Steve Easterbrook became the CEO of McDonald's Corporation (NYSE:MCD) in 2015. First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
How Does Steve Easterbrook's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that McDonald's Corporation has a market cap of US$157b, and reported total annual CEO compensation of US$16m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$1.3m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).
Thus we can conclude that Steve Easterbrook receives more in total compensation than the median of a group of large companies in the same market as McDonald's Corporation. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see, below, how CEO compensation at McDonald's has changed over time.
Is McDonald's Corporation Growing?
Over the last three years McDonald's Corporation has grown its earnings per share (EPS) by an average of 13% per year (using a line of best fit). It saw its revenue drop 3.5% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Shareholders might be interested in this free visualization of analyst forecasts.
Has McDonald's Corporation Been A Good Investment?
Boasting a total shareholder return of 96% over three years, McDonald's Corporation has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared total CEO remuneration at McDonald's Corporation with the amount paid at other large companies. We found that it pays well over the median amount paid in the benchmark group.
However we must not forget that the EPS growth has been very strong over three years. In addition, shareholders have done well over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling McDonald's shares (free trial).
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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