MCD McDonalds Corp

In moving to Dunkin' Brands Group Inc., David Hoffmann may be sacrificing more than $6 million in compensation because he ended a 22-year career at McDonald's Corp. without signing a noncompete agreement.

The estimate of foregone pay comes from a compensation consultant who has never advised McDonald's. The money he's leaving on the table shows the high price some executives pay for leaving their employer in the lurch. But Mr. Hoffmann's move may speak to his better odds of becoming chief executive at the doughnut maker than at the burger chain.

In a regulatory filing on Wednesday, McDonald's said Mr. Hoffmann's "failure to satisfy certain conditions upon his departure," including not signing a noncompete agreement, will result in him forfeiting all unvested cash and equity incentive awards.

Mr. Hoffmann couldn't be reached for comment.

"It's quite standard" for companies to seek such noncompete accords from exiting executives, but executives rarely refuse to accept them, said Robert Sedgwick, who heads the executive-pay practice for law firm Morrison Cohen LLP.

Some companies require executives to sign a noncompete agreement upon being hired or in exchange for getting an annual incentive award. But such restrictions often are less onerous than the additional ones demanded as an executive leaves.

Mr. Hoffmann didn't have any type of noncompete agreement in place while he was working at the company, a McDonald's spokeswoman said. She said she couldn't verify the amount of money he lost.

At McDonald's, Mr. Hoffmann, 48-years-old, ran the company's Asia-Pacific, Middle East and Africa operations until he was appointed in July 2015 to lead the high-growth markets division—which includes China, Russia and South Korea. His expanded role in the company was part of a corporate reshuffling that Chief Executive Steve Easterbrook sought to drive growth at the struggling burger chain.

The consultant's estimate about the money left behind included Mr. Hoffmann's vested stock options. Some companies cancel all outstanding options upon an executive's exit. When executives give up certain awards, they often seek to make up for it in compensation from the new company they join. Mr. Hoffmann will make up some of the difference at Dunkin', but not all.

On Oct. 3, Mr. Hoffmann will assume the role of president of Dunkin' Donuts U.S. and Canada, where he will be responsible for the doughnut chain's operations and marketing in the two countries, as well as global franchising and store development for both Dunkin' Donuts and Baskin-Robbins.

In a statement Thursday announcing Mr. Hoffmann's hire, Dunkin' Chief Executive Nigel Travis, 66, said the appointment "supports our succession planning efforts as we work to position the company for long-term growth."

Under his agreement with Dunkin', where he is seen as a possible successor to Mr. Travis after the current chief's contract ends in December 2018, Mr. Hoffmann gets equity worth about $2.8 million and is expected to receive a fiscal 2017 award valued at about $2 million.

Mr. Hoffmann's offer agreement with Dunkin' also said that if he is terminated without cause or resigns for good reason, he would be entitled to severance of up to 12 months of his then current base salary.

The Dunkin' filing Thursday also said Mr. Hoffmann will be subject to noncompetition provisions.

Noncompete accords typically block executives from trying to hire colleagues from their previous employer. Since Mr. Hoffmann didn't sign one at McDonald's, he may be able to poach talent from the company, experts say.

Sometimes avoiding a noncompete accord can also lead to an unexpected payday. Immediately after American Airlines Group Inc. President Scott Kirby was let go last month, he assumed the same role at United Continental Holdings Inc. Mr. Kirby didn't have an employment contract or a noncompete agreement, and while American therefore wasn't obligated to give Mr. Kirby a severance package, the company gave him more than $13 million in cash and stock.

Mr. Hoffmann is the latest high-level executive to leave the struggling fast-food chain. McDonald's Chief Administrative Officer Pete Bensen announced his retirement last month, followed by McDonald's U.S. President Mike Andres, who will remain at the company until the end of the year.

Write to Joann S. Lublin at joann.lublin@wsj.com and Julie Jargon at julie.jargon@wsj.com

(END) Dow Jones Newswires

September 22, 2016 18:45 ET (22:45 GMT)

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