|
|
|
4,981,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
2,611,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
3,567,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Thompson |
|
|
2011 |
|
|
|
829,167 |
|
|
|
625,165 |
|
|
|
785,902 |
|
|
Annual: |
|
|
1,526,000 |
|
|
|
307,514 |
|
|
|
4,073,748 |
|
President and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
Chief Operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
1,526,000 |
|
|
|
|
|
|
|
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(President and |
|
|
2010 |
|
|
|
794,952 |
|
|
|
583,838 |
|
|
|
722,908 |
|
|
Annual: |
|
|
1,855,000 |
|
|
|
174,662 |
|
|
|
4,131,360 |
|
Chief Executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
Officer, effective |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
1,855,000 |
|
|
|
|
|
|
|
|
|
July 1, 2012) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
570,833 |
|
|
|
344,725 |
|
|
|
715,758 |
|
|
Annual: |
|
|
581,000 |
|
|
|
166,077 |
|
|
|
5,138,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
2,760,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
3,341,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. Fenton |
|
|
2011 |
|
|
|
601,500 |
|
|
|
401,969 |
|
|
|
505,299 |
|
|
Annual: |
|
|
667,000 |
|
|
|
302,468 |
|
|
|
2,478,236 |
|
President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
McDonalds Asia/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
667,000 |
|
|
|
|
|
|
|
|
|
Pacific, Middle East
and Africa |
|
|
2010 |
|
|
|
581,083 |
|
|
|
371,564 |
|
|
|
460,033 |
|
|
Annual: |
|
|
961,000 |
|
|
|
385,411 |
|
|
|
2,759,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
961,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
563,750 |
|
|
|
344,725 |
|
|
|
461,941 |
|
|
Annual: |
|
|
834,000 |
|
|
|
1,164,702 |
|
|
|
6,129,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
2,760,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
3,594,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janice L. Fields |
|
|
2011 |
|
|
|
593,333 |
|
|
|
321,602 |
|
|
|
404,242 |
|
|
Annual: |
|
|
679,000 |
|
|
|
155,854 |
|
|
|
2,154,031 |
|
President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
McDonalds USA (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
679,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
573,351 |
|
|
|
291,947 |
|
|
|
361,459 |
|
|
Annual: |
|
|
780,000 |
|
|
|
146,659 |
|
|
|
2,153,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
780,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 McDonalds Corporation 2012
(1) |
Reflects annual increases in salary that took effect March 1, 2011. Annual base salaries as of December 31, 2011 were as follows: |
|
|
|
|
|
|
|
James A. Skinner |
|
|
$1,480,000 |
|
|
|
Peter J. Bensen |
|
|
675,000 |
|
|
|
Donald Thompson |
|
|
835,000 |
|
|
|
Timothy J. Fenton |
|
|
605,000 |
|
|
|
Janice L. Fields |
|
|
597,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
Represents the aggregate grant date fair value, as computed in accordance with FASB ASC Topic 718, based on the probable outcome of the applicable performance conditions
and excluding the effect of estimated forfeitures during the applicable vesting periods, of RSUs granted under the McDonalds Corporation Amended and Restated 2001 Omnibus Stock Ownership Plan, as amended (Equity Plan). Values are based on the
closing price of the Companys common stock on the grant date, less the present value of expected dividends over the vesting period. Generally, RSUs vest on the third anniversary of the grant date and are subject to performance-based vesting
conditions linked to the achievement of target levels of diluted EPS growth. Additional information is disclosed in the Grants of Plan-Based Awards table on page 20 and the Outstanding Equity Awards at 2011 Year-end table on pages 23 and 24. A more
detailed discussion of the assumptions used in the valuation of RSU awards may be found in the Notes to Consolidated Financial Statements under Share-based Compensation on pages 41 and 42 of the Companys Annual Report on Form 10-K
for the year ended December 31, 2011. |
(3) |
Represents the aggregate grant date fair value, as computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures during the applicable
vesting periods of options. Options have an exercise price equal to the closing price of the Companys common stock on the grant date, vest in equal installments over a four-year period and are subject to the Equity Plan. Values for options
granted in 2011 are determined using a closed-form pricing model based on the following assumptions, as described in the footnotes to the consolidated financial statements: expected volatility based on historical experience of 21.5%; an expected
annual dividend yield of 3.2%; a risk-free return of 2.8%; and expected option life based on historical experience of 6.3 years. Additional information about options is disclosed in the Grants of Plan-Based Awards table on page 20 and the
Outstanding Equity Awards at 2011 Year-end table on pages 23 and 24. A more detailed discussion of the assumptions used in the valuation of option awards may be found in the Notes to Consolidated Financial Statements under Share-based
Compensation on page 31 of the Companys Annual Report on Form 10-K for the year ended December 31, 2011. |
(4) |
Our annual cash incentive plan is referred to as TIP and our long-term cash incentive plan is referred to as CPUP. CPUP operates on non-overlapping three-year cycles.
|
(5) |
All other compensation for 2011 includes the Companys contributions to the Profit Sharing and Savings Plan and Excess Benefit and Deferred Bonus Plan as
follows: |
|
|
|
|
|
|
|
James A. Skinner |
|
|
$597,333 |
|
|
|
Peter J. Bensen |
|
|
196,684 |
|
|
|
Donald Thompson |
|
|
268,417 |
|
|
|
Timothy J. Fenton |
|
|
156,250 |
|
|
|
Janice L. Fields |
|
|
137,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Also included are the following categories of perquisites: personal use of
Company-provided cars or an allowance; life insurance (at a cost of $28,428 for Mr. Skinner); financial counseling; annual physical examinations for the executives and spouses; executive security; matching charitable donations; limited personal
items; and personal use (which includes travel for service on boards of directors other than our Board) of the Companys aircraft (with a net cost to the Company in 2011 of $108,851 for Mr. Skinner). In general, the CEO is the only
executive permitted to use the aircraft for personal travel. However, in certain circumstances the CEO may at his discretion permit other executives to use the aircraft for personal travel. In 2011, Mr. Thompson used the aircraft for one
personal trip. In addition, at the discretion of the CEO, other executives may be joined by their spouses on the aircraft. The Company does not provide any tax gross-ups on the perquisites described above.
Mr. Fenton previously performed an international assignment in Hong Kong. As a result, he received certain tax-related
benefits in connection with his international assignment. In particular, Mr. Fenton participated in the Companys tax equalization program, which reimburses an executives tax obligations arising solely as a result of an international
assignment, to the extent that those tax obligations are in excess of taxes that would have been due had the executive not performed the international assignment. Although Mr. Fenton returned to the U.S. in April of 2010, he continued to have
tax liability in Hong Kong in 2011 arising from his international assignment. In 2011, the Company made a Hong Kong tax payment in the amount of $86,195 on Mr. Fentons behalf. Consistent with Company policy, the Company also provided
Mr. Fenton with tax preparation services at a cost of $29,514.
McDonalds
Corporation 2012 19
The incremental cost of perquisites is included in the amount provided in the
table and based on actual charges to the Company, except as follows: (i) Company-provided cars includes a pro rata portion of the purchase price, fuel and maintenance, based on personal use, and (ii) corporate aircraft includes fuel,
on-board catering, landing/handling fees and crew costs and excludes fixed costs, such as pilot salaries and the cost of the aircraft. In accordance with Company policy, the CEO must reimburse the Company for a portion of personal use of the
corporate aircraft, calculated as the lower of (i) amount determined under the Code based on four times the Standard Industry Fare Level (SIFL) rate per person or (ii) 200% of the actual fuel cost.
(6) |
Ms. Fields was not an executive officer in 2009. |
Grants of Plan-based AwardsFiscal 2011
In 2011, the NEOs received annual cash awards under TIP. The formula for determining payouts under the TIP is described following the footnotes to the table.
Columns (d) and (e) below show the target and maximum awards they could have earned. Actual payouts are in column (g) of the Summary Compensation Table. In 2011, the NEOs also received two types of equity awards: RSUs subject to
performance-based vesting criteria (see columns (f), (g), (h) and (l)) and stock options (see columns (j), (k) and (l)).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated future payouts under non-equity
incentive plan awards |
|
|
Estimated future payouts under equity
incentive plan awards (1) |
|
|
All other option awards:
number of
securities
underlying |
|
|
Exercise or base price
of option |
|
|
Grant date fair value of stock
and options |
|
Name (a) |
|
Plan |
|
Grant date (b) |
|
Threshold ($)(c) |
|
|
Target ($)(d) |
|
|
Maximum ($)(e) |
|
|
Threshold (#)(f) |
|
|
Target (#)(g) |
|
|
Maximum (#)(h) |
|
|
option (2) (#)(j) |
|
|
awards ($/Sh)(k) |
|
|
awards (3) ($)(l) |
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. |
|
TIP |
|
|
|
|
0 |
|
|
$ |
2,220,000 |
|
|
$ |
5,550,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skinner |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,268 |
|
|
|
21,071 |
|
|
|
21,071 |
|
|
|
|
|
|
|
|
|
|
$ |
1,429,035 |
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,496 |
|
|
$ |
75.93 |
|
|
|
1,796,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter J. |
|
TIP |
|
|
|
|
0 |
|
|
|
675,000 |
|
|
|
1,687,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bensen |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,647 |
|
|
|
6,587 |
|
|
|
6,587 |
|
|
|
|
|
|
|
|
|
|
|
446,730 |
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,105 |
|
|
|
75.93 |
|
|
|
561,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald |
|
TIP |
|
|
|
|
0 |
|
|
|
1,043,750 |
|
|
|
2,609,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thompson |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,305 |
|
|
|
9,218 |
|
|
|
9,218 |
|
|
|
|
|
|
|
|
|
|
|
625,165 |
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,524 |
|
|
|
75.93 |
|
|
|
785,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. |
|
TIP |
|
|
|
|
0 |
|
|
|
514,250 |
|
|
|
1,285,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fenton |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,482 |
|
|
|
5,927 |
|
|
|
5,927 |
|
|
|
|
|
|
|
|
|
|
|
401,969 |
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,486 |
|
|
|
75.93 |
|
|
|
505,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janice L. |
|
TIP |
|
|
|
|
0 |
|
|
|
507,450 |
|
|
|
1,268,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fields |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,186 |
|
|
|
4,742 |
|
|
|
4,742 |
|
|
|
|
|
|
|
|
|
|
|
321,602 |
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
2/9/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,189 |
|
|
|
75.93 |
|
|
|
404,242 |
|
(1) |
Reflects grants of RSUs subject to performance-based vesting conditions under the Equity Plan. The RSUs vest on February 9, 2014, subject to achievement of a
specified EPS growth target during the performance period ending on December 31, 2013. The performance target for all RSU awards granted to the NEOs in 2011 is compounded annual EPS growth of 6% on a cumulative basis, adjusted to exclude
certain items as described on page 14. If target is achieved, 100% of the RSUs will vest. If no compounded EPS growth is achieved, no RSUs will vest. If compounded EPS growth is achieved, but below target, the awards will vest proportionally.
|
20 McDonalds Corporation 2012
(2) |
Reflects grants of options in 2011. For details regarding options, please refer to footnote 3 to the Summary Compensation Table on page 19. |
(3) |
The values in this column for RSUs and options were determined based on the assumptions described in footnotes 2 and 3, respectively, to the Summary Compensation Table on
page 19. |
TIP AWARDS
Target TIP awards for 2011 were equal to a percentage of salary. The final payouts (shown in column (g) to the Summary Compensation Table) were
determined based on the following principles:
> |
TIP measures performance using a team factor that is initially determined based on growth in operating income. The team factor increases with growth in
operating income up to 100% at the target level of growth and to higher percentages at higher levels of growth, up to the maximum (175% in 2011). The team factor can then be adjusted up or down, within specified limits, based on
modifiers reflecting other measures of Corporate and/or AOW performance. The target amount is multiplied by the team factor, which includes the modifiers. The product is the adjusted target award. |
> |
Each participant is assigned an individual performance factor determined based on a combination of both subjective and objective factors. The adjusted target award is
multiplied by the individual performance factor, and the product is the final payout. |
The flowchart below illustrates this process:
McDonalds
Corporation 2012 21
The table below shows how increases in operating income determined the team factor
for each business segment in 2011, before the application of modifiers. The table shows the target and maximum levels of growth in operating income. Operating income at the Corporate level was included in the TIP team factor calculation for all of
our executives. In addition, the results for the U.S. were included in the calculation for Ms. Fields and the results for APMEA were included in the calculation for Mr. Fenton.
TIP team factor and growth in operating income for 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Team factor as % of target |
|
0% |
|
|
100% (Target) |
|
|
175% (Maximum) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth in operating income over 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate factor |
|
|
0 |
% |
|
|
8.5 |
% |
|
|
13.7 |
% |
|
|
U.S. factor |
|
|
0 |
|
|
|
5.2 |
|
|
|
9.4 |
|
|
|
APMEA factor |
|
|
0 |
|
|
|
12.0 |
|
|
|
20.9 |
|
|
|
Europe factor |
|
|
0 |
|
|
|
7.6 |
|
|
|
13.5 |
|
|
|
Operating income growth in 2011 was 9.7% (Corporate), 6.4% (U.S.), 13.3% (APMEA) and 9.7%
(Europe). The resulting Corporate, U.S., APMEA and Europe team factors were 115.1%, 119.7%, 110.1% and 125.2%, respectively, before the application of modifiers.
The target TIP awards, the team factors (including the modifiers), the individual performance factors and the final payouts as a percentage of target awards for the NEOs in 2011 are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Team factors (Corporate factor; AOW factor; blend) |
|
|
|
|
|
|
|
Named executive officer |
|
Target TIP award (% of salary) |
|
|
Applicable
team factor(s) |
|
|
Team factor(s) before application of modifiers (% of target award) |
|
|
Impact
of modifiers
(% added or subtracted) |
|
|
Final team factor applied to determine TIP payout (% of
target award) |
|
|
Personal factor (%) |
|
|
Final
TIP payout
(% of target award) |
|
James A. Skinner |
|
|
150 |
% |
|
|
Corporate |
|
|
|
115.1 |
% |
|
|
6.7 |
% |
|
|
121.8 |
% |
|
|
122 |
% |
|
|
148.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter J. Bensen |
|
|
100 |
|
|
|
Corporate |
|
|
|
115.1 |
|
|
|
6.7 |
|
|
|
121.8 |
|
|
|
120 |
|
|
|
146.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Thompson |
|
|
125 |
|
|
|
Corporate |
|
|
|
115.1 |
|
|
|
6.7 |
|
|
|
121.8 |
|
|
|
120 |
|
|
|
146.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. Fenton |
|
|
85 |
|
|
|
Corporate |
|
|
|
115.1 |
|
|
|
6.7 |
|
|
|
121.8 |
|
|
|
107 |
|
|
|
129.7 |
|
|
|
|
|
|
|
|
(weighted 25%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APMEA |
|
|
|
110.1 |
|
|
|
10.9 |
|
|
|
121.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(weighted 75%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janice L. Fields |
|
|
85 |
|
|
|
Corporate |
|
|
|
115.1 |
|
|
|
6.7 |
|
|
|
121.8 |
|
|
|
107 |
|
|
|
133.8 |
|
|
|
|
|
|
|
|
(weighted 25%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(weighted 75%) |
|
|
|
119.7 |
|
|
|
6.3 |
|
|
|
126.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The applicable modifiers are described in the following table:
|
|
|
|
|
|
|
Team factor |
|
Modifiers |
|
Potential weight of each modifier (range) |
|
Potential overall adjustment of team factor by modifiers (range) |
|
|
|
|
|
|
|
|
|
|
|
Corporate factor |
|
> Comparable Guest Counts Growth |
|
Up to +7.5 or -5 |
|
Up to +/-15 |
|
|
> Customer Satisfaction Opportunity |
|
percentage points |
|
percentage points |
|
|
> G&A Expense Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOW factor |
|
> Comparable Guest Counts Growth |
|
Up to +/-10 |
|
Up to +/-25 |
|
|
> Customer Satisfaction Opportunity |
|
percentage points |
|
percentage points |
|
|
> Improvements in Employee Commitment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 McDonalds Corporation 2012
Outstanding Equity Awards at 2011 Year-end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option awards |
|
|
Stock awards |
|
|
|
Number of securities underlying unexercised options
exercisable (1) |
|
|
Number of securities underlying unexercised options unexercisable (1) |
|
|
Option exercise price |
|
|
Option expiration date |
|
|
Number of shares or units of stock that have not vested (2) |
|
Market value of shares
or units of stock that have not vested (2)(3) |
|
Equity incentive plan awards: number of unearned shares,
units or other rights that have not vested (4) |
|
|
Equity incentive plan awards: market or payout value of unearned shares, units or other
rights that have not vested (3)(4) |
|
Name (a) |
|
(#)(b) |
|
|
(#)(c) |
|
|
($)(e) |
|
|
(f) |
|
|
(#)(g) |
|
($)(h) |
|
(#)(i) |
|
|
($)(j) |
|
|
|
|
|
|
|
|
|
|
|
|
James A. Skinner |
|
|
40,000 |
|
|
|
0 |
|
|
$ |
14.31000 |
|
|
|
03/18/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,193 |
|
|
|
0 |
|
|
|
35.25000 |
|
|
|
03/21/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,500 |
|
|
|
0 |
|
|
|
26.63000 |
|
|
|
02/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,500 |
|
|
|
0 |
|
|
|
25.31000 |
|
|
|
05/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
0 |
|
|
|
31.21000 |
|
|
|
12/01/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151,910 |
|
|
|
0 |
|
|
|
34.54000 |
|
|
|
03/23/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,589 |
|
|
|
0 |
|
|
|
45.02000 |
|
|
|
02/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278,073 |
|
|
|
92,690 |
|
|
|
56.64000 |
|
|
|
02/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,870 |
|
|
|
115,870 |
|
|
|
57.08000 |
|
|
|
02/11/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,253 |
|
|
|
132,756 |
|
|
|
63.25000 |
|
|
|
02/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
147,496 |
|
|
|
75.93000 |
|
|
|
02/09/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,478 |
|
|
|
$7,974,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter J. Bensen |
|
|
12,000 |
|
|
|
0 |
|
|
|
26.63000 |
|
|
|
02/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
|
|
0 |
|
|
|
25.31000 |
|
|
|
05/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,971 |
|
|
|
0 |
|
|
|
32.60000 |
|
|
|
02/16/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,870 |
|
|
|
0 |
|
|
|
36.37000 |
|
|
|
02/14/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,157 |
|
|
|
0 |
|
|
|
45.02000 |
|
|
|
02/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,075 |
|
|
|
6,025 |
|
|
|
56.64000 |
|
|
|
02/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,233 |
|
|
|
20,230 |
|
|
|
57.08000 |
|
|
|
02/11/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,449 |
|
|
|
37,338 |
|
|
|
63.25000 |
|
|
|
02/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
46,105 |
|
|
|
75.93000 |
|
|
|
02/09/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,484 |
|
|
|
1,954,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Thompson |
|
|
500 |
|
|
|
0 |
|
|
|
39.50000 |
|
|
|
01/24/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,800 |
|
|
|
0 |
|
|
|
35.25000 |
|
|
|
03/21/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
0 |
|
|
|
26.63000 |
|
|
|
02/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
0 |
|
|
|
25.31000 |
|
|
|
05/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,299 |
|
|
|
0 |
|
|
|
32.60000 |
|
|
|
02/16/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,611 |
|
|
|
0 |
|
|
|
36.37000 |
|
|
|
02/14/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,984 |
|
|
|
0 |
|
|
|
45.02000 |
|
|
|
02/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,369 |
|
|
|
11,123 |
|
|
|
56.64000 |
|
|
|
02/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,049 |
|
|
|
37,046 |
|
|
|
57.08000 |
|
|
|
02/11/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,256 |
|
|
|
54,765 |
|
|
|
63.25000 |
|
|
|
02/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
64,524 |
|
|
|
75.93000 |
|
|
|
02/09/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,486 |
|
|
|
$2,657,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. Fenton |
|
|
28,315 |
|
|
|
0 |
|
|
|
45.02000 |
|
|
|
02/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,369 |
|
|
|
11,123 |
|
|
|
56.64000 |
|
|
|
02/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,910 |
|
|
|
23,910 |
|
|
|
57.08000 |
|
|
|
02/11/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,617 |
|
|
|
34,851 |
|
|
|
63.25000 |
|
|
|
02/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
41,486 |
|
|
|
75.93000 |
|
|
|
02/09/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,401 |
|
|
|
$1,946,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table continued on next page
McDonalds
Corporation 2012 23
Table continued from previous page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option awards |
|
|
Stock awards |
|
|
|
Number of securities underlying unexercised options
exercisable (1) |
|
|
Number of securities underlying unexercised options unexercisable (1) |
|
|
Option exercise price |
|
|
Option expiration date |
|
|
Number of shares or units of stock that have not vested (2) |
|
|
Market value of shares
or units of stock that have not vested (2)(3) |
|
|
Equity incentive plan awards: number of unearned shares,
units or other rights that have not vested (4) |
|
|
Equity incentive plan awards: market or payout value of unearned shares, units or other
rights that have not vested (3)(4) |
|
Name (a) |
|
(#)(b) |
|
|
(#)(c) |
|
|
($)(e) |
|
|
(f) |
|
|
(#)(g) |
|
|
($)(h) |
|
|
(#)(i) |
|
|
($)(j) |
|
|
|
Janice L. Fields |
|
|
26,400 |
|
|
|
0 |
|
|
$ |
35.25000 |
|
|
|
03/21/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
|
|
|
0 |
|
|
|
26.63000 |
|
|
|
02/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
0 |
|
|
|
25.31000 |
|
|
|
05/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,460 |
|
|
|
0 |
|
|
|
32.60000 |
|
|
|
02/16/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,580 |
|
|
|
0 |
|
|
|
36.37000 |
|
|
|
02/14/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,987 |
|
|
|
0 |
|
|
|
45.02000 |
|
|
|
02/14/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,075 |
|
|
|
6,025 |
|
|
|
56.64000 |
|
|
|
02/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,875 |
|
|
|
12,874 |
|
|
|
57.08000 |
|
|
|
02/11/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,130 |
|
|
|
27,381 |
|
|
|
63.25000 |
|
|
|
02/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
33,189 |
|
|
|
75.93000 |
|
|
|
02/09/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,680 |
|
|
$ |
369,214 |
|
|
|
9,960 |
|
|
|
$999,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In general, options expire on the tenth anniversary of grant. However, the options due to expire on March 21, 2013 were granted on March 21, 2000. Options
generally vest and become exercisable in equal installments over a four-year period. For details regarding equity treatment upon termination, see page 30. |
(2) |
These RSUs vested on February 11, 2012 and were not subject to performance-based vesting conditions as they were granted to Ms. Fields prior to serving as
President of McDonalds USA. |
(3) |
Calculated by multiplying the number of shares covered by the award by $100.33, the closing price of Company stock on the New York Stock Exchange on December 30,
2011. |
(4) |
Reflects unvested performance-based RSUs that are scheduled to be paid out as follows if the targets are met (or were paid out, in the case of awards that vested in 2012).
|
|
|
|
|
|
|
|
|
|
|
|
Named executive officer |
|
Vesting date |
|
|
Number of RSUs |
|
|
|
|
James A. Skinner |
|
|
02/11/12 |
|
|
|
33,112 |
|
|
|
|
|
|
02/10/13 |
|
|
|
25,295 |
|
|
|
|
|
|
02/09/14 |
|
|
|
21,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter J. Bensen |
|
|
02/11/12 |
|
|
|
5,782 |
|
|
|
|
|
|
02/10/13 |
|
|
|
7,115 |
|
|
|
|
|
|
02/09/14 |
|
|
|
6,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Thompson |
|
|
02/11/12 |
|
|
|
6,833 |
|
|
|
|
|
|
02/10/13 |
|
|
|
10,435 |
|
|
|
|
|
|
02/09/14 |
|
|
|
9,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. Fenton |
|
|
02/11/12 |
|
|
|
6,833 |
|
|
|
|
|
|
02/10/13 |
|
|
|
6,641 |
|
|
|
|
|
|
02/09/14 |
|
|
|
5,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janice L. Fields |
|
|
02/10/13 |
|
|
|
5,218 |
|
|
|
|
|
|
02/09/14 |
|
|
|
4,742 |
|
|
|
24 McDonalds Corporation 2012
Option Exercises and Stock VestedFiscal 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option awards |
|
|
Stock awards |
|
|
|
|
|
Number of shares acquired on exercise |
|
|
Value realized on exercise |
|
|
Number of shares acquired on vesting |
|
|
Value realized on vesting |
|
|
|
Name (a) |
|
(#)(b) |
|
|
($)(c) |
|
|
(#)(d) |
|
|
($)(e) |
|
|
|
|
James A. Skinner |
|
|
100,000 |
|
|
$ |
3,623,510 |
|
|
|
52,967 |
|
|
$ |
4,032,907 |
|
|
|
Peter J. Bensen |
|
|
13,826 |
|
|
|
812,825 |
|
|
|
7,857 |
|
|
|
598,232 |
|
|
|
Donald Thompson |
|
|
30,000 |
|
|
|
1,618,317 |
|
|
|
6,356 |
|
|
|
483,946 |
|
|
|
Timothy J. Fenton |
|
|
0 |
|
|
|
0 |
|
|
|
6,356 |
|
|
|
483,946 |
|
|
|
Janice L. Fields |
|
|
63,250 |
|
|
|
3,114,340 |
|
|
|
3,443 |
|
|
|
262,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified Deferred CompensationFiscal 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive |
|
|
Registrant |
|
|
Aggregate |
|
|
Aggregate |
|
|
Aggregate |
|
|
|
|
|
contributions |
|
|
contributions |
|
|
earnings |
|
|
withdrawals/ |
|
|
balance at |
|
|
|
|
|
in last FY (1) |
|
|
in last FY (1) |
|
|
in last FY |
|
|
distributions |
|
|
last FYE (2) |
|
|
|
Name (a) |
|
($)(b) |
|
|
($)(c) |
|
|
($)(d) |
|
|
($)(e) |
|
|
($)(f) |
|
|
|
|
James A. Skinner |
|
$ |
4,699,000 |
|
|
|
$579,717 |
|
|
$ |
2,006,917 |
|
|
|
0 |
|
|
$ |
38,471,994 |
|
|
|
Peter J. Bensen |
|
|
298,193 |
|
|
|
182,115 |
|
|
|
512,250 |
|
|
|
0 |
|
|
|
4,717,035 |
|
|
|
Donald Thompson |
|
|
250,972 |
|
|
|
243,917 |
|
|
|
356,447 |
|
|
|
0 |
|
|
|
2,246,397 |
|
|
|
Timothy J. Fenton |
|
|
1,119,450 |
|
|
|
143,767 |
|
|
|
664,926 |
|
|
|
0 |
|
|
|
7,027,459 |
|
|
|
Janice L. Fields |
|
|
449,067 |
|
|
|
112,833 |
|
|
|
234,413 |
|
|
|
0 |
|
|
|
3,902,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents salary deferrals which are also reported as compensation for 2011 in the Summary Compensation Table on page 18: $199,000 for Mr. Skinner; $90,833 for
Mr. Bensen; $41,750 for Mr. Thompson; $158,450 for Mr. Fenton; and $39,800 for Ms. Fields. The remaining amounts represent bonus deferrals under TIP, which were previously reported in the Summary Compensation Table for 2010. The
amounts reported in column (c) are included in All other compensation in column (i) of the Summary Compensation Table. |
(2) |
Includes amounts previously reported in the Summary Compensation Table, in the aggregate, as follows: |
|
|
|
|
|
|
|
James A. Skinner |
|
$ |
14,998,733 |
|
|
|
Peter J. Bensen |
|
|
2,873,894 |
|
|
|
Donald Thompson |
|
|
627,881 |
|
|
|
Timothy J. Fenton |
|
|
3,572,004 |
|
|
|
Janice L. Fields |
|
|
1,000,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCESS BENEFIT AND DEFERRED BONUS PLAN (EXCESS PLAN)
The Companys Excess Plan is a successor plan to the Supplemental Plan described below. The Excess Plan is a non-tax-qualified, unfunded plan that allows certain management and highly compensated
employees to (i) make tax-deferred contributions from their salary, TIP and CPUP awards; and (ii) receive matching contributions (on deferrals of salary and TIP awards only), in excess of the Internal Revenue Service (IRS) limits under the
Profit Sharing and Savings Plan.
At the time of deferral, participants may elect to receive distributions either in a
lump-sum or in regular installments over a period of up to 15 years following separation from service. Distributions are delayed for six months following separation from service.
Deferrals are nominally invested in investment funds selected by participants and are credited with a rate of return based on the
investment option(s) selected. The investment options are currently based on the Profit Sharing and Savings Plans McDonalds common stock fund; a stable value fund; and an S&P 500 Index fund.
McDonalds
Corporation 2012 25
SUPPLEMENTAL PROFIT SHARING AND SAVINGS PLAN (SUPPLEMENTAL PLAN)
Prior to the Excess Plan, the Companys Supplemental Plan allowed participants to defer compensation in excess of the IRS limits that applied to the
Profit Sharing and Savings Plan. In 2004, the Company froze the Supplemental Plan. Prior to 2005, the Supplemental Plan allowed deferrals of salary and all or a portion of cash incentives as well as Company contributions on deferrals of salary and
TIP. The investment options for existing accounts under the Supplemental Plan are identical to those under the Excess Plan. A participant may elect to have distributions commence in the year following termination in a single lump-sum, in
installments commencing on a date of the participants choice or in an initial lump-sum payment with subsequent installment payments, all of which must be completed within 25 years. If the participant does not file a distribution election in
the year of termination, the participants entire Supplemental Plan balance is paid out in cash in the year following termination. In-service and hardship withdrawals are permitted subject to certain conditions.
Potential Payments Upon Termination or Change in Control
Our NEOs would become entitled to certain payments and benefits in connection with a change in control and/or if their employment with the Company were to terminate as described below.
POTENTIAL PAYMENTS UPON OR IN CONNECTION WITH A CHANGE IN CONTROL
A change in control is generally defined as either (i) the acquisition of 20% or more of our common stock or voting securities by a single purchaser or a group of purchasers acting together;
(ii) the incumbent members of the Board cease to constitute at least a majority of the Board as a result of an actual or threatened election contest; (iii) a significant merger or other business combination involving the Company; or
(iv) a complete liquidation or dissolution of the Company.
> |
Change in control employment agreements (CIC Agreements) |
The Company has CIC Agreements with some of its senior management, including all of the NEOs. The Company does not intend to enter into any new CIC agreements. An executive who also participates in the ERRP
would be entitled to receive the greater of the benefits under the ERRP or the benefits under the CIC Agreement, but not both. A minimum of two years notice is required to terminate a CIC Agreement.
The CIC Agreements provide that, during the three-year period following a change in control, referred to as the protected period,
the executives (i) position and authority may not be reduced; (ii) place of work may not be relocated by more than 30 miles; (iii) salary may not be reduced; (iv) annual bonus opportunity may not be reduced; and
(v) participation in benefit plans will continue on terms not less favorable than before the change in control. In addition, within 30 days after a change in control, if it is also a change in control under Code Section 409A, the Company
will pay a prorated portion of (i) the target annual bonus and (ii) the target long-term incentive bonus, both for the partial performance period in which the change in control occurs. If it is not a change in control under Code
Section 409A, the Company will pay (i) a prorated portion of the executives annual bonus, based on the Companys actual performance, and (ii) a prorated portion of the executives long-term incentive bonus based on
target performances, both on the date on which such bonuses are paid to Company employees generally. The treatment of outstanding equity awards is described under Equity awards on page 27. If the Company fails to comply with these
provisions, the executive may terminate employment for good reason during the protected period.
If the executive
terminates employment for good reason or is terminated by the Company without cause during the protected period, then, in addition to receiving accrued but unpaid salary, bonus, deferred compensation and other benefit amounts due on
termination, the executive will be entitled to: (i) a lump-sum cash payment equal to three times the sum of the executives salary, target annual bonus and contribution received under the Companys deferred compensation plan;
(ii) a pro rata portion of the target annual bonus, reduced (but not below zero) by the amount of annual bonus paid for that year; (iii) a lump-sum payment equal to continued medical, life insurance, fringe and other benefits for three
years after the termination; and (iv) a lump-sum cash payment for any accrued sabbatical leave. In addition, for purposes of determining eligibility for any post-retirement medical benefits, the executive will be treated as having three
additional years of age and service. The executive will be eligible for these benefits subject to execution of an agreement that includes restrictive covenants and a release of claims. Payment of these benefits will be delayed for six months.
The Company will reimburse an executive on an after-tax basis for excise tax payments that are considered to be contingent upon a
change in control. If the aggregate after-tax amount of benefits is not more than 110% of what the executive would receive if benefits were reduced to a level that would not be subject to excise taxes, the executive will not be entitled to receive a
reimbursement and the aggregate amount of benefits to which he/she is entitled will be reduced to the greatest amount that can be paid without triggering excise taxes.
26 McDonalds Corporation 2012
In the case of the death or disability of an executive during the protected period, the
executive or his/her estate will be entitled to receive accrued salary, bonus, deferred compensation and other benefit amounts due at levels provided to peers and at least as favorable as those immediately preceding the change in control.
If (i) the Company terminates an executive for cause following a change in control; (ii) an executive voluntarily
terminates employment without good reason following a change in control; or (iii) an executive who is otherwise eligible to receive severance benefits fails to execute the requisite agreements, then that executive will receive only a lump-sum
payment of accrued salary, bonus, deferred compensation and other benefit amounts.
The following table sets forth the benefits
that would have been payable under the CIC agreements, assuming that on December 31, 2011 they had been terminated without cause or resigned with good reason in the protected period following a change in control. Pro rata 2011 TIP payments are
not included because if the NEOs had terminated employment on December 31, 2011, they would have earned these awards in full under the 2011 TIP and the pro rata payout they would have been entitled to would be zero. Pro rata CPUP payments are
not included because the NEOs would be entitled to these awards pursuant to the 20102012 CPUP following a change in control, as described below, and there is no incremental benefit upon termination.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance payment (3x salary, bonus and
Company contribution to deferred compensation plan) ($) |
|
|
Benefit continuation ($) |
|
|
Sabbatical ($) |
|
|
Tax gross-up payments ($) |
|
|
Total ($) |
|
James A. Skinner |
|
|
$12,869,174 |
|
|
|
$110,033 |
|
|
|
$227,692 |
|
|
|
$11,157,824 |
|
|
|
$24,364,723 |
|
Peter J. Bensen |
|
|
4,614,532 |
|
|
|
121,595 |
|
|
|
0 |
|
|
|
4,986,114 |
|
|
|
9,722,241 |
|
Donald Thompson |
|
|
6,282,179 |
|
|
|
119,787 |
|
|
|
128,462 |
|
|
|
5,716,141 |
|
|
|
12,246,569 |
|
Timothy J. Fenton |
|
|
3,837,280 |
|
|
|
121,117 |
|
|
|
0 |
|
|
|
0 |
|
|
|
3,958,397 |
|
Janice L. Fields |
|
|
3,704,797 |
|
|
|
109,564 |
|
|
|
91,846 |
|
|
|
0 |
|
|
|
3,906,207 |
|
Under the 20102012 CPUP, all of the
NEOs would be entitled to accelerated vesting and, in certain circumstances, payment of CPUP awards on a change in control. If a change in control were to occur before December 31, 2012, notwithstanding the terms of the CIC agreements, each NEO
would be entitled to receive a pro rata portion of the award based on performance prior to the CIC event. If the change in control also qualified as a change in control under Section 409A, we intend to pay this amount immediately. Otherwise,
the prorated award would be paid out as originally scheduled.
The table below sets forth the payments that the NEOs would have
been entitled to receive under the 20102012 CPUP if a change in control had occurred on December 31, 2011, based on performance through that date:
|
|
|
|
|
|
|
|
|
James A. Skinner |
|
|
|
|
$10,885,333 |
|
|
|
Peter J. Bensen |
|
|
|
|
3,809,867 |
|
|
|
Donald Thompson |
|
|
|
|
5,170,533 |
|
|
|
Timothy J. Fenton |
|
|
|
|
2,245,100 |
|
|
|
Janice L. Fields |
|
|
|
|
2,245,100 |
|
|
|
Under the Equity Plan, upon a
change in control, outstanding unvested options and RSUs will be replaced by equivalent awards based on publicly-traded stock of the successor entity. The replacement awards will vest and become exercisable (in the case of options) or be paid out
(in the case of service-based RSUs) if the grantees employment is terminated for any reason other than cause within two years following the change in control. In addition, if employment is terminated other than for
cause within two years following the change in control, all options will remain outstanding for not less than two years following termination or until the end of the original term, if sooner.
If the awards cannot be replaced (e.g., because the acquirer does not have publicly-traded securities) or if the Committee so determines,
vesting will be accelerated. RSUs would vest (performance-based RSUs at target) and be paid out upon a Code Section 409A change in control; otherwise, the RSUs would be paid out on the originally scheduled payment date or, if earlier, on the
executives death, disability or termination of employment, subject to any required delay under Code Section 409A.
Terminations initiated by the employee will not result in accelerated vesting of replacement awards.
McDonalds
Corporation 2012 27
If a change in control had occurred on December 31, 2011 and either (i) if the
outstanding options and RSUs held by the NEOs could not be replaced or (ii) if the Committee so determined, assuming that the transaction met the applicable definition of a change in control under the Equity Plan and Section 409A:
(i) options would have vested and (ii) RSUs would have vested and been paid out immediately (performance-based RSUs at target). The awards held by the NEOs as of December 31, 2011 are set forth in the Outstanding Equity Awards at 2011
Year-end table on pages 23 and 24.
The table below summarizes the value of the change in control payouts that the NEOs could have
received based on (i) in the case of options, the spread between the exercise price and the closing price of the Companys common stock on December 30, 2011 and (ii) in the case of RSUs, the target number of shares,
multiplied by the closing price of the Companys common stock on December 30, 2011. The table sets forth the hypothetical value that the NEOs could have realized as a result of the accelerated equity awards, based on these assumptions. If
there were no change in control, the amounts shown would have vested over time, subject to continued employment and with respect to the RSUs, performance-based vesting conditions, except in the case of Mr. Skinner due to the ERRP. As a result,
the values shown are greater than the benefit attributable solely to acceleration of the awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named
executive officer |
|
Stock
options (closing price on 12/30/11 minus exercise price) ($) |
|
|
RSUs
(number of shares/target number of shares multiplied by closing price on 12/30/11) ($) |
|
|
Total ($) |
|
|
|
James A. Skinner |
|
|
$17,582,498 |
|
|
|
$7,974,028 |
|
|
|
$25,556,526 |
|
|
|
Peter J. Bensen |
|
|
3,647,635 |
|
|
|
1,954,830 |
|
|
|
5,602,465 |
|
|
|
Donald Thompson |
|
|
5,693,275 |
|
|
|
2,657,340 |
|
|
|
8,350,615 |
|
|
|
Timothy J. Fenton |
|
|
3,824,605 |
|
|
|
1,946,502 |
|
|
|
5,771,107 |
|
|
|
Janice L. Fields |
|
|
2,645,132 |
|
|
|
1,368,501 |
|
|
|
4,013,633 |
|
|
|
POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT
(OTHER THAN FOLLOWING A CHANGE IN CONTROL)
> McDonalds
Corporation Severance Plan (Severance Plan)
Under the Severance Plan, Messrs. Bensen, Fenton and Thompson and Ms. Fields would receive
severance benefits if they were terminated by the Company without cause, due to a reduction in work force or job elimination; however, the Severance Plan excludes terminations for performance reasons. Applicable benefits consist of a
lump-sum payment with respect to severance pay, based on final salary; and the continuation of medical and dental benefits. Amounts are based on position and length of service. In addition, in a covered termination, each eligible NEO would receive
prorated TIP and CPUP payments based on actual performance and paid at the same time payments are made to other participants; accrued sabbatical leave; and outplacement assistance. Payments would be delayed for six months following termination of
employment to the extent required under Section 409A.
The value of the benefits that would be payable under the Severance
Plan on December 31, 2011 are as set forth below. Pro rata 2011 TIP payments are not included because they would have earned these awards in full under the 2011 TIP. The pro rata CPUP payment shown under the 20102012 CPUP is estimated
based on performance through 2011. Any pro rata CPUP payment would be based on actual performance for the full performance period and would be paid after the completion of the 2012 fiscal year at the same time as payments are made to other CPUP
participants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary continuation |
|
|
Benefit continuation |
|
|
Other (sabbatical and out-placement) |
|
|
Pro rata CPUP awards |
|
|
Total |
|
Peter J. Bensen |
|
|
$389,423 |
|
|
|
$34,187 |
|
|
|
$12,000 |
|
|
|
$3,809,867 |
|
|
|
$4,245,477 |
|
Donald Thompson |
|
|
674,423 |
|
|
|
43,634 |
|
|
|
140,462 |
|
|
|
5,170,533 |
|
|
|
6,029,052 |
|
Timothy J. Fenton |
|
|
605,000 |
|
|
|
37,531 |
|
|
|
12,000 |
|
|
|
2,245,100 |
|
|
|
2,899,631 |
|
Janice L. Fields
|
|
|
597,000 |
|
|
|
32,945 |
|
|
|
103,846 |
|
|
|
2,245,100 |
|
|
|
2,978,891 |
|
BENEFITS UNDER THE EXECUTIVE RETENTION REPLACEMENT PLAN
Under the ERRP, Mr. Skinner is entitled to certain benefits if his employment is terminated for any reason other than death, disability or cause or if Mr. Skinner retired or resigned
for good reason. In connection with his June 30, 2012 retirement, he will receive the benefits described in (i) through (v) below, plus the equivalent of Company matching
28 McDonalds Corporation 2012
contributions under deferred compensation plans for 6.5 years, as well as secretarial services for two years
and $135,000 in lieu of fringe benefits and provision of an office. In addition, a pro rata portion of his outstanding TIP and CPUP awards will vest and will be paid at the end of each awards respective performance period, based on the
Companys achievement of the applicable performance goals for the full performance periods. All of Mr. Skinners outstanding RSUs will vest and will be paid out on the originally scheduled payment dates, subject to the Companys
achievement of the applicable performance goals. In addition, all of Mr. Skinners outstanding options will become exercisable in accordance with their original vesting schedule and remain outstanding for 9.5 years following his retirement
(or until the expiration of the options original term, if sooner).
If Mr. Skinner were to be terminated without
cause, he would be entitled to receive a cash lump-sum equal to the present value of (i) final salary for 18 months; (ii) 50% of final salary for five years; (iii) prorated TIP, based on actual performance, for the year of
termination; (iv) target TIP for 18 months; and (v) the estimated value of continued participation in Company health and welfare plans for 6.5 years. In addition, his options that would have vested within five years following termination
would vest and become exercisable, and all vested options would remain outstanding until five years following termination or until the expiration of the options original term, if sooner. RSUs would vest on a pro rata basis, based on the number
of months employed during the vesting period, and would be paid out in accordance with actual performance results achieved during the vesting period. A pro rata portion (based on the portion of the performance period prior to termination) of any
outstanding CPUP award would vest and would be paid at the end of the performance period, based on the achievement of the applicable performance goals.
Payments under the ERRP will be delayed for six months following the termination of his employment. Receipt of benefits is subject to the execution of an agreement that includes restrictive covenants,
including a non-compete agreement and a release of claims.
The benefits that would have been payable if Mr. Skinners
employment had terminated on December 31, 2011 under the ERRP and CPUP are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump-sum ERRP payment ($) |
|
|
Pro rata CPUP payment ($)(2) |
|
|
Other (3) |
|
|
Total ($) |
|
|
|
Termination without cause |
|
|
$8,779,384 |
|
|
|
10,885,333 |
|
|
|
N/A |
|
|
|
$19,664,717 |
|
|
|
Retirement (1) |
|
|
9,714,124 |
|
|
|
10,885,333 |
|
|
|
$135,000 |
|
|
|
20,734,457 |
|
|
|
(1) |
Pursuant to SEC rules, this table reflects benefits which Mr. Skinner would have been entitled to if he had terminated on December 31, 2011. In connection with
his June 30, 2012 retirement, he will be entitled to a pro rata portion of his 2012 TIP and 2010-2012 CPUP awards. The awards will be subject to actual performance for the full performance period, prorated based on his retirement date, and paid
in early 2013. |
(2) |
As noted in footnote 1, Mr. Skinner will be entitled to receive a pro rata CPUP award based upon his retirement date and actual performance against the specific
metrics. This number represents the pro rata CPUP payment based on actual performance through 2011. |
(3) |
Payments in lieu of fringe benefits and provision of an office, plus secretarial services, as described above. |
The table below shows the effect on outstanding equity awards if Mr. Skinners employment had terminated on December 31, 2011
under the ERRP based on: (i) in the case of options, the spread between the exercise price and the closing price of the Companys stock on December 30, 2011; and (ii) in the case of RSUs, the number of prorated shares
in which he would vest, multiplied by the closing price of the Companys stock on December 30, 2011.
|
|
|
|
|
|
|
|
|
Amount of outstanding equity upon termination without cause ($) |
|
Effect of retirement |
|
Effect of termination without cause |
James A.
Skinner |
|
$23,079,880 |
|
No acceleration of vesting; outstanding options will be exercisable in accordance with original vesting schedule and remain outstanding for 9.5
years or until expiration of the original term if sooner. RSUs will vest in accordance with the original vesting schedule and will be paid out in accordance with actual performance results achieved. |
|
All options that would have vested within five years following termination would vest and become exercisable, and all vested stock options would
remain outstanding until five years following termination or until the expiration of the options original term, if sooner. RSUs would vest on a pro rata basis based on the number of months employed during the vesting period and would be paid
out in accordance with actual performance results achieved. |
McDonalds
Corporation 2012 29
If Mr. Skinners employment were to terminate due to death or disability, under the
ERRP, he or his estate would be entitled to receive: (i) accrued salary and annual incentive awards; and (ii) payment or provision of death or disability benefits, as applicable, equal to the benefits provided by the Company to the estates
and beneficiaries of his peers. Upon termination for cause, he would be entitled to receive accrued salary and annual incentive awards and no other benefits.
Participation in this program was previously frozen, and following Mr. Skinners retirement, there will only be one remaining participant.
EFFECT OF TERMINATION OF EMPLOYMENT UNDER EQUITY INCENTIVE PLANS
Unvested options are generally
forfeited on termination of employment, with vested options remaining outstanding and exercisable for 90 days, except on termination for cause. For grants prior to 2010, executives (and all other employees) may be entitled to accelerated
exercisability and an extended post-termination exercise period (generally one to three years) upon certain termination events (including retirement and termination by the Company without cause).
Beginning with awards granted to executives in 2010, options no longer provide for accelerated exercisability. Instead, the options continue
to become exercisable on the originally scheduled dates and remain exercisable for the extended post-termination exercise period, as applicable. If an executive violates a restrictive covenant following termination, the Company may cancel any
outstanding options. Further, beginning in 2011, except for participants in the ERRP, if an executive terminates employment for any reason other than death or disability, all options granted in the last 12 months are immediately forfeited.
The table below summarizes the value of the payouts on termination of employment in circumstances that would result in
acceleration of the option awards (i.e., retirement or special circumstances, which includes termination by the Company without cause, death or disability), if termination had occurred on December 31, 2011.
The values shown are based on the spread between the exercise price and the closing price of the Companys common stock on December 30,
2011. The table sets forth the total hypothetical value that a NEO could have realized as a result of acceleration of awards. The values shown are greater than the incremental benefit attributable solely to acceleration of the awards.
|
|
|
|
|
|
|
|
|
|
|
Named executive officer |
|
Type of termination |
|
Stock options (closing price on 12/30/11 minus exercise
price) ($) |
|
|
|
|
|
James A. Skinner |
|
Retirement |
|
|
n/a |
(1) |
|
|
|
|
|
|
Special circumstances |
|
|
$17,582,498 |
|
|
|
|
|
|
|
Death/disability |
|
|
17,582,498 |
|
|
|
|
|
Peter J. Bensen |
|
Retirement |
|
|
0 |
(2) |
|
|
|
|
|
|
Special circumstances |
|
|
2,061,175 |
|
|
|
|
|
|
|
Death/disability |
|
|
3,647,635 |
|
|
|
|
|
Donald Thompson |
|
Retirement |
|
|
4,118,890 |
|
|
|
|
|
|
|
Special circumstances |
|
|
4,118,890 |
|
|
|
|
|
|
|
Death/disability |
|
|
5,693,275 |
|
|
|
|
|
Timothy J. Fenton |
|
Retirement |
|
|
2,812,346 |
|
|
|
|
|
|
|
Special circumstances |
|
|
2,812,346 |
|
|
|
|
|
|
|
Death/disability |
|
|
3,824,605 |
|
|
|
|
|
Janice L. Fields |
|
Retirement |
|
|
1,835,320 |
|
|
|
|
|
|
|
Special circumstances |
|
|
1,835,320 |
|
|
|
|
|
|
|
Death/disability |
|
|
2,645,132 |
|
|
|
|
|
(1) |
Please refer to the table on page 29 for a description of Mr. Skinners treatment upon retirement under the ERRP. |
(2) |
Mr. Bensen is not eligible to receive favorable treatment upon retirement under the Equity Plan. |
30 McDonalds Corporation 2012
Unvested RSUs are generally forfeited on
termination of employment. In the case of certain termination events (including retirement and termination by the Company without cause), executives (and all other employees) are entitled to accelerated vesting of RSUs, prorated based
upon the number of months worked during the vesting period. However, RSUs subject to performance-based vesting conditions are not accelerated on termination of employment; instead any pro rata vesting is subject to the satisfaction of the applicable
performance conditions, determined following completion of the performance period. As discussed on page 13, the Companys practice is to grant executives RSUs with performance-based vesting conditions. Further, beginning in 2011, except for
participants in the ERRP, if an executive (or any other employee) terminates employment for any reason other than death or disability, all RSUs granted in the last 12 months are immediately forfeited upon termination.
DEFERRED COMPENSATION
Following separation
from service for any reason, the NEOs would receive distributions from their accounts under the Supplemental Plan and the Excess Plan in accordance with their elected distribution schedules, as described on pages 25 and 26.
PROPOSAL NO. 2.
ADVISORY VOTE TO APPROVE
EXECUTIVE COMPENSATION
We are asking our shareholders to provide an advisory, nonbinding vote to approve the compensation awarded to our
named executive officers for 2011, as described in the Executive Compensation section, beginning on page 8, which includes the Compensation Discussion and Analysis, the compensation tables and related material.
As described in the Compensation Discussion and Analysis section, the Compensation Committee oversees our executive compensation program in
light of McDonalds circumstances and to promote the objectives of the program. These objectives include: to motivate our executives to increase profitability and shareholder returns, to tie pay to performance effectively, and to compete
effectively for and retain managerial talent.
We are asking our shareholders to indicate their support for our named executive
officer compensation.
We believe that the information we have provided in this Proxy Statement demonstrates that our executive compensation
program was designed appropriately and is working to ensure that managements interests are aligned with our shareholders interests to support long-term value creation.
This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers
and the philosophy, policies and procedures described in this Proxy Statement.
Information about the voting standard for this
proposal appears on page 53. While this vote is advisory and not binding, the Board and the Compensation Committee will consider the outcome of the vote, along with other relevant factors, when considering future executive compensation decisions.
The Board of Directors recommends that shareholders vote FOR the approval of the compensation awarded to McDonalds
named executive officers for 2011, as disclosed under SEC rules, including the Compensation Discussion and Analysis, the compensation tables and related material included in this Proxy Statement.
McDonalds
Corporation 2012 31
Other management proposals
PROPOSAL NO. 3.
VOTE TO APPROVE THE 2012
OMNIBUS STOCK OWNERSHIP PLAN
On February 8, 2012, the Compensation Committee of the Board adopted the McDonalds Corporation
2012 Omnibus Stock Ownership Plan (2012 Plan) and recommended that the Board submit the 2012 Plan for shareholder approval so that the Company may continue to grant equity awards and that payments made under it qualify for deductibility by the
Company for federal income tax purposes. The 2012 Plan will replace the Amended and Restated 2001 Omnibus Stock Ownership Plan (2001 Plan) and will apply to awards granted on or after June 1, 2012.
The material features of the 2012 Plan are summarized below, which summary is qualified in its entirety by reference to the text of the 2012
Plan. A copy of the 2012 Plan is available on our website at www.governance.mcdonalds.com and the SEC website at www.sec.gov, where it is an appendix to the electronic version of this Proxy Statement. We
will provide you with a copy without charge if you call Shareholder Services at 1.630.623.7428, or write to us at McDonalds Corporation, Shareholder Services, Department 720, One McDonalds Plaza, Oak Brook IL 60523. Copies will also be
available at the Annual Shareholders Meeting.
PURPOSE
The 2012 Plan is an important part of our pay-for-performance compensation strategy. The Compensation Committee and management continually evaluate ways to attract, retain and motivate highly
qualified individuals and to ensure compensation is tied to performance and aligns the interests of employees and directors with those of shareholders. Except as otherwise specified below, the terms of the 2012 Plan are generally consistent with the
terms of the 2001 Plan.
GENERAL INFORMATION
The 2012 Plan provides for the granting of non-qualified stock options, restricted stock units, stock bonuses, dividend equivalents and other stock-based awards (collectively, Awards). The Committee expects
to grant non-qualified stock options and restricted stock units under the 2012 Plan, and may consider the grant of other types of Awards. Awards may be granted under the 2012 Plan to any employee (including officers), as well as non-employee
directors of the Company or any of its subsidiaries.
COMMON STOCK AVAILABLE
Under the 2001 Plan, approximately 27.6 million shares were available for grant as of December 31, 2011. If the 2012 Plan is approved, no further grants will be made under the 2001 Plan after
June 1, 2012, and those shares (including the portion of those shares subject to awards that have been granted since December 31, 2011, as hereinafter described, and that may be subject to awards granted prior to June 1, 2012) and any
shares returned to the pool of shares available under the 2001 Plan will become available for grant under the 2012 Plan. We are also asking shareholders to authorize an additional 27.5 million shares for grant under the 2012 Plan. Approximately
5 million shares have been granted under the 2001 Plan from December 31, 2011 through March 1, 2012. Therefore, total shares available under the 2012 Plan would be approximately 55.1 million shares, and would in no event exceed
56 million shares. As under the 2001 Plan, common stock issued under the 2012 Plan may be treasury shares or newly issued shares. The Company intends to use treasury shares purchased through its share repurchase program for Awards. As of
December 31, 2011, 639.2 million shares of common stock were held in treasury, and approximately $3.5 billion in additional share repurchases remained authorized.
The closing price for the common stock on the New York Stock Exchange Composite Tape on March 1, 2012 was $99.25.
To meet the performance exception under Internal Revenue Code Section 162(m), the 2012 Plan provides that the maximum number of shares of common stock for which Awards may be granted to any single
participant during any one-year period is two million for options, and 500,000 for restricted stock units that are intended to qualify for the performance exception, subject to adjustments as described below.
AWARDS UNDER THE 2012 PLAN
Stock
options. The 2012 Plan provides that the per-share option price cannot be less than 100% of the fair market value of a share of the common stock on the grant date. The Committee expects to continue to grant this type of Award under the
2012 Plan. Payment of the option price may be made in cash, through the exchange of common stock or through a broker-assisted exercise.
32 McDonalds Corporation 2012
The Committee determines when and how an option may be exercised, and establishes its maximum
term, which may not be greater than 10 years. Generally, an option may not be exercisable within one year after its grant date.
Restricted stock units (RSUs). The 2012 Plan provides for the grant of RSUs. The Committee expects to continue to grant this type of Award under the
2012 Plan. RSUs are generally similar to restricted stock awards, except that instead of issuing actual shares at the time of grant, the units are settled at or after the time they vest by the delivery of the appropriate number of shares of common
stock, or of cash equal to the then-value of those shares, depending upon the terms of the Award. Unless and until RSUs are settled with actual shares, the participant does not have the rights of a shareholder, although he or she may, if the Award
so provides, be entitled to dividend equivalents.
Stock bonuses. As under the 2001 Plan, the Committee may grant stock bonuses or
incentives to eligible employees other than executive officers under the 2012 Plan. The maximum number of shares available for this form of Award is one million over the life of the 2012 Plan.
Other stock-based awards. As under the 2001 Plan, the 2012 Plan provides that the Committee may grant other stock-based awards, that is, Awards other
than options, SARs, RSUs or restricted stock, the value of which is based on or otherwise related to the common stock, on terms and conditions specified by the Committee.
Dividend equivalents. The 2012 Plan provides for dividend equivalents, a form of stock-based award representing the right to receive cash or shares of common stock measured by the dividends payable
with respect to specific shares of common stock or a number of shares. Dividend equivalents may only be granted as part of another Award. The 2012 Plan specifies that if the value of another stock-based award is based on the excess of the fair
market value of a share of common stock on the date the value is determined over the Awards exercise or grant price, the per-share exercise or grant price for such an Award may not be less than 100% of the fair market value of a share of
common stock on the date of grant.
The 2012 Plan provides that RSUs and other stock-based awards, the value of which is based
on the full value of a share of stock, will be subject to a minimum vesting requirement of one year if the award vests based solely on continued employment (subject to accelerated vesting upon certain terminations of employment and upon a change in
control, as described below). The Committee cannot waive this requirement.
PLAN ADMINISTRATION
The 2012 Plan will be administered by the Committee, in conformity with the SECs short-swing trading requirements and the requirements for the
performance exception described below. Committee members must also be independent under applicable listing standards. The Committee may delegate certain of its administrative responsibilities, and its powers may also be exercised by the full Board.
Subject to the 2012 Plan, the Committee has the authority to administer the 2012 Plan, including the right to: approve the
persons to whom, and the times when, Awards are to be granted, as well as the type, size and terms of such Awards and to modify such grants; interpret the 2012 Plan; accelerate the exercisability of, and waive the restrictions and conditions
applicable to, Awards; and extend the time during which Awards may be exercised (but not beyond 10 years). The Committees powers are identical to those under the 2001 Plan, except that the Committee also has authority to make all other
determinations required or that it deems appropriate for the administration of the 2012 Plan.
AMENDMENT AND TERMINATION
The 2001 Plan terminates on March 14, 2014. If shareholders approve the 2012 Plan, the 2001 Plan will be terminated on June 1, 2012. In either
case, the 2001 Plan may be terminated by the Board before its scheduled termination date. Termination will not affect outstanding Awards under the 2001 Plan.
The 2012 Plan and Awards may be amended by the Board or the Committee, subject to shareholder approval if required by applicable listing requirements. The 2012 Plan provides that shareholder approval is
required for any amendment that would result in the reduction of the option price of any option, except for the adjustments described below. The 2012 Plan provides that amendments may not adversely affect outstanding Awards without the consent
of the affected grantees, unless the amendment does not materially decrease the value of the Award or is made to comply with applicable law, stock exchange rules or accounting rules. Moreover, no amendment may be made that would cause the loss of
Section 162(m) performance exception for any outstanding Qualified Performance-Based Awards (as defined below under Certain Federal income tax consequences).
McDonalds
Corporation 2012 33
In addition, Awards may not be amended in a way that is inconsistent with the requirements of the 2012 Plan.
For example, an Award that is subject to the minimum vesting schedule for service-vesting restricted stock, RSUs and other full-value stock-based Awards may not be amended to eliminate that minimum vesting schedule.
ESTIMATE OF BENEFITS
Because the grant of
Awards pursuant to the 2012 Plan will be within the discretion of the Committee, it is not possible to determine the Awards that will be made to executive officers. Information about Awards made under the 2001 Plan to our NEOs in 2011 is provided on
page 20. In 2011, no options were granted to non-employee Directors, options covering 469,706 shares of common stock were granted to all current executive officers as a group, and options covering over 3,416,122 shares of common stock were granted
to approximately 3,520 employees, including all current officers who are not executive officers. In addition, in 2011, 67,106 RSUs were granted to all current executive officers as a group, and 559,297 RSUs were granted to 3,706 employees, including
all current officers who are not executive officers.
OTHER TERMS AND CONDITIONS
Transferability. Awards granted under the 2012 Plan are non-transferable other than by will or the laws of descent and distribution and may be exercised, during a grantees lifetime, only by the
grantee.
Termination of employment. The 2012 Plan provides that treatment of Awards upon termination of employment or directorship shall
be determined by the Committee in the applicable grant agreement or thereafter. Absent a determination otherwise, unvested Awards are forfeited upon termination and vested options will remain exercisable for 90 days following termination.
Tax withholding. The Company may make such provisions as it deems appropriate to withhold any taxes due in connection with any Award, and
may require the grantee to satisfy relevant tax withholding requirements before authorizing any issuance of shares to a grantee. This requirement may be satisfied by the grantees payment of cash or delivery of shares of common stock, or by
having shares of common stock otherwise issuable to the grantee withheld.
CHANGE IN CONTROL
The 2012 Plan provides for a double-trigger approach. In the event of a Change in Control of the Company (defined in the 2012
Plan identically as under the 2001 Plan), all options and other service-vesting awards will be replaced with a Replacement Award (as defined in the 2012 Plan). If a Replacement Award cannot be issued or upon determination by the
Committee prior to the Change in Control, the Replaced Awards (as defined in the 2012 Plan) will instead vest and become fully exercisable upon the Change in Control. In addition, if a grantees employment or status as a director,
as applicable, terminates other than for cause and other than upon a termination initiated by the grantee, within two years after a Change in Control, all Replacement Awards become fully vested and exercisable and all stock options held by the
grantee immediately before the Termination of Employment (as defined in the 2012 Plan) and that were held by such grantee as of the date of the Change in Control, or which are Replacement Awards, remain outstanding for the shorter of
(i) two years following such Termination of Employment and (ii) the expiration of the term of the option or stock appreciation right, unless otherwise provided in the applicable grant agreement.
The Committee will have the ability to vary these general rules for particular Awards at the time of grant in the grant agreements. The
consequences of a Change in Control for performance-vesting Awards, other than options, will be specified in the grant agreements.
ADJUSTMENTS FOR CHANGES IN CAPITALIZATION AND CORPORATE TRANSACTIONS
The 2012 Plan authorizes the Committee to adjust the limitations on shares available for Awards, and to adjust outstanding Awards, as appropriate in connection with stock dividends, stock splits, reverse
stock splits, share combinations, recapitalizations, mergers, consolidations, acquisitions of property or shares, separations, spinoffs, reorganizations, stock rights offerings, liquidations, sales or spinoffs of subsidiaries, and similar events.
These may include canceling Awards in exchange for payments of cash and/or property, substituting other equity (including equity of another entity that agrees to the substitution) for the common stock available under the 2012 Plan and subject to
then-outstanding Awards, or in the case of a sale or spinoff of a subsidiary, arranging for the buyer or the subsidiary to assume the Awards held by subsidiary employees.
34 McDonalds Corporation 2012
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following describes the principal United States federal income tax consequences related to options granted under the 2012 Plan.
Non-qualified Options. A grantee will not be subject to tax at the time a non-qualified option is granted, and no tax deduction is then available to the Company. Upon the exercise of a non-qualified
option, an amount equal to the difference between the option price and the fair market value of the shares acquired on the date of exercise will be included in the grantees ordinary income and the Company will generally be entitled to deduct
the same amount. Upon disposition of shares acquired upon exercise, appreciation or depreciation after the date of exercise will be treated by the grantee or transferee of the non-qualified option as either capital gain or capital loss.
Incentive Stock Options. A grantee will not be subject to tax at the time an incentive stock option is granted or exercised, and no tax deduction is
available to the Company; however, the grantee may be subject to the alternative minimum tax on the excess of the fair market value of the shares received upon exercise of the incentive stock option over the option price. Upon disposition of the
shares acquired upon exercise of an incentive stock option, capital gain or capital loss will generally be recognized in an amount equal to the difference between the sale price and the option price, as long as the grantee has not disposed of the
shares within two years of the date of grant or within one year from the date of exercise and has been employed by the Company at all times from the grant date until the date three months before the date of exercise (one year in the case of
permanent disability). If the grantee disposes of the shares without satisfying both the holding period and employment requirements (a disqualifying disposition), the grantee will recognize ordinary income at the time of the disqualifying
disposition to the extent of the difference between the option price and the amount realized on such disqualifying disposition or, if the disqualifying disposition resulted from a failure to satisfy the holding period requirement, the fair market
value of the shares on the date the incentive stock option is exercised (if less). Any remaining gain or loss is treated as a capital gain or capital loss.
If the grantee pays the option price, in whole or in part, with previously acquired shares, the exchange will not affect the tax treatment of the exercise. Upon such exchange, and except for disqualifying
dispositions, no gain or loss is recognized upon the delivery of the previously acquired shares to the Company, and the shares received by the grantee equal in number to the previously acquired shares exchanged therefor will have the same basis and
holding period for capital gain or capital loss purposes as the previously acquired shares. Shares received by the grantee in excess of the number of previously acquired shares will have a basis of zero and a holding period which commences as of the
date the shares are issued to the grantee upon exercise of the incentive stock option. If such an exercise is effected using shares previously acquired through the exercise of an incentive stock option, the exchange of the previously acquired shares
will be considered a disposition of such shares for the purpose of determining whether a disqualifying disposition has occurred.
The Company is not entitled to a tax deduction upon either the exercise of an incentive stock option or upon disposition of the shares
acquired pursuant to such exercise, except to the extent that the grantee recognized ordinary income in a disqualifying disposition.
Limits on Companys deductions. Code Section 162(m) generally places a $1 million annual limit on a companys tax deduction for compensation paid to a covered employee. A
covered employee is defined as the chief executive officer and the other three highest paid officers named in the companys proxy statement. This limit does not apply to compensation that satisfies the requirements for the
performance-based compensation exception, including shareholder approval of the material terms of the compensation. Approval of the 2012 Plan at the Annual Shareholders Meeting will satisfy this requirement.
The 2012 Plan incorporates the provisions required to satisfy the performance exception for options, in addition to shareholder approval.
These include limiting the maximum number of shares of common stock for which options and SARs may be granted to any single participant during any one-year period to 2 million (subject to adjustments as described above), allowing such Awards to
only be granted by the Committee, which must be comprised of outside directors as defined under Code Section 162(m), and requiring that the option price of such Awards be not less than the fair market value of the underlying stock
on the date of grant. Therefore, all options granted to covered employees under the 2012 Plan are intended to qualify for the performance exception.
In addition, the 2012 Plan gives the Committee the ability to grant RSUs and other stock-based awards designed to qualify for the performance exception (Qualified Performance-Based Awards). As explained
earlier, the 2012 Plan provides that the number of shares subject to Qualified Performance-Based Awards of this type that may be granted to any single participant during any one-year period may not exceed 500,000 shares, subject to adjustments as
described above.
McDonalds
Corporation 2012 35
Qualified Performance-Based Awards (other than options) also must be subject to the
achievement of performance goals based upon the attainment of specified levels of one or more of the following measures, applied to the Company as a whole or to any subsidiary, division or other unit of the Company: revenue, operating income, net
income, basic or diluted earnings per share, return on revenue, return on assets, return on equity, return on total capital or total shareholder return. The 2012 Plan permits the use of any other measure of financial performance that can be
determined under U.S. generally accepted accounting principles.
Performance goals may be absolute or relative to the performance
of one or more other companies or of an index. The Committee may specify that there be excluded the effect of restructuring charges, discontinued operations, extraordinary items, cumulative effects of accounting changes, and other unusual or
nonrecurring items, as well as asset impairment and the effects of foreign currency fluctuations determined under generally accepted accounting principles, so long as they are objectively determinable by reference to the Companys financial
statements (including the notes) and/or managements discussion and analysis.
If the Committee makes Awards other than
options and SARs subject to the achievement of performance goals, and complies with the other procedures required by the performance exception, the Awards should qualify for the performance exception. These procedures require that the Committee
establish objective performance goals based upon one or more of the above measures within the time allowed by the performance exception and at a time when achievement of the goals is not substantially certain, and that it certify the achievement of
those goals before the vesting or payment of the Awards. In addition, the 2012 Plan, like the 2001 Plan, provides that except in the event of death, disability or Change in Control, the achievement of the performance goals associated with Qualified
Performance-Based Awards may not be waived, nor may the amounts of such Awards be increased after they have been granted.
The
Committee expects, in general, to administer the 2012 Plan so as to avoid loss of the Companys tax deduction because of Code Section 162(m), but it is possible that some Awards may not qualify for the performance exception. Further, if
Awards vest or are paid on an accelerated basis upon a Change in Control or a subsequent termination of employment, some or all of the value of that acceleration may be considered an excess parachute payment under Section 280G of
the Code. This would result in the imposition of a 20% federal excise tax on the recipients of the excess parachute payments and a loss of the Companys deduction for the excess parachute payments.
RECOMMENDATION
The Board believes that the
approval of the 2012 Plan will enable us to continue its pay-for-performance compensation strategy and motivate our employees. If shareholders do not approve the 2012 Plan, management and the Compensation Committee will examine available
alternatives, including continuing to use the 2001 Plan as in effect before the amendments made after shareholder approval of that plan on March 14, 2004.
The Board of Directors recommends that shareholders vote FOR the approval of the 2012 Omnibus Stock Ownership Plan.
PROPOSAL NO. 4.
VOTE TO APPROVE DECLASSIFICATION OF THE BOARD OF DIRECTORS
At the 2011 Annual Shareholders Meeting, shareholders approved an advisory proposal that requested the Board of Directors to take the steps necessary to eliminate the classification of the Board of
Directors. After careful consideration, the Board has adopted proposed amendments to our Restated Certificate of Incorporation to eliminate the classification of the Board of Directors.
Article TWELFTH of our Restated Certificate of Incorporation currently provides that our Directors are divided into three classes, with the
term of office of one class expiring each year and the Directors in each class serving three-year terms. If the proposed amendments are adopted and become effective, Directors elected at or before this Annual Shareholders Meeting will serve
out their three-year terms, but Directors elected by shareholders after this Annual Shareholders Meeting will be elected to one-year terms. Beginning at the 2015 Annual Shareholders Meeting, all Directors would be subject to annual
election for one-year terms.
In addition, because Delaware law specifies that directors serving on an unclassified board must be
removable by shareholders either with or without cause, Article TWELFTH would be amended to specify that Directors may be removed with or without cause, but amended Article TWELFTH will provide that Directors serving the remainder of a three-year
term will be removable only for cause.
36 McDonalds Corporation 2012
Article TWELFTH would be further amended to provide that, following the termination of the
classified Board structure in 2015, a Director appointed to a vacancy or new directorship would serve for a term expiring at the next Annual Shareholders Meeting following his or her appointment.
Finally, Section (d) of Article TWELFTH sets forth the standard to modify Article TWELFTH (i.e., the affirmative vote of the holders of
a majority of the voting power of the outstanding capital stock). This is the same standard as would be required to amend any other Article in our Restated Certificate of Incorporation; therefore, Section (d) of Article TWELFTH would be
repealed to remove this language that is duplicative of applicable law.
The proposed changes to Article TWELFTH are set forth in
their entirety in Exhibit A.
In accordance with Delaware law, the Board of Directors has adopted resolutions approving and
declaring advisable these proposed amendments and is recommending them to shareholders for approval.
Information about the voting
standard for this proposal appears on page 54. If the proposed amendments are adopted and become effective, the Board will adopt conforming amendments to our Amended and Restated By-Laws.
The Board of Directors recommends that shareholders vote FOR declassification of the Board of Directors.
PROPOSAL NO. 5.
VOTE TO APPROVE
SHAREHOLDERS RIGHT TO CALL SPECIAL MEETINGS
The Board of Directors is requesting that shareholders approve amendments to our
Restated Certificate of Incorporation that would enable holders of at least 25% of our outstanding shares of common stock (excluding derivatives) to request the Secretary of the Company to call a special meeting of shareholders.
Currently, Article THIRTEENTH of our Restated Certificate of Incorporation specifies that only the Board of Directors may call special
meetings of shareholders. The Board frequently reviews corporate governance best practices and, after due consideration, has determined that our shareholders should be permitted to call special meetings. The proposed 25% threshold to exercise this
right balances competing interests. It ensures that shareholders with substantial holdings in our Company could convene a meeting to address significant strategic concerns prior to the next annual meeting, but special interest groups with views not
shared by shareholders with substantial holdings cannot damage the interests of shareholders by causing our Company to incur unnecessary costs and diversion of key personnel.
Additionally, the exclusion of derivative securities from the determination of satisfaction of the prescribed ownership threshold will ensure that the shareholders seeking to call a special meeting have a
true economic interest in the Company.
The proposed changes to Article THIRTEENTH are set forth in their entirety in Exhibit
B.
In accordance with Delaware law, the Board of Directors has adopted resolutions approving and declaring advisable these
proposed amendments and is recommending them to shareholders for approval.
Information about the voting standard for this
proposal appears on page 54. If the proposed amendments are adopted and become effective, the Board of Directors will consider amendments to our Amended and Restated By-Laws to adopt provisions, including notice and timing restrictions, relating to
the shareholders right to call special meetings.
The Board of Directors recommends that shareholders vote FOR
shareholders right to call special meetings.
PROPOSAL NO. 6.
ADVISORY VOTE TO APPROVE THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITOR FOR 2012
The Audit Committee is responsible for the appointment of the
independent auditor engaged by the Company. The Audit Committee has appointed Ernst & Young LLP as independent auditor for 2012. The Board is asking shareholders to approve this appointment. Ernst & Young LLP audited the
Companys financial statements and internal control over financial reporting for 2011. A representative of that firm will attend the Annual Shareholders Meeting and will have an opportunity to make a statement and answer questions.
Information about the voting standard for this proposal appears on page 53.
The Board of Directors recommends that
shareholders vote FOR the appointment of Ernst & Young LLP as independent auditor for 2012.
McDonalds
Corporation 2012 37
Audit Committee matters
AUDIT COMMITTEE REPORT
Dear Fellow Shareholders:
The Audit Committee is composed of five Directors, each of whom meets the independence and other requirements of the New York Stock Exchange.
Enrique Hernandez, Jr., Cary D. McMillan, and Roger W. Stone qualify as audit committee financial experts. The Committee has the responsibilities set out in its charter, which has been adopted by the Board of Directors and is reviewed
annually.
Management is primarily responsible for the Companys financial statements, including the Companys internal
control over financial reporting. Ernst & Young LLP (Ernst & Young), the Companys independent auditor, is responsible for performing an audit of the Companys annual consolidated financial statements in accordance with
generally accepted accounting principles (GAAP) and for issuing a report on those statements. Ernst & Young also reviews the Companys interim financial statements in accordance with Statement on Auditing Standards No. 100
(interim financial information). The Committee oversees the Companys financial reporting process and internal control structure on behalf of the Board of Directors. The Committee met nine times during 2011, including meeting regularly with
Ernst & Young and the internal auditor, both privately and with management present.
In fulfilling its oversight
responsibilities, the Committee reviewed and discussed with management and Ernst & Young the audited and interim financial statements, including Managements Discussion and Analysis, included in the Companys Reports on Form 10-K and
Form 10-Q. These reviews included a discussion of:
> |
critical accounting policies of the Company; |
> |
the reasonableness of significant financial reporting judgments made in connection with the financial statements, including the quality (and not just the acceptability) of
the Companys accounting principles; |
> |
the clarity and completeness of financial disclosures; |
> |
the effectiveness of the Companys internal control over financial reporting, including managements and Ernst & Youngs reports thereon, the basis
for the conclusions expressed in those reports and significant changes made to the Companys internal control over financial reporting during 2011; |
> |
items that could be accounted for using alternative treatments within GAAP, the ramifications thereof and the treatment preferred by Ernst & Young;
|
> |
the annual management letter issued by Ernst & Young, managements response thereto and other material written communications between management and
Ernst & Young; |
> |
unadjusted audit differences noted by Ernst & Young during its audit of the Companys annual financial statements; and |
> |
the potential effects of regulatory and accounting initiatives on the Companys financial statements. |
In connection with its review of the Companys annual consolidated financial statements, the Committee also discussed with
Ernst & Young other matters required to be discussed with the auditor under Statement on Auditing Standards No. 61, as modified or supplemented (communication with audit committees), and those addressed by Ernst & Youngs
written disclosures and its letter provided under the applicable requirements of the Public Company Accounting Oversight Board, as modified or supplemented (independence discussions with audit committees).
The Committee is responsible for the engagement of the independent auditor and appointed Ernst & Young to serve in that capacity
during 2011 and 2012. In that connection, the Committee:
> |
reviewed Ernst & Youngs independence from the Company and management, including Ernst & Youngs written disclosures described above;
|
> |
reviewed periodically the level of fees approved for payment to Ernst & Young and the pre-approved non-audit services it has provided to the Company to ensure
their compatibility with Ernst & Youngs independence; and |
> |
reviewed Ernst & Youngs performance, qualifications and quality control procedures. |
38 McDonalds Corporation 2012
Among other matters, the Committee also:
> |
reviewed the scope of and overall plans for the annual audit and the internal audit program; |
> |
consulted with management and Ernst & Young with respect to the Companys processes for risk assessment and risk management; |
> |
reviewed and approved the Companys policy with regard to the hiring of former employees of the independent auditor; |
> |
reviewed and approved the Companys policy for the pre-approval of audit and permitted non-audit services by the independent auditor; |
> |
received reports pursuant to our policy for the submission and confidential treatment of communications from employees and others about accounting, internal controls and
auditing matters; |
> |
reviewed with management the scope and effectiveness of the Companys disclosure controls and procedures, including for purposes of evaluating the accuracy and fair
presentation of the Companys financial statements in connection with certifications made by the CEO and CFO; |
> |
reviewed significant legal developments and the Companys processes for monitoring compliance with law and Company policies; and |
> |
reviewed the Companys related person transactions. |
Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Companys Annual Report on Form 10-K
for the year ended December 31, 2011 for filing with the SEC.
Respectfully submitted,
The Audit Committee
Enrique Hernandez,
Jr., Chairman
Walter E. Massey
Cary D. McMillan
Sheila A. Penrose
Roger W. Stone
POLICY FOR PRE-APPROVAL OF AUDIT AND PERMITTED NON-AUDIT SERVICES
The Audit Committee has a policy for the pre-approval of all audit and permitted non-audit services to be provided to the Company by its independent auditor. The Audit Committee may pre-approve engagements
on a case-by-case basis or on a class basis if the relevant services are predictable and recurring.
Pre-approvals for classes of
services are granted at the start of each fiscal year and are applicable for the year. In considering these pre-approvals, the Audit Committee reviews a description of the scope of services falling within each class and imposes budgetary estimates
that are largely based on historical costs.
Any audit or permitted non-audit service that is not included in an approved class,
or for which total fees are expected to exceed the relevant budgetary estimate, must be pre-approved on an individual basis. Pre-approval of any individual engagement may be granted not more than one year before commencement of the relevant service.
Pre-approvals of services that may be provided over a period of years must be reconsidered each year.
The Corporate Controller
monitors services provided by the independent auditor and overall compliance with the pre-approval policy. The Corporate Controller reports periodically to the Audit Committee about the status of outstanding engagements, including actual services
provided and associated fees, and must promptly report any noncompliance with the pre-approval policy to the Chairman of the Audit Committee.
The policy is available on the Companys website at www.governance.mcdonalds.com.
McDonalds
Corporation 2012 39
AUDITOR FEES AND SERVICES
The following table presents fees paid for
professional services rendered for the audit of the Companys annual financial statements for 2011 and 2010 and fees paid for other services provided by our independent auditor in those years:
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
|
Audit fees (1) |
|
$ |
11.5 |
|
|
$ |
10.4 |
|
|
|
Audit-related fees (2) |
|
|
0.4 |
|
|
|
0.3 |
|
|
|
Tax fees (3) |
|
|
1.1 |
|
|
|
1.0 |
|
|
|
All other fees (4) |
|
|
0 |
|
|
|
0.2 |
|
|
|
|
Total |
|
$ |
13.0 |
|
|
$ |
11.9 |
|
|
|
|
(1) |
Fees for services associated with the annual audit (including internal control reporting), statutory audits required internationally, reviews of Quarterly Reports on
Form 10-Q and accounting consultations. |
(2) |
Fees for employee benefit plan audits and certain attestation services not required by statute or regulation. |
(3) |
Primarily fees for tax compliance in various international markets. |
(4) |
Fees for miscellaneous advisory services. |
Shareholder proposal
PROPOSAL NO. 7.
ADVISORY VOTE ON A SHAREHOLDER
PROPOSAL REQUESTING A NUTRITION REPORT
The text of the shareholder proposal and supporting statement appear exactly as received by the
Company unless otherwise noted. All statements contained in the shareholder proposal and supporting statement are the sole responsibility of the proponent. The shareholder proposal may contain assertions about the Company or other matters that the
Company believes are incorrect, but the Company has not attempted to refute all of those assertions. The Board recommends a vote against the shareholder proposal based on the reasons set forth in the Companys statement in opposition following
the shareholder proposal.
John Harrington advised the Company that he intends to present the following shareholder proposal at
the Annual Shareholders Meeting. Mr. Harrington owns 100 shares of the Companys common stock. The address of the proponent is available upon request by calling 1-630-623-2553 or by sending a request to McDonalds Corporation,
Shareholder Services, Department 720, One McDonalds Plaza, Oak Brook, IL 60523.
Shareholder Proposal
Evaluating Our Companys Policy Responses and Financial Risks
Regarding the Childhood Obesity Issue
Whereas, the contribution of the fast food industry to the global epidemic of childhood obesity has become a major public issue:
|
§
|
The Centers for Disease Control reports that 1 in 3 US children born in the year 2000 will develop diabetes as a result of diet. |
|
§
|
Childhood obesity greatly increases the risk of diabetes, hypertension, heart disease, cancers, asthma, arthritis, reproductive complications and premature death.
|
|
§
|
A study from the Institute of Medicine of the National Academies (IOM) concluded that fast food marketing influences childrens food preferences, diets and health. In
2009, the IOM recommended that local governments take actions such as adopting zoning policies that restrict fast food near schools and limiting the density of fast food restaurants in residential communities. |
40 McDonalds Corporation 2012
Growing public concerns have spurred action by policymakers:
|
§
|
In August 2010, Congress subpoenaed 48 food companies, including our company, to submit data to the Federal Trade Commission regarding marketing activities and product
nutrition. |
|
§
|
In January 2011, the USDA released 2010 Dietary Guidelines, recommending limiting the fast food environment as key to healthy eating. |
|
§
|
In January 2011, Senator Harkin introduced the HeLP America Act of 2011 to restore the rulemaking authority of the FTC to issue restrictions on unfair advertising to kids.
|
|
§
|
In June 2011, the American Academy of Pediatrics released a policy statement calling for a total ban on child targeted television junk food advertising as well as
interactive digital advertising. |
|
§
|
In July 2011, the U.S. Interagency Working Group on Food Marketing to Children proposed nutrition standards to limit marketing unhealthy foods to children.
|
|
§
|
On December 1, 2011, San Francisco implemented an ordinance prohibiting toys with childrens meals failing basic nutritional standards. Instead of complying with
the spirit of the law, our company exploited a legal loophole to include a toy for a nominal fee with kids meals instead of meeting the nutrition standards mandated by the law. Other municipalities are currently considering passing similar measures.
|
A leading obesity research institution, the Yale Rudd Center on Food Policy and Obesity, recently released a study on fast food
marketing and nutrition. The study reports that 21 percent more preschoolers saw McDonalds ads in 2009 than 2007. The study ranks our companys nutritional quality among the worst, and notes that our marketing especially targets Hispanic
and African American children.
Resolved:
Shareholders request that the Board of Directors issue a report, at reasonable expense and excluding proprietary information, within six months of the 2012 annual meeting, assessing the companys policy
responses to growing evidence of linkages between fast food and childhood obesity, diet-related diseases and other impacts on childrens health. Such report should include an assessment of the potential impacts of public concerns and evolving
public policy on the companys finances and operations.
The Boards Statement in Opposition
The Board recommends voting AGAINST the advisory proposal requesting a nutrition report.
The Board of Directors has carefully considered the proposal and, in light of our Companys continuous efforts to address the issues
raised by the proposal and our reporting on these efforts, we believe that the report requested in the proposal is unnecessary and redundant.
We acknowledge the importance of childrens nutrition and well-being and have publicly addressed the subject in numerous reports. While these are global issues that require actions that go well beyond
what our Company or any other provider of prepared foods can take on its own, we are committed to being part of the effort to address the relevant issues underlying these concerns. We offer a variety of food choices to our customers; provide
nutrition information about our menu items in a variety of accessible ways so that families can make informed decisions; communicate with children in a responsible manner through age appropriate marketing and promotional activities; and encourage
children and families to live balanced, active lifestyles.
The Company has publicly reported on these efforts in a thorough and
transparent way and is committed to continue reporting on these efforts. Further, the Company provides public disclosure regarding its assessment of the potential impact on its finance and operations of public concerns about health and evolving
public policy, including in the Companys risk factors in relevant filings with the Securities and Exchange Commission. The publication of another report on this topic, as requested by the proponent, would provide no meaningful new
information about the Companys efforts or disclosures.
Since 2004, the Companys sustainability reports have clearly
demonstrated our commitment to address nutrition and well-being matters. As recently as December 2011, the Company published the 2011 Sustainability Scorecard (Scorecard), which highlights our focus in five key priority areas, including nutrition
and well-being. Among other things, the Scorecard reports on efforts by McDonalds markets around the world to continue to expand food and beverage choices that contain fruits and vegetables and to grow awareness for these menu items,
especially for children. The Scorecard supplements the extensive information on nutrition and well-being that is on the Companys website, including Policies and Programs, Best Practices, Childrens Global
Marketing Guidelines and Nutrition Information. The Scorecard and sustainability reports may be found at http://www.aboutmcdonalds.com/mcd/sustainability.html.
McDonalds
Corporation 2012 41
In addition, many McDonalds markets also provide their own reports in their local
languages and on their individual websites about their efforts regarding nutrition and well-being. The Companys U.S. subsidiary, McDonalds USA, for example, reports extensively on its efforts to address childrens nutrition and
well-being issues. (See, for example, http://www.mcdonalds.com/us/en/food/food_quality/nutrition_choices.html.)
(The reports referenced above are not considered part of this Proxy Statement.)
Highlights of recent initiatives in the U.S. include:
|
In July 2011, McDonalds USA announced a comprehensive plan (Plan) designed to help customersespecially children and familiesmake nutrition-minded choices
while visiting McDonalds or eating elsewhere. Certain aspects of the Plan have already been implemented, including: |
|
> |
Happy Meals served in all U.S. restaurants now automatically include apple slices and smaller-sized French fries (The impact of this change is an estimated 20% reduction
in calories of the most popular Happy Meals.); and |
|
> |
McDonalds USA has launched a television campaign that includes nutrition messages to children. This is part of the annual pledge that McDonalds USA has made to
the Council of Better Business Bureaus since 2006 regarding its compliance with the Childrens Food and Beverage Advertising Initiative. |
Other aspects of the Plan that are scheduled for future implementation, include:
|
Providing funding for grass roots community nutrition awareness programs; and |
|
Evaluating the progress of McDonalds USA nutrition commitments by relying on independent third parties with expertise in childrens well-being.
|
Highlights of other global initiatives include:
|
Adherence to the McDonalds Global Childrens Marketing Guidelines, which, among other things, guide the way that we communicate to children about balanced food
choices that fit their nutritional needs and provide positive messages that support their well-being. These guidelines have unified our worldwide markets around a common set of principles for marketing to children. |
|
More than 95% of McDonalds restaurants around the world offer Happy Meals with sides of fruit, vegetable or low-fat dairy as an option. |
|
Engaging the support of subject matter experts to help guide our efforts to promote informed choices by children and families worldwide. We work with a Global Advisory
Council comprised of nutrition and public health experts from around the world to provide us with independent, scientific input. |
|
Engaging with policy leaders to provide input and learn from others. |
In light of our Companys extensive efforts to address childrens nutrition and well-being, as well as our public reporting on these matters, we believe that the report requested by the proposal is
unnecessary and redundant. We further believe that the proposal represents the potential for a diversion of resources with no corresponding benefit to the Company, our customers or our shareholders. Although we believe that the report requested by
the proposal is unnecessary, we reached out to the proponent to communicate our willingness to issue a report in return for the proponents withdrawal of the proposal. The proponent was unwilling to withdraw the proposal. Finally, we note that
a substantially similar proposal voted on by McDonalds shareholders in 2011 received only 5.6% of shares voted in support.
Therefore, your Board of Directors recommends that you vote AGAINST this proposal.
42 McDonalds Corporation 2012
Board and governance matters
LEADERSHIP STRUCTURE
Since 2004, our Board has been led by an independent
Chairman, Andrew McKenna. This structure has worked well to assure constructive engagement among the Board and the Chief Executive Officer, and effective oversight of management. In addition, this structure allows the CEO to focus on the
Companys business, while the Chairman can focus on corporate governance matters, as well as leadership development and succession planning.
DIRECTOR SELECTION PROCESS
The Company has a policy for the consideration of Director candidates under which the Governance Committee establishes criteria for nominees, screens
candidates and evaluates the qualifications of persons nominated or recommended by shareholders. The Governance Committee recommends Director nominees for approval by the Board. The Governance Committee considers candidates suggested by other
Directors, senior management and shareholders. The Committee may, at the Companys expense, retain search firms and other advisors to assist it.
The Governance Committee reviews the size and structure of the Board and considers Director tenure, skills and experience in determining the slate of nominees and as part of Director succession planning. All
candidates are evaluated on the basis of qualifications. The Governance Committee seeks Directors with records of achievement in their chosen fields and experience relevant to the Companys scope, strategy and operations. Director candidates
also are expected to possess certain qualities, such as integrity, independence of mind, analytical skills, a commitment to serve the interests of shareholders, and a willingness to challenge management in a constructive and collegial environment,
as well as the ability to exercise good judgment and provide practical insights and diverse perspectives. Candidates also are evaluated in light of Board policies, such as those relating to Director independence and service on other boards.
Candidates with appropriate qualifications are interviewed in person, typically by the Chairman, the Chief Executive Officer, a
majority of the members of the Governance Committee and other available Directors. The Governance Committee also periodically evaluates all Directors in light of the above considerations and their contributions to the Board.
Shareholders who wish to suggest candidates for nomination by the Board or who wish to directly nominate Director candidates for election at
the Companys 2013 Annual Shareholders Meeting should follow the procedures described in the section on Consideration of Director Nominations for the 2013 Annual Shareholders Meeting, appearing on page 51.
BOARD DIVERSITY
In selecting Director candidates, the Governance
Committee and the Board take diversity into account, seeking to ensure a representation of varied perspectives and experience, although the Companys nomination policy does not prescribe specific standards for diversity. Currently, 50% of the
Board is composed of women or individuals who are minorities.
SUCCESSION PLANNING
The Board regularly reviews short
and long-term succession plans for the Chief Executive Officer and for other senior management positions. In assessing possible CEO candidates, the independent Directors identify the skills, experience and attributes they believe are required to be
an effective CEO in light of the Companys global business strategies, opportunities and challenges.
The Board also
considers its own succession. In doing so, the Governance Committee and Board take into account, among other things, the needs of the Board and the Company in light of the overall composition of the Board with a view to achieving a balance of the
skills, experience and attributes that would be beneficial to the Boards oversight role.
McDonalds
Corporation 2012 43
DIRECTOR INDEPENDENCE
Our Corporate Governance Principles require that all
Directors except management Directors be independent under applicable law and listing standards, as well as under the Boards Standards on Director Independence. The Board considers relationships involving Directors and their immediate family
members and relies on information derived from Company records, questionnaires and other inquiries.
The relationships reviewed by
the Board in its most recent determination involved commercial relationships with companies:
> |
at which Board members then served as officers (including Mattel, Inc., Inter-Con Security Systems, Inc. and NIKE, Inc.); |
> |
in which Board members or their immediate family members then held an aggregate 10% or more direct or indirect interest (including Schwarz Supply Source and Inter-Con
Security Systems, Inc.); and |
> |
at which Board members then served as outside Directors (including Aon Corporation, Chevron Corporation, ConAgra Foods, Inc., Discover Financial Services, Exelon
Corporation, Jones Lang LaSalle Incorporated, The Walt Disney Company and Wells Fargo & Company). |
These
relationships involved McDonalds purchases of products and services in the ordinary course of business that were made on arms-length terms in amounts and under other circumstances that did not affect the relevant Directors
independence.
The Board also reviewed Company donations to not-for-profit organizations with which Board members or their
immediate family members were affiliated by membership or service as directors or trustees.
Based on its review, the Board
determined that none of its non-management Directors has a material relationship with the Company and that all of them are independent. Currently, our non-management Directors are Susan E. Arnold, Robert A. Eckert, Enrique Hernandez, Jr., Jeanne P.
Jackson, Richard H. Lenny, Walter E. Massey, Andrew J. McKenna, Cary D. McMillan, Sheila A. Penrose, John W. Rogers, Jr., Roger W. Stone and Miles D. White.
BOARD COMMITTEES
Our Corporate Governance Principles provide for six standing committees: Audit, Compensation, Governance, Sustainability and Corporate Responsibility,
Finance and Executive. Committee charters are available on the Companys website at www.governance.mcdonalds.com.
|
|
|
|
|
|
|
Committee |
|
Current members |
|
Primary responsibilities |
|
Number of 2011 meetings |
|
|
|
|
Audit |
|
Enrique Hernandez, Jr. (Chairman) Walter E. Massey Cary D. McMillan Sheila A. Penrose Roger W. Stone |
|
> Oversees financial reporting, accounting,
control and compliance matters.
> Appoints and evaluates the independent auditor.
> Reviews with the internal and
independent auditors the scope and results of their audits and the adequacy and effectiveness of internal controls.
> Reviews material financial disclosures.
> Pre-approves all audit and
permitted non-audit services.
> Annually reviews the Companys compliance programs and receives regular updates about
compliance matters.
> Annually reviews the Companys disclosure controls and procedures.
> Reviews, and makes
recommendations to the Board about, related person transactions. |
|
9 |
|
|
|
|
Compensation |
|
Robert A. Eckert
(Chairman) Susan E. Arnold Richard H. Lenny John W. Rogers, Jr. Miles D. White |
|
> Approves the CEOs compensation based
upon an evaluation of his performance by the independent Directors. > Reviews and approves senior managements compensation and approves compensation guidelines for all other officers.
> Administers incentive and
equity compensation plans and, in consultation with senior management, approves compensation policies.
> Reviews executive compensation disclosure.
|
|
8 |
Table continued on next page
44 McDonalds Corporation 2012
Table continued from previous page
|
|
|
|
|
|
|
Committee |
|
Current members |
|
Primary responsibilities |
|
Number of
2011 meetings |
Governance |
|
Andrew J. McKenna
(Chairman) Robert A.
Eckert Enrique Hernandez, Jr.
Jeanne P.Jackson Roger W. Stone
Miles D. White |
|
> Monitors the Boards structure and operations.
> Sets criteria for Board membership.
> Searches for and screens
candidates to fill Board vacancies and recommends candidates for election. > Evaluates Director and Board performance and assesses Board composition and size.
> Recommends to the Board non-management Director compensation.
> Evaluates the Companys
corporate governance process.
> Recommends to the Board whether to accept the resignation of incumbent Directors who fail to be
re-elected in uncontested elections. |
|
7 |
Sustainability
and Corporate Responsibility |
|
Walter E. Massey
(Chairman) Susan E. Arnold
Richard H. Lenny Sheila A. Penrose
John W. Rogers, Jr. |
|
> Advises management about the Companys global sustainability strategies and reporting.
> Reviews social trends and stakeholder activities that may impact the Companys brand
reputation. > Reviews
the Companys diversity activities, corporate political contributions and philanthropy efforts.
> Considers shareholder proposals about the Companys sustainability practices.
|
|
4 |
Finance |
|
Jeanne P. Jackson
(Chair) Richard H. Lenny
Cary D. McMillan John W. Rogers, Jr.
Roger W. Stone |
|
> Reviews the Companys dividend policy and share repurchase program in light of the Companys strategy and performance.
> Oversees certain material
financial matters, such as derivatives commodities, liquidity and debt. > Annually reviews the Companys banking arrangements. |
|
2 |
Executive |
|
James A. Skinner
(Chairman) Robert A.
Eckert Enrique Hernandez, Jr. Andrew J.
McKenna |
|
> May exercise most Board powers during the periods between Board meetings. |
|
0 |
BOARD AND COMMITTEE MEETINGS
Directors are expected to attend the Annual
Shareholders Meeting and all Board meetings and meetings of the Committees on which they serve. Our Board met eight times during 2011. At each regularly scheduled Board meeting, our independent Directors met in executive session. Each Director
attended over 90% of the total number of meetings of the Board and relevant Committees while the Director was a member. All Directors attended the 2011 Annual Shareholders Meeting.
McDonalds
Corporation 2012 45
BOARD AND COMMITTEE EVALUATIONS
The Governance Committee annually evaluates the
performance of the Board of Directors. Directors are evaluated periodically, but no less often than each time they are slated for re-election. In addition, each of the Audit, Compensation and Governance Committees annually conducts self-evaluations
and each of the Sustainability and Corporate Responsibility and Finance Committees conducts such evaluations at least every two years. Results of these evaluations are discussed at Committee meetings and with the full Board.
RISK OVERSIGHT
The Board is actively engaged in overseeing and
reviewing the Companys strategic direction and objectives, taking into account (among other considerations) the Companys risk profile and exposures. The Board conducts an annual in-depth review of the business, which includes
consideration of certain risk exposures. In addition, the Board receives regular updates on risk exposures.
Although the Board as
a whole has responsibility for risk oversight, including CEO succession planning, the Boards Committees also oversee the Companys risk profile and exposures relating to matters within the scope of their authority and report to the Board
about their deliberations. The Audit Committee considers audit, accounting and compliance risk, and it receives reports from the head of internal audit, the head of corporate tax, the General Counsel, the Chief Compliance Officer and the Chief
Information Officer. The Audit Committee annually reviews the Companys policies with respect to financial risk assessment and financial risk management. The Audit Committee is also responsible for discussing audit, accounting and compliance
risk exposures with management, internal audit and Ernst & Young, and taking steps to monitor and control such exposures, and for evaluating managements process to assess and manage enterprise risk issues. The Compensation Committee
considers the level of risk posed by our compensation programs, including incentive compensation programs. The Governance Committee monitors potential risks to the effectiveness of the Board, notably Director succession and Board composition. The
Sustainability and Corporate Responsibility Committee reviews risks to the business and the Companys brand reputation that may result from trends in sustainability issues. The Finance Committee monitors the Companys risk profile through
its review of our worldwide insurance program and other material financial matters.
CODE OF
CONDUCT FOR THE BOARD OF DIRECTORS
Each year, Directors confirm that they have read, and will comply with, the Code of Conduct for the Board of Directors.
DIRECTOR COMPENSATION
The Governance Committee recommends to the Board the
form and amount of compensation for non-management Directors. Only non-management Directors are paid for their service on the Board. In 2011, this compensation structure was as follows: (i) an annual cash retainer of $90,000; (ii) an
annual retainer fee of $20,000 for each Director serving as Chair of the Audit, Compensation or Governance Committees, and an annual retainer fee of $10,000 for each Director serving as Chair of other Board Committees; and (iii) common stock
equivalent units with a $130,000 value granted annually to each Director serving for the entire calendar year, under the Directors Deferred Compensation Plan. Directors serving for a portion of the year receive prorated grants of common stock
equivalent units.
The Company reimburses non-management Directors for expenses incurred in attending Board, Committee,
shareholder and other McDonalds business meetings. On limited occasions, the Company may permit Directors to be joined by their spouses and reimburses the spouses travel expenses. The Company also reimburses expenses for Director
continuing education.
Beginning in 2012, non-management Directors will receive: (i) an annual cash retainer of $100,000;
(ii) an annual retainer fee of $25,000 for serving as Chair of the Audit, Compensation or Governance Committees and an annual retainer fee of $15,000 for serving as Chair of other Board Committees; and (iii) common stock equivalent units
with a $140,000 value.
46 McDonalds Corporation 2012
The following table summarizes the compensation received by each non-management Director in 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name (a) |
|
Fees earned or paid in cash (1) (b) |
|
|
Stock
awards (2)(3) (c) |
|
|
All other compensation (4) (g) |
|
|
Total
(h) |
|
Susan E. Arnold |
|
$ |
90,000 |
|
|
$ |
130,000 |
|
|
$ |
10,000 |
|
|
$ |
230,000 |
|
Robert A. Eckert |
|
|
110,000 |
|
|
|
130,000 |
|
|
|
10,000 |
|
|
|
250,000 |
|
Enrique Hernandez, Jr. |
|
|
110,000 |
|
|
|
130,000 |
|
|
|
10,000 |
|
|
|
250,000 |
|
Jeanne P. Jackson |
|
|
100,000 |
|
|
|
130,000 |
|
|
|
10,000 |
|
|
|
240,000 |
|
Richard H. Lenny |
|
|
90,000 |
|
|
|
130,000 |
|
|
|
10,000 |
|
|
|
230,000 |
|
Walter E. Massey |
|
|
100,000 |
|
|
|
130,000 |
|
|
|
10,000 |
|
|
|
240,000 |
|
Andrew J. McKenna (5) |
|
|
110,000 |
|
|
|
895,438 |
|
|
|
10,000 |
|
|
|
1,015,438 |
|
Cary D. McMillan |
|
|
90,000 |
|
|
|
130,000 |
|
|
|
10,000 |
|
|
|
230,000 |
|
Sheila A. Penrose |
|
|
90,000 |
|
|
|
130,000 |
|
|
|
5,000 |
|
|
|
225,000 |
|
John W. Rogers, Jr. |
|
|
90,000 |
|
|
|
130,000 |
|
|
|
10,000 |
|
|
|
230,000 |
|
Roger W. Stone |
|
|
90,000 |
|
|
|
130,000 |
|
|
|
10,000 |
|
|
|
|