What are the main performance metrics for the 2015-2017 executive compensation plans?

The primary performance metrics for the Cash Performance Unit Plan (CPUP) are compounded annual growth in operating income (75% weight) and return on incremental invested capital (25% weight). For the performance-based Restricted Stock Units (RSUs), the key metric is compounded annual growth in diluted Earnings Per Share (EPS), with a target range of 5%-7%.

When will the executives receive their payouts under these new awards?

Payouts for the Cash Performance Unit Plan (CPUP) will not be made until after the three-year performance period concludes on December 31, 2017. The Restricted Stock Units (RSUs) are subject to a three-year cliff vesting period, meaning they will vest after three years, contingent on meeting the performance conditions.

Are there any conditions that could increase or decrease the executive payouts?

Yes, the CPUP payouts can be adjusted. First, by a modifier based on the change in McDonald's share of guest traffic in its top eight markets. Second, by a multiplier based on the company's cumulative total shareholder return compared to the S&P 500 Index over the performance period. The RSU payouts are directly tied to EPS growth, with a maximum of 200% of the target award if EPS growth exceeds the target range.

How is Earnings Per Share (EPS) calculated for the RSU performance?

For compensation purposes, EPS is adjusted to exclude the effects of foreign currency translation (expressed in constant currencies) to better reflect underlying business trends. The Compensation Committee may also, at its discretion and according to pre-established guidelines, exclude certain income or expense items not indicative of ongoing results.

MCD 8-K: Leadership Changes

Summary

This 8-K filing from McDonald's Corporation, dated March 20, 2015, details executive compensation adjustments through the approval of awards under the Cash Performance Unit Plan (CPUP) and grants of performance-based Restricted Stock Units (RSUs) for the 2015-2017 performance cycle. The CPUP awards, effective March 16, 2015, are tied to a three-year cumulative performance period and will be paid out after December 31, 2017. Primary metrics for these cash awards include compounded annual growth in operating income (75% weighting) and return on incremental invested capital (25% weighting), with potential adjustments based on guest traffic share and total shareholder return relative to the S&P 500. The filing also outlines performance-based RSUs granted to executives, which will vest after three years contingent on achieving compounded annual growth in diluted Earnings Per Share (EPS) between 5% and 7%. The payout for these RSUs can range from 0% to 200% of the target award, with EPS adjusted for constant currency and certain non-indicative items to reflect underlying business trends. These compensation plans signal a focus on long-term operational and financial performance, with specific targets set for key growth and profitability metrics.

Key Highlights

1McDonald's Compensation Committee approved awards under the Cash Performance Unit Plan (CPUP) for the 2015-2017 performance cycle on March 16, 2015.
2CPUP awards are based on three-year cumulative performance metrics: compounded annual growth in operating income (75%) and return on incremental invested capital (25%).
3Payouts for CPUP awards will not occur until after the performance period concludes on December 31, 2017.
4CPUP payouts are subject to adjustments based on changes in guest traffic share and total shareholder return relative to the S&P 500.
5Performance-based Restricted Stock Units (RSUs) were also granted, vesting after three years based on achieving compounded annual growth in diluted EPS.
6Target EPS growth for RSU vesting is set between 5% and 7%; maximum payout is 200% of the target award.
7EPS for RSU performance is adjusted for constant currency and potential exclusions to better reflect ongoing business trends.

MCDONALDS CORP 8-K Report, Executive Changes (Mar 20, 2015)

Summary

Key Highlights

Frequently Asked Questions