Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

☑

Filed by the Registrant

☐

Filed by a Party other than the Registrant

CHECK THE APPROPRIATE BOX:
☐		Preliminary Proxy Statement
☐		Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☑		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Material Under Rule 14a-12

McDonald's Corporation

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
☑		No fee required.
☐		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
			1) Title of each class of securities to which transaction applies:
			2) Aggregate number of securities to which transaction applies:
			3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
			4) Proposed maximum aggregate value of transaction:
			5) Total fee paid:
☐		Fee paid previously with preliminary materials:
☐		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
			1) Amount previously paid:
			2) Form, Schedule or Registration Statement No.:
			3) Filing Party:
			4) Date Filed:

---

Table of Contents

McDONALD’S CORPORATION

2018 NOTICE OF
ANNUAL SHAREHOLDERS’ MEETING
AND PROXY STATEMENT

---

Table of Contents

			•
		A LETTER FROM THE CHAIRMAN OF THE BOARD
	•

Dear Fellow McDonald’s Shareholders,

At McDonald’s, we are committed to growing our business today and serving our customers for generations to come. With our global scale and powerful System of franchisees, suppliers and employees, few can match McDonald’s in our ability to drive positive change in our industry and the world. But, at a time when the world is grappling with complex environmental and societal challenges, we recognize that it’s not enough to simply run a good business. Companies like ours have the capability to do more. We have embedded key initiatives into our strategy that will strengthen trust in our Brand over the long term. As one of the world’s largest restaurant companies, we also have a unique opportunity to address some of the most pressing social and environmental challenges in the world. And it’s at the heart of our values of responsible leadership. We embrace this opportunity to use our scale as a force for good in the world.

It’s an exciting time at McDonald’s and I am pleased to update you on the Company’s progress.

Velocity Growth Plan. McDonald’s strategic plan focuses on a long-term outlook to deliver meaningful growth and increase guest counts, a reliable measure of the Company’s strength that is vital to growing sales and shareholder value. We are targeting opportunities at the core of McDonald’s — food, value and the customer experience. The Velocity Growth Plan has aligned the McDonald’s System, and we made substantial progress in 2017:

●	Guest counts grew by 1.9%, with all business segments reporting positive results, marking the first full year of positive comparable guest count growth since 2012;
●	Comparable sales increased by 5.3%, McDonald’s best comparable sales performance in six years;
●	Systemwide sales increased 7% in constant currencies; and
●	Diluted earnings per share of $6.37 increased 17%.

The Company also made significant advances with the refranchising strategy, culminating in our largest refranchising transaction in 2017 with the sale of our businesses in China and Hong Kong. We reached our refranchising target of 4,000 restaurants more than a year ahead of schedule. We are also on track to return about $24 billion to shareholders over a three-year period ending in 2019.

Our CEO, Steve Easterbrook, has re-vitalized McDonald’s. He continues to lead a cultural transformation — one that is customer obsessed, working together to make a difference for our business, our people and our communities, and aspiring to be a leading, world-class organization. Steve and his management team are passionate about McDonald’s, well-positioned to build on the success of 2017 and importantly, not satisfied. On behalf of the Board of Directors, I state with confidence that Steve is the right leader for McDonald’s.

Active Oversight of Company Strategy. The Company’s Board of Directors is comprised of a diverse group of committed and highly qualified individuals who care deeply about McDonald’s, and have skills and expertise that are aligned with the Company’s strategy. More than one-third of the Directors joined the Board within the last four years, bringing fresh perspectives and unique skills that contribute to the overall effectiveness of the Board.

The Board provides active oversight of the Company’s strategy. The Velocity Growth Plan is discussed at each Board meeting, and the Board’s Public Policy & Strategy Committee, established in 2016, was actively engaged in the development of the Board’s annual “deep dive” strategy session, which took place in London in 2017. The United Kingdom market has had over 10 years of steady growth, and we experienced many of the Velocity Growth Plan’s accelerators firsthand in the restaurants there. We also engaged with the global leadership team and the UK management team, participating in open and robust discussions about the opportunities and challenges that will help to evolve the Company’s strategic direction as we move forward.

The Board continuously monitors the Company’s strategy, leadership and operations in light of an ever-changing business environment. We also carefully examine with management the different ways McDonald’s can continue to create value for shareholders. We believe the Directors’ experiences and perspectives have helped evolve McDonald’s culture and focus on the Company’s strategic initiatives, and we look forward to continued progress in 2018 and beyond.

McDonald’s Corporation

3

---

Table of Contents

Enhanced Focus on Risk Management. Acknowledging the fast pace of change at McDonald’s, the Board oversaw the refreshment of the Company’s enterprise risk management processes in 2017. The enhancements are designed to better enable the Board and Committees to calibrate with management to identify, assess and address risks in order to further protect McDonald’s Brand.

Scale for Good. The Board has long supported and provided input into and oversight of the Company’s efforts around sustainability and corporate responsibility. More recently, as the reorganization and turnaround took root, the Company looked to revitalize McDonald’s sustainability vision and to embed it into the markets’ business plans. The 2018 launch of the Scale for Good framework establishes the Company’s commitment to global priorities — beef sustainability, packaging and recycling, commitment to families, investment in people and climate action, which are aligned with our strategy and designed to drive meaningful industry-wide change in areas where McDonald’s global scale and reach can fuel collaboration and action. Beyond these priorities, the Company continues to drive progress on goals across key social and environmental topics such as diversity and inclusion and animal health and welfare.

The Board, Sustainability & Corporate Responsibility Committee and Public Policy & Strategy Committee monitor and provide input on these initiatives and work to raise the bar on what it means to be a responsible organization committed to people and the planet. During the Board’s trip to the UK in 2017, we visited a long-time strategic advisor to McDonald’s at its headquarters — a working farm. We saw firsthand sustainable sourcing innovations for beef and learned from expert farmers and scientists how these solutions can and will address industry-wide climate change challenges and animal welfare issues, among other benefits. Following the farm visit, the Board engaged in a lively discussion on corporate reputation with research experts at Oxford University. These opportunities not only helped to educate the Directors, but continue to inform the discussions that drive the Scale for Good strategy forward.

Ongoing Shareholder Outreach. The Company believes in the importance of feedback from shareholders and management regularly reports to the Board on its engagements with a wide variety of shareholders. Topics of interest from shareholders over the past year have included the Velocity Growth Plan, business and financial performance, governance practices, sustainability initiatives, and the link of the Company’s executive compensation programs to growth strategy. This feedback, as well as voting results from previous annual meetings, are valuable perspectives during our boardroom deliberations.

As seriously as we take our responsibilities as members of the Board of Directors, we enjoy the role of McDonald’s customer most of all. A visit to a McDonald’s restaurant confirms our optimism about the trajectory of McDonald’s and the unrelenting focus on efforts to build and sustain profitable, long-term growth, with each and every meal.

We are honored to serve you, our shareholders. On behalf of the Board of Directors, I thank you for your continued support.

See you at McDonald’s.

4

2018 Proxy Statement

---

Table of Contents

			•
		NOTICE OF THE ANNUAL SHAREHOLDERS’ MEETING
	•

McDONALD’S CORPORATION
One McDonald’s Plaza, Oak Brook, Illinois 60523

Meeting Time and Date: 9:00 a.m. Central Time on Thursday, May 24, 2018
Meeting Place: The Hyatt Lodge, The Prairie Ballroom, 2815 Jorie Boulevard, Oak Brook, Illinois 60523

To McDonald’s Corporation Shareholders:
McDonald’s Corporation (McDonald’s or the Company) will hold its 2018 Annual Shareholders’ Meeting (Annual Meeting or Annual Shareholders’ Meeting) on Thursday, May 24, 2018, at 9:00 a.m. Central Time at The Hyatt Lodge in The Prairie Ballroom at 2815 Jorie Boulevard, Oak Brook, Illinois 60523. The registration desk will open at 8:00 a.m. At the meeting, shareholders will be asked to consider and vote upon the following proposals:

			Items to be voted on		Board voting recommendation
PROPOSAL	1		Election of 11 Directors named in the Proxy Statement, each for a one-year term expiring in 2019;			FOR each nominee
PROPOSAL	2		Advisory vote to approve executive compensation;			FOR
PROPOSAL	3		Advisory vote to approve the appointment of Ernst & Young LLP as independent auditor for 2018; and			FOR
PROPOSALS	4-6		Advisory votes on three shareholder proposals, if properly presented.			AGAINST each shareholder proposal

In addition, we will transact any other business properly presented at the meeting, including any adjournment or postponement thereof, by or at the direction of the Board of Directors.

Who Can Vote: Shareholders at the close of business on March 26, 2018 (the record date). Each share of common stock is entitled to one vote for each Director and one vote for each other proposal.

How to Listen to the Annual Shareholders’ Meeting: You can listen to a live audiocast of the Annual Shareholders’ Meeting at www.investor.mcdonalds.com by clicking on the appropriate link. The audiocast will be available for a limited time after the meeting.

How to Attend the Annual Shareholders’ Meeting in Person: If you plan to attend in person, you must pre-register with McDonald’s Shareholder Services in advance. Space is very limited. See page 86 for information about how to pre-register to attend in person.

The Company will provide the Notice of Internet Availability, electronic delivery of the proxy materials or mailing of the 2018 Proxy Statement, the 2017 Annual Report on Form 10-K and a proxy card to shareholders beginning on or about April 12, 2018.

McDonald’s Corporation

5

---

Table of Contents

Your vote is important. Please consider the issues presented in this Proxy Statement and vote your shares as promptly as possible.

Important Voting Information: It is important that you vote your shares. Please carefully review the proxy materials and follow the instructions below to cast your vote as soon as possible in advance of the meeting.

Registered Shareholders If you hold shares through the Company’s transfer agent, Computershare, please use one of these options to vote:
	Internet www.proxyvote.com	Tablet or Smartphone Scan this QR code to vote with your mobile device	Telephone 800-690-6903 Dial toll-free 24/7	Mail If you received a proxy card by mail, mark, date, sign and return it in the postage-paid envelope furnished for that purpose.
Beneficial Owners If you hold shares through your bank or brokerage account, please use one of these options to vote:
	Internet www.proxyvote.com	Tablet or Smartphone Scan this QR code to vote with your mobile device	Telephone 800-454-8683 Dial toll-free 24/7	Mail If you received a voting instruction form by mail, mark, date, sign and return it in the postage-paid envelope furnished for that purpose.

6

2018 Proxy Statement

---

Table of Contents

			•
		TABLE OF CONTENTS
	•

McDonald’s Corporation

7

---

Table of Contents

	•
		PROXY STATEMENT SUMMARY
			•

This summary contains highlights about the Company and the upcoming 2018 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 and our 2017 Annual Report on Form 10-K carefully before voting.

VOTING MATTERS AND RECOMMENDATIONS

The following proposals are scheduled to be presented at the upcoming 2018 Annual Shareholders’ Meeting:

Management proposals

					Board’s recommendation			Page
PROPOSAL	1		Election of 11 Directors named in this Proxy Statement, each for a one-year term expiring in 2019			FOR each nominee		14
PROPOSAL	2		Advisory vote to approve executive compensation			FOR		40
PROPOSAL	3		Advisory vote to approve the appointment of Ernst & Young LLP as independent auditor for 2018			FOR		66

Shareholder proposals

				Board’s recommendation			Pages
PROPOSALS	4-6	Advisory votes on three shareholder proposals, if properly presented			AGAINST each shareholder proposal		69-76

8

2018 Proxy Statement

---

Table of Contents

Proxy Statement Summary

BUSINESS STRATEGY AND 2017 PERFORMANCE HIGHLIGHTS

Velocity Growth Plan

Beginning in 2017, we shifted our focus from turnaround to delivering long-term growth through the execution of our customer-centric strategy: the Velocity Growth Plan. Our plan is rooted in extensive research and insights, along with a deep understanding of the key drivers of the business. We are targeting the opportunities at the core of our business — food, value and customer experience. Our plan outlines actions to drive sustainable guest count growth, which is a reliable long-term measure of the Company’s strength that is vital to growing sales and shareholder value.

The Velocity Growth Plan is built on the following three pillars, each of which focuses on building a better McDonald’s:

Each pillar has established sustainable platforms that enable execution of the plan with greater speed, efficiency and impact. Additionally, through the following three growth accelerators, we are enhancing the overall customer experience with hospitality, friendly service and ever-improving convenience for customers on their terms:

The Company’s strong performance in 2017, as highlighted below, demonstrates that we have developed momentum, which enables us to drive our business, innovate and invest in our growth, and compete effectively in today’s global marketplace.

McDonald’s Corporation

9

---

Table of Contents

Proxy Statement Summary

GOVERNANCE HIGHLIGHTS

We are committed to sound corporate governance informed by feedback received from our shareholders and our ongoing review of evolving best practices.

Strong Independent Leadership		We continue to separate our Chairman and CEO roles, which enables our Chairman to focus on leading the Board and corporate governance matters and the CEO to focus on leading the Company’s day-to-day business. In addition, our Board’s Committees, except for the Executive Committee, are chaired by other independent Directors. This structure provides for strong independent leadership that promotes critical evaluation and oversight of Company management and its practices. It also allows our Board to effectively represent the best interests of all shareholders and enhance shareholder value.
Continued Evolution of Board & Strategic Oversight		Our Board’s Public Policy & Strategy Committee was formed in 2016 to provide enhanced oversight and counsel to management on the Company’s short- and long-term strategies, as well as other matters that are important to the iconic McDonald’s Brand. In 2017, the Committee focused on a number of key topics, including human capital management strategies and cybersecurity and technology risks.
Robust and Enhanced Risk Oversight		In 2017, the Company enhanced its enterprise risk management framework to further protect McDonald’s Brand. Our augmented processes leverage internal risk committees comprised of cross-functional senior leadership that meet regularly to evaluate and prioritize risk in the context of the Company’s new strategy and cultural transformation. The Board oversaw the development of these enhancements.
Effective Shareholder Engagement		The Company continues to engage with a significant and diverse portion of shareholders on topics of importance to both the Company and our shareholders. In 2017, we reached out to shareholders representing approximately 50% of our outstanding shares. During the engagements, we discussed a range of topics, including our Velocity Growth Plan, Board and other governance practices, executive compensation, risk oversight, and environmental and social issues.

10

2018 Proxy Statement

---

Table of Contents

Proxy Statement Summary

The following table provides an overview of our Directors, all of whom are nominees for re-election at the 2018 Annual Shareholders’ Meeting. Additional information regarding our Directors may be found beginning on page 15.

Name

Director since

Primary occupation

Independent

Committee membership

AFC

CC

GC

SCR

PPS

EC

Lloyd Dean

2015

President and CEO Dignity Health

✓

Stephen Easterbrook

2015

President and CEO McDonald’s Corporation

Robert Eckert

2003

Operating Partner Friedman, Fleischer & Lowe, LLC

✓

Margaret Georgiadis

2015

CEO Mattel, Inc.

✓

Enrique Hernandez, Jr. Chairman of the Board

1996

Chairman and CEO Inter-Con Security Systems, Inc.

✓

Jeanne Jackson

1999

CEO MSP Capital

✓

Richard Lenny

2005

Non-executive Chairman Information Resources, Inc.

✓

John Mulligan

2015

Executive Vice President and COO Target Corporation

✓

Sheila Penrose

2006

Non-executive Chairman Jones Lang LaSalle Incorporated

✓

John Rogers, Jr.

2003

Founder, Chairman and CEO Ariel Investments, LLC

✓

Miles White

2009

Chairman and CEO Abbott Laboratories

✓

AFC = Audit & Finance Committee		SCR = Sustainability & Corporate Responsibility Committee		= Member
CC = Compensation Committee		PPS = Public Policy & Strategy Committee		= Committee Chair
GC = Governance Committee		EC = Executive Committee		= Financial Expert

McDonald’s Corporation

11

---

Table of Contents

Proxy Statement Summary

Our Board continues to reflect a diverse and highly engaged group of Directors with a wide range of skills and experience, which continue to evolve. More than one-third of our Directors have joined our Board in the last four years.

Strong Board and Governance Practices:

	Separate Chairman and CEO roles, including a new independent Chairman elected in 2016			Significant shareholder outreach and engagement
	Diverse, independent Board with a mix of tenures			Executive sessions of independent Directors scheduled for each regular Board meeting
	Committee memberships and Chairs refreshed in 2016			Stock ownership guidelines for Directors
	Board Committees are 100% independent (except Executive Committee)			Proxy access for Director candidates nominated by shareholders
	Regular succession planning at CEO, senior management and Board levels			Shareholder right to call special meetings
	Robust annual Board and Committee self-assessments and Director peer review			Capital structure that requires one vote per share of common stock
	Annual election of Directors			Public disclosure of corporate political contributions and certain trade association memberships
	Majority voting standard for uncontested Director elections			No shareholder rights plan

RESPONSIBLE LEADERSHIP HIGHLIGHTS

We recognize the link between our Company’s success — and value creation for our shareholders — and our ability to positively impact the industry and communities in which we operate. As one of the world’s largest restaurant companies, we aim to use our size and reach to promote meaningful change through our recently launched Scale for Good platform. This platform plays an important role in our Velocity Growth Plan and is aligned with our strategic objectives. Our current Scale for Good priorities include beef sustainability, packaging and recycling, commitment to families, investment in people and climate action. We also continue to further our progress in key social and environmental areas, such as diversity and inclusion, animal health and welfare, and supporting families and farmers.

In addition to our Scale for Good platform, we are demonstrating leadership as an employer by providing employment opportunities, training, tuition assistance and educational resources. For more details about our Scale for Good platform and other sustainability efforts, please see page 36 of this Proxy Statement.

EXECUTIVE COMPENSATION HIGHLIGHTS

Our executive compensation program is designed to support business initiatives, align the interests of our executives with those of our shareholders and strongly link pay and performance. We believe that our compensation program effectively incentivizes our executives through a mix of short- and long-term awards, which include rigorous performance goals that utilize objective metrics that reflect key drivers of the Company’s business strategy.

12

2018 Proxy Statement

---

Table of Contents

Proxy Statement Summary

2017 Program Summary

Key compensation elements			Performance- based		Primary metric		Key terms
Base Salary					N/A		●Evaluated based on individual circumstances, including responsibility, performance and tenure
Short-Term Incentive Plan (STIP)					●Operating income growth		●Includes objective modifiers that can impact payouts
Long-Term Incentives	Performance- Based Restricted Stock Units (RSUs)				●Compound annual net income growth ●Return on incremental invested capital (ROIIC) ●Share price		●Cliff vest at end of three-year service period, subject to achievement of net income and ROIIC thresholds
	Stock Options				●Share price		●Vest 25% per year ●10-year term

Performance-based Compensation

A large portion of our executive compensation is “at risk” and performance-based. As described earlier in this summary and in our Compensation Discussion and Analysis (CD&A) beginning on page 41, the execution of our growth strategy produced strong results in 2017, including the first full year of comparable guest count growth since 2012 and the Company’s highest comparable sales growth increase in six years. 2017 payouts demonstrate our sound pay-for-performance culture. The Company’s one- and three-year performance resulted in above-target payouts under each of the Company’s performance-based compensation plans. As described in more detail in the CD&A, the Corporate STIP payout was equal to 152.7% of target, the 2015-2017 Cash LTIP paid out at 176.3% of target, and 200% of the 2015-2017 performance-based RSUs vested.

Our Compensation Committee adheres to the following best practices:

Strong pay-for-performance alignment Challenging quantitative performance targets Performance metrics align interests of management with interests of shareholders Majority of direct compensation paid over the long term Double-trigger change in control equity provisions Independent compensation consultant Significant stock ownership and retention requirements Anti-hedging and pledging policy Clawback provisions

Change in control agreements Tax gross-up on perquisites Repricing of stock options Backdating of stock options Encourage unreasonable risk taking Employment agreements

McDonald’s Corporation

13

---

Table of Contents

	•
		ELECTION OF DIRECTORS
			•

PROPOSAL 1			Item to be voted on: Election of Directors The Board of Directors recommends the following nominees for election to the Board of Directors for a one-year term beginning in May and continuing until the 2019 Annual Shareholders’ Meeting:
			1.	Lloyd Dean	4.	Margaret Georgiadis	7.	Richard Lenny	10.	John Rogers, Jr.
			2.	Stephen Easterbrook	5.	Enrique Hernandez, Jr.	8.	John Mulligan	11.	Miles White
			3.	Robert Eckert	6.	Jeanne Jackson	9.	Sheila Penrose

The Board recommends a vote FOR each of the 11 Director nominees.

All Directors will be standing for re-election. With the exception of our CEO, all Director nominees are independent.

Nominees who receive a majority of the votes cast will be elected. Each Director has tendered an irrevocable resignation that will be effective if he or she does not receive a majority of the votes cast and, upon the recommendation of the Governance Committee, the Board accepts his or her resignation following the meeting.

The Board expects all nominees to be available for election. If any of them becomes unavailable to serve for any reason prior to the Annual Shareholders’ Meeting, the Board may substitute another person as a nominee. If you have voted for the unavailable nominee, your shares will be voted for the substitute nominee.

14

2018 Proxy Statement

---

Table of Contents

Election of Directors

DIRECTOR QUALIFICATIONS

Our Board is a diverse, highly engaged group of individuals that provides strong, effective oversight of our Company. Both individually and collectively, our Directors have the qualifications, skills and experience needed to inform and oversee the Company’s long-term strategic growth priorities. Importantly, each Director has senior executive experience, in many cases having served as CEOs of large, complex organizations, often with significant global operations. As particularly important to our Company, several Directors have leadership experience in the consumer goods or food sector, and many bring expertise in information technology, cybersecurity and digital matters. These and the other skills and attributes discussed below are key considerations in evaluating the composition of our Board and inform our Board succession planning and Director selection process.

	High Integrity		Strength of Character and Judgment		Intellectual/Analytical Skills
	Proven Record of Success		Knowledge of Corporate Governance Practices		Strategic Planning
	Leadership		Talent Management/Succession Planning		Risk Assessment and Oversight

Our Director nominees’ individual experiences, qualifications, attributes and skills are highlighted in the following matrix. The matrix is intended as a high-level summary and not an exhaustive list of each nominee’s skills or contributions to the Board. Further biographical information about each Director standing for re-election is set forth on the following pages.

Other Public Company Board

●

●

●

●

●

●

●

●

●

Chair Experience (Board/Committee)

●

●

●

●

●

●

●

●

●

Global Brand Management

●

●

●

●

●

●

●

●

Marketing/Digital

●

●

●

●

●

●

●

Information Technology/Cybersecurity

●

●

●

Retail/Customer-Centric Experience

●

●

●

●

●

●

●

●

●

Real Estate

●

●

Financial

●

●

●

●

●

●

●

●

●

●

●

Sustainability/Corporate Responsibility

●

●

●

●

●

Ethnic/Gender Diversity

●

●

●

●

●

●

McDonald’s Corporation

15

---

Table of Contents

Election of Directors

BIOGRAPHICAL INFORMATION

	Lloyd Dean
	Age: 67 Director since: 2015 Board Committees: ●Audit & Finance ●Compensation		Professional experience Dignity Health, one of the nation’s largest healthcare systems ●President and Chief Executive Officer (2000 - Present) Advocate Health Care, a healthcare organization ●Chief Operating Officer (1997 - 2000) Director qualifications In his career in executive management at leading healthcare organizations, Mr. Dean has led significant strategic, operational and financial transformations. He brings over 25 years of leadership and management experience to our Board, which contributes an important perspective to the Board’s discussion of opportunities and challenges in a constantly changing business environment. We also benefit from Mr. Dean’s finance, systems operations, service quality and human resources and community affairs expertise. Other directorships Mr. Dean will retire from the Board of Wells Fargo & Company at its 2018 Annual Meeting of Shareholders. He previously served on the Boards of Navigant Consulting, Inc., Cytori Therapeutics, Inc. and Premier, Inc.

	Stephen Easterbrook
	Age: 50 Director since: 2015 Board Committees: ●Executive (Chair since 2015)		Professional experience McDonald’s Corporation ●President and Chief Executive Officer (March 2015 - Present) ●Corporate Senior Executive Vice President and Global Chief Brand Officer (May 2014 - February 2015) ●Corporate Executive Vice President and Global Chief Brand Officer (June 2013 - April 2014) ●President, McDonald’s Europe (December 2010 - September 2011) Wagamama Limited, a Japanese-inspired restaurant company ●Chief Executive Officer (September 2012 - May 2013) Pizza Express Limited, a casual dining company in the UK ●Chief Executive Officer (September 2011 - September 2012) Director qualifications Mr. Easterbrook’s experience enables him to contribute an important Company perspective and comprehensive industry knowledge to Board discussions about the Company’s business and relationships with key constituencies and stakeholders in the McDonald’s system, including franchisees and suppliers. This experience adds to our Board’s knowledge and understanding as it oversees our global operations and strategy. Mr. Easterbrook also led two UK-based restaurant chains, giving him broader industry perspective and deeper understanding of consumer preferences. Other directorships None

16

2018 Proxy Statement

---

Table of Contents

Election of Directors

	Robert Eckert
	Age: 63 Director since: 2003 Board Committees: ●Public Policy & Strategy (Chair since 2016) ●Governance ●Executive		Professional experience Friedman, Fleischer & Lowe, LLC, a private equity firm ●Operating Partner (2014 - Present) Mattel, Inc., a global learning, development and play company ●Chairman of the Board (2000 - 2012) ●Chief Executive Officer (2000 - 2011) Kraft Foods Inc., a packaged food company ●Chief Executive Officer (1997 - 2000) Director qualifications Mr. Eckert’s service as a chief executive officer of large, global consumer branded and food products companies contributes to our Board’s understanding of business and product development, marketing, supply chain management and distribution, and consumer behavior. He brings experience as a senior executive engaged in global consumer brand companies with high performance expectations. In addition, through his role on other companies’ boards of directors, Mr. Eckert has extensive experience in corporate governance, leadership development and succession planning and finance. Other directorships Mr. Eckert also serves on the Boards of Amgen Inc. and Levi Strauss & Co.

	Margaret (Margo) Georgiadis
	Age: 54 Director since: 2015 Board Committees: ●Audit & Finance ●Sustainability & Corporate Responsibility		Professional experience Mattel, Inc., a global learning, development and play company ●Chief Executive Officer (February 2017 - Present) Google Inc., a global technology company ●President, Americas (October 2011 - January 2017) ●Vice President, Global Sales Operations (October 2009 - April 2011) Groupon, Inc., a global online local marketplace ●Chief Operating Officer (April 2011 - September 2011) Synetro Capital LLC, a private investment firm ●Principal (January 2009 - September 2009) Discover Financial Services, a direct banking and payments company ●Executive Vice President, Card Products and Chief Marketing Officer (2004 - 2008) Director qualifications Ms. Georgiadis’ experience as a senior executive at large global businesses affords her a broad knowledge of global consumer businesses and marketing, as well as technology, digital consumer insights, e-commerce, finance, leadership, global business, and strategy and development. She has led teams that successfully have launched new products. Her knowledge in these and other areas provides critical insights to our business, particularly as the Board considers the impact of technology, digital, and cybersecurity risk. Ms. Georgiadis also has over 15 years of analytical and strategic experience at McKinsey & Company, a global management and consulting firm. Other directorships Ms. Georgiadis also serves on the Board of Mattel, Inc. She previously served on the Boards of Amyris, Inc. and The Jones Group, Inc.

McDonald’s Corporation

17

---

Table of Contents

Election of Directors

	Enrique Hernandez, Jr.
	Independent Chairman (since 2016) Age: 62 Director since: 1996 Board Committees: ●Governance ●Public Policy & Strategy ●Executive		Professional experience Inter-Con Security Systems, Inc., a provider of high-end security and facility support to government, utilities and industrial customers ●Chairman and Chief Executive Officer (1986 - Present) Nordstrom, Inc., a leading fashion specialty retailer ●Non-executive Chairman and Presiding Director (2006 - 2016) Director 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. In addition, Mr. Hernandez served for five years as lead director and ten years as non-executive chairman and presiding director at Nordstrom, Inc., a large publicly-traded retail company, providing him with significant experience in corporate governance, leadership development and succession planning. Mr. Hernandez’s experience also facilitates the Board’s oversight and counsel regarding strategy, business development and finance. Other directorships Mr. Hernandez also serves on the Board of Chevron Corporation, and he will retire from the Board of Wells Fargo & Company at its 2018 Annual Meeting of Shareholders. He previously served on the Board of Nordstrom, Inc.

18

2018 Proxy Statement

---

Table of Contents

Election of Directors

	Richard Lenny
	Age: 66 Director since: 2005 Board Committees: ●Compensation ●Sustainability & Corporate Responsibility		Professional experience Information Resources, Inc., a leading market research firm ●Non-executive Chairman (2013 - Present) Friedman, Fleischer & Lowe, LLC, a private equity firm ●Senior Advisor (2014 - 2016) ●Operating Partner (2011 - 2014) The Hershey Company, an industry leading snacks company ●Chairman, President and Chief Executive Officer (2001 - 2007) Director qualifications Mr. Lenny's experience as a chief executive officer of a global retail food company with a major consumer brand is an asset to our Board given his knowledge of strategy and business development, finance, marketing and consumer insights, supply chain management and distribution, sustainability and social responsibility matters. Mr. Lenny also has a broad understanding of corporate governance from his service on other companies' boards of directors. He also serves as director of Evans Food Group, a privately-held snack food manufacturer, which provides Mr. Lenny with additional food industry knowledge. Other directorships Mr. Lenny also serves on the Boards of ConAgra Brands, Inc. and Illinois Tool Works Inc. He will retire from the Board of Discover Financial Services at its 2018 Annual Meeting of Shareholders.

	John Mulligan
	Age: 52 Director since: 2015 Board Committees: ●Audit & Finance (Chair since 2016) ●Public Policy & Strategy ●Executive		Professional experience Target Corporation, a general merchandise retailer with an online presence ●Executive Vice President and Chief Operating Officer (2015 - Present) ●Executive Vice President and Chief Financial Officer (2012 - 2015) ●Senior Vice President, Treasury, Accounting and Operations (2010 - 2012) Director qualifications Mr. Mulligan's experience as a senior executive for a major consumer retailer has provided him with extensive experience in finance, global supply chain, operations, e-commerce, properties and human resources. In addition, his experience in digital and technology issues, including cybersecurity risk, is an important asset as the Board considers these topics and their potential impact on the Company. In addition, Mr. Mulligan's qualification as an "audit committee financial expert" is an important attribute as Chair of our Audit & Finance Committee. Other directorships None

McDonald’s Corporation

19

---

Table of Contents

Election of Directors

	Sheila Penrose
	Age: 72 Director since: 2006 Board Committees: ●Sustainability & Corporate Responsibility (Chair since 2016) ●Audit & Finance		Professional experience Jones Lang LaSalle Incorporated, a global real estate services and investment management firm ●Non-executive Chairman (2005 - Present) Boston Consulting Group, a global management consulting firm ●Executive Advisor (2001 - 2008) Northern Trust Corporation, a financial services firm ●President, Corporate and Institutional Services (1994 - 2000) Director qualifications Ms. Penrose brings to the Board extensive experience and knowledge of investment services, banking, and real estate, all areas of significance to the Company. She is well-versed in strategy and business development, finance, and leadership development and succession planning. Ms. Penrose also has significant experience in corporate governance from her service on other companies' boards of directors, including as non-executive chairman at Jones Lang LaSalle. In addition, Ms. Penrose co-founded the Corporate Leadership Center, which partners with leading institutions to offer programs in executive leadership development. Other directorships Ms. Penrose also serves on the Board of Jones Lang LaSalle Incorporated.

	John Rogers, Jr.
	Age: 60 Director since: 2003 Board Committees: ●Compensation ●Governance		Professional experience Ariel Investments, LLC, a privately held institutional money management firm ●Founder, Chairman of the Board and Chief Executive Officer (1983 - Present) Ariel Investment Trust ●Trustee (2000 - Present; 1986 - 1993) Director qualifications Mr. Rogers’ experience as a long-serving chief executive officer of an institutional money management firm has given him broad knowledge of finance, leadership development and succession planning, as well as strategy and business development. Mr. Rogers’ investment management knowledge also provides a unique perspective on investor relations. Mr. Rogers also brings perspective to the Company’s corporate responsibility and community affairs initiatives. Other directorships Mr. Rogers also serves on the Boards of Exelon Corporation and Ariel Investment Trust.

20

2018 Proxy Statement

---

Table of Contents

Election of Directors

	Miles White
	Age: 63 Director since: 2009 Board Committees: ●Governance (Chair since 2014) ●Public Policy & Strategy ●Executive		Professional experience Abbott Laboratories, a global healthcare company ●Chairman and Chief Executive Officer (1999 - Present) Director qualifications As the long-standing chairman and chief executive officer of a global healthcare company that develops products and technologies that span the breadth of healthcare, Mr. White has extensive knowledge of strategy and business development, global operations, finance, leadership development and succession planning, public policy matters and corporate governance. In addition, he brings to the Board strong experience in addressing the needs of a global public company, as well as insights into the Board's responsibility to oversee management and operations matters. As Governance Committee Chair, Mr. White leads the Board's succession planning and director candidate selection process, and he is periodically involved in shareholder engagement. Other directorships Mr. White also serves on the Boards of Abbott Laboratories and Caterpillar, Inc.

McDonald’s Corporation

21

---

Table of Contents

	•
		BOARD AND GOVERNANCE MATTERS
			•

BOARD LEADERSHIP

The Chairman and CEO roles have been separated since 2004, enabling the Chairman to focus on leading our Board and corporate governance matters and the CEO to focus on leading the Company’s day-to-day business. The Chairman facilitates the flow of information between management and our Board and leads a critical evaluation of Company management, business practices and culture, and adherence to the Company’s strategic plan and objectives. Enrique Hernandez, Jr. has served as our Board’s independent Chairman since 2016.

Having an independent Chairman fosters open dialogue and constructive feedback among the independent Directors and management while allowing our Board to effectively represent the best interests of all shareholders and contribute to the Company’s long-term success. In addition, our Board’s Committees, other than the Executive Committee, are chaired by other independent Directors. This structure ensures effective oversight, further strengthens our Board’s independent leadership and enables our Chairman to focus his efforts on leading our Board in its commitment to enhancing shareholder value. Our Board is committed to continually assessing its leadership structure to meet the evolving needs of the Company and its shareholders.

BOARD COMPOSITION AND SUCCESSION PLANNING

Our Board is comprised of a diverse, highly-engaged group of Directors who contribute to overall Board and Committee effectiveness. Under our Corporate Governance Principles, the Governance Committee is primarily responsible for maintaining a strong and diverse Board through robust evaluation and succession planning processes, which include recommending Directors for re-election and identifying new candidates who will bring complementary skills and differentiated perspectives to our Board.

The Governance Committee evaluates and determines the appropriate and desirable mix of characteristics, skills, experience and diversity for our Board as a whole, as well as the qualifications and attributes of individual Directors and Director candidates. Among other qualifications, the Committee considers: high integrity and business ethics; strength of character and judgment; independence from management; necessary skills to meet the evolving needs of our business; the ability and willingness to devote sufficient time to Board duties; and diversity in all its forms, including ethnicity, gender, geography and experience. The Committee also reviews each Director’s contributions, including by considering the results of the most recent Board, Committee and peer evaluations (as further described on the next page).

Our Governance Committee strives to achieve an appropriate balance of continuity and refreshment through a mix of newer and longer-tenured Directors. Our Board’s sound balance in this respect is supported by the fact that more than one-third of our Directors have joined our Board in the last four years.

Our Board and Governance Committee strongly believe that long tenure does not itself impair a Director’s independence and often enhances a Director’s ability to demonstrate independence. For example, a longer-tenured Director who has overseen more than one management team may have the experience, knowledge and confidence to develop and express a more independent view compared to a Director who is new to the Board and has overseen only one management team. Further, each of our Directors is a

22

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

dynamic leader whose experiences and perspectives are continually evolving as he or she navigates today’s fast-paced, ever-changing business environment both as a Director of McDonald’s and in his or her other professional roles. Accordingly, while the Committee and Board consider tenure in evaluating the overall effectiveness of our Board, it is not a dispositive factor. As the Company’s strategic priorities continue to evolve and in consideration of anticipated retirements and departures, our Governance Committee continues to proactively evaluate the Board’s composition to facilitate a smooth transition of skills, experience and diversity in the boardroom.

BOARD AND COMMITTEE EVALUATIONS

Our Board is committed to regular evaluations of itself, its Committees and Directors to measure on going effectiveness and succession planning. Each year, Directors are asked to complete a written evaluation of the Board, their peers and the Committees on which they serve. The following describes the process by which our Board currently carries out its evaluations:

Annual Written Evaluations	Directors complete Board, peer and Committee evaluations and send Board and peer evaluations directly to an independent third party. Committee evaluations are sent to the respective Committee Chair. Board evaluations consider: ●General board practices, including fostering a culture that promotes candid discussion ●Input for improvement ●Suggestions for new skills and experiences for potential future candidates Peer evaluations consider a Director’s: ●Contributions to Board discussions and decisions throughout the year ●Sharing of knowledge and expertise with Board and senior management ●Staying informed on matters that impact the Company ●Acting independently and in best interests of shareholders Committee evaluations consider: ●Members’ balance of skills and experiences to promote active participation ●Adequacy of information received, including access to non-management resources ●Committee effectiveness
▼
Independent Third Party Generates Report	To protect anonymity and the integrity of the Board and peer evaluation process, an independent third party compiles responses to these evaluations into a report for the Chair of the Governance Committee.
▼
Discussion of Results	The Governance Committee and full Board discuss the Board and peer evaluation results. Each of the Board’s Committees, except the Executive Committee, discusses its respective Committee evaluation and determines if any follow-up actions are appropriate.
▼
Incorporation of Feedback	The Board and each of its Committees, except for the Executive Committee, develops and executes plans to take actions based on the results, as appropriate. The Chair of the Governance Committee follows up with Directors regarding their peer evaluation results, as appropriate.

McDonald’s Corporation

23

---

Table of Contents

Board and Governance Matters

SELECTION OF NEW DIRECTOR CANDIDATES

Our Governance Committee, together with our Board, maintains a robust policy for the consideration of potential Director candidates and is responsible for establishing criteria, screening candidates and evaluating the qualifications of persons who may be considered for service as a Director, including candidates nominated or suggested by shareholders. The Governance Committee may retain search firms, consultants and any other advisors it deems appropriate to help identify, screen and evaluate potential Director candidates and to enhance the Board’s preparedness in the event of an unanticipated Director departure.

The following describes the Company’s selection process for new Directors:

Succession Planning	The Governance Committee considers current and long-term needs of our evolving business and seeks potential Director candidates in light of emerging needs, current Board structure, tenure, skills, diversity and experience.
▼
Identification of Candidates	The Governance Committee engages in a robust search process to identify qualified Director candidates, which process may include the use of an independent search firm or other advisors, and assesses candidates’ skills, experience and background and their alignment with the Company’s business strategy. Among other qualifications, the Governance Committee considers: ●High integrity and business ethics ●Strength of character and judgment ●Necessary skills to meet the evolving needs of our business ●Ability and willingness to devote sufficient time to Board duties ●Independence from management ●Ethnic, gender and geographic diversity
▼
Meeting with Candidates	Potential Director candidates are interviewed by the Chairman, CEO, Chair of the Governance Committee and other Governance Committee members.
▼
Decision and Nomination	The Governance Committee recommends, and the full Board approves, Director candidates best qualified to serve the interests of the Company and all shareholders for appointment to the Board and election by shareholders.
▼
Election	Shareholders consider the nominees and elect Directors to serve one-year terms.

The Board’s Director Selection Process may be found on the Company’s website at http://corporate.mcdonalds.com/content/corpmcd/investors-relations/governance-principle-policies-and-guidelines.html.

BOARD DIVERSITY

Our Governance Committee, together with the Board, proactively seeks diverse Director candidates to ensure representation of varied backgrounds, perspectives and experience in the boardroom to support the global demands of our business. Diversity is considered in a broad sense, including, among other attributes, leadership, experience, skills, perspectives, gender, ethnicity and geography. Our current Directors bring a diverse set of skills and experiences to the Company that are important to drive our strategy forward as the market and competitive landscape evolves. When seeking new Director candidates, our Governance Committee actively endeavors to include women, racial or ethnic minorities and geographically-diverse persons in the candidate pool. Currently, more than 50% of our Directors are women or racial or ethnic minorities.

24

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

DIRECTOR ORIENTATION AND CONTINUING EDUCATION

Upon joining our Board, Directors are provided with an orientation about the Company, which includes introductions to members of our senior management and information about our operations, performance, strategic plans, and corporate governance practices. Members of senior management and outside speakers are periodically invited to attend Board meetings to provide updates on business and general industry trends, governance, regulatory and financial control matters. Directors are also encouraged to participate in continuing education programs to help them stay abreast of developments in corporate governance and emerging issues relating to the operation of public company boards.

Our Board believes that a sound understanding of the Company’s business and industry assists it in the effective discharge of its duties, including oversight of the Company’s business strategy and risk management. As part of its regularly scheduled meetings, our Board reviews the operating plan of the Company with senior management and conducts periodic visits to our restaurants.

Beyond the boardroom, our Board traveled to the Company’s United Kingdom market for its annual global strategy meeting in 2017. The trip included meetings with market leadership, interactions with managers and crew at local McDonald’s restaurants, and reviews of McDonald’s UK’s strategies in relation to our Velocity Growth Plan. The Directors also met with a renowned expert on corporate reputation at Oxford University and engaged in a robust discussion that continues to inform the Board’s oversight of business initiatives. In addition, while in the UK, the Board visited the farm headquarters of a longtime McDonald’s advisor on sustainable solutions for our food supply chain. The Directors toured the farm with a team of scientists, farmers and strategists, which provided them with direct exposure to food production and its challenges, as well as learnings to help address issues important to McDonald’s such as beef sustainability, animal health and welfare, and climate change.

Of course, our Directors are also McDonald’s customers. These experiences provide them with consumer viewpoints that help inform and shape their perspectives as members of our Board.

Our Board’s engagement in the Company’s business, such as through the UK market visit and as customers, provides it with useful information and perspectives that enhance its performance, particularly in today’s ever-changing business environment.

McDonald’s Corporation

25

---

Table of Contents

Board and Governance Matters

DIRECTOR INDEPENDENCE

Our Corporate Governance Principles require that all non-management Directors be independent under applicable law and listing standards, as well as under the Board’s Standards on Director Independence, available on the Company’s website at http://corporate.mcdonalds.com/content/corpmcd/investors-relations/governance-principle-policies-and-guidelines.html. 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 and employees (including Mattel, Inc. and Target Corporation); and
●	at which Board members then served as outside Directors (including Chevron Corporation, ConAgra Brands, Inc., Discover Financial Services, Exelon Corporation, Illinois Tool Works Inc., Jones Lang LaSalle Incorporated, The Kraft Heinz Company, Navigant Consulting, Inc. and Wells Fargo & Company).

These relationships involved McDonald’s purchases of products and services in the ordinary course of business that were made on arm’s-length terms in amounts and under other circumstances that did not affect Director independence.

The Board also reviewed certain de minimis arm’s-length retail transactions with other companies affiliated with Directors, as well as Company donations to not-for-profit organizations with which Board members or their immediate family members were affiliated by 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. Our non-management Directors are Lloyd Dean, Robert Eckert, Margaret Georgiadis, Enrique Hernandez, Jr., Jeanne Jackson, Richard Lenny, John Mulligan, Sheila Penrose, John Rogers, Jr. and Miles White. In addition, the Board previously determined that Walter Massey, who served as Director during 2017 and did not stand for re-election at our 2017 Annual Shareholders’ Meeting, was independent.

MEETING ATTENDANCE

Our Board met six times during 2017. As a group, our Directors attended 97% of the total number of meetings of the Board and respective Committees on which they serve. In addition, Directors are expected to attend the Annual Shareholders’ Meeting and all Board meetings and meetings of the Committees on which they serve. All Directors who stood for re-election last year attended the 2017 Annual Shareholders’ Meeting.

EXECUTIVE SESSIONS

The independent Directors meet regularly in executive sessions, which, from time to time, include the CEO. An executive session is typically scheduled immediately before or after each regular Board meeting. At such sessions, the Chairman presides, except in such matters as may involve his re-election or compensation, in which case the Chair of the Governance Committee presides. Executive sessions are also regularly scheduled for Committee meetings, other than the Executive Committee, throughout the year.

26

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

BOARD COMMITTEES

Our Board has the following Committees: Audit & Finance; Compensation; Governance; Public Policy & Strategy; Sustainability & Corporate Responsibility and Executive. Each Committee has the responsibilities set forth in its respective Charter, which has been adopted by the Board. Other than the Executive Committee, all Committees review their respective Charters at least annually, and changes are recommended to the full Board for approval. Committee Charters are available on the Company’s website at http://corporate.mcdonalds.com/content/corpmcd/investors-relations/board-committees-and-charters.html.

Consistent with its commitment to strong corporate governance, our Board continually assesses its Committee structure to reflect best practices and meet the evolving needs of the Company and our business. In 2016, our Board established a Public Policy & Strategy Committee to provide more focused oversight and counsel to management on the Company’s short- and long-term strategies, as well as other matters that are important to the iconic McDonald’s Brand. The Committee also provides counsel and oversight on a number of key topics, including human capital management strategies and cybersecurity and technology risks.

All Committee members are independent as defined by the listing standards of the New York Stock Exchange (NYSE) and the Board’s Standards on Director Independence, except for our CEO, who serves solely on the Executive Committee. In addition, the Board has determined that each member of the Audit & Finance Committee is financially literate, and that Lloyd Dean, Margaret Georgiadis and John Mulligan qualify as “audit committee financial experts” as defined by applicable SEC rules and NYSE listing standards.

The primary responsibilities of each Committee are summarized on the following pages. Each Committee also has oversight of risk areas as illustrated beginning on page 33.

McDonald’s Corporation

27

---

Table of Contents

Board and Governance Matters

AUDIT & FINANCE COMMITTEE
Members			Primary Areas of Oversight
John Mulligan (Chair) (FE) Lloyd Dean (FE) Margaret Georgiadis (FE) Sheila Penrose (FE = Financial Expert) Meetings in 2017: 8			●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, the adequacy and effectiveness of internal controls and the performance of the internal auditors ●Reviews material financial disclosures ●Reviews the Company’s capital structure, dividend policy and plans for share repurchases ●Oversees financial risk and evaluates management’s process to assess and manage enterprise risk issues ●Pre-approves all audit and permitted non-audit services ●Annually reviews the Company’s Sarbanes-Oxley and tax compliance ●Reviews the Company’s Disclosure Controls and Procedures
The Audit & Finance Committee establishes its meeting calendar for the following year during the fourth quarter, and typically addresses the following key matters throughout the year:

28

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

COMPENSATION COMMITTEE
Members			Primary Areas of Oversight
Jeanne Jackson (Chair) Lloyd Dean Richard Lenny John Rogers, Jr. Meetings in 2017: 5			●Oversees executive compensation and the Company’s compensation program and policies ●Reviews risks related to compensation programs ●For more information, see the Compensation Discussion and Analysis beginning on page 41.
The Compensation Committee establishes its meeting calendar for the following year during the fourth quarter, and typically addresses the following key matters throughout the year:

McDonald’s Corporation

29

---

Table of Contents

Board and Governance Matters

GOVERNANCE COMMITTEE
Members			Primary Areas of Oversight
Miles White (Chair) Robert Eckert Enrique Hernandez, Jr. Jeanne Jackson John Rogers, Jr. Meetings in 2017: 6			●Monitors the Board’s structure, operations and Committee memberships ●Sets criteria for Board membership ●Considers and recommends candidates for election or to fill vacancies ●Develops Board succession plans and makes recommendations to the Board on succession matters ●Evaluates Director and Board performance and assesses Board composition and size ●Recommends to the Board compensation for non-management Directors ●Reviews the Company’s Corporate Governance Principles and oversees governance risks
The Governance Committee establishes its meeting calendar for the following year during the fourth quarter, and typically addresses the following key matters throughout the year:

30

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

PUBLIC POLICY & STRATEGY COMMITTEE
Members			Primary Areas of Oversight
Robert Eckert (Chair) Enrique Hernandez, Jr. John Mulligan Miles White Meetings in 2017: 5			●Reviews and monitors the Company’s long-term strategy development and implementation ●Reviews and monitors trends and issues that could affect the Company’s business activities and performance, as well as reputation ●Reviews and monitors government affairs strategies and priorities ●Reviews human capital management matters ●Reviews and monitors cybersecurity, technology and tax strategies and priorities ●Reviews compliance matters, including compliance with the Company’s Political Contributions Policy and employees’ compliance with the Company’s Standards of Business Conduct ●Reviews risks related to public policy and strategy matters
The Public Policy & Strategy Committee establishes its meeting calendar for the following year during the fourth quarter, and typically addresses the following key matters throughout the year:

McDonald’s Corporation

31

---

Table of Contents

Board and Governance Matters

SUSTAINABILITY & CORPORATE RESPONSIBILITY COMMITTEE
Members			Primary Areas of Oversight
Sheila Penrose (Chair) Margaret Georgiadis Richard Lenny Meetings in 2017: 4			●Reviews and monitors the Company’s strategies and efforts to address Brand trust through its performance as a sustainable organization ●Reviews and monitors Scale for Good priorities and other matters important to the Company, including philanthropy and diversity and inclusion ●Reviews and monitors the development and implementation of performance metrics with respect to the Company’s Scale for Good ●Reviews the Company’s global sustainability communication plans and reporting ●Reviews risks related to sustainability and corporate responsibility matters ●Considers shareholder proposals, as appropriate
For more information on the matters under the Sustainability & Corporate Responsibility Committee’s oversight and addressed throughout the year, see information under the heading “Scale for Good” on page 36.

EXECUTIVE COMMITTEE

The Executive Committee may exercise most Board powers during the periods between Board meetings. The Executive Committee members are Stephen Easterbrook (Chair), Robert Eckert, Enrique Hernandez, Jr., Jeanne Jackson, John Mulligan and Miles White. The Executive Committee did not meet during 2017.

MANAGEMENT SUCCESSION PLANNING

The Board regularly reviews short- and long-term succession plans for the CEO and 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 leader in light of the Company’s global business strategies, opportunities and challenges. The Board employs a similar approach with respect to evaluating possible candidates for other senior management positions. Our Board regularly interacts with members of management who are possible candidates to succeed the CEO and other members of senior leadership. In general, the Board’s management succession planning is designed to anticipate both expected successions, such as those arising from anticipated retirements, as well as unexpected successions, such as those occurring when executives leave for positions at other companies, or due to death, disability or other unforeseen events.

32

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

RISK OVERSIGHT

The Board is actively engaged in overseeing the Company’s integrated enterprise risk management framework, which is designed to identify, assess and prioritize strategic, financial and reputational risks with the potential to have a sustained impact on the Company. The Board exercises its oversight, both as a whole Board and through its standing Committees (which are comprised solely of independent Directors). Given management’s responsibility for the design and execution of the Company’s enterprise risk management framework, an important element of the Board’s oversight involves its regular interaction with senior leadership, including on the Company’s business strategy and operations as well as its risk profile and the principal risks it faces. In 2017, with oversight from the full Board, the Company enhanced its enterprise risk management framework to further protect the McDonald’s Brand. The enhanced processes leverage internal risk committees comprised of cross-functional senior leadership, which meet regularly to evaluate and prioritize risk in the context of the Company’s new Velocity Growth Plan strategy and cultural transformation, with further escalation to the CEO and Board as appropriate. The Company’s Internal Audit function also supports risk identification and risk monitoring within the Company.

The Board’s oversight process is further outlined below:

Board	●Under the Company’s Corporate Governance Principles, the entire Board is responsible for overseeing the Company’s enterprise-wide risk management framework and the processes that are in place to safeguard the Company’s assets and manage material risks facing the Company. ●The Board conducts an annual review of strategic risks and, among other items, considers the Company’s strategy, competitive landscape, capital structure and succession planning. ●Each of the Audit & Finance, Compensation, Governance, Public Policy & Strategy and Sustainability & Corporate Responsibility Committees are responsible for overseeing risks within their respective areas of accountability. These Committees report any risks that they conclude are reasonably likely to be material to the Company to the full Board and regularly update the Board on their particular risk oversight activities. ●The Board also considers any emerging risks that may require assignment to a particular Committee for continuing oversight.

McDonald’s Corporation

33

---

Table of Contents

Board and Governance Matters

Audit & Finance Committee	●The Audit & Finance Committee assists the Board in fulfilling its oversight responsibility by evaluating management’s process to assess and manage the Company’s enterprise risk issues. ●This Committee oversees risks associated with financial reporting, internal controls, capital structure and treasury and compliance matters. ●This Committee discusses with financial management, Internal Audit and the Company’s independent auditors major risk exposures and the adequacy and effectiveness of accounting and financial controls.
Compensation Committee	●The Compensation Committee assists the Board in fulfilling its oversight responsibility by assessing and responding as appropriate to risks related to the Company’s executive compensation matters. ●This Committee oversees risks related to the Company’s compensation program and policies, including incentive plans, and whether such programs and policies incentivize unnecessary and excessive risk taking. ●For additional information regarding this Committee’s oversight of risks related to the Company’s compensation program, see “Risk and Compensation Programs” on page 53.
Governance Committee	●The Governance Committee assists the Board in fulfilling its oversight responsibility by assessing and responding as appropriate to risks related to governance-related matters, including Director selection and succession planning. ●This Committee reviews Director compensation matters, including risks associated with such compensation.
Public Policy & Strategy Committee	●The Public Policy & Strategy Committee assists the Board in fulfilling its oversight responsibility by assessing and responding as appropriate to risks related to strategy, public policy, human capital management and tax planning. ●This Committee reviews and monitors the Company’s assessment and management of cybersecurity and other technology risks.
Sustainability & Corporate Responsibility Committee	●The Sustainability & Corporate Responsibility Committee assists the Board in fulfilling its oversight responsibility by assessing and responding as appropriate to risks related to Brand trust and sustainability matters. ●For more information on the Company’s sustainability priorities, see the disclosure under the heading “Scale for Good” on page 36.

For more information about specific risks facing the Company, see the disclosure under the heading “Risk Factors and Cautionary Statement Regarding Forward-Looking Statements” in our 2017 Annual Report on Form 10-K.

34

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

SHAREHOLDER ENGAGEMENT

Our Board and management team have developed a robust shareholder engagement program. Throughout the year, we engage with a significant and diverse portion of shareholders on topics of importance to both our Company and shareholders. In addition to discussing our business results and initiatives, strategy, and capital structure, we engage on other matters, such as Board composition, tenure and refreshment and other corporate governance practices; executive compensation; and environmental, social, and other sustainability topics.

In 2017, we reached out to a broad group of shareholders, including actively-managed funds, index funds, hedge funds, union and public pension funds and socially-responsible investment funds, that are based in and outside of the U.S. This group represented approximately 50% of our outstanding shares. Shareholder feedback, including through direct discussions and prior shareholder votes, as well as engagement with proxy and other investor advisory firms that represent the interests of a wide array of shareholders is reported to our Governance Committee periodically throughout the year. We also review our practices against guidelines published by shareholders and proxy advisory firms, among others. As appropriate, the Governance Committee may delegate specific issues to relevant Committees for further consideration.

The following graphic illustrates elements of our ongoing shareholder outreach and engagement, as well as certain items that take place more specifically before, during and after our Annual Shareholders’ Meeting:

Ongoing Shareholder Engagement

▼

▼

▼

▼

▼

▼

Business Strategy and Performance

Capital Structure

Executive Compensation

Board Composition, Tenure and Refreshment and Other Governance Practices

Oversight of Risk and Strategy

Environmental, Social and Other Sustainability Matters

McDonald’s Corporation

35

---

Table of Contents

Board and Governance Matters

BOARD’S RESPONSE TO SHAREHOLDER PROPOSALS

Following the Annual Shareholders’ Meeting, the Governance Committee considers the voting outcomes for management and shareholder proposals. In addition, the Governance Committee and other Board Committees, as appropriate, consider proposed courses of action in light of the voting outcomes of shareholder proposals under their oversight.

At the 2017 Annual Shareholders’ Meeting, an advisory shareholder proposal regarding the use of antibiotics by the Company’s meat suppliers received support of approximately 30% of shares voted. In August 2017, the Company updated its antibiotics vision with oversight from the Sustainability & Corporate Responsibility Committee. The 2017 vision (available at http://corporate.mcdonalds.com/content/corpmcd/scale-for-good/our-food/animal-health-and-welfare.html) establishes that the routine preventative use of antibiotics is not permitted within our supply chain and instead highlights our purchasing preferences for chicken, beef, and pork raised in compliance with this new vision. The Company received a similar shareholder proposal for the 2018 Annual Shareholders’ Meeting and reached a successful outcome of an exchange on this issue with the proponent and other shareholders, resulting in withdrawal of the proposal.

At the same meeting, an advisory shareholder proposal requesting a report on the environmental impacts of polystyrene foam beverage cups received support of approximately 31% of shares voted. The Company has since announced that it plans to eliminate foam packaging from its global system by the end of 2018. For more information, see the Company’s website at http://corporate.mcdonalds.com/content/corpmcd/scale-for-good/packaging-and-recycling.html#goals.

In addition, an advisory shareholder proposal to decrease the threshold to call special shareholder meetings received support of approximately 48% of shares voted at last year’s Annual Shareholders’ Meeting. In response, the Governance Committee carefully considered the proposal and continues to believe that in light of the Company’s ongoing commitment to shareholder engagement and sound governance practices, including the fact that the Company’s current By-Laws provide shareholders the right to call special meetings, it is unnecessary to take steps to implement this proposal.

RESPONSIBLE LEADERSHIP

SCALE FOR GOOD

The Company’s sustainability vision and initiatives are embodied in our recently launched Scale for Good platform, which establishes our commitment to global priorities that are aligned with our strategic objectives and designed to drive meaningful change in partnership with our franchisees and suppliers. Our current Scale for Good priorities include beef sustainability, packaging and recycling, commitment to families, investment in people and climate action. Beyond these priorities, the Company continues to drive progress on our goals and commitments across key social and environmental topics such as diversity and inclusion, animal health and welfare, and supporting families and farmers.

Highlights from some of our most recent Scale for Good achievements include:

BEEF SUSTAINABILITY

We launched a 2020 vision to lead a global movement for beef sustainability designed to accelerate industry progress, engage farmers, pioneer new practices and preserve forests in regions with identified deforestation risks where beef is produced.

36

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

PACKAGING AND RECYCLING

We expanded our global goals for sustainable packaging and restaurant recycling, which are aligned with the Company’s Commitment on Forests.

COMMITMENT TO FAMILIES

We established new global goals for our iconic Happy Meal menu designed to offer more balanced meals, simplify ingredients, and leverage innovative marketing to help impact the purchase of foods and beverages that contain recommended food groups in Happy Meals.

CLIMATE ACTION

We became the first global restaurant company to address climate change by setting a 2030 target, which was approved by the Science Based Target initiative (SBTi). The Company’s target will involve collaboration with franchisees and suppliers to reduce greenhouse gas emissions from McDonald’s restaurants and supply chain.

ANIMAL HEALTH AND WELFARE

We announced antibiotics and animal welfare policies in markets around the world, which set out to source chickens that have not been treated with antibiotics defined by the World Health Organization as Highest Priority Critically Important to Human Medicine (HPCIA).

For more information on the Scale for Good platform, see the Company’s website at http://corporate.mcdonalds.com/content/corpmcd/scale-for-good/using-our-scale-for-good.html.

INVESTMENT IN PEOPLE

In addition, the Company has raised the bar on what it means to be a responsible employer. We are proud of the positive impact McDonald’s makes in local communities around the world by providing opportunities through employment, training and education, particularly given that working at McDonald’s is often a first job and can be a launching pad for a career — at a McDonald’s restaurant or elsewhere.

We recently increased contributions toward educational opportunities for eligible restaurant employees, investing up to $150 million over a five year period toward the “Archways to Opportunity” program, which will increase tuition assistance for eligible employees and extend educational and advising resources to their families.

For additional information on our efforts with regard to investing in people, see the Company’s website at http://corporate.mcdonalds.com/content/corpmcd/scale-for-good/investment-in-people.html.

CORPORATE GOVERNANCE PRINCIPLES

The Governance Committee regularly reviews the Company’s Corporate Governance Principles and other governing documents and policies to ensure their appropriateness in light of the Company’s current and expected long-term circumstances, as well as evolving best practices. The Company’s Corporate Governance Principles are available on our website at http://corporate.mcdonalds.com/content/corpmcd/investors-relations/governance-principle-policies-and-guidelines.html.

CODE OF CONDUCT FOR THE BOARD OF DIRECTORS

Each year, our Directors confirm that they have read, and will comply with, the Code of Conduct for the Board of Directors. This code may be found on our website at http://corporate.mcdonalds.com/content/corpmcd/investors-relations/codes-of-conduct.html.

McDonald’s Corporation

37

---

Table of Contents

Board and Governance Matters

DIRECTOR COMPENSATION

Only non-management Directors are paid for their service on our Board. Through June 30, 2017, this compensation was as follows: (i) an annual cash retainer of $110,000; (ii) common stock equivalent units with a $165,000 value granted annually under the Directors’ Deferred Compensation Plan (Directors’ Plan); (iii) an annual cash retainer fee of $30,000 for the Chair of the Audit & Finance Committee; and (iv) an annual cash retainer fee of $25,000 for each Director serving as Chair of the Compensation, Governance, Public Policy & Strategy or Sustainability & Corporate Responsibility Committee.

In 2017, our Board’s independent compensation consulting firm, Frederic W. Cook & Co., Inc. (FW Cook), presented market data and peer benchmarking for the Company’s non-employee director compensation. Upon evaluating this information, the Governance Committee recommended, and our Board approved, an increase effective July 1, 2017 to $175,000 for the value of common stock equivalent units to be granted to each Director annually under the Directors’ Plan, to maintain the Company’s competitive market position to attract and retain Directors and Director candidates. The level and type of compensation paid to the non-employee Directors otherwise remained the same, as it was determined to be competitive and well-structured for 2017.

Directors serving for a portion of the year receive prorated compensation. In addition, our Board considers and may, in its discretion, grant additional compensation to the Non-executive Chairman. Upon the recommendation of our Governance Committee, the disinterested members of our Board awarded Mr. Hernandez an annual retainer fee of $250,000 and a restricted stock unit award with a deemed grant value of $250,000 for his service as Chairman.

The Company reimburses non-management Directors for expenses incurred in attending Board, Committee, shareholder and other McDonald’s business meetings, as well as expenses for Director continuing education. In addition, the Company matches up to $10,000 of charitable contributions made annually by Directors to certain types of tax-exempt organizations.

The following table summarizes the compensation received by each non-management Director serving in 2017:

Name		Fees earned or paid in cash ($)(2)		Stock awards ($)(3)(4)		All other compensation ($)(5)		Total ($)
Lloyd Dean		110,000		170,000		800		280,800
Robert Eckert		135,000		170,000		10,800		315,800
Margaret Georgiadis		110,000		170,000		800		280,800
Enrique Hernandez, Jr.		360,000		414,016		26,602		800,618
Jeanne Jackson		135,000		170,000		10,800		315,800
Richard Lenny		110,000		170,000		10,800		290,800
Walter Massey (1)		43,819		65,096		10,000		118,915
John Mulligan		140,000		170,000		10,800		320,800
Sheila Penrose		135,000		170,000		800		305,800
John Rogers, Jr.		110,000		170,000		10,800		290,800
Miles White		135,000		170,000		10,800		315,800

(1)	Dr. Massey did not stand for re-election at the 2017 Annual Shareholders’ Meeting and received prorated compensation to reflect his service in 2017.

38

2018 Proxy Statement

---

Table of Contents

Board and Governance Matters

(2)	Non-management Directors may defer all or a portion of their retainer(s) in the form of common stock equivalent units under the Directors’ Plan. Such deferrals, as well as the annual grant of common stock equivalent units described in footnote 3 below, are credited to an account that is periodically adjusted to reflect the gains, losses and dividends associated with a notional investment in our common stock. Common stock equivalent units so credited are based on a per-share price equal to the closing price of our common stock on the date of credit. Amounts credited are deferred until retirement from the Board or a date specified by the Director. A Director may elect that all or a portion of the credited amount be paid in a lump sum or equal annual installments over a period of up to 15 years beginning after retirement from the Board. In the event of death, amounts are paid in a lump sum. For Mr. Hernandez, the amount in this column also reflects additional compensation of $250,000 for his service as Chairman.
(3)	Common stock equivalent units are deferred until retirement from the Board or death. A Director may specify that deferred amounts from each year’s award be paid in a lump sum or equal annual installments over a period of up to 15 years beginning after retirement from the Board. In the event of death, amounts are paid in a lump sum. Amounts in this column represent the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (ASC 718) of common stock equivalent units granted under the Directors’ Plan on December 31, 2017 to each non-management Director who served on the Board during 2017. Due to the compensation changes described above, such amounts reflect prorated values before and after July 1, 2017 of $165,000 and $175,000, respectively. In connection with his service as Chairman, Mr. Hernandez also received a grant of 1,593 restricted stock units in July 2017 with an aggregate grant date fair value of $244,016 computed in accordance with ASC 718. These restricted stock units vest on the later of one year from the date of grant or Mr. Hernandez’s departure from the Board, and shall be payable in either shares of the Company’s stock or cash, at the Company’s discretion.
(4)	Outstanding stock awards held by non-management Directors are set forth below. Stock awards include common stock equivalent units under the Directors’ Plan and, in the case of Mr. Hernandez, both common stock equivalent units and restricted stock units as described in footnote 3. Amounts are as of December 31, 2017.

	Name		Outstanding stock awards
	Lloyd Dean		4,406
	Robert Eckert		54,470
	Margaret Georgiadis		3,417
	Enrique Hernandez, Jr.		77,006
	Jeanne Jackson		67,132
	Richard Lenny		31,119
	Walter Massey		39,863
	John Mulligan		2,776
	Sheila Penrose		23,721
	John Rogers, Jr.		50,886
	Miles White		13,637

(5)

Represents Company matching gifts of charitable contributions to tax-exempt organizations for participating non-management Directors that were received in 2017, and, for each non-management Director other than Dr. Massey, a McDonald’s gift card and McDonald’s merchandise received in connection with the launch of McDelivery. For Mr. Hernandez, this amount also includes travel expenses incurred to accommodate Mr. Hernandez’s schedule incident to a meeting of the Board in London.

McDonald’s Corporation

39

---

Table of Contents

	•
		EXECUTIVE COMPENSATION
			•

PROPOSAL 2

Item to be voted on: Advisory vote to approve executive compensation

The Board recommends that you vote FOR this proposal.

The Company is asking its shareholders to approve, on an advisory basis and as required pursuant to Section 14A of the Securities Exchange Act of 1934, the compensation awarded to the named executive officers for 2017, as described in the Executive Compensation section, beginning on page 41, which includes the Compensation Discussion and Analysis (CD&A) and the compensation tables and related narrative discussion.

As fully described in the CD&A, the Company’s executive compensation program is designed to support our business initiatives, align the interest of our executives with those of shareholders, and strongly link pay and performance. The Company believes its compensation program appropriately incentivizes executives through a mix of short- and long-term plans that reflect measurable, rigorous performance goals closely aligned with Company strategy.

In 2017, as discussed on page 41, the Company’s Velocity Growth Plan resonated with our customers, generating meaningful growth in global comparable sales, guest traffic, operating income, and ultimately shareholder value. These increases are on top of strong prior-year performance, which produced above-target payouts under both the Company’s annual plans as well as its long-term (three-year) plans. The Company believes these pay outcomes support our pay for performance compensation philosophy as well as the alignment between executive pay and shareholder value.

The Board believes that the Company’s executive compensation program appropriately incentivizes strong operational and financial performance in both the current year and over the long-term, thereby aligning the interests of executives with the interests of shareholders.

Consistent with the Company’s past practice and supported by our shareholders at last year’s annual shareholders’ meeting, we currently hold our Say on Pay vote annually and the next Say on Pay vote is expected to occur at our 2019 annual meeting of shareholders.

40

2018 Proxy Statement

---

Table of Contents

Executive Compensation

COMPENSATION COMMITTEE REPORT

The Compensation Committee (the Committee) of the Board of Directors has reviewed and discussed the Company’s Compensation Discussion and Analysis with McDonald’s management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Respectfully submitted,

The Compensation Committee

Jeanne Jackson, Chair
Lloyd Dean
Richard Lenny
John Rogers, Jr.

COMPENSATION DISCUSSION AND ANALYSIS

OUR YEAR IN REVIEW

The Company introduced the Velocity Growth Plan in 2017, signifying a shift in focus from our business turnaround plan to a comprehensive, customer-centric growth strategy. Under the Velocity Growth Plan, the Company has established sustainable growth platforms grounded in critical insights around key customer segments that have enabled us to execute with greater speed, efficiency and impact. This multi-dimensional strategy is resonating with our customers and has triggered meaningful growth in sales, guest traffic and shareholder value, which in turn generated above-target payouts under our incentive plans. The Company is now well-positioned to deliver sustained long-term profitable growth for all shareholders.

STRONG FINANCIAL PERFORMANCE*

2017 1-Year Total Shareholder Return		Cumulative 3-Year Total Shareholder Return		2017 EPS Growth		2017 Operating Income		2017 Global Comparable Sales		2017 Global Comparable Guest Counts
45%		101%		17%		$9.6B		5.3%		1.9%

*	The 1-Year and Cumulative 3-Year Total Shareholder Return percentages are as reported on Bloomberg.com as of December 31, 2017.

McDonald’s Corporation

41

---

Table of Contents

Executive Compensation

EXECUTIVE SUMMARY

Our 2017 pay package included base salary, a short-term cash incentive (STIP), performance-based restricted stock units (RSUs) and stock options. Our NEOs (as defined below) also received a final payout under our long-term cash incentive plan (Cash LTIP) for the 2015 to 2017 performance period. The Cash LTIP was discontinued in 2015 in favor of increased equity incentive compensation, in an effort to more closely align executives’ interests with those of our shareholders.

COMPENSATION GUIDING PRINCIPLES

The following three key principles guide the design and implementation of our compensation programs, in support of our Velocity Growth Plan.

► FIRST PRINCIPLE:     PAY FOR PERFORMANCE

We remain committed to a pay-for-performance culture that stresses “at risk” compensation, as evidenced by the pie chart below.

Payouts to our executives vary based on performance against robust targets. Our incentive plans are based on diverse strategic financial metrics that are aligned with our key measures of long-term sustainable growth.

Financial Metrics*
Operating income growth		Net income growth
Return on Incremental Invested Capital (ROIIC)		Total Shareholder Return (TSR)

*	Operating income growth is used in our STIP while the other metrics are used in our performance-based RSUs.

In addition, for the NEOs who were employed at year-end, approximately 83% of the target total direct compensation opportunity for 2017 was allocated to variable compensation that is at-risk based on performance.

► SECOND PRINCIPLE:     DRIVE BUSINESS RESULTS AND LONG-TERM VALUE CREATION

While we believe it is important to reward short-term success, our focus is on driving long-term shareholder value. To this end, over 70% of our CEO’s compensation opportunity is delivered in the form of equity awards that vest over several years. Further, we maintain a straightforward and holistic compensation program that supports our strategic business initiatives. Finally, in order to mitigate risk, our compensation program does not focus on a single aspect of business performance, as more fully described below.

42

2018 Proxy Statement

---

Table of Contents

Executive Compensation

► THIRD PRINCIPLE     PAY COMPETITIVELY

Attracting, engaging and motivating talented executives who will drive our Velocity Growth Plan is very important to our success. Our compensation opportunities are designed to support this critical objective. As discussed in greater detail below, the Committee establishes a peer group of companies with which we compete for talent and monitors the compensation practices at those peer companies. Further, the Committee considers internal pay equity, as described below, when making executive compensation decisions.

INCENTIVE AWARD PROGRAM - 2017 PAYOUTS

We design our performance metrics to drive improvement year-over-year in order to support the Company’s growth strategy and to reward performance over both the short- and long-term.

Strong financial performance over the short- and long-term yielded above target payouts under the 2017 STIP, the 2015-2017 RSUs and 2015-2017 Cash LTIP as set forth in the table below.

Incentive Compensation Element		2017 Payout (% of target)
2017 STIP (Corporate)		152.7%
2015-2017 Performance–based RSUs		200%
2015-2017 Cash LTIP		176.3%

TRANSITION FROM CASH LTIP TO LONG-TERM EQUITY

Historically, the Company’s long-term incentives included awards under our Cash LTIP program, with the last awards occurring in 2015. Beginning in 2016, our long-term incentive awards consist entirely of equity-based incentives. SEC rules require proxy disclosure of the value of equity awards in the year of grant and the payout of cash awards upon vesting. Accordingly, the 2017 Summary Compensation Table (SCT) (on page 54), includes the value of equity-based incentives granted in 2017, plus the payout from the Cash LTIP awards granted in 2015. As a result, the 2017 SCT reflects relatively higher 2017 compensation of our NEOs. For further information, please refer to the Long-Term Cash Incentive Plan (Cash LTIP) — Final Payout on page 50.

NAMED EXECUTIVE OFFICERS (NEOs)

NEOs refer to the following executive officers whose compensation is described in this Proxy Statement, pursuant to requirements of the Securities and Exchange Commission.

Stephen Easterbrook		President and Chief Executive Officer (CEO)
Kevin Ozan		Executive Vice President and Chief Financial Officer (CFO)
Douglas Goare		President, International Lead Markets and Global Chief Restaurant Officer
Silvia Lagnado		Executive Vice President, Global Chief Marketing Officer
Christopher Kempczinski		President, McDonald’s USA
Gloria Santona*		Former Executive Vice President, General Counsel and Secretary (retired March 3, 2017)

*	Please see the description on page 52 of the benefits Ms. Santona received upon retirement.

McDonald’s Corporation

43

---

Table of Contents

Executive Compensation

COMPENSATION SETTING PROCESS

The Committee meets regularly during the year (five times in 2017). Meeting agendas are determined by the Committee Chair with the assistance of our Chief People Officer. Members of management, including the Chief People Officer, also attend Committee meetings, as well as representatives from the Committee’s independent advisor, FW Cook, and external legal counsel, if needed.

At least annually, the Committee reviews our overall executive compensation program to ensure that it remains aligned with current business objectives and evolving best practices. The graphic on page 29 highlights the Committee’s annual review process.

FW Cook reviews and provides input on management’s recommendations with respect to each of the NEOs at least annually. The Committee considers peer data and other similar information obtained from various sources, including Willis Towers Watson & Co., Aon Hewitt and Meridian Compensation Partners, LLC. While management provides the Committee with its perspectives on compensation matters, no member of management is involved in decisions regarding his or her own compensation.

The Chair of the Committee regularly reports to the Board following Committee meetings. In addition, the Chair, along with the Chairman of the Board, lead the independent Directors in the evaluation of the CEO’s performance. Based upon the results of this performance evaluation, and informed by input from FW Cook and the Chief People Officer, the Committee reviews and approves CEO compensation.

ESTABLISHING PERFORMANCE-BASED COMPENSATION

COMPENSATION METRICS

Our compensation program is comprised of both short- and long-term incentive awards, based on objective performance metrics (both absolute and relative), as well as our stock price performance, as reflected in the chart below.

2017 principal performance measures		STIP		Stock options		Performance-based RSUs
Operating income growth		●
Net income growth						●
ROIIC						●
Share price				●		●

The Committee takes a holistic approach to establishing performance targets under the Company’s incentive compensation programs. The Committee recognizes the importance of achieving an appropriate balance between rewarding executives for strong performance over both the short- and long-term, and establishing realistic but rigorous targets that continue to motivate and retain executives. In setting these objective performance targets, the Committee considers the Company’s financial objectives and the economic, industry and competitive environments.

44

2018 Proxy Statement

---

Table of Contents

Executive Compensation

EXCLUSIONS FROM REPORTED FINANCIAL RESULTS

In order to focus our executives on the fundamentals of the Company’s underlying business performance, certain items that are not indicative of ongoing performance may be excluded from the financial results used to determine incentive-based compensation. The Committee considers potential exclusions pursuant 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 include the following categories: “strategic” (such as restructurings, acquisitions and divestitures); “regulatory” (changes in tax or accounting rules); and “external” (extraordinary, non-recurring events such as natural disasters).

For 2017, the Committee reviewed the impact of strategic actions taken in connection with the Company’s Velocity Growth Plan (e.g., refranchising gains and asset impairment related to the sale of disaffiliated markets) on performance-based compensation. Consistent with the guidelines noted above, the Committee determined that it was appropriate to exclude certain credits related to those strategic actions from operating income and earnings per share results for purposes of calculating payouts under 2017 STIP, 2015 performance-based RSU awards and the final Cash LTIP. In addition, for performance-based RSUs, the Committee excluded benefits/costs associated with the Company’s strategic incremental share repurchases and corresponding debt obligations as well as a net tax liability resulting from the 2017 Tax Cut and Jobs Act (Tax Act). As provided in more detail on page 48, the exclusions to operating income meaningfully reduced payouts for the 2017 STIP and 2015-2017 Cash LTIP. These exclusions were applied to the 2015-2017 performance-based RSUs but did not impact payouts.

Payouts under our compensation plans also exclude the effects of foreign currency translation (either positive or negative) since we believe that changes in foreign exchange rates can cause our reported results to appear more or less favorable than business fundamentals indicate.

PEER COMPANIES

Consistent with our goal of providing competitive compensation to incentivize and retain executive talent, we review total direct compensation compared to levels at peer companies that we believe are reflective of our business. When we set executive compensation targets, we use the market median for each compensation element as a reference point; however, we do not specifically target any element of compensation at the market median.

Following an annual review and input from FW Cook, the Committee selects a peer group comprised of 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. Revenues, market capitalization, systemwide sales and TSR are some of the criteria considered in constructing the peer group. Our 24-company peer group (listed below) did not change this year.

3M Company		Johnson & Johnson		Restaurant Brands International Inc.
Best Buy Co., Inc.		Kellogg Company		Starbucks Corporation
The Coca-Cola Company		The Kraft Heinz Company		Target Corporation
Colgate-Palmolive Company		Lowe’s Companies, Inc.		Walgreens Boots Alliance, Inc.
Dunkin’ Brands Group, Inc.		Mondeléz International, Inc.		Wal-Mart Stores, Inc.
FedEx Corporation		NIKE, Inc.		The Walt Disney Company
General Mills, Inc.		PepsiCo, Inc.		The Wendy’s Company
The Home Depot, Inc.		The Procter & Gamble Company		Yum! Brands, Inc.

McDonald’s Corporation

45

---

Table of Contents

Executive Compensation

The following table compares McDonald’s size and performance to that of our peer group.

McDonald’s vs. Peer Group

*	Dollars in millions. Financial data as reported on Bloomberg.com and as of December 31, 2017 unless otherwise indicated.

INTERNAL EXECUTIVE PAY EQUITY

Compensation opportunities reflect our executive officers’ 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). Although our executive pay decisions are based on individual performance and other criteria, we consider the potential impact of internal pay equity on morale, incentive, management alignment and succession planning. In addition, from time to time, we make special one-time equity awards to executives in connection with their hiring, promotion or retention. These awards permit us to meet one-time business objectives with minimum impact to long-term pay equity.

ELEMENTS OF TOTAL DIRECT COMPENSATION

ANNUAL COMPENSATION

BASE SALARY

In setting annual salary levels, we take into account competitive considerations, change in responsibilities, individual performance, tenure in position, internal pay equity and the effect on our general and administrative expenses. In 2017, the Committee did not increase Mr. Easterbrook’s base salary, but increased his equity awards to more closely align his compensation with the interests of shareholders and our long-term performance. As Mr. Kempczinski received a salary increase in late 2016 in connection with his promotion to President, McDonald’s USA; he also did not receive a salary increase in 2017. Messrs. Goare and Ozan and Ms. Lagnado each received a modest salary increase for 2017 as part of the annual review process.

46

2018 Proxy Statement

---

Table of Contents

Executive Compensation

SHORT-TERM CASH INCENTIVE (STIP)

Our STIP rewards growth in annual operating income, which measures the success of the most important elements of our business strategy. 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. If there is no growth in operating income, there is no STIP payout. STIP payouts are capped at 200% of target.

If sufficient operating income growth is achieved, STIP payouts take into account pre-established “modifiers” reflecting other measures of Corporate and/or segment performance that are important drivers of our business. To drive further accountability for and focus on the Company’s strategic objectives, 2017 STIP modifiers were closely aligned with growth accelerators under the Velocity Growth Plan, and the Committee increased the weighting applied to each modifier in determining payouts compared to prior years. 2017 modifiers included the following objective metrics:

Modifier Metric		Description
Comparable Guest Count Growth		●Measures the health of our business ●Strengthens our focus on this important measure ●Potential impact of plus or minus up to 25 percentage points (in 2016, it was plus or minus 10 percentage points)
Implementation of Delivery Initiative		●Incentivizes rapid expansion of our Delivery initiative ●Potential impact of 0 to 25 percentage points

The following graphic illustrates the Corporate STIP payout calculation for 2017:

 

The chart below provides operating income growth necessary to achieve threshold, target and maximum payouts under 2017 STIP for Corporate (prior to adjustment based on the modifiers discussed above):

2017		Threshold		Target		Maximum
Consolidated annual operating income growth*		0%		6.1%		12.4%

*	Payout percentage interpolated for results that fall between each of the performance levels specifically identified.

McDonald’s Corporation

47

---

Table of Contents

Executive Compensation

The following table shows the operating income targets and results under 2017 STIP:

(Dollars in millions)		Target 2017 operating income ($)		Target 2017 operating income growth over 2016 (%)		2017 adjusted operating income* ($)		2017 adjusted operating income growth over 2016 (%)
Corporate		8,484		6.1		8,655		8.2
U.S.		4,002		5.5		4,022		6.0
International Lead Markets (ILM)		3,040		5.8		3,106		8.0
High Growth Markets		1,160		5.8		1,195		8.9
Foundational Markets		1,073		9.9		1,182		21.2

*

Adjusted for the exclusions discussed on page 45, which had the following impact (reduction of operating income) on the calculation of incentive awards (including 2017 STIP, 2015-2017 Cash LTIP and 2015-2017 performance-based RSUs): Corporate $(870) million; U.S. $0; International Lead Markets $(36) million; High Growth Markets $(785) million, and Foundational Markets $(40) million.

The 2017 STIP target awards and payouts for the NEOs are shown in the table below. Please see the notes to the Grants of Plan-Based Awards table on page 57 for more information regarding the team factors applicable to each NEO as well as the impact of the modifiers on these payouts.

Named executive officer		Applicable team factor		Target STIP payment as percentage of salary (%)			2017 target STIP payout ($)			2017 STIP payout ($)		STIP payment as percentage of target (%)
Stephen Easterbrook		Corporate		175	%		2,275,000			3,473,925		152.7
Kevin Ozan		Corporate		100	%		750,000			1,145,250		152.7
Douglas Goare		Corporate (25%) ILM (75%)		90	%		639,000			954,666		149.4
Silvia Lagnado		Corporate		80	%		512,000			781,824		152.7
Christopher Kempczinski		Corporate (25%) U.S. (75%)		90	%		607,500			813,291		133.9
Gloria Santona		Corporate		85	%		98,903	*		151,025		152.7

*	As a result of her March 2017 retirement, Ms. Santona was entitled to a prorated payout.

LONG-TERM INCENTIVE COMPENSATION

48

2018 Proxy Statement

---

Table of Contents

Executive Compensation

RESTRICTED STOCK UNITS (RSUs)

RSUs provide the right to receive a share of McDonald’s stock, subject to certain vesting requirements. RSUs granted to the NEOs typically are subject to both service- and performance-based vesting requirements.

RSUs granted in 2017 as part of the annual cycle will vest on the third anniversary of the grant date, subject to the Company’s achievement of two key financial metrics, compound annual net income growth and ROIIC, subject to a relative TSR modifier over the 2017-2019 performance period, as illustrated in the graphic below. This balanced set of metrics encourages an increase in profitability and an efficient and effective use of capital, which will enhance shareholder value. These awards also align the interests of our NEOs with those of our shareholders by delivering payouts in the form of Company stock.

Payout of the RSUs is limited to 200% of the target award (calculated as a cap of 180% of target based on the two performance metrics, subject to a modifier of up to an additional 20% based on the Company’s cumulative TSR vs. the S&P 500 Index over the performance period).

In addition to the performance-based RSUs awarded as part of the annual grant cycle, an executive may receive a special RSU award (e.g., a sign-on, retention or promotional incentive) from time to time. Such special RSU awards may be either performance-based or time-based. For example, as an incentive to join the Company, Ms. Lagnado received a sign-on award of time-based RSUs in 2017 that vested on the first anniversary of the grant date.

In 2015, the Committee granted RSUs to our executives, which were subject to EPS performance over the 2015 to 2017 performance period. As the Company’s compound annual EPS growth rate exceeded the maximum threshold of 11%, the RSUs vested at 200% of the target amount.

2017-2019*		Threshold			Target			Maximum*
3-year ROIIC		10	%		10 to 24.9	%		25	%
Compound annual net income growth		1	%		5	%		9	%

*	A maximum payout will be earned if the Company achieves 9% net income growth and ROIIC exceeds the 10% threshold over the performance period. At 8% net income growth, a maximum payout can also be earned with ROIIC of at least 25%.

Cumulative TSR v. S&P 500 Index Modifier*
0 - 19%-tile	-20	%
20 - 39%-tile	-10	%
40 - 59%-tile	0	%
60 - 79%-tile	10	%
80 - 100%-tile	20	%

STOCK OPTIONS

Options granted to our NEOs 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, subject to continued service. Options provide value only if our share price increases, thereby closely aligning executive pay with shareholder interests. The Company’s policies and practices regarding option grants, including the timing of grants and the determination of the exercise price, are described on page 53.

McDonald’s Corporation

49

---

Table of Contents

Executive Compensation

LONG-TERM CASH INCENTIVE PLAN (CASH LTIP) — FINAL PAYOUT

The Committee eliminated the Cash LTIP, with the 2015-2017 award being the final cycle. Beginning in 2016, the Committee replaced the Cash LTIP with long-term incentives in the form of options and performance-based RSUs in approximately equal economic proportions. The final Cash LTIP payout was made in March 2018 primarily based on growth in operating income and ROIIC over the 2015-2017 performance period. The Company’s operating income and ROIIC performance during the 2015-2017 period was strong, including our relative TSR, resulting in a final LTIP payout at 176.3% of target. The following graphic depicts the calculation of the 2015-2017 Cash LTIP payouts:

The Company’s elimination of the Cash LTIP and replacement of that value in the form of equity-based awards impacts the compensation amounts disclosed in the 2017 Summary Compensation Table (SCT). As required, the Cash LTIP is included in the SCT in the year of vesting (not the year in which the award is granted as is the case with equity-based awards). As a result, the 2017 SCT includes both the 2015-2017 Cash LTIP payout and the stock option and performance-based RSU awards granted in 2017.

2018 CHANGES TO COMPENSATION PROGRAM

In 2017, the Company undertook a holistic review of our incentive compensation programs (executive and broad-based) to ensure that they continue to reflect our compensation guiding principles and align with the Company’s culture and desired behaviors, as well as reward performance in support of the Velocity Growth Plan. Based on this review, we have implemented the following changes for 2018.

PERFORMANCE-BASED RSUs

While the existing ROIIC performance metric and a TSR modifier were maintained for 2018, the net income metric was replaced with EPS. As our long-term business strategies and financial targets as well as plans for returning capital to shareholders are now established, we believe the strategic measure of EPS is more appropriate. This change also provides further diversification of metrics between our short-term plans and our long-terms plans. In addition, dividend equivalent rights will now accumulate on RSUs. Both of these changes are consistent with market practice.

50

2018 Proxy Statement

---

Table of Contents

Executive Compensation

EXPANDED CLAWBACK PROVISIONS

Our cash incentives have contained clawback provisions since 2013. In order to strengthen these protections, beginning in 2018, we added clawbacks to the existing forfeiture provisions provided for in our equity awards to executives. This change furthers the following key principles — maintaining sound corporate governance policies, encouraging accountability and managing risk. For further details on our clawbacks, please see page 53.

ENHANCED DIFFERENTIATION

To further reinforce our pay for performance culture, we have enhanced our focus on differentiating top performers, including through increases in base salary and above-target equity grants.

SHAREHOLDER ENGAGEMENT AND STRONG SUPPORT OF SAY ON PAY

Throughout the year, management and Directors engage in dialogue with a significant portion of the Company’s shareholder base on a variety of matters important to both the Company and its investors, including our executive compensation program (for more details see page 35). The Committee considers feedback received through direct discussions with investors as well as previous “Say on Pay” results and the voting results of any shareholder proposals related to our executive compensation program. Our compensation program has received very strong shareholder support over the last five years, receiving at least 94% support in each year (including 95% in 2017).

OTHER COMPENSATION ELEMENTS

RETIREMENT SAVINGS ARRANGEMENTS

We believe a competitive retirement program contributes to the recruitment and retention of top executive talent. NEOs participate in the same tax-qualified defined contribution retirement savings plan and non-tax qualified deferred compensation retirement plan applicable to U.S.-based employees.

SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS

The Company has a broad-based U.S. severance plan that covers our NEOs. Benefits under the severance plan are described under “Potential Payments Upon Termination of Employment” on page 62.

The Company does not have any change in control agreements. Further, we do not provide for any single-trigger severance benefits or Section 280G tax gross-up payments.

PERQUISITES AND OTHER BENEFITS

The Company provides certain limited perquisites to NEOs, including a car allowance, financial planning, physical examination (which are also available for the NEOs’ spouses), life insurance, matching charitable donations, and limited personal items. The safety and security of our employees is a priority for the Company, accordingly, we provide risk-based executive security for select NEOs. As an additional security measure, the CEO uses the Company’s aircraft for personal use, subject to reimbursement of a portion of the cost.

The Company does not provide any tax gross-ups on perquisites. NEOs also participate in all of the broad-based benefit and welfare plans available to Company staff in general.

McDonald’s Corporation

51

---

Table of Contents

Executive Compensation

RETIREMENT OF GLORIA SANTONA

Ms. Santona retired in March 2017. Ms. Santona was the last participant in the Executive Retention Replacement Plan (ERRP), an executive retention program established in 1999 that the Committee stopped offering to new participants in 2003. Under the ERRP, Ms. Santona qualified for specified retirement benefits, including a cash payment of approximately $3.4 million, as well as full vesting of her outstanding equity awards. Ms. Santona’s stock options will continue to become exercisable on their originally scheduled dates and her RSUs will be paid out on the originally scheduled dates, based on the Company’s achievement of the applicable performance goals. Ms. Santona satisfied all of the ERRP’s commitments, including the delivery of post-termination covenants not to compete, not to solicit employees, nondisparagement and nondisclosure covenants as well as a release of claims.

The ERRP cash payment to Ms. Santona is included in the SCT beginning on page 54, and details of her retirement benefits are more fully described on page 64.

COMPENSATION POLICIES AND PRACTICES

POLICY REGARDING MANAGEMENT’S STOCK OWNERSHIP

The Company maintains stock ownership requirements because it believes executives will more effectively pursue the long-term interests of shareholders if they are long-term shareholders themselves. The Committee reviews compliance with these stock ownership requirements annually. Based on the most recent annual evaluation, all NEOs are in compliance with the policy.

The following table illustrates our stock ownership requirements.

Stock ownership requirements		Multiple of salary
President & CEO		6x
Other NEOs		4x

Executives have five years to achieve their required ownership level. This five-year period restarts when an executive is promoted to a position with a higher ownership requirement. In response to shareholder feedback, the Company enhanced its policy to require that if an executive is not on track to meet his/her ownership requirements following the third year of the five-year period, he or she must retain the lesser of 50% of the net after-tax shares received upon the vesting of an RSU award or such percentage of net after-tax shares necessary to satisfy the applicable requirement. If an executive has not achieved the requisite stock ownership within five years, he or she must retain 100% of the net after-tax shares received upon the vesting of an RSU award and/or a stock option exercise until the required ownership level is attained.

POLICY REGARDING PROHIBITION ON PLEDGING AND HEDGING

The Company has adopted restrictions that prohibit executives from engaging in pledging and/or derivative transactions to hedge the risk associated with their stock ownership. Further, executives may not enter into an agreement that has the effect of transferring or exchanging economic interest in any award.

INDEPENDENT COMPENSATION CONSULTANT

The Committee has the sole authority to retain and dismiss an independent compensation consultant, and has engaged FW Cook as its consultant. FW Cook also provides assistance to the Board in compiling and summarizing the results of Board and Director evaluations and advising on Director compensation. Consistent with its Charter, the Committee regularly considers FW Cook’s independence and, in 2017, the Committee concluded that FW Cook is independent and that its work for the Committee did not raise any conflicts of interest. Management may not engage the Committee’s consultant for any purpose.

52

2018 Proxy Statement

---

Table of Contents

Executive Compensation

CLAWBACKS AND FORFEITURE PROVISIONS

The Company’s equity grant agreements contain a repayment/forfeiture provision that triggers repayment of any benefits received in connection with such grants as may be required to comply with (i) New York Stock Exchange listing standards adopted in accordance with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the Securities and Exchange Commission adopted thereunder, and (ii) similar rules under the laws of any other jurisdiction, as well as pursuant to any policies adopted by the Company to implement such requirements, in all cases to the extent determined by the Company in its discretion to be applicable to the award recipient.

In addition, the Committee revised the Company’s equity grant agreements beginning in 2018 to provide that, consistent with provisions already applicable to awards made under the STIP and the Cash LTIP, the Company may terminate participation in the current cycle and/or recapture previously paid award(s) if a participant engages in willful fraud that: (i) causes harm to the Company or (ii) is intended to manipulate performance goals either during employment, or after employment has terminated. Furthermore, starting in 2018, equity awards to our executives will include restrictive covenant obligations that will apply to all terminations of employment and an executive who violates restrictive covenants to which he or she is subject will forfeit outstanding equity awards, whether or not vested, and may be required to repay awards that have previously been paid.

RISK AND COMPENSATION PROGRAMS

Our compensation program is designed to mitigate the potential to reward unreasonable 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. In particular, our executive compensation program seeks to provide an appropriate balance of short-term and long-term incentives. Our incentive program incorporates performance metrics related to various measures of operational performance. By diversifying the time horizons and the applicable performance metrics of our incentives, we seek to mitigate the risk of significant compensation payments based on accomplishments in one area that may have a negative consequence for our business as a whole.

The Company reviews its compensation programs, including broad-based programs, taking into consideration the factors described above. Based on this review, the Company does not believe that the risks arising from its compensation program are reasonably likely to have a material adverse effect on the Company.

POLICY WITH RESPECT TO TAX DEDUCTIBILITY OF COMPENSATION

Our compensation programs were designed to permit the Company to deduct compensation expense under Section 162(m) of the Internal Revenue Code (Code), which historically limited the tax deductibility of annual compensation paid to NEOs other than the CFO to $1 million, unless the compensation qualified as “performance-based,” although the Company reserved the right to pay compensation that did not qualify as “performance-based” from time to time.

The Tax Act eliminated the ability to rely on this “performance-based” exception unless the compensation is payable pursuant to a binding written agreement in effect on November 2, 2017. The Tax Act also expanded the limitation on deductibility generally to include all of the NEOs. As a result, the Company will generally no longer be able to take a deduction for any compensation paid to its NEOs in excess of $1 million.

POLICIES AND PRACTICES REGARDING EQUITY AWARDS

The Company does not grant equity awards when in possession of 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 (e.g., for certain new hires or promotions). Stock options may be granted only with an exercise price at or above the closing market price of the Company’s stock on the date of grant.

McDonald’s Corporation

53

---

Table of Contents

Executive Compensation

COMPENSATION TABLES

SUMMARY COMPENSATION TABLE

The table below summarizes the total compensation earned by our NEOs in 2017, 2016 and 2015.

Name and principal position (a)		Year (b)		Salary ($)(c)(1)		Bonus ($)(d)			Stock awards ($)(e)(2)(3)			Option awards ($)(f)(2)(4)			Non-equity incentive plan compensation ($)(g)(2)				All other compensation ($)(i)(5)		Total ($)(j)(2)
Stephen Easterbrook President and Chief Executive Officer		2017		1,300,000		0			5,301,249			5,318,329			Annual:		3,473,925		743,905		21,761,052
															Long-term:		5,623,644
															Total:		9,097,569
		2016		1,266,667		0			5,108,811			3,897,785			Annual:		4,447,625		523,665		15,355,746
															Long-term:		111,193
															Total:		4,558,818
		2015		1,025,000		0			2,968,674			2,104,524			Annual:		1,469,797		341,301		7,909,296
															Long-term:		0
															Total:		1,469,797
Kevin Ozan Corporate Executive Vice President and Chief Financial Officer		2017		741,667		0			1,204,846			1,208,724			Annual:		1,145,250		160,166		5,474,378
															Long-term:		1,013,725
															Total:		2,158,975
		2016		683,333		0			1,277,262			974,446			Annual:		1,368,500		110,247		4,437,188
															Long-term:		23,400
															Total:		1,391,900
		2015		568,333		0			534,434			378,818			Annual:		503,223		76,662		2,061,470
															Long-term:		0
															Total:		503,223
Douglas Goare President, International Lead Markets and Chief Restaurant Officer		2017		705,833		0			963,976			966,982			Annual:		954,666		975,712		5,598,524
															Long-term:		1,031,355
															Total:		1,986,021
		2016		648,750		0			1,021,786			779,565			Annual:		1,057,760		1,249,941		4,849,062
															Long-term:		91,260
															Total:		1,149,020
		2015		586,667		0			623,463			441,950			Annual:		659,277		963,909		3,275,266
															Long-term:		0
															Total:		659,277
Silvia Lagnado Corporate Executive Vice President and Global Chief Marketing Officer (6)		2017		636,333		0			1,238,665			604,362			Annual:		781,824		123,098		3,973,663
															Long-term:		589,381
															Total:		1,371,205
		2016		615,000		337,500	(6)		1,138,466			350,805			Annual:		966,552		54,848		3,463,171
															Long-term:		0
															Total:		966,552
Christopher Kempczinski President, McDonald’s USA (7)		2017		675,000		0			843,479			846,103			Annual:		813,291		120,846		3,847,453
															Long-term:		548,734
															Total:		1,362,025
		2016		612,500		200,000	(7)		0	(7)		0	(7)		Annual:		961,860		14,784		1,789,144
															Long-term:		0
															Total:		961,860
		2015		111,538		200,000	(7)		1,268,848			447,479			Annual:		78,329		14,607		2,120,801
															Long-term:		0
															Total:		78,329
Gloria Santona Former Executive Vice President, General Counsel and Secretary (8)		2017		114,167		0			0			0			Annual:		151,025		3,475,536		4,289,462
															Long-term:		548,734
															Total:		699,759

54

2018 Proxy Statement

---

Table of Contents

Executive Compensation

(1)	Reflects annual increases in base salary that took effect during 2017. Annual base salaries as of December 31, 2017 were as follows: Messrs. Easterbrook: $1,300,000; Ozan: $750,000; Goare: $710,000; and Kempczinski: $675,000; and Ms. Lagnado: $640,000. The base salary of Ms. Santona as of her last day of employment was $685,000.
(2)	In 2016, the Company eliminated the long-term cash incentive plan (Cash LTIP). The 2015-2017 period was the last remaining cycle under the Cash LTIP and was paid in March 2018. This is reflected in column (g) in the “Long-term” row. The Cash LTIP was replaced with annual grants of additional performance-based RSUs and options in generally equal proportions, which are reflected in columns (e) and (f). Because the above table shows both the last remaining cycle under the Cash LTIP and the equity grants that replaced that program, the “Total” column depicts relatively higher compensation attributed to 2017 than in prior years.
(3)	Represents the aggregate grant date fair value of restricted stock units (RSUs) granted under the McDonald’s Corporation 2012 Omnibus Stock Ownership Plan (2012 Plan) based on the probable outcome of the applicable performance conditions and excluding the effect of estimated forfeitures during the applicable vesting periods of RSUs, as computed in accordance with Accounting Standards Codification (ASC) 718. Values are based on the closing price of the Company’s common stock on the grant date, less the present value of expected dividends over the vesting period. Performance-based RSUs vest on the third anniversary of the grant date and are subject to performance-based vesting conditions linked to the achievement of ROIIC and, beginning with 2016 grants, net income and a relative TSR modifier over the performance period (as described on page 49). The fair value of performance-based RSUs that include the TSR modifier is determined using a Monte Carlo valuation model. 2015 grants of performance-based RSUs were linked to the achievement of target levels of diluted earnings per share growth.
	This also includes, for Ms. Lagnado and Mr. Kempczinski, grants of service-based RSUs, which were granted as incentives to join the Company, as further discussed below in footnotes 6 and 7, respectively.
	Additional information is disclosed in the Grants of Plan-Based Awards table on pages 57-58 and the Outstanding Equity Awards at 2017 Year-End table on pages 59-60. 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 38 and 49 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
(4)	Represents the aggregate grant date fair value of options granted under the 2012 Plan, excluding the effect of estimated forfeitures during the applicable vesting periods of options, as computed in accordance with ASC 718. Options have an exercise price equal to the closing price of the Company’s common stock on the grant date, vest in equal installments over a four-year period and are subject to the 2012 Plan, as applicable. Values for options granted in 2017 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 18.4%; an expected annual dividend yield of 3.1%; a risk-free return of 2.2%; and expected option life based on historical experience of 5.9 years.
	Additional information about options is disclosed in the Grants of Plan-Based Awards table on pages 57-58 and the Outstanding Equity Awards at 2017 Year-End table on pages 59-60. 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 pages 38 and 49 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
(5)	“All other compensation” for 2017 includes the Company’s contributions to the 401k Plan and Deferred Compensation Plan as follows:

McDonald’s Corporation

55

---

Table of Contents

Executive Compensation

	Because Mr. Goare is based overseas, the amount in this column includes certain benefits in connection with his international assignment including: Company-provided housing (in the amount of $198,620), which includes: rent, rental furniture and utilities; a cost-of-living adjustment; appliances; a property management fee; a security deposit; shipment of household goods; home leave travel, relocation allowance and assistance; departure and international destination services; tax preparation services; and tax equalization (in the amount of $509,425), which is designed to satisfy tax obligations arising solely as a result of his international assignment. In addition, certain amounts were paid in local currency. In these cases, when the information is available, the amounts reported reflect the exchange rate on the date the respective payments were made, and when the information is not available, the amounts reported reflect the average monthly exchange rate.
	For Ms. Santona, the amount in this column includes an Executive Retention and Replacement Plan (ERRP) payment of $3,393,234 that she earned by satisfying the conditions of the ERRP, as well as $1,680 for a retirement gift in recognition of her service to the Company.
(6)	As an incentive to join the Company in 2015, Ms. Lagnado received a sign-on bonus, $337,500 of which was paid in 2016, a sign-on equity grant under the 2012 Plan of $700,000, 50% of which was in the form of stock options which vest equally on the first four anniversaries of the grant date and 50% in the form of performance-based RSUs, which vest in full on August 7, 2018, subject to the achievement of performance conditions, and a sign-on equity grant under the 2012 Plan of $700,000 of service-based RSUs, which vested on August 7, 2016.
(7)	As an incentive to join the Company in 2015 as Corporate Executive Vice President-Strategy, Mr. Kempczinski received a sign-on bonus, $200,000 of which was paid in each of 2015 and 2016, and a sign-on equity grant under the 2012 Plan of $1,250,000, 50% of which was in the form of stock options which vest equally on the first four anniversaries of the grant date and 50% in the form of performance-based RSUs, which vest in full on November 12, 2018, subject to the achievement of performance conditions, and a sign-on equity grant under the 2012 Plan of $750,000 of service-based RSUs, which vest in three equal annual installments beginning on November 12, 2016. In light of his initial sign-on equity grant, Mr. Kempczinski did not receive an equity grant in February 2016 when the other NEOs received their annual awards. Mr. Kempczinski was promoted to President, McDonald’s USA effective January 1, 2017.
(8)	Ms. Santona retired from the Company, effective March 3, 2017. Ms. Santona’s STIP and Cash LTIP awards were prorated through her retirement date in accordance with the terms of the applicable plans.

56

2018 Proxy Statement

---

Table of Contents

Executive Compensation

GRANTS OF PLAN-BASED AWARDS

						Estimated future payouts under non-equity incentive plan awards (1)						Estimated future payouts under equity incentive plan awards (2)						All other stock awards: number of shares of stock or units (#)(i)		All other option awards: number of securities underlying option (#)(j)		Exercise  or base price of option awards ($/Sh)(k)		Grant date fair value of stock and option awards ($)(l)(3)
Name (a)		Plan		Grant date (b)		Threshold ($)(c)		Target ($)(d)		Maximum ($)(e)		Threshold (#)(f)		Target (#)(g)		Maximum (#)(h)
Stephen Easterbrook		STIP				0		2,275,000		4,550,000
		Equity Plan (4)		3/8/2017								0		42,939		85,878								5,301,249
		Equity Plan (5)		3/8/2017																330,331		128.09		5,318,329
Kevin Ozan		STIP				0		750,000		1,500,000
		Equity Plan (4)		3/8/2017								0		9,759		19,518								1,204,846
		Equity Plan (5)		3/8/2017																75,076		128.09		1,208,724
Douglas Goare		STIP				0		639,000		1,278,000
		Equity Plan (4)		3/8/2017								0		7,808		15,616								963,976
		Equity Plan (5)		3/8/2017																60,061		128.09		966,982
Silvia Lagnado		STIP				0		512,000		1,024,000
		Equity Plan (4)		3/8/2017								0		4,880		9,760								602,485
		Equity Plan (5)		3/8/2017																37,538		128.09		604,362
		Equity Plan (6)		3/8/2017														5,465						636,181
Christopher Kempczinski		STIP				0		607,500		1,215,000
		Equity Plan (4)		3/8/2017								0		6,832		13,664								843,479
		Equity Plan (5)		3/8/2017																52,553		128.09		846,103
Gloria Santona (7)		STIP				0		98,903		197,806

(1)	In 2017, each of the NEOs received an annual cash award under the STIP. Columns (d) and (e) show the target and maximum awards they could have earned. Actual STIP payouts are in column (g) of the Summary Compensation Table. The amount paid to Ms. Santona was prorated to reflect service during 2017. STIP awards for 2017 were equal to a percentage of salary. STIP measures performance using a “team factor” that is initially determined based on growth in operating income. See the Compensation Discussion and Analysis at pages 47-48 for a discussion of operating income targets, as adjusted for certain exclusions. The target level of growth produces a 100% payout and a payout can be achieved from the threshold of 0% to the maximum. Payouts can then be adjusted up or down, within specified limits, based on “modifiers” that reflect other measures of Corporate and/or segment performance that are important drivers of our business. In 2017, these modifiers included comparable guest count growth and implementation of the Company’s delivery initiative. The target amount is multiplied by the team factor, which includes the modifiers. The maximum STIP payout is 200% of target.
(2)	In 2017, all of the NEOs other than Ms. Santona, who retired from the Company effective March 3, 2017, received two types of equity awards: RSUs subject to performance-based vesting conditions (see columns (f), (g), (h) and (l)) and options (see columns (j), (k) and (l)).
(3)	The values in this column for RSUs and options were determined based on the assumptions described in footnotes 3 and 4, respectively, to the Summary Compensation Table.

McDonald’s Corporation

57

---

Table of Contents

Executive Compensation

(4)	Reflects grants of RSUs subject to performance-based vesting conditions. The RSUs vest on March 8, 2020, subject to achievement of a 3-year compound annual net income growth of 5% and 3-year ROIIC of 10-25%. If the targets are achieved, 100% of the RSUs will vest. If net income growth is above or below target and ROIIC is at or above the 10% threshold, the awards will vest proportionally. In addition, if net income growth and ROIIC thresholds are achieved, a TSR modifier can impact final payouts by up to plus or minus 20 percentage points. The maximum payout is 200% of target. See page 49 for more information.
(5)	Reflects grants of options in 2017. For details regarding options, refer to footnote 4 to the Summary Compensation Table.
(6)	As an incentive to join the Company, Ms. Lagnado received an equity grant of service-based RSUs in each of 2015, 2016 and 2017. The 2017 award is reflected in this table (see column (i)).
(7)	In connection with Ms. Santona’s retirement, she will continue to vest in outstanding options pursuant to their original vesting schedule and such options shall remain outstanding until the original expiration date, and her RSUs will be paid out on the originally scheduled dates, based on the Company’s achievement of the applicable performance goals. She was not granted any options or RSUs in 2017.

2017 STIP

The target STIP awards, the team factors (including the impact of the modifiers), and the final payouts for the NEOs in 2017 are summarized below:

Name		Target STIP award (% of salary)		Applicable team factor(s)		Team factor(s) before application of modifiers (% of target award)		Impact of modifiers (% added or subtracted)		Final STIP award ($)(1)
Stephen Easterbrook		175		Corporate		125.2		+27.5		3,473,925
Kevin Ozan		100		Corporate		125.2		+27.5		1,145,250
Douglas Goare		90		Corporate (25%)		125.2		+27.5		954,666
				ILM (75%)		127.1		+21.2
Silvia Lagnado		80		Corporate		125.2		+27.5		781,824
Christopher Kempczinski		90		Corporate (25%)		125.2		+27.5		813,291
				U.S. (75%)		106.3		+21.3
Gloria Santona (2)		85		Corporate		125.2		+27.5		151,025

(1)	These amounts are also reflected in column (g) of the Summary Compensation Table.
(2)	The target award was prorated for Ms. Santona for her service through March 3, 2017, in accordance with the terms of the STIP.

58

2018 Proxy Statement

---

Table of Contents

Executive Compensation

OUTSTANDING EQUITY AWARDS AT 2017 YEAR-END

		Option awards								Stock awards
Name (a)		Number of securities underlying unexercised options exercisable (#)(b)(1)		Number of securities underlying unexercised options unexercisable (#)(c)(1)		Option exercise price ($)(e)		Option expiration date (f)		Number of shares or units of stock that have not vested (#)(g)(2)		Market value of shares or units of stock that have not vested ($)(h)(3)		Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)(i)(4)		Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(j)(3)(4)
Stephen Easterbrook		0		7,903		94.89		02/12/2024
		0		100,888		97.15		03/16/2025
		71,388		214,164		116.73		02/11/2026
		0		330,331		128.09		03/08/2027						120,085		20,669,030
Kevin Ozan		11,755		0		75.93		02/09/2021
		20,291		0		100.05		02/08/2022
		10,639		0		94.00		02/13/2023
		8,498		2,831		94.89		02/12/2024
		18,160		18,160		97.15		03/16/2025
		17,847		53,541		116.73		02/11/2026
		0		75,076		128.09		03/08/2027						26,645		4,586,137
Douglas Goare		38,481		0		100.05		02/08/2022
		34,575		0		94.00		02/13/2023
		27,661		9,220		94.89		02/12/2024
		21,187		21,186		97.15		03/16/2025
		14,280		42,831		116.73		02/11/2026
		0		60,061		128.09		03/08/2027						23,581		4,058,762
Silvia Lagnado		10,408		10,406		98.92		08/07/2025
		6,425		19,275		116.73		02/11/2026
		0		37,538		128.09		03/08/2027		5,465		940,636		12,275		2,112,773
Christopher Kempczinski		18,584		18,582		112.11		11/12/2025
		0		52,553		128.09		03/08/2027		2,230		383,828		12,407		2,135,493
Gloria Santona (5)		20,052		0		75.93		02/09/2021
		30,085		0		100.05		02/08/2022
		22,873		0		94.00		02/13/2023
		17,783		5,927		94.89		02/12/2024
		13,620		13,620		97.15		03/16/2025
		9,389		28,161		116.73		02/11/2026						10,266		1,766,984

(1)	In general, options expire on the tenth anniversary of grant. For details regarding customary equity treatment upon termination, the section on Potential Payments Upon Termination of Employment or Change in Control beginning on page 62.
(2)	Our typical practice is to grant RSUs subject to performance-based vesting conditions to our NEOs. The RSUs shown in columns (g) and (h) for Ms. Lagnado reflect a sign-on grant of service-based RSUs, which vested on March 8, 2018. Similarly, Mr. Kempczinski’s RSUs shown in columns (g) and (h) reflect a sign-on grant of service-based RSUs, which are scheduled to vest on November 12, 2018.
(3)	Calculated by multiplying the number of shares covered by the award by $172.12, the closing price of Company stock on the New York Stock Exchange on December 29, 2017, the last trading day in 2017.

McDonald’s Corporation

59

---

Table of Contents

Executive Compensation

(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 early 2018):

	Named executive officer		Vesting date		Number of performance-based RSUs
	Stephen Easterbrook		3/16/2018		34,312	*
			2/11/2019		42,834
			3/8/2020		42,939
	Kevin Ozan		3/16/2018		6,177	*
			2/11/2019		10,709
			3/8/2020		9,759
	Douglas Goare		3/16/2018		7,206	*
			2/11/2019		8,567
			3/8/2020		7,808
	Silvia Lagnado		8/7/2018		3,539
			2/11/2019		3,856
			3/8/2020		4,880
	Christopher Kempczinski		11/12/2018		5,575
			3/8/2020		6,832
	Gloria Santona		3/16/2018		4,633	*
			2/11/2019		5,633

*

200% of these shares vested as a result of the Company’s performance during the 2015-2017 performance period.

(5)	In connection with Ms. Santona’s retirement, under the ERRP, she will continue to vest in outstanding RSUs and options pursuant to their original vesting schedule, and her options will remain outstanding until their original expiration date.

OPTION EXERCISES AND STOCK VESTED — FISCAL 2017

		Option awards				Stock awards
Name (a)		Number of shares acquired on exercise (#)(b)		Value realized on exercise ($)(c)		Number of shares acquired on vesting (#)(d)		Value realized on vesting ($)(e)
Stephen Easterbrook		171,577		12,204,576		2,214		278,565
Kevin Ozan		25,322		2,491,359		2,108		265,229
Douglas Goare		17,286		1,427,305		2,582		324,867
Silvia Lagnado		0		0		5,997		754,543
Christopher Kempczinski		0		0		2,230		369,266
Gloria Santona (1)		49,813		4,520,758		1,661		208,987

(1)	Ms. Santona exercised all of the stock options referenced above following her retirement.

60

2018 Proxy Statement

---

Table of Contents

Executive Compensation

NON-QUALIFIED DEFERRED COMPENSATION — FISCAL 2017

Name (a)		Executive contributions in last FY ($)(b)(1)		Registrant contributions in last FY ($)(c)(1)		Aggregate earnings in last FY ($)(d)		Aggregate withdrawals/ distributions ($)(e)			Aggregate balance at last FYE ($)(f)(2)
Stephen Easterbrook		328,657		328,657		13,303		0			1,161,463
Kevin Ozan		398,033		110,410		446,657		0			3,800,630
Douglas Goare		240,539		89,616		782,179		0			4,584,086
Silvia Lagnado		1,020,286		79,973		255,033		0			1,355,292
Christopher Kempczinski		120,486		82,012		13,975		0			216,473
Gloria Santona		68,298		68,298		272,905		(2,845,627	)		4,395,936

(1)	Represents salary deferrals which are also reported as compensation for 2017 in the Summary Compensation Table.
(2)	Includes the following aggregate amounts reported in the Summary Compensation Table in prior years:

	Stephen Easterbrook	$	484,161
	Kevin Ozan	$	383,870
	Douglas Goare	$	784,951
	Silvia Lagnado		$0
	Christopher Kempczinski		$0
	Gloria Santona	$	185,939

DEFERRED COMPENSATION PLAN

The Company’s Deferred Compensation Plan (Deferred Plan) is a non-tax-qualified, unfunded deferred compensation plan that allows NEOs and certain highly compensated staff employees to: (i) make tax-deferred contributions from their salary, STIP and Cash LTIP awards; and (ii) receive Company matching contributions (on deferrals of salary and STIP awards only), in excess of the Internal Revenue Service (IRS) limits under the Company’s 401k Plan.

At the time of deferral, participants must elect how and when they will receive distributions. Participants can elect from the following distribution options: (i) lump-sum in-service distributions; (ii) lump-sum distributions upon separation from service, or (iii) installment payments upon separation from service. Installment payments can be paid over 5, 10 or 15 years. Distributions upon a separation from service are delayed for six months following the participant’s separation.

Deferrals are nominally invested in investment options 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 returns of the 401k Plan’s Capital Preservation Fund, Large Cap Equity Index Fund, and the Company’s Common Stock Fund.

SUPPLEMENTAL PROFIT SHARING AND SAVINGS PLAN

Prior to the adoption of the Deferred Plan, the Company’s Supplemental Profit Sharing and Savings Plan (Supplemental Plan) allowed participants to defer compensation in excess of the IRS limits that applied to the 401k Plan. 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 STIP payouts. At the end of 2004, the Company froze the Supplemental Plan. The investment options for existing accounts under the Supplemental Plan are identical to those under the Deferred Plan. A participant may elect to have distributions in a single lump-sum, in installments commencing on a date of the participant’s choice or in an initial lump-sum payment with subsequent installment payments.

McDonald’s Corporation

61

---

Table of Contents

Executive Compensation

Distributions may commence in the year following termination or any later date and must be completed within 25 years. If the participant does not file a distribution election in the year of termination, the participant’s entire Supplemental Plan balance is paid out in cash in the calendar year following termination. In-service and hardship withdrawals are permitted subject to certain conditions.

POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL

The Company has a broad-based U.S. severance plan that covers our NEOs. Our NEOs are entitled to certain payments and benefits in connection with a termination of employment or change in control followed by termination of employment, as described below. Post-termination arrangements for Ms. Santona, who retired from the Company prior to December 31, 2017, are discussed under its own subheading.

TERMINATION OF EMPLOYMENT

SEVERANCE PLAN

Messrs. Easterbrook, Ozan, Goare, Kempczinski and Ms. Lagnado would have received severance benefits under the McDonald’s Corporation Severance Plan (Severance Plan) if they were terminated by the Company without “cause,” due to a reduction in work force or job elimination. The Severance Plan excludes severance benefits in the event of termination for performance reasons.

The applicable benefits consist of a lump-sum payment with respect to severance pay, based on final salary, and a continued subsidy 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 STIP and Cash LTIP payments based on actual performance (and paid at the same time payments are made to other participants), unused sabbatical leave, and transitional assistance. Payments would be delayed for six months following termination of employment to the extent required under Code Section 409A.

The value of the benefits that would have been payable to eligible NEOs under the Severance Plan, assuming a covered termination of employment on December 31, 2017, are set forth below.

Name		Salary continuation ($)		Benefit continuation ($)		Other (sabbatical and transition assistance) ($)(1)		Total ($)
Stephen Easterbrook		650,000		2,550		25,000		677,550
Kevin Ozan		576,923		3,923		127,385		708,231
Douglas Goare		710,000		15,443		12,000		737,443
Silvia Lagnado		320,000		6,299		12,000		338,299
Christopher Kempczinski		337,500		6,982		12,000		356,482

(1)	Includes eligible sabbatical time for Mr. Ozan.

STOCK OPTIONS

Unvested options are generally forfeited on termination of employment, with vested options remaining outstanding and exercisable for 90 days, except on termination for “cause.”

If the NEO qualifies for favorable treatment (by satisfying the conditions for retirement or “special circumstances,” which includes termination by the Company without “cause,” and agreeing to the restrictive covenants and a general release of claims in favor of the Company), the options continue to become exercisable on the originally scheduled dates and remain exercisable for an extended post-termination exercise period (the full term of the option in the case of retirement and for a lesser period in the case of “special circumstances”), as applicable. If a NEO terminates employment as a result of death or disability,

62

2018 Proxy Statement

---

Table of Contents

Executive Compensation

the options vest upon termination and remain exercisable for an extended post-termination exercise period. If a NEO violates a restrictive covenant following termination, the Company may cancel any outstanding options. Further, if a NEO terminates employment for any reason other than death or disability, all options granted in the last 12 months are generally forfeited upon termination, although the Committee may elect to waive that forfeiture.

Per the terms of their sign-on arrangements:

●	In the event Ms. Lagnado voluntarily or involuntarily terminates (excluding for “cause”) her employment following three years from her August 2015 start date, she will receive two years of additional vesting and a two-year post-termination period to exercise her outstanding sign-on options.
●	In the event Mr. Kempczinski’s employment is terminated by the Company without “cause” prior to the vesting dates of his sign-on options, they will continue to vest and be exercisable per their regular vesting and exercisability schedules and may be exercised at any time prior to and including the option expiration date.

RSUs

Unvested RSUs are generally forfeited on termination of employment. As discussed on page 49, the Company’s practice generally is to grant NEOs RSUs subject to performance-based vesting conditions. In the case of certain termination events (including retirement and termination by the Company without “cause”), generally NEOs are entitled to full or pro-rata vesting with respect to their unvested RSUs; however, performance-based RSUs are not accelerated on termination of employment and vesting remains subject to the satisfaction of the applicable performance conditions, which is determined following completion of the performance period. Further, if a NEO terminates employment for any reason other than death or disability, all RSUs granted in the last 12 months are generally forfeited upon termination, although the Committee may elect to waive that forfeiture. Further, the Committee may waive the achievement of performance goals on death or disability. With respect to the performance-based RSUs held by our NEOs, we are not able to calculate the hypothetical value that each NEO could have realized as a result of a termination of employment, as vesting may be based not only on the portion of the vesting period in which the NEO remained employed, but also on the Company’s actual performance through the entire performance period.

Per the terms of their respective sign-on arrangements:

●

In the event Ms. Lagnado voluntarily or involuntarily terminates (excluding for “cause”) her employment following three years from her August 2015 start date, she will vest in a pro-rata portion of her sign-on grant of RSUs based on the number of months worked during the vesting period, with a minimum prorated vesting equal to 6 months of service in the case of involuntary termination. If Ms. Lagnado’s employment had been involuntarily terminated by the Company on December 31, 2017, she would have realized a value of $784,007.

●

Effective April 26, 2017, in the event Mr. Kempczinski’s employment is terminated by the Company without “cause” prior to the vesting dates of his sign-on grant of RSUs, they will continue to vest per their regular vesting schedule.

McDonald’s Corporation

63

---

Table of Contents

Executive Compensation

POST-TERMINATION ARRANGEMENT FOR MS. SANTONA

In connection with Ms. Santona’s retirement on March 3, 2017 pursuant to the ERRP, Ms. Santona received a payment of $3,393,234, which includes $105,385 in lieu of untaken sabbatical as well as $53,628 of a continued subsidy of health benefits for 18 months and $50,000 to replace certain fringe benefits. Ms. Santona continued to vest in her outstanding options pursuant to their original vesting schedule and such options shall remain outstanding until the original expiration date, and her RSUs will be paid out on the originally scheduled dates, based on the Company’s achievement of the applicable performance goals.

CHANGE IN CONTROL

The Company does not have any change in control agreements. However, a change in control may trigger certain rights under the Severance Plan and the 2012 Plan.

A “change in control” is generally defined in the 2012 Plan 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.

SEVERANCE PLAN PAYMENTS

Following a change in control, Messrs. Easterbrook, Ozan, Goare, and Kempczinski and Ms. Lagnado would be entitled to payments under the Severance Plan as described above in the event their employment is terminated and they otherwise qualify for the payments and benefits thereunder.

TREATMENT OF EQUITY AWARDS UPON A CHANGE IN CONTROL

Under the 2012 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 grantee’s 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 are not 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 NEO’s death, disability or termination of employment, subject to any required delay under Code Section 409A. Terminations initiated by the NEO will not result in accelerated vesting of replacement awards.

64

2018 Proxy Statement

---

Table of Contents

Executive Compensation

If a change in control had occurred on December 31, 2017 and either (i) the outstanding options and RSUs held by the NEOs could not be replaced or (ii) the Committee so determined, assuming that the transaction met the applicable definition of a change in control under the 2012 Plan and Code Section 409A: (i) options would have become fully vested, exercisable and free of restrictions; 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, 2017 are set forth in the Outstanding Equity Awards at 2017 Year-End table on pages 59-60.

The table below summarizes the value of the change in control payments 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 Company’s common stock on December 29, 2017 (the last trading day in 2017) and (ii) in the case of RSUs, the target number of shares, multiplied by the closing price of the Company’s common stock on December 29, 2017. 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 was no change in control, the amounts shown would have vested over time, subject to continued employment and, with respect to the RSUs, subject to performance-based vesting conditions.

Name		Stock options (closing price on 12/29/17 minus exercise price) ($)		RSUs (target number of shares multiplied by closing price on 12/29/17) ($)		Total ($)
Stephen Easterbrook		34,580,940		20,669,030		55,249,970
Kevin Ozan		7,851,326		4,586,137		12,437,463
Douglas Goare		7,317,270		4,058,762		11,376,032
Silvia Lagnado		3,482,160		3,053,409		6,535,569
Christopher Kempczinski		3,429,014		2,519,320		5,948,334

DEFERRED COMPENSATION

Following separation from service for any reason, the NEOs will receive distributions from their accounts under the Deferred Plan and the Supplemental Plan in accordance with their elected distribution schedules, as described on page 61.

ADDITIONAL COMPENSATION MATTERS

PAY RATIO

The Company identified its median employee for purposes of this disclosure by annualizing one month’s base compensation for its full-time and part-time employees (other than the CEO) located in markets across the globe who were employed on October 1, 2017. The Company considered all full-time, part-time, seasonal and temporary workers employed on such date. Our methodology was straightforward and transparent; we did not exclude employees or make any adjustments to compensation. Using this methodology, 2017 total compensation for our median employee (a part-time restaurant crew employee located in Poland) was $7,017. For executives, McDonald’s is committed to a strong pay for performance culture that stresses “at risk” compensation in order to closely align their interests with those of shareholders. Over 90% of our CEO’s direct compensation opportunity is “at risk” based on the Company’s performance against robust objective targets. Over the past three years, the McDonald’s Brand has been revitalized, successfully completing a transition from turnaround to growth. In fact, during 2017, the Company’s value grew about $36 billion. Driven largely by strong financial performance over both the short- and long-term, our CEO’s 2017 total compensation was $21,761,052, resulting in a ratio of 3,101:1.

McDonald’s Corporation

65

---

Table of Contents

	•
		AUDIT & FINANCE COMMITTEE MATTERS
			•

PROPOSAL 3

Item to be voted on: Advisory vote to approve the appointment of Ernst & Young LLP as independent auditor for 2018

The Board recommends that you vote FOR this proposal.

The Audit & Finance Committee is directly responsible for the appointment, compensation, retention, evaluation and termination of the independent external audit firm. The Committee has appointed Ernst & Young LLP as the Company’s independent external audit firm for 2018. In executing its responsibilities, the Committee engages in a thorough annual evaluation of Ernst & Young’s qualifications, performance and independence. Among other things, the Committee is informed by results of a comprehensive assessment survey of the firm by senior financial personnel from the Company’s headquarters and largest global markets, and discusses opportunities for improvement with the lead audit partner. The Committee has sole authority to approve all engagement fees to be paid to Ernst & Young. In assessing independence, the Committee reviews the fees paid, including those related to non-audit services, and annually reviews compliance with the Company’s Hiring Policy for Employees of External Audit Firm and Its Affiliates. The Committee regularly meets with the lead audit partner without members of management present, and in executive session with only the Committee members present, which provides the opportunity for continuous assessment of the firm’s effectiveness and independence and for consideration of rotating audit firms.

Ernst & Young or its predecessor, Arthur Young & Company, has been retained as the Company’s external audit firm continuously since 1964. In accordance with SEC rules and Ernst & Young policies, the firm’s lead engagement partner rotates every five years. The Audit & Finance Committee and its Chairman are directly involved in the selection of Ernst & Young’s lead engagement partner.

The Audit & Finance Committee and the Board of Directors believe that the continued retention of Ernst & Young LLP to serve as the Company’s independent external audit firm for 2018 is in the best interests of the Company and its shareholders, and the Board is asking shareholders to approve this appointment. A representative of the firm is expected to attend the Annual Meeting and will be available to answer shareholders’ questions and have the opportunity to make a statement. If shareholders do not approve the appointment of Ernst & Young, the Audit & Finance Committee will reconsider the appointment.

66

2018 Proxy Statement

---

Table of Contents

Audit & Finance Committee Matters

AUDIT & FINANCE COMMITTEE REPORT

The role of the Audit & Finance Committee is to assist the Board in fulfilling its responsibility to oversee the Company’s financial reporting process. Management is primarily responsible for the Company’s financial statements, including the Company’s internal control over financial reporting. Ernst & Young LLP (Ernst & Young), the Company’s independent auditor, is responsible for performing an audit of the Company’s annual consolidated financial statements in accordance with generally accepted accounting principles and for issuing a report on those statements. Ernst & Young also reviews the Company’s interim financial statements in accordance with applicable auditing standards. The Audit & Finance Committee oversees the Company’s financial reporting process and internal control structure on behalf of the Board. The Audit & Finance Committee met regularly with Ernst & Young and the head of internal audit, both privately and with management present, during 2017.

In fulfilling its oversight responsibilities, the Audit & Finance Committee reviewed and discussed with management and Ernst & Young the audited and interim financial statements, including Management’s Discussion and Analysis, included in the Company’s Reports on Form 10-K and Form 10-Q.

In connection with its review of the Company’s annual consolidated financial statements, the Audit & Finance Committee also discussed with Ernst & Young other matters required to be discussed with the auditor under Auditing Standard 1301, as modified or supplemented (communication with audit committees), and those addressed by Ernst & Young’s 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 Audit & Finance Committee is responsible for the engagement of the independent auditor and appointed Ernst & Young to serve in that capacity during 2017 and 2018. In that regard, the Audit & Finance Committee reviewed Ernst & Young’s independence from the Company and management, including Ernst & Young’s written disclosures described above.

Based on the reviews and discussions referred to above, the Audit & Finance Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for filing with the SEC.

Respectfully submitted,

The Audit & Finance Committee

John Mulligan, Chair
Lloyd Dean
Margaret Georgiadis
Sheila Penrose

McDonald’s Corporation

67

---

Table of Contents

Audit & Finance Committee Matters

POLICY FOR PRE-APPROVAL OF AUDIT AND PERMITTED NON-AUDIT SERVICES

The Audit & Finance Committee has a policy for the pre-approval of all audit and permitted non-audit services to be provided to the Company by Ernst & Young. The Audit & Finance 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 & Finance 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 reviewed for renewal each year.

The Chief Accounting Officer monitors services provided by Ernst & Young and overall compliance with the pre-approval policy. The Chief Accounting Officer reports periodically to the Audit & Finance 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 Chair of the Audit & Finance Committee.

In accordance with the policy, all services provided to the Company by Ernst & Young in 2017 and 2016 were pre-approved by the Audit & Finance Committee.

The policy is available on the Company’s website at http://corporate.mcdonalds.com/content/corpmcd/investors-relations/governance-principle-policies-and-guidelines.html.

AUDITOR FEES AND SERVICES

The following table presents fees billed for professional services rendered for the audit of the Company’s annual financial statements for 2017 and 2016 and fees paid for other services provided by Ernst & Young in those years:

(In millions)		2017			2016
Audit fees (1)		$	10.5		$	12.0
Audit-related fees (2)			0.3			1.7
Tax fees (3)			1.7			0.5
Total		$	12.5		$	14.2

(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. Reduction in audit fees for 2017 primarily relates to fewer international entities in audit scope as a result of the Company’s refranchising initiatives.
(2)	Fees for employee benefit plan audits and certain attestation services not required by statute or regulation. 2016 also includes audit-related fees associated with the Company’s refranchising related initiatives.
(3)	Primarily fees for tax advisory and compliance in the U.S. and various international markets. 2017 includes fees for expanded scope of tax compliance work.

68

2018 Proxy Statement

---

Table of Contents

			•
		SHAREHOLDER PROPOSALS
	•

The text of the shareholder proposals and supporting statements appear exactly as received by the Company unless otherwise noted. All statements contained in the shareholder proposals and supporting statements are the sole responsibility of the respective proponent(s). The shareholder proposals may contain assertions about the Company or other matters that the Company believes are incorrect, but the Company has not attempted to refute all such assertions. All website links included in the shareholder proposals, supporting statements and statements in opposition are not part of the Proxy Statement. The Board recommends a vote against all of the shareholder proposals based on the reasons set forth in the Board’s statements in opposition following each shareholder proposal.

The name and share ownership of each proponent of a shareholder proposal is set forth below. The address of each proponent, and the name and share ownership of any co-filer, are available, and will be provided promptly, upon request by calling 1-630-623-2553 or by sending a request to McDonald’s Corporation, Shareholder Services, Department 720, 711 Jorie Boulevard, Oak Brook, IL 60523.

PROPOSAL 4

Item to be voted on: Advisory vote on a shareholder proposal requesting the ability for shareholders to act by written consent

The Board recommends that you vote AGAINST this proposal.

Mr. John Chevedden has notified the Company that he intends to submit the following shareholder proposal at this year’s Annual Shareholders’ Meeting. As explained below, the Board recommends that you vote AGAINST this proposal. The proponent beneficially owns 50 shares of the Company’s common stock, and there were 786,087,519 shares outstanding as of the record date.

The proponent is responsible for the content of the following proposal, for which the Company and the Board accept no responsibility:

SHAREHOLDER PROPOSAL

Shareholders request that our board of directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to be consistent with applicable law and consistent with giving shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law.

This proposal topic won majority shareholder support at 13 major companies in a single year. This included 67%-support at both Allstate and Sprint. Hundreds of major companies enable shareholder action by written consent.

McDonald’s Corporation

69

---

Table of Contents

Shareholder Proposals

Taking action by written consent in lieu of a meeting is a means shareholders can use to raise important matters outside the normal annual meeting cycle. A shareholder right to act by written consent and to call a special meeting are 2 complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. More than 100 Fortune 500 companies provide for shareholders to call special meetings and to act by written consent.

In fact we now have a sad joke of a right to call a special meeting.

At McDonald’s it would take 25% of shares and then all shares held for less than one continuous year would be disqualified. Thus in order to obtain the 25% requirement it could take the holders of 51% of McDonald’s shares (minus perhaps 26% of shares that were held for less than one continuous year) to obtain the 25% that represented one-year of continuous holdings. In other words it would be somewhat absurd for 51% of shares to go to the extra shareholder trouble to initiate a meeting in which the same 51% of shares would be needed to take action.

Written consent won 41%-support at the 2016 McDonald’s annual meeting. This 41%-support could have been higher (perhaps 45%) if small shareholders had the same access to independent corporate governance recommendations as large shareholders. Plus the 41%-support could have been still higher had the sad state of our right to call a special meeting been pointed out.

Please vote to improve director accountability to shareholders:
Shareholder Right to Act by Written Consent – Proposal 4

THE BOARD’S STATEMENT IN OPPOSITION

The Board recommends voting AGAINST this advisory proposal requesting that the Company take steps to allow shareholders to act by written consent. After careful consideration, the Board continues to believe that the ability to act by written consent is neither necessary nor in our shareholders’ best interests in light of the Company’s existing strong governance structure and practices. Further, our shareholders have agreed with the Board and consistently expressed their opposition to this measure by rejecting similar proposals from the same proponent in 2014, 2015 and 2016.

We Are Committed to Strong and Evolving Corporate Governance Practices. The Board is committed to strong corporate governance practices that promote the rights of our shareholders and the accountability of our Board. Significantly, and as further discussed below, shareholders holding 25% of the outstanding shares of the Company’s stock for at least one year may request a special meeting. The Company maintains other leading governance practices and policies, including:

●	proxy access for Director candidates nominated by shareholders;
●	separate Chairman and CEO roles;
●	a majority voting standard in uncontested Director elections;
●	the annual election of all Directors;
●	an annual advisory vote to approve executive compensation;
●	no supermajority voting provisions;
●	no shareholder rights plan; and
●	additional avenues for shareholder input, including:

●	the ability of shareholders to suggest Director nominees to the Board; and
●	mechanisms for shareholders to communicate directly with the full Board, the independent Directors and/or any individual Director.

70

2018 Proxy Statement

---

Table of Contents

Shareholder Proposals

Our Shareholders Have the Ability to Raise Matters and Act Outside of the Annual Meeting Cycle. The Board has demonstrated its commitment to active shareholder engagement and responsiveness to shareholder feedback. As detailed in this Proxy Statement, the Company maintains a comprehensive engagement program and reaches out to a wide variety of shareholders to learn their views. Recently, shareholders have been interested in discussing topics such as: the Company’s business strategy and performance, Board and corporate governance matters, executive compensation, oversight of risk and