What is the purpose of the 2010-2012 Cash Performance Unit Plan (CPUP)?

The CPUP is designed to incentivize and reward the Company's principal executive officer, principal financial officer, and other named executive officers for achieving specific long-term financial performance goals over a three-year period (2010-2012). The ultimate payout is tied to improvements in operating income growth and return on assets, as well as relative shareholder performance.

What are the key financial metrics used to determine payouts under the CPUP?

The CPUP uses two primary metrics: consolidated three-year compounded annual growth in operating income (weighted at 75%) and average return on total assets (ROTA, weighted at 25%). These measures are intended to reflect overall business growth and efficiency.

How do Restricted Stock Units (RSUs) differ from the CPUP awards?

RSUs are a form of equity-based compensation that vest after three years, subject to a performance condition related to the company's compounded annual growth in diluted Earnings Per Share (EPS). The CPUP, on the other hand, is a cash-based incentive plan directly linked to operating income growth and ROTA, with payouts also influenced by relative total shareholder return.

Are there any specific conditions or thresholds that must be met for executives to receive any payout?

Yes, participants will not receive any payout under the CPUP unless threshold levels of both key performance measures (operating income growth and ROTA) are achieved. Similarly, for the RSUs, no award will vest if the compounded annual EPS growth is less than 1%.

MCD 8-K: Leadership Changes

Summary

McDonald's Corporation (MCD) filed an 8-K on February 16, 2010, detailing significant executive compensation arrangements for the 2010-2012 performance cycle. The Compensation Committee approved a new Cash Performance Unit Plan (CPUP) and granted awards under it to its named executive officers. These awards are tied to rigorous performance metrics, aiming to incentivize long-term growth and shareholder value creation. The CPUP focuses on consolidated three-year compounded annual growth in operating income (75% weight) and average return on total assets (ROTA, 25% weight). Payouts are contingent upon achieving threshold levels for both metrics and may be further adjusted by a multiplier based on the company's total shareholder return relative to the S&P 500. Additionally, restricted stock units (RSUs) were granted, which vest after three years, contingent on achieving a compounded annual EPS growth rate of at least 6%. These compensation plans underscore the company's strategic focus on sustained financial performance and market competitiveness.

Key Highlights

1McDonald's Compensation Committee approved the 2010-2012 Cash Performance Unit Plan (CPUP) and granted awards to named executive officers.
2The CPUP is a three-year performance cycle plan with payouts determined at the end of the cycle (December 31, 2012).
3Key performance metrics for CPUP payouts include 75% weight for consolidated three-year compounded annual growth in operating income and 25% weight for average return on total assets (ROTA).
4CPUP payouts require achievement of threshold levels for both performance metrics and can be adjusted by up to 15% based on relative total shareholder return versus the S&P 500.
5Target awards for named executive officers range from $1.65 million to $8 million for the CEO.
6Maximum payouts under the CPUP can reach 230% of the target award for each executive.
7Restricted Stock Units (RSUs) were also granted, vesting after three years and performance-based on achieving a 6% compounded annual EPS growth rate, with no vesting below 1% EPS growth.

MCDONALDS CORP 8-K Report, Executive Changes (Feb 16, 2010)

Summary

Key Highlights

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