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. )
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Definitive Proxy Statement |
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McDonald's Corporation
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
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Table
of Contents
McDonalds Corporation
NOTICE OF 2017 ANNUAL
MEETING
AND PROXY
STATEMENT
Table of
Contents
A LETTER TO OUR SHAREHOLDERS
FROM THE CHAIRMAN OF THE
BOARD |
Dear Fellow McDonalds
Shareholders,
Following last years Annual Shareholders
Meeting, I was honored to be elected as Chairman by your Board of Directors. In
my new role, I have focused my efforts on furthering the Board's commitment to
enhancing shareholder value.
I am pleased to update you on the
Companys progress as we transition from revitalizing the McDonalds Brand to
strengthening the business for long-term sustainable growth.
2015-2016 business
performance. The Board named Steve
Easterbrook as President and CEO in 2015, with a mandate that he lead a
turnaround of the McDonalds business. We knew we had to change, for our
customers and our shareholders. As the turnaround strategy evolved into action,
the last eighteen months proved to be a time of purposeful change, fueled by
four key areas of focus.
First, the Company restructured the business around
four operating segments, becoming a more efficient organization. The Board and
Steve built a strong leadership team, including naming presidents for each new
segment, as well as new leaders in key areas such as strategy, people, marketing
and communications. Including Steve, all are thoughtful innovators, passionate
about McDonalds and willing to challenge the status quo. Second, management
embarked on a plan to refranchise 4,000 restaurants by the end of 2018,
bolstering McDonalds outstanding network of dedicated and independent
franchisees and developmental licensees. The Company is well on its way to
achieving the plan and will likely meet this goal by the end of 2017. Third, the
Company targeted $500 million of net G&A savings by the end of 2018,
supported in large part by the refranchising strategy as well as a more
stringent discipline around spending throughout the Company. We have made
meaningful progress on this initiative and are on track to achieve this target
by the end of 2018. Fourth was the completion of our three-year plan to return
$30 billion to shareholders by the end of 2016. That target was achieved,
including the return of more than $14 billion to shareholders in 2016 - $11
billion of share repurchases and more than $3 billion in dividends, including a
6% dividend increase in the fourth quarter.
Quite simply, McDonalds is now more
focused, forward looking, fit for purpose and committed to sustaining operating
growth. All of these purposeful changes resulted in improved financial results
for 2016, notably our strongest year of global comparable sales since 2011. We
also increased operating income and earnings per share, and grew restaurant cash
flows worldwide. On behalf of the Board, I can state with confidence that Steve
is the right leader for McDonalds, and that he and his team are well-positioned
to build on the success of 2016.
Board composition and
structure. Our Board reflects a diverse,
engaged group of Directors with relevant skills and backgrounds to oversee the
McDonalds business now and into the future. Since 2015, we have added four new
Directors to the Board and four Directors retired, ensuring an appropriate mix
of tenure that provides fresh perspectives balanced with institutional knowledge
as we accelerate growth. Dr. Walter Massey will be retiring from the Board and
not standing for re-election in 2017. We thank Walter for his 19 years of
dedicated service to McDonalds and our shareholders.
Our Governance Committee continues to
utilize a comprehensive process to identify potential Director candidates who
can contribute to the overall effectiveness of the Board as the need arises. We
also have a robust Board evaluation process that includes regular
self-assessment and Director peer review. We remain committed to ensuring that
we have the right Directors in place to oversee the Companys business and serve
the interests of McDonalds shareholders well into the future.
After becoming Chairman, I established a
new Public Policy & Strategy Committee of the Board, designed to provide
attentive oversight and counsel to management on the Companys short- and
long-term strategies, as well as on other matters that could affect McDonalds
iconic Brand. We also took the opportunity to rotate our other Committee
memberships and most Committee Chairs, resulting in refreshing dialogue and
renewed energy for all of the Directors. One thing that has not changed is our
commitment to strong governance practices that appropriately balance the
interests of the Company and our shareholders.
McDonalds
Corporation |
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03 |
Table of
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2017 and beyond. On March 1 of this year, I was pleased to participate in the
Companys announcement of our new global customer-centric growth plan during a
McDonalds Investor Day event in Chicago. Steve and his team outlined the plan,
new financial targets and initiatives to unlock meaningful growth and increase
guest counts. Briefly, the plan focuses on enhancing digital capabilities and
technology to elevate the customer experience; redefining customer convenience
through delivery; accelerating deployment of Experience of the Future
restaurants in the U.S.; initiating a new $22-24 billion target for cash return
to shareholders for the three-year period ending 2019; and establishing new
financial performance targets beginning in 2019.
We are optimistic about the trajectory of
McDonalds growth opportunities and the focus on efforts to build and sustain
profitable, long-term growth. On behalf of the Board of Directors, I thank you
for your continued support.
See you in the restaurants.
Sincerely,
Enrique Hernandez, Jr.
Chairman
of the Board
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2017 Proxy
Statement |
Table of
Contents
NOTICE OF THE ANNUAL
SHAREHOLDERS'
MEETING |
Time and
Date:
8:30 a.m. Central Time on
Wednesday, May 24, 2017
Place:
The Prairie
Ballroom at The Lodge at McDonalds Office Campus
2815 Jorie Boulevard, Oak
Brook, Illinois 60523
Record
Date:
March 27, 2017
Voting:
Shareholders
as of the record date are entitled to vote. Each share of common stock is
entitled to one vote for each Director position and one vote for each of the
other proposals.
To McDonalds
Corporation Shareholders:
McDonalds Corporation will hold its 2017 Annual Shareholders Meeting
(Annual Meeting or Annual Shareholders Meeting) on Wednesday, May 24, 2017, at
8:30 a.m. Central Time in the Prairie Ballroom at The Lodge at McDonalds Office
Campus, Oak Brook, Illinois. The registration desk will open at 7:30 a.m. At the
meeting, shareholders will be asked to consider and vote upon the following
proposals:
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1. |
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Election of 11 Directors named in the Proxy Statement,
each for a one-year term expiring in 2018; |
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2. |
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Advisory vote to approve executive
compensation; |
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3. |
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Advisory vote on the frequency of future advisory votes
to approve executive compensation; |
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4. |
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Approval of the material terms of the performance goals
for awards under the McDonalds Corporation 2012 Omnibus Stock Ownership
Plan; |
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5. |
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Advisory vote to approve the appointment of Ernst &
Young LLP as independent auditor for 2017; and |
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6. |
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Advisory votes on seven shareholder proposals, if
properly presented. |
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.
Your Board of Directors recommends that
you vote FOR the Boards nominees for the election of Directors, FOR the approval of our
executive compensation, in favor of a ONE
YEAR advisory vote on executive
compensation, FOR the approval of the material terms of the performance goals for awards
under the 2012 Omnibus Stock Ownership Plan, FOR the approval of the appointment of
the independent auditor and AGAINST
all of the shareholder proposals.
To listen to the live audiocast of the
Annual Meeting, go to www.investor.mcdonalds.com and click
on the appropriate link. The Annual Meeting audiocast will be available for a
limited time after the meeting.
Seating at the Annual Meeting is very
limited. If you plan to attend the meeting in person, you must pre-register with
McDonalds Shareholder Services prior to the meeting. See page 86 for
information about how to pre-register.
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By order of the Board of Directors,
Jerome N. Krulewitch Corporate Secretary Oak
Brook, Illinois April 13,
2017 |
Your vote is
important Please consider the
issues presented in this Proxy Statement and vote your shares as promptly
as possible.
Internet
www.proxyvote.com
Telephone
800-690-6903 Dial toll-free
24/7
Mail
If you received a proxy/ voting
instruction card by mail, you can mark, date, sign and return it in the
postage-paid envelope furnished for that
purpose. |
The Company will provide the Notice
of Internet Availability, electronic delivery of the proxy materials or
mailing of the 2017 Proxy Statement, the 2016 Annual Report on Form 10-K
and a proxy card to shareholders beginning on or about April 13,
2017. |
McDonalds Corporation |
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Table of
Contents
06 |
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2017 Proxy
Statement |
Table of
Contents
McDonalds Corporation |
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07 |
Table of Contents
This summary contains highlights about
the Company and the upcoming 2017 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
2016 Annual Report on Form 10-K carefully before voting.
NEW
CUSTOMER-CENTRIC GROWTH STRATEGY
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* Long-term, average annual constant currency targets, beginning in
2019. |
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On March 1, 2017, the Company announced
its new Velocity Growth Plan, shifting its focus from turnaround to growth. We
are going after the tremendous opportunity at the core of our business by
building a better McDonalds, not a different one. Our actions are focused on
tapping into our unique competitive advantages unmatched global scale, iconic
Brand and local market presence.
08 |
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2017 Proxy
Statement |
Table of Contents
Specifically, the three pillars of the new
strategy are to:
At the same time, we remain relentlessly
focused on the fundamentals of running great restaurants. As important as what
we do is what we do not do we are concentrating on our biggest opportunities and
not doing the smaller things. We are building a Brand that makes delicious feel
good moments easy for everyone. We have a keen sense of who we are, the
customers we serve and what we will do to win back our customers.
GOVERNANCE
HIGHLIGHTS
Our Board continues to evolve, including
with the election of a new independent Chairman. As always, the Board continues
to review, evaluate and enhance our governance. This is informed by feedback
received from shareholders and evolving best practices, including:
Board refreshment. After the 2016 Annual Shareholders Meeting, the Board elected
Enrique Hernandez, Jr. to be its next independent Chairman after the retirement
of Andy McKenna. Mr. McKenna continues to advise the Board in his role as
Chairman Emeritus. Later in 2016, Dr. Walter Massey announced that he would
retire from the Board and not stand for reelection at the upcoming Annual
Shareholders Meeting.
Committee refreshment. Following his election, Chairman Hernandez and the Board
announced the creation of a new Board Committee the Public Policy & Strategy
Committee to provide oversight and counsel to management on the Companys
short- and long-term strategies, as well as on other matters that could affect
the McDonalds iconic Brand. This action was complemented by the Boards
rotation of Committee members among the various standing Committees, and the
appointment of new Chairs for each of the Audit & Finance, Compensation,
Sustainability & Corporate Responsibility and Public Policy & Strategy
Committees.
Shareholder engagement.
Management continues to engage together with
participation from members of our Board with a significant portion and variety of
domestic and international shareholders, including index funds, union and public
pension funds, actively-managed funds and socially-responsible investment funds.
Over the past year, we have engaged with representatives of more than 30% of our
outstanding shares on a variety of topics, including our turnaround and growth
plans, board composition, corporate governance, executive compensation, and
environmental and social issues.
BOARD OF
DIRECTORS
Our current Board continues to reflect a
diverse, highly-engaged group of Directors with a range of
experiences.
Independence |
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Diversity |
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Experience |
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All independent, except the
CEO |
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>50% are women or
minorities |
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Fresh perspectives balanced with
institutional knowledge |
McDonalds
Corporation |
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09 |
Table of Contents
Strong Board and Governance
Practices |
✓ |
Separate Chairman and CEO
roles, including a new independent Chairman elected in 2016 |
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✓ |
Ongoing shareholder
outreach and engagement |
✓ |
Diverse, independent Board |
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✓ |
Annual election of Directors |
✓ |
New Public Policy & Strategy
Committee |
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✓ |
Majority voting standard for uncontested
Director elections |
✓ |
Committee memberships and Chairs refreshed
in 2016 |
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✓ |
Proxy access for Director candidates
nominated by shareholders |
✓ |
Board Committees are 100% independent
(except Executive Committee) |
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✓ |
Shareholder right to call special
meetings |
✓ |
Robust annual Board and Committee
self-assessments and Director peer review |
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✓ |
Capital structure that requires one vote per
share of common stock |
✓ |
Executive sessions of independent Directors
generally scheduled for each regular Board meeting |
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✓ |
Regular succession planning at CEO, senior
management and Board levels |
✓ |
Limited membership on other public company
boards |
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✓ |
No shareholder rights plan |
✓ |
Stock ownership guidelines for
Directors |
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✓ |
Public disclosure of corporate political
contributions |
The following table provides summary
information about our Directors who are nominees for re-election at the 2017
Annual Shareholders Meeting. Additional information regarding our Directors may
be found beginning on page 14.
AFC = Audit & Finance Committee |
SCR = Sustainability & Corporate Responsibility
Committee |
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= Member |
CC = Compensation Committee |
PPS = Public Policy & Strategy
Committee |
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= Committee Chair |
GC = Governance Committee |
EC = Executive Committee |
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= Financial
Expert |
10 |
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2017 Proxy
Statement |
Table of Contents
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 designed to drive the Companys business
strategy.
Below is a summary of our 2016 executive
compensation program:
Key
compensation elements |
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Performance- based |
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Primary
metric |
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Key
terms |
Base Salary |
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N/A |
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Evaluated based on individual circumstances, including
responsibility, performance and tenure |
Short-Term Incentive
Plan (STIP) |
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✓ |
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Operating income growth |
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Includes objective modifiers that can impact
payouts |
Stock
Options |
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✓ |
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Share price |
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Vest 25% per year |
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10-year term |
Performance-Based Restricted Stock Units (RSUs) |
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✓ |
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Compound
annual net income growth |
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Cliff vest at end of three-year service
period, subject to achievement of net income and ROIIC
thresholds |
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Return on
incremental invested capital (ROIIC) |
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Share price |
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The primary change from the Companys 2015
executive compensation program was the elimination of our long-term cash
incentive plan (Cash LTIP) moving forward. Beginning in 2016, long-term
incentives will be delivered in generally equal economic proportions between
performance-based RSUs and stock options to more closely align executive
compensation with shareholder interests, and to better reflect market practice.
Further, metrics for performance-based RSUs now include net income growth and
ROIIC thresholds (versus earnings per share growth, which was used in prior
years) to align executives with the Companys new growth strategy.
Performance-based
Compensation |
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90% of CEO direct compensation opportunity is at risk |
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●195.5% payout for Corporate employees under 2016 STIP
●15.6% payout under 2014-2016 Cash LTIP
●35% vesting of 2014-2016 performance-based RSUs
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81% of named executive officers direct
compensation opportunity is at risk |
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As further described in our Compensation
Discussion and Analysis beginning on page 34, our turnaround efforts produced
strong results in 2016, including:
● |
3.8% increase in global comparable
sales |
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8% (11% in constant currency)
increase in operating income |
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13% (16% in constant currency)
increase in diluted earnings per share |
McDonalds
Corporation |
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11 |
Table of Contents
Demonstrating our strong
pay-for-performance culture, the Companys 2016 performance resulted in a
Corporate STIP payout equal to 195.5% of target; however, as performance in
prior years was not as strong, the 2014-2016 Cash LTIP paid out at 15.6% of
target and only 35% of the 2014-2016 RSUs vested. The Company believes our 2016
incentive payouts highlight the appropriate balance of short- and long-term
awards supported by challenging performance targets.
Our Compensation Committee adheres to the
following best practices.
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What We Do |
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✓ |
Strong pay-for-performance
alignment |
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✓ |
Challenging quantitative performance
targets |
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✓ |
Performance metrics align interests of
management with interests of shareholders |
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✓ |
Majority of direct compensation paid over
the long term |
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✓ |
Double-trigger change in control
provisions |
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✓ |
Independent compensation
consultant |
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✓ |
Significant stock ownership and retention
requirements |
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✓ |
Anti-hedging and pledging policy |
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✓ |
Clawback provisions |
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What We Dont
Do |
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✗ |
No change in control agreements |
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No tax gross-up on perquisites |
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✗ |
No repricing of stock options |
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✗ |
No backdating of stock options |
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Do not encourage unreasonable risk
taking |
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No employment agreements |
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VOTING
MATTERS
Item |
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Matter to be voted
on |
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Board recommendation |
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Page reference (for
more detail) |
Management
proposals |
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Proposal No. 1 |
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Election of 11 Directors, each for a one-year term
expiring in 2018 |
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FOR each nominee |
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13 |
Proposal No. 2 |
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Advisory vote to approve executive
compensation |
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FOR |
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54 |
Proposal No. 3 |
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Advisory vote on the frequency of future advisory votes
to approve executive compensation |
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ONE YEAR |
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54 |
Proposal No. 4 |
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Approval of the material terms of the
performance goals for awards under the McDonalds Corporation 2012 Omnibus
Stock Ownership Plan |
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FOR |
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55 |
Proposal No. 5 |
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Advisory vote to approve the appointment of Ernst &
Young LLP as independent auditor for 2017 |
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FOR |
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60 |
Shareholder
proposals |
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Proposal Nos. 6 12 |
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Advisory votes on seven shareholder proposals, if
properly presented |
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AGAINST each proposal |
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2017 Proxy
Statement |
Table of Contents
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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 2018 Annual Shareholders Meeting:
Lloyd Dean; Stephen Easterbrook; Robert Eckert; Margaret Georgiadis; Enrique
Hernandez, Jr.; Jeanne Jackson; Richard Lenny; John Mulligan; Sheila Penrose;
John Rogers, Jr. and Miles White. Walter Massey will retire from the Board
effective as of the 2017 Annual Shareholders Meeting and will not stand for
re-election. |
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The Board recommends a
vote FOR each of the 11 Director nominees. |
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In connection with our Annual
Shareholders Meeting, the size of our Board will be decreased by one Director,
so that a total of 11 Directors will be standing for re-election, 10 of whom are
independent.
Nominees who receive a majority of the
votes cast will be elected. Each of the incumbent Directors has tendered an
irrevocable resignation that will be effective if (i) the nominee does not
receive a majority of the votes cast and (ii) upon the recommendation of the
Governance Committee, the Board accepts the resignation following the
meeting.
The Board of Directors expects all
nominees to be available for election. If any of them should become unavailable
to serve as a Director 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.
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The Board of Directors recommends that shareholders
vote FOR all nominees. |
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McDonalds
Corporation |
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Table of
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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 Companys long-term strategic growth
priorities. Importantly, each Director has senior executive experience, in many
cases as CEO, in large organizations, often with significant global operations,
and eight of our Directors have leadership experience in the consumer goods or
food sector.
These and the other skills and attributes
discussed below are taken into account in connection with Board succession
planning and Director selection. For example, Directors Margaret Georgiadis and
John Mulligan, who joined the Board in 2015, add to the Boards qualifications
on technology, digital initiatives and cyber-security oversight. Directors Lloyd
Dean who also joined the Board in 2015 and John Mulligan supplement the Boards
skills regarding capital structure strategy and resource allocation priorities.
They replaced two retiring Directors as audit committee financial experts,
facilitating a smooth transition of financial reporting and accounting
oversight.
The following are among the key attributes
and skills possessed by all of our Directors:
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✓High
Integrity |
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✓Strength of
Character and Judgment |
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✓Intellectual/Analytical Skills |
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✓Proven Record of
Success |
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✓Knowledge of
Corporate Governance Practices |
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✓Strategic
Planning |
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✓Leadership |
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✓Talent
Management/Succession Planning |
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✓Risk
Assessment |
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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 nominees skills or contributions to the Board. Further
biographical information about each Director standing for re-election is set
forth on the following pages.
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CEO/Operating Head Leadership |
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Other Public Company
Board |
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Board
Chair and/or Committee Chair |
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Global Brand
Management |
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Marketing and Consumer Insight |
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Technology, Digital
and/or Cyber-security |
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Consumer Goods/Food |
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Real
Estate |
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Financial |
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Sustainability/Corporate
Responsibility |
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Ethnic/Gender Diversity |
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2017 Proxy
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Table of
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BIOGRAPHICAL INFORMATION
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Lloyd Dean |
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Age:
66
Director since:
2015 |
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McDonalds
Committees
●Audit & Finance
●Compensation
Other public company
directorships
Wells Fargo &
Company
Former public company
directorships (within past five years)
Navigant Consulting, Inc.; Cytori
Therapeutics, Inc. and Premier, Inc. |
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Career
highlights
Dignity Health, a
not-for-profit healthcare system
●President and Chief Executive Officer
(2000 - Present)
Advocate Health Care, a
healthcare organization
●Chief Operating Officer (1997 -
2000)
Experience and
qualifications
In his career in executive
management at leading healthcare organizations, Mr. Dean has led
significant strategic, operational and financial transformations, which
enables him to contribute an important perspective to the Boards
discussion of opportunities and challenges in a constantly changing
business environment. We also benefit from Mr. Deans finance, systems
operations, service quality and human resources expertise. |
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Stephen Easterbrook |
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Age:
49
Director since:
2015 |
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McDonalds
Committees
●Executive (Chair since 2015)
Other public company
directorships
None
Former public company
directorships (within past five years)
None |
|
|
Career
highlights
McDonalds
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, McDonalds 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 U.K.
●Chief Executive Officer (September 2011 -
September 2012)
Experience and
qualifications
Mr. Easterbrooks experience
enables him to contribute an important Company perspective and
comprehensive industry knowledge to Board discussions about the Companys
business and relationships with key constituencies and stakeholders in the
McDonalds system, including franchisees and suppliers. This experience
adds to our Boards knowledge and understanding as it oversees our global
operations and strategy. |
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McDonalds Corporation |
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15 |
Table of
Contents
|
Robert Eckert |
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Age:
62
Director since:
2003 |
|
McDonalds
Committees
●Public Policy & Strategy
(Chair since
2016)
●Governance
●Executive
Other public company
directorships
Amgen Inc.
Other
directorships
Levi Strauss &
Co.
Former public company
directorships (within past five years)
Mattel, Inc. |
|
|
Career
highlights
Friedman, Fleischer & Lowe,
LLC, a private equity firm
●Operating Partner (2014 -
Present)
Mattel, Inc., a designer,
manufacturer and marketer of toy products
●Chairman of the Board (2000 -
2012)
●Chief Executive Officer (2000 -
2011)
Kraft Foods Inc., a packaged
food company
●Chief Executive Officer (1997 -
2000)
Experience and
qualifications
Mr. Eckerts service as a chief
executive officer of large, global consumer branded and food products
companies contributes to our Boards understanding of business and product
development, marketing, supply chain management and distribution, and
consumer behavior. In addition, through his role on other companies
boards of directors, Mr. Eckert has extensive experience in corporate
governance, leadership development and succession planning, finance, and
risk assessment. |
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Margaret (Margo) Georgiadis |
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Age:
53
Director since:
2015 |
|
McDonalds
Committees
●Audit & Finance
●Sustainability & Corporate
Responsibility
Other public company
directorships
Mattel, Inc.
Former public company
directorships (within past five years)
The Jones Group, Inc. and Amyris,
Inc. |
|
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Career
highlights
Mattel, Inc., a designer,
manufacturer and marketer of toy products
●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)
Experience and
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 and
digital initiatives. She has led teams that successfully have launched new
products, and her achievements include the turnaround of a consumer
finance business. Her knowledge in these and other areas provides critical
insights to our business, particularly as the Board considers the impact
of technology, including cyber-security risk. |
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16 |
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2017 Proxy
Statement |
Table of
Contents
|
Enrique Hernandez, Jr. |
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Age:
61
Chairman (since 2016)
Director since:
1996 |
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McDonalds
Committees
●Governance
●Public Policy & Strategy
●Executive
Other public company
directorships
Chevron Corporation; Wells Fargo
& Company and Nordstrom, Inc. (through May 2017)
Former public company
directorships (within past five years)
None |
|
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Career
highlights
Inter-Con Security Systems, Inc.,
a provider of high-end security and facility support to government,
utilities and industrial customers
●Chairman, Chief Executive Officer and
President (1986 - Present)
Nordstrom, Inc., a leading fashion
specialty retailer
●Non-executive Chairman and Presiding
Director (2006 - 2016)
Experience and
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.,
providing him with significant experience in corporate governance,
leadership development and succession planning. Mr. Hernandezs experience
also facilitates the Boards oversight and counsel regarding the Companys
knowledge about strategy, business development, finance and risk
assessment. |
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Jeanne Jackson |
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Age:
65
Director since:
1999 |
|
McDonalds
Committees
●Compensation
(Chair since
2016)
●Governance
●Executive
Other public company
directorships
The Kraft Heinz Company and Delta
Air Lines, Inc.
Former public company
directorships (within past five years)
Motorola Mobility Holdings,
Inc. |
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Career
highlights
NIKE, Inc., a designer,
marketer and distributor of athletic footwear, apparel, equipment and
accessories
●President, Senior Strategic Advisor (2016
- Present)
●President, Product & Merchandising
(2013 - 2016)
●President, Direct to Consumer (2009 -
2013)
MSP Capital, a private investment
company
●Chief Executive Officer (2002 -
2009)
Walmart.com, a private e-commerce
enterprise
●Chief Executive Officer (2000 -
2002)
Experience and
qualifications
Ms. Jacksons extensive experience
as a senior executive in global brand management, as well as her service
as a director of large, public companies, provides the Board with insights
on a broad range of topics, including product development, strategy and
business development, leadership development and succession planning,
finance, media and marketing and consumer behavior. These areas are
important in the Boards oversight of our strategic direction and
operations. |
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McDonalds Corporation |
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17 |
Table of
Contents
|
Richard Lenny |
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Age:
65
Director since:
2005 |
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McDonalds
Committees
●Compensation
●Sustainability & Corporate
Responsibility
Other public company
directorships
ConAgra Brands, Inc.; Discover
Financial Services and Illinois Tool Works Inc.
Former public company
directorships (within past five years)
None |
|
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Career
highlights
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, a
chocolate and snacks company
●Chairman, President and Chief Executive
Officer (2001 - 2007)
Experience and
qualifications
Mr. Lennys 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, and risk assessment. Mr. Lenny also has
a broad understanding of corporate governance from his service on other
companies boards of directors. |
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John Mulligan |
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Age:
51
Director since:
2015 |
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McDonalds
Committees
●Audit & Finance
(Chair since
2016)
●Public Policy & Strategy
●Executive
Other public company
directorships
None
Former public company
directorships (within past five years)
None |
|
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Career
highlights
Target Corporation, a general
merchandise retailer
●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)
Experience and
qualifications
Mr. Mulligans experience as a
senior executive for a major consumer retailer has provided him with
extensive experience in finance, supply chain, operations and properties.
In addition, his experience in digital and technology issues, including
cyber-security risk, is an important asset as the Board considers these
topics and their potential impact on the Company. In addition, Mr.
Mulligans qualifications as an audit committee financial expert is an
important attribute as Chair of our Audit & Finance
Committee. |
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18 |
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|
2017 Proxy
Statement |
Table of
Contents
|
Sheila Penrose |
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Age:
71
Director since:
2006 |
|
McDonalds
Committees
●Sustainability & Corporate
Responsibility (Chair since 2016)
●Audit & Finance
Other public company
directorships
Jones Lang LaSalle
Incorporated
Former public company
directorships (within past five years)
None |
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Career
highlights
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)
Experience and
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, risk assessment, 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. |
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John Rogers, Jr. |
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Age:
59
Director since:
2003 |
|
McDonalds
Committees
●Compensation
●Governance
Other public company
directorships
Exelon Corporation
Registered investment
company directorships
Ariel Investment Trust
Former public company directorships (within past five years)
Aon Corporation |
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Career
highlights
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 (1986 - 1993; 2000 -
Present)
Experience and
qualifications
Mr. Rogers experience as a
long-serving chief executive officer of an institutional money management
firm has given him broad knowledge of finance, risk assessment, 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 Companys corporate responsibility and community
affairs initiatives. |
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McDonalds Corporation |
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19 |
Table of Contents
|
Miles White |
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Age:
62
Director since:
2009 |
|
McDonalds
Committees
●Governance (Chair since 2014)
●Public Policy & Strategy
●Executive
Other public company
directorships
Abbott Laboratories and
Caterpillar, Inc.
Former public company
directorships (within past five years)
None |
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Career
highlights
Abbott Laboratories,
a global pharmaceuticals and biotechnology company
●Chairman and Chief Executive Officer (1999
- Present)
Experience and
qualifications
As the long-standing chairman and
chief executive officer of a large pharmaceutical, biotechnology and
nutritional health products company, Mr. White has extensive knowledge of
strategy and business development, risk assessment, finance, leadership
development and succession planning, 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 Boards
responsibility in oversight of management and operations matters. As
Governance Committee Chair, Mr. White leads the Companys succession
planning and director candidate selection process, and he is often
involved in shareholder engagement. |
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20 |
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|
2017 Proxy
Statement |
Table of Contents
BOARD AND GOVERNANCE MATTERS |
|
INDEPENDENT CHAIRMAN
Following the 2016 Annual Shareholders
Meeting, the Board elected Enrique Hernandez, Jr. to be our new, independent
Chairman. Our former independent Chairman, Andrew McKenna, retired from the
Board and was named Chairman Emeritus, an honorary position.
The principal duty of the Chairman is to
lead and oversee the Board of Directors. The Chairman facilitates an open flow
of information between management and the Board of Directors, and leads a
critical evaluation of Company management, practices and adherence to the
Companys strategic plan and objectives. The Chairman and Chief Executive
Officer (CEO) roles have been separated since 2004, enabling the Chairman to
focus on corporate governance matters and the CEO to focus on the Companys
business. We find that this leadership structure fosters an open dialogue and
constructive feedback among the independent Directors and management. It further
allows the Board to effectively represent the best interests of all shareholders
and contribute to the Companys long-term success.
COMPOSITION
The Companys Board of Directors reflects
a diverse, highly-engaged group of Directors. The Governance Committee of the Board of
Directors is responsible for maintaining a strong and diverse Board through a
robust succession planning process, which includes recommending Directors for
re-election and selecting new candidates with a solid record of accomplishment
in their chosen fields.
The Governance Committee evaluates and
determines the appropriate and desirable mix of characteristics, skills,
experience and diversity for the Board as a whole, as well as the qualifications
and attributes of individual Directors and 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 Governance Committee also strives to
achieve an appropriate balance of continuity and refreshment through a mix of relatively new
and longer tenured Directors. In considering this issue, the Committee and the
Board strongly believe that long tenure does not in itself impair a Directors
independence and that, in fact, tenure may enhance independence. For example, a
Director who has overseen CEO successions may be more independent than Directors
who are new to the Board and have served with only one CEO. Accordingly, while
the Committee and the Board consider tenure in evaluating the effectiveness of
the Board, it is not a controlling factor.
McDonalds
Corporation |
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21 |
Table of Contents
Board and
Governance Matters |
|
BOARD SUCCESSION
PLANNING
Under our Corporate Governance Principles,
the Governance Committee has the primary responsibility for developing a
succession plan for the Board and for making recommendations to the full Board
on succession matters. The Governance Committee considers suggestions for new
Director nominees that it receives from a variety of sources, including the
independent search firm that it retained in 2015, to help ensure that diverse
candidates are regularly identified, screened and evaluated as potential
candidates.
The Governance Committee also evaluates all Directors who are being
considered for renomination. In doing so, the Committee looks at their skills
and experience in light of overall Board composition and the desire for new and
different perspectives and skill sets, particularly given the evolving needs of
the business. The Committee reflects on a Directors contributions, including by
taking into account results of the most recent Board and peer evaluations (as
further described below).
In addition, the Governance Committee
continually evaluates the mix of Directors in light of future retirements to
facilitate a smooth transition of skills, experience and diversity as
retirements occur.
EVALUATIONS
The Board is committed to regular
evaluations of itself, its Committees and individual Directors. Each year, the
Directors are asked to complete a written evaluation of the Board, their peers
and the Committees on which they serve. The following graphic illustrates the
process by which the Board currently carries out its evaluations:
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Directors complete evaluations
(Board, peer and Committee) and send directly to an independent third
party. |
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Board evaluations consider:
●General board practices
●Input for improvement
●Suggestions for new skills and experiences for potential
future candidates |
Peer evaluations consider:
●Contributions to Board discussions and decisions
throughout 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
●Effectiveness of Committee |
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To protect anonymity and integrity
of the process, an independent third party compiles responses to Board,
peer and Committee evaluations into a report for the Chair of the
Governance Committee. |
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The Governance Committee and full
Board discuss the Board and peer evaluation results.
Each of the standing Board
Committees, except the Executive Committee, discusses its respective
Committee evaluation. |
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22 |
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|
2017 Proxy
Statement |
Table of Contents
Board and
Governance Matters |
SELECTION OF DIRECTOR
CANDIDATES
The Board has a robust policy for the
consideration of potential Director candidates. The Governance Committee plays a
critical role by establishing criteria, screening candidates and evaluating the
qualifications of persons that may be considered for service as a Director,
including candidates nominated or suggested by shareholders. The Governance
Committee has retained an independent search firm to identify, screen and
evaluate potential candidates. Informed by this outside perspective, the
Governance Committee develops a pool of candidates that the Board may draw upon
from time to time.
The following graphic illustrates the
Companys selection process for new Directors:
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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. |
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The Governance Committee
identifies a pool of qualified Director candidates through a robust search
process, which includes use of an independent search firm, and assesses
candidates skills experience and background. 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 |
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Potential Director candidates are
interviewed by the Chairman, CEO, Chair of the Governance Committee and
other Governance Committee members. |
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The Governance Committee recommends,
and the full Board approves, Director candidates best qualified to serve
the interests of the Company and all shareholders. |
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Shareholders consider the nominees
for election to the Board and elect Directors to serve one-year
terms. |
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The Boards Director Selection Process may
be found on the Companys website at http://corporate.mcdonalds.com/mcd/investors/corporate-governance/governance-principles-policies-and-guidelines.html.
BOARD DIVERSITY
The Governance Committee, together with
the Board, proactively seeks diverse Director candidates to ensure a
representation of varied perspectives and experience in the boardroom. Diversity
is considered in the broadest sense, including, among other attributes,
leadership, experience, skills, perspectives, gender, ethnicity and geography.
When seeking new candidates, the Governance Committee actively endeavors to
include women, minorities and geographically-diverse persons in the candidate
pool. Currently, more than 50% of the Board are women and individuals who are
minorities, and this majority will continue following Dr. Masseys retirement
from the Board at the 2017 Annual Shareholders Meeting.
Our global business demands that we have
highly skilled, broadly experienced and diverse leadership at both the executive
level and in the boardroom. Our current Board members 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.
McDonalds
Corporation |
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23 |
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 Boards Standards on Director
Independence. 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 Google Inc., Inter-Con Security
Systems, Inc., Mattel, Inc. and Target Corporation); |
● |
in which Board members or their
immediate family members then held an aggregate 10% or more direct or
indirect interest (Inter-Con Security Systems, Inc.); 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 McDonalds
purchases of products and services in the ordinary course of business that were
made on arms-length terms in amounts and under other circumstances that did not
affect Director independence.
The Board also reviewed certain
de minimis arms-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. Currently, our non-management
Directors are Lloyd Dean, Robert Eckert, Margaret Georgiadis, Enrique Hernandez,
Jr., Jeanne Jackson, Richard Lenny, Walter Massey, John Mulligan, Sheila
Penrose, John Rogers, Jr. and Miles White. In addition, the Board previously
determined that Susan Arnold and Andrew McKenna, who served as Directors during
2016 and did not stand for re-election at our 2016 Annual Shareholders Meeting,
were independent.
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 Companys global business strategies, opportunities and
challenges. The Board employs a similar approach with respect to evaluating
possible candidates for other senior management positions. In general, the
Boards management succession planning is designed to anticipate both planned
successions, such as those arising from anticipated retirements, as well as
unexpected successions, such as those occurring when an executive leaves
suddenly to take a new position, or due to death, disability or other unforeseen
events.
MEETING ATTENDANCE
Directors are expected to attend the
Annual Shareholders Meeting and all Board meetings and meetings of the
Committees on which they serve. Our Board met eight times during 2016. On
average, our Directors attended 95% of the total number of meetings of the Board
and respective Committees on which they serve. All Directors who stood for
re-election last year attended the 2016 Annual Shareholders Meeting.
24 |
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2017 Proxy
Statement |
Table of Contents
Board and
Governance Matters |
EXECUTIVE SESSIONS
The independent Directors meet regularly
in executive sessions, which, from time to time, include the CEO. An executive
session is generally scheduled immediately before or after each regular Board of
Directors 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.
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 of Directors. Other than the Executive Committee, all Committees
review their respective Charters at least annually, and changes are recommended
to the full Board of Directors for approval. Committee charters are available on
the Companys website at http://corporate.mcdonalds.com/mcd/investors/corporate-governance/board-committees-charters.html.
All Committee members are independent as
defined by the listing standards of the New York Stock Exchange (NYSE) and the
Boards 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 and John Mulligan qualify as audit committee financial experts as
defined by applicable SEC rules and NYSE listing standards. In 2016, the
Committee memberships were refreshed, and new Chairs were appointed to the
following Committees: Audit & Finance; Compensation; Public Policy &
Strategy and Sustainability & Corporate Responsibility.
The primary responsibilities of each
Committee are summarized on the following pages. Each Committee also has
oversight of risk areas as illustrated on page 30.
McDonalds Corporation |
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Board and Governance
Matters |
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AUDIT & FINANCE COMMITTEE |
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|
|
|
|
|
|
|
|
|
|
|
|
Members
John Mulligan (Chair) (FE) Lloyd
Dean (FE) Margaret Georgiadis Walter Massey Sheila Penrose
(FE = Financial Expert) |
|
Primary Areas of
Oversight
●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 Companys capital structure, dividend policy
and plans for share repurchases
●Pre-approves all audit and permitted non-audit
services
●Annually reviews the Companys Sarbanes-Oxley and tax
compliance
●Reviews the Companys Disclosure Controls and
Procedures |
|
|
|
|
|
|
Meetings in 2016: 8*
Attendance: 93%
*In 2016, certain responsibilities
of the Finance Committee were transferred to the Audit Committee, which
was renamed the Audit & Finance Committee. The number of meetings
reflects the total number of meetings of the Audit Committee (as
originally constituted) and the Audit & Finance Committee (as later
combined). |
|
|
The Audit & Finance Committee
typically addresses the following items throughout the year:
Second
Quarter |
●Review first quarter Form 10-Q
●Monitor Disclosure Controls and Procedures and
managements conclusions about their
effectiveness |
|
|
|
First Quarter |
Third Quarter |
●Review critical accounting policies
●Review Disclosure Controls and Procedures, internal
control over financial reporting and managements conclusions about their
effectiveness
●Review Form 10-K
●Approve Committee Report and Fee Table for inclusion in
Proxy Statement
●Review services and fees of independent
auditors
●Monitor compliance matters |
●Review second quarter Form 10-Q
●Monitor Disclosure Controls and Procedures and
managements conclusions about their effectiveness
●Review audit plan and associated fees for annual
audit
●Monitor new or proposed regulatory and accounting
initiatives
●Review update regarding Internal Audit and
controls
●Discuss capital structure (including dividend and share
repurchase) |
|
|
Fourth Quarter |
●Review third quarter Form 10-Q
●Monitor Disclosure Controls and Procedures and
managements conclusions about their effectiveness
●Review Committee
Charter |
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Table of Contents
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Board and Governance
Matters |
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COMPENSATION
COMMITTEE |
|
|
|
|
|
|
|
|
|
|
|
|
|
Members
Jeanne Jackson (Chair) Lloyd
Dean Richard Lenny John Rogers, Jr. |
|
Primary Areas of
Oversight
●Oversees the Companys compensation program and
policies
●For more information, see the Compensation Discussion
and Analysis beginning on page 34. |
|
|
|
|
|
|
Meetings in 2016: 6 Attendance:
89% |
|
|
The Compensation Committee typically
addresses the following matters throughout the year:
Second
Quarter |
●Monitor trends and developments in executive
compensation
●Review feedback from shareholders and policies of
investors and proxy advisory firms
●Review executives progress against stock ownership
requirements
●Evaluate potential exclusions from financial results
used to determine incentive
compensation |
|
|
|
First Quarter |
Fourth Quarter |
●Determine prior year payouts earned under annual and
long-term plans
●Set annual salaries
●Determine current year awards
●Establish performance targets for current year
awards
●Review potential risks associated with establishing
current year performance targets
●Evaluate potential exclusions from financial results
used to determine incentive compensation
●Approve Committee Report for inclusion in Proxy
Statement |
●Consider total compensation program
●Establish plan design, including performance metrics and
payout ranges for upcoming year
●Review peer group
●Review potential risks associated with plan design
and/or payout ranges
●Evaluate potential exclusions from financial results used to
determine incentive compensation
●Review Committee Charter |
The Committee does not generally meet
during the third quarter; however, it will address matters that arise off-cycle
(e.g., promotional and new-hire compensation).
McDonalds
Corporation |
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Board and Governance
Matters |
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GOVERNANCE
COMMITTEE |
|
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|
|
|
|
|
|
|
|
|
|
Members
Miles White (Chair) Robert
Eckert Enrique Hernandez, Jr. Jeanne Jackson John Rogers,
Jr. |
|
Primary Areas of
Oversight
●Monitors the Boards 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
●Evaluates the Companys Corporate Governance Principles
and oversees governance risks |
|
|
|
|
|
|
Meetings in 2016: 5 Attendance:
100% |
|
|
The Governance Committee typically
considers the following matters throughout the year:
Second
Quarter |
●Recommend Committee appointments
●Recommend election of Chairman and compensation
●Review Directors compliance with Stock Ownership Guidelines
●Discuss proxy voting update/Annual Shareholders Meeting matters
●Discuss Director candidates/succession planning |
|
|
|
First Quarter |
Third Quarter |
●Review Corporate Governance Principles
●Monitor shareholder proposals for Proxy Statement
●Discuss Director candidates/succession planning
●Recommend Director nominees/candidates for election at Annual Meeting |
●Review Annual Shareholders Meeting voting results
●Approve criteria and process for evaluation of Board, Directors and Committees
●Review Directors compensation
●Review Directors Code of Conduct
●Discuss Director candidates/succession planning |
|
|
Fourth Quarter |
●Review Committee Charter
●Consider Board, Director and Committee evaluations
●Review Director Selection Process
●Discuss Director candidates/succession planning
|
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2017 Proxy
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Table of Contents
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Board and Governance
Matters |
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PUBLIC POLICY & STRATEGY COMMITTEE |
|
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|
|
|
|
|
|
|
|
|
Members
Robert Eckert (Chair) Enrique Hernandez, Jr. John
Mulligan Miles White |
|
Primary Areas of
Oversight
●Reviews and monitors the Companys long-term strategy
development and implementation
●Reviews and monitors trends and issues that could affect
the Companys business activities and performance, as well as
reputation
●Reviews and monitors government affairs strategies and
priorities
●Reviews human capital management matters
●Reviews the Companys compliance programs, including
compliance with the Companys Political Contributions Policy and
employees compliance with the Companys Standards of Business
Conduct
●Reviews risks related to cyber-security and tax
matters |
|
|
|
|
|
|
Meetings in 2016: 2 Attendance:
100%
In 2016, the Board created a new
Public Policy & Strategy Committee to oversee the Companys strategic
initiatives and public policy matters relating to its evolving
business. |
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SUSTAINABILITY & CORPORATE RESPONSIBILITY
COMMITTEE |
|
|
|
|
|
|
|
|
|
|
|
|
|
Members
Sheila Penrose (Chair)
Margaret Georgiadis Richard Lenny Walter
Massey |
|
Primary Areas of
Oversight
●Reviews and monitors the Companys strategies and
efforts to address Brand trust through its performance as a sustainable
organization
●Reviews and monitors Brand leadership priorities that
are significant to the Company and its stakeholders, including food,
sourcing, the environment, community engagement, philanthropy, and
diversity and inclusion
●Reviews and monitors the development and implementation
of goals for performance with respect to the Companys sustainability
framework and initiatives
●Reviews the Companys global sustainability
communication plans and reports |
|
|
|
|
|
|
Meetings in 2016: 4 Attendance:
100%
|
|
|
The Executive Committee may exercise most
Board powers during the periods between Board meetings. In 2016, the Executive
Committee met once. The Executive Committee members are Stephen Easterbrook
(Chair), Robert Eckert, Enrique Hernandez, Jr., Jeanne Jackson, John Mulligan
and Miles White.
McDonalds
Corporation |
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Board and Governance
Matters |
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RISK OVERSIGHT
The Board oversees the Companys
enterprise-wide risk management activities, both as a whole and through its
Committees that are comprised solely of independent Directors. The following
graphic illustrates this risk oversight process:
For more information on the Boards risk
oversight responsibilities, see the Companys Corporate Governance Principles
at http://corporate.mcdonalds.com/mcd/investors/corporate-governance/governance-principles-policies-and-guidelines.html and the various Committee Charters. Oversight of risks related
to executive compensation are more fully described on page 42.
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Table of Contents
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Board and Governance
Matters |
SHAREHOLDER ENGAGEMENT
Throughout each year, management and
members of our Board engage with a significant portion of shareholders. In
addition to current topics of particular relevance to McDonalds, including our
business results and initiatives, strategy and capital structure, we invite
shareholders to discuss matters related to Board composition and tenure,
corporate governance, executive compensation, and environmental and social
issues, among other topics.
In 2016, we reached out to a variety of
shareholders, including index funds, hedge funds, union and public pension
funds, actively-managed funds and socially-responsible investment funds. Our outreach
efforts represented more than 30% of our outstanding shares, with an emphasis
this year on outreach to investors located outside of the United States.
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. As appropriate, the
Governance Committee may delegate specific issues to relevant Board Committees
for further consideration.
The graphic below represents 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:
Prior to Annual Shareholders
Meeting |
|
|
|
Annual Shareholders Meeting |
●Seek feedback on matters for shareholder consideration
●Discuss shareholder proposals with proponents, when
appropriate
●Publish Annual Report and Proxy Statement, highlighting
recent Board and Company activities |
|
|
●Opportunity for direct engagement with shareholders
●Voting results for management and shareholder proposals
|
Off-season engagement and
evaluation of practices |
|
|
Post Annual Shareholders
Meeting |
●Engage shareholders and other stakeholders regarding our
Board, governance and executive compensation practices to better
understand investor viewpoints and inform discussions in the boardroom
●Evaluate potential changes to Board, governance or
executive compensation practices in light of shareholder feedback and
review of practices
●Conduct annual Board and Committee evaluations and
Director peer reviews |
|
|
●Discuss vote outcomes from Annual Shareholders Meeting
in light of existing governance and compensation practices, as well as
feedback received from shareholders during proxy season
●Review corporate governance trends, recent regulatory
developments, and the Companys own corporate governance documents,
policies and procedures
●Determine topics for discussion during off-season
shareholder engagement |
McDonalds
Corporation |
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Table of Contents
Board and
Governance Matters |
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BOARDS RESPONSE TO SHAREHOLDER
PROPOSALS
Last year, at the 2016 Annual
Shareholders Meeting, shareholders expressed some support for an advisory
shareholder proposal regarding the use of antibiotics by the Companys meat
suppliers. This proposal received support of less than 17% of our outstanding
shares. As part of its oversight responsibilities with respect to sustainability
matters generally, the Sustainability & Corporate Responsibility Committee
continues to evaluate this issue. Additional information regarding the Boards
thoughtful analysis of this subject is included in its Statement in Opposition
to a similar shareholder proposal expected to be presented at this years Annual
Shareholders Meeting, beginning on page 70.
At the same meeting, an advisory
shareholder proposal requesting the ability for shareholders to act by written
consent received the support of about 30% of our outstanding shares. In
response, the Board carefully considered the proposal and continues to believe
that, in light of the Companys strong governance profile, including the
shareholder right to call special meetings, and the Boards responsiveness to
shareholder input, it is unnecessary and not in the best interests of all
shareholders.
CORPORATE GOVERNANCE
PRINCIPLES
The Governance Committee regularly reviews
the Companys Corporate Governance Principles and other governing documents and
policies to ensure their appropriateness in light of the Companys current and
expected long-term circumstances, as well as evolving best practices. The
Companys Corporate Governance Principles are available on our website at
http://corporate.mcdonalds.com/mcd/investors/corporate-governance/governance-principles-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/mcd/investors/corporate-governance/codes-of-conduct.html.
DIRECTOR COMPENSATION
Only non-management Directors are paid for
their service on the Board. Through the 2016 Annual Meeting, this compensation
was as follows: (i) an annual cash retainer of $100,000; (ii) an annual retainer
fee of $25,000 for each Director serving as Chair of the Audit, Compensation or
Governance Committee and an annual retainer fee of $15,000 for each Director serving as
Chair of other Board Committees; and (iii) common stock equivalent units with a
$140,000 value granted annually under the Directors Deferred Compensation Plan
(Directors Plan).
In July 2016, upon the recommendation of
the Governance Committee, the Board of Directors approved the following changes
to the Directors compensation: (i) an annual cash retainer of $110,000; and
(ii) common stock equivalent units with a $165,000 value granted annually under
the Directors Plan. The Board of Directors also approved, upon the
recommendation of the Governance Committee, an annual retainer fee of $30,000
for the Chair of the Audit & Finance Committee and an annual retainer fee of $25,000
for each Director serving as Chair of the Compensation, Governance, Public
Policy & Strategy or Sustainability & Corporate Responsibility
Committee, effective from and after the 2016 Annual Meeting.
Directors serving for a portion of the
year receive prorated compensation. In addition, the Board considers and may, in
its discretion, grant additional compensation to the Non-executive Chairman.
Upon the recommendation of the Governance Committee, the disinterested members
of the Board of Directors awarded Mr. Hernandez an annual retainer fee of
$250,000 (prorated based on service as Chairman) and a restricted stock unit
award with a deemed grant value of $250,000.
The Company reimburses non-management
Directors for expenses incurred in attending Board, Committee, shareholder and
other McDonalds business meetings, as well as expenses for Director continuing
education.
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2017 Proxy
Statement |
Table of Contents
Board and
Governance Matters |
The following table summarizes the
compensation received by each non-management Director serving in
2016:
Name (a) |
|
Fees earned or paid in
cash ($)(b) |
(2) |
Stock awards ($)(c) |
(3)(4) |
All
other compensation ($)(g) |
(5) |
Total ($)(h) |
Susan Arnold(1) |
|
40,385 |
|
56,230 |
|
0 |
|
96,615 |
Lloyd Dean |
|
104,266 |
|
150,724 |
|
0 |
|
254,990 |
Robert Eckert |
|
129,266 |
|
150,724 |
|
10,000 |
|
289,990 |
Margaret Georgiadis |
|
104,266 |
|
150,724 |
|
10,000 |
|
264,990 |
Enrique Hernandez, Jr. |
|
264,019 |
|
393,201 |
|
10,000 |
|
667,220 |
Jeanne Jackson |
|
125,255 |
|
150,724 |
|
10,000 |
|
285,979 |
Richard Lenny |
|
104,266 |
|
150,724 |
|
10,000 |
|
264,990 |
Walter Massey |
|
110,283 |
|
150,724 |
|
5,000 |
|
266,007 |
Andrew McKenna(1) |
|
40,385 |
|
116,066 |
|
0 |
|
156,451 |
John Mulligan |
|
122,233 |
|
150,724 |
|
0 |
|
272,957 |
Sheila Penrose |
|
119,239 |
|
150,724 |
|
10,000 |
|
279,963 |
John Rogers, Jr. |
|
104,266 |
|
150,724 |
|
0 |
|
254,990 |
Miles White |
|
129,266 |
|
150,724 |
|
0 |
|
279,990 |
(1) |
Ms. Arnold did not stand for
re-election at the 2016 Annual Shareholders Meeting and received prorated
compensation to reflect her service in 2016. Mr. McKenna did not stand for
re-election at the 2016 Annual Shareholders Meeting and was named
Chairman Emeritus upon his retirement from the Board. Mr. McKenna received
prorated compensation to reflect his service in 2016 and $100,000 in
recognition of his service as Chairman Emeritus, prorated to $59,836 for
2016. |
(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 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,
prorated for 2016. |
(3) |
Common stock equivalent units
are deferred until retirement from the Board or death. A Director may
specify that deferred amounts from each years award be paid in a lump sum
or 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, 2016 to
each non-management Director who served on the Board during 2016. Due to
the compensation changes described above, such amounts reflect prorated
values before and after May 2016 of $140,000 and $165,000, respectively.
In connection with his service as Chairman, Mr. Hernandez also received a
grant of 2,119 restricted stock units in August 2016 with an aggregate
grant date fair value of $242,477 computed in accordance with ASC 718
(deemed grant value of $250,000). These restricted stock units vest on the
later of one year from the date of grant or Mr. Hernandezs departure from
the Board, and shall be payable in either shares of the Companys stock or
cash, at the Companys 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,
2016. |
Name |
|
Outstanding stock awards |
Susan Arnold |
|
14,742 |
Lloyd Dean |
|
2,981 |
Robert Eckert |
|
52,151 |
Margaret Georgiadis |
|
2,369 |
Enrique Hernandez, Jr. |
|
72,573 |
Jeanne Jackson |
|
63,619 |
Richard Lenny |
|
29,382 |
Walter Massey |
|
38,502 |
Andrew McKenna |
|
121,685 |
John Mulligan |
|
1,743 |
Sheila Penrose |
|
22,167 |
John Rogers, Jr. |
|
48,656 |
Miles White |
|
12,335 |
(5) |
Represents Company matching
gifts of charitable contributions to tax-exempt organizations for
participating non-management Directors that were received in 2016. The
matching gift program matches up to $10,000 of charitable contributions
made to certain types of tax-exempt
organizations. |
McDonalds Corporation |
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33 |
Table of Contents
EXECUTIVE COMPENSATION |
|
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed
and discussed the Companys Compensation Discussion and Analysis with McDonalds
management. Based on this review and discussion, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this Proxy Statement and the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2016.
Respectfully submitted,
The Compensation
Committee
Jeanne Jackson, Chair
Lloyd Dean
Richard Lenny
John Rogers, Jr.
COMPENSATION
DISCUSSION AND ANALYSIS
OUR YEAR IN REVIEW
In 2016, we continued to implement our
turnaround plan focusing on driving operational growth, returning excitement to
our Brand and unlocking financial value. Over the past year, our results have
demonstrated that the turnaround plan is working as we continue to strive to
grow global comparable sales and serve more customers. We are focused on driving
long-term, profitable results and pursuing our goal of being recognized by our
customers as a modern, progressive burger company.
We remain committed to a
pay-for-performance culture. Payouts to our executives vary based on performance
against strategic financial metrics aligned with our key measures of long-term
sustainable growth including: operating income, net income, return on
incremental invested capital (ROIIC), and share price performance. Our 2016 pay
package generally included base salary, a short-term cash incentive (STIP),
performance-based restricted stock units (RSUs) and stock options. We eliminated
our long-term cash incentive plan (Cash LTIP) in 2016 (see pages 36 and 40 for a
discussion of this decision and its impact on our overall compensation
program).
Our turnaround efforts yielded strong 2016
results, including a 3.8% increase in global comparable sales, an 8% (11%
constant currencies) increase in operating income and a 13% (16% constant
currencies) increase in diluted earnings per share. These results support the
higher payouts under the 2016 STIP (195.5% for Corporate); however, our NEOs
also received payouts well below target for the 2014-2016 Cash LTIP (15.6%) and
2014-2016 RSUs (35%), both based on performance during the 2014-2016 cycle. This
balance is appropriate, as we believe it is important to reward short-term
success, while also incentivizing our executives to drive shareholder value over
the long term. Thus, our compensation approach effectively aligns pay and
performance over both the short and long term.
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2017 Proxy
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Table of Contents
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 |
Michael Andres |
|
President, McDonalds USA (retired December 31,
2016) |
Silvia Lagnado |
|
Executive Vice President, Global Chief Marketing
Officer |
Peter Bensen |
|
Former Chief Administrative Officer (CAO) (retired
September 2, 2016) |
David Hoffmann |
|
Former President, High Growth Markets (resigned
September 30, 2016) |
COMPENSATION SETTING
PROCESS
The Compensation Committee of the
Board (Committee) meets regularly during the year (six times in 2016). Meeting
agendas are determined by the Chair of the Committee 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 Committees
independent advisor, Frederic W. Cook & Co., Inc. (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 27 highlights the Committees annual review process.
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 CEOs 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.
FW Cook provides the Committee with
detailed compensation recommendations for the CEO and CFO (and, prior to Mr.
Bensens retirement, the CAO) at least annually. The Committee considers peer
data and other similar information obtained from various sources, including
Towers Watson & Co., Equilar and Aon Hewitt. 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.
Throughout the year, management and
Directors are engaged in dialogue with a significant portion of the Companys
shareholder base on a number of matters important to both the Company and its
investors, including our executive compensation program. 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.
Historic Say on Pay Voting Results
(FOR) |
McDonalds Corporation |
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35 |
Table of Contents
2016 CHANGES TO COMPENSATION
PROGRAM
ELIMINATION OF CASH
LTIP
● |
The Company eliminated the
Cash LTIP plan, removing the prior overlap of the operating income
performance measure in short- and long-term plans. |
● |
Long-term incentives are now
awarded in the form of performance-based RSUs and stock options in generally equal
economic proportions. |
● |
Performance-based RSUs now
have net income growth and ROIIC performance targets, as well as a total
shareholder return (TSR) modifier. |
● |
The use of equity-based awards
more closely aligns executive compensation with shareholder interests and
better reflects market practice. |
● |
The 2015-2017 Cash LTIP award
remains outstanding (the 2014-2016 award was paid in March 2017 and the
2015-2017 award will be paid in March 2018, subject to the achievement of
the applicable performance targets). |
COMPENSATION PERFORMANCE MEASURES AND
TARGETS
In order to accomplish our
compensation objectives, the Committee uses a mix of variable and fixed forms of
compensation comprised of both short- and long-term incentive awards, based on
various measurable, objective performance metrics (both absolute and relative),
as well as our stock price performance, as reflected in the chart
below.
2016 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 Companys 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 targets that continue to motivate and
retain executives. In setting these objective performance targets, the Committee
considers the Companys financial objectives (over the short- and long-term) and
the economic, industry and competitive environments.
EXCLUSIONS FROM
REPORTED FINANCIAL RESULTS
The Committee may exclude certain items
from the financial results used to determine incentive-based compensation for
items that are not indicative of ongoing performance in order to focus our
executives on the fundamentals of the Companys underlying business performance.
The Committee considers these 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 2016, the Committee reviewed the
impact of strategic actions taken in connection with the Companys business
turnaround plan (e.g., asset impairment and other one-time costs related to the
sale of disaffiliated markets, business restructuring, and benefits/costs
associated with incremental share repurchase and debt) on performance-based
compensation. Consistent with the guidelines noted above, the Committee
determined that it was appropriate to exclude certain turnaround-related charges, as well
as charges related to changes in local market tax laws affecting the restaurant
industry from operating income and earnings per share results. The impact of
these exclusions on the calculation of the 2016 STIP, 2014-2016 Cash LTIP and
performance-based RSUs is provided on page 39.
The Committee remains focused on ensuring
that payouts closely reflect Company performance and hold management accountable
for delivering long-term sustainable growth. Since actions to complete the
turnaround plan will continue beyond 2016, we anticipate that additional
exclusions will apply going forward, which may impact payouts in future
years.
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.
36 |
|
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|
2017 Proxy
Statement |
Table of Contents
PEER
COMPANIES
Consistent with our goal of providing
competitive compensation to incentivize and retain executive talent, we review
our executives total direct compensation compared to levels at a peer group of
companies that we believe is 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, 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 peer group did not change this year and is set
forth in the graphic below.
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 |
|
Lowes 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 Wendys Company |
The
Home Depot, Inc. |
|
The
Procter & Gamble Company |
|
Yum! Brands, Inc. |
The following table compares McDonalds
size and performance to that of our peer group.
McDonalds vs. Peer
Group |
* |
Dollars in millions.
Financial data as reported on Bloomberg.com and as of December 31, 2016
unless otherwise indicated. |
McDonalds Corporation |
|
|
|
37 |
Table of Contents
ELEMENTS OF TOTAL
DIRECT COMPENSATION
Approximately 90% of our CEOs total
direct target compensation opportunity for 2016 was allocated to variable
compensation that is at-risk based on performance, including short- and
long-term incentive compensation (as shown in the pie chart below). Further, for
the NEOs who were employed at year-end, approximately 81% of the total direct
compensation opportunity for 2016 was allocated to variable compensation that is
at-risk based on performance.
The above chart uses ASC 718 values for
equity awards granted in 2016.
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. As part of the annual review process, each
NEO received a salary increase for 2016.
STIP
Our STIP is designed to reward 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 payout under the STIP.
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. These modifiers in 2016 included the
following objective metrics:
● |
Comparable guest count
growth |
● |
Customer satisfaction (only
for U.S. segment) |
38 |
|
|
|
2017 Proxy
Statement |
Table of Contents
The following graphic illustrates the
Corporate STIP payout calculation for 2016.
The chart below provides operating income
growth necessary to achieve threshold, target and maximum payouts under 2016
STIP for Corporate (prior to adjustment based on the modifiers discussed on the
previous page).
2016 |
|
Threshold |
|
Target |
|
Maximum |
Consolidated annual operating income
growth* |
|
0% |
|
5.3% |
|
11.6% |
* |
Payout percentage interpolated
for results that fall between each of the performance levels specifically
identified. |
The following table shows the operating
income targets and results under 2016 STIP, as adjusted for the exclusions described
on page 36:
(Dollars in millions) |
|
Target 2016 operating income ($) |
|
Target 2016 operating income growth over 2015
(%) |
|
2016 adjusted operating income*
($) |
|
2016 adjusted operating income growth over 2015
(%) |
Corporate |
|
7,715 |
|
5.3 |
|
8,182 |
|
11.7 |
U.S. |
|
3,617 |
|
3.6 |
|
3,793 |
|
8.7 |
International Lead Markets |
|
2,886 |
|
5.6 |
|
2,981 |
|
9.1 |
High Growth Markets |
|
987 |
|
6.6 |
|
1,063 |
|
14.8 |
Foundational Markets |
|
955 |
|
11.1 |
|
1,085 |
|
26.3 |
* |
The exclusions discussed on
page 36 had the following impact on the calculation of incentive awards
(including 2016 STIP, 2014-2016 Cash LTIP and 2014-2016 performance-based
RSUs): Corporate $265 million; U.S. $24 million; International Lead
Markets $37 million; High Growth Markets $(20) million, and Foundational
Markets $46 million. |
The 2016 target awards and STIP payouts
for the NEOs are shown in the table below. Please see the notes to the Grants of
Plan-Based Awards table on page 47 for more information regarding the impact of
the modifiers on these payouts.
Named executive officer |
|
Target STIP payment as percentage of salary
(%) |
|
2016 target STIP payout ($) |
|
2016 STIP payout ($) |
|
STIP payment as percentage of target
(%) |
Stephen Easterbrook |
|
175% |
|
2,275,000 |
|
4,447,625 |
|
195.5 |
Kevin Ozan |
|
100% |
|
700,000 |
|
1,368,500 |
|
195.5 |
Douglas Goare |
|
90% |
|
616,500 |
|
1,057,760 |
|
171.6 |
Michael Andres |
|
90% |
|
576,000 |
|
1,080,720 |
|
187.6 |
Silvia Lagnado |
|
80% |
|
494,400 |
|
966,552 |
|
195.5 |
Peter Bensen |
|
84% |
|
819,160 |
|
1,601,457 |
|
195.5 |
David Hoffmann |
|
67% |
|
|
|
|
|
0 |
McDonalds Corporation |
|
|
|
39 |
Table of Contents
LONG-TERM INCENTIVE
COMPENSATION
RSUs
An RSU provides the right to receive a
share of McDonalds stock subject to both service- and performance-based vesting
requirements.
RSUs granted to executives in 2016 as part
of the annual cycle are scheduled to vest on the third anniversary of the grant
date, subject to the Companys achievement of two key financial metrics,
compound annual net income growth and ROIIC, along with a modifier based on
relative TSR over the 2016-2018 performance period, as illustrated in the
graphic below. These awards also align executive pay with shareholder value by
delivering any payout in the form of shares of Company stock.
Consistent with market practice, there is
an above-target payout opportunity with a maximum payout at 200% of the target
award (180% based on the two performance metrics, with an additive modifier of
up to 20% based on the Companys cumulative TSR vs. the S&P 500 Index). In
granting performance-based RSUs, we use a balanced set of metrics to encourage
an increase in profitability, ensure an efficient and effective use of capital,
and enhance shareholder value. The combination of compound annual net income
growth and ROIIC metrics emphasizes the Companys key long-term focus of growing
net income while achieving desired returns.
While the RSUs awarded to our executives
as part of the annual grant cycle are generally performance-based, from time to
time an executive may receive a special award (e.g., a sign-on incentive) of
RSUs that are time-based. In 2016, Ms. Lagnado received a sign-on award of
time-based RSUs that vested on the first anniversary of the grant
date.
2016-2018* |
|
Threshold |
|
Target |
|
Maximum |
3-year ROIIC |
|
10% |
|
10 to 24.9% |
|
25% |
Compound annual |
|
1% |
|
5% |
|
9% |
net income growth |
|
|
|
|
|
|
|
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% |
40 - 59%-tile |
|
0% |
80 - 100%-tile |
|
20% |
* |
In all cases, payout
percentage will be interpolated for results that fall between each of the
performance levels specifically
identified. |
STOCK
OPTIONS
Options 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 require
executives to drive share price increases in order to receive value from awards
and thereby closely align executive pay with shareholder interests. The
Companys policies and practices regarding option grants, including the timing
of grants and the determination of the exercise price, are described on page
43.
OUTSTANDING CASH
LTIP AWARDS FROM PRIOR YEARS
In 2016, the Committee eliminated the Cash
LTIP, and instead grants long-term incentives in the form of options and
performance-based RSUs in generally equal economic proportions. This transition
was designed to simplify our long-term incentive design, better align with
market practice and to more closely align executive compensation with
shareholder interests. As a result of this transition, in 2016, executives
received larger option and RSU awards than in previous years (see the Summary Compensation Table
on page 44 for more information regarding these awards).
The 2014-2016 Cash LTIP was paid in March
2017 at 15.6% of target, based on performance during that period (see pages 36
and 39 for information on the exclusions applied for 2016). The 2015-2017 Cash
LTIP remains outstanding and will be paid in March 2018. Payouts will be initially
determined based on the following quantitative measures over the three-year
performance period: growth in operating income and ROIIC. 2015-2017 Cash LTIP
payouts will be adjusted, positively or negatively, by first applying a modifier
based on share of traffic and then applying a multiplier based on cumulative TSR versus
the S&P 500 Index for the performance period.
40 |
|
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|
2017 Proxy
Statement |
Table of Contents
The following graphic depicts the
calculation of the outstanding 2015-2017 Cash LTIP payouts:
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 supplemental non-qualified deferred compensation
retirement plan applicable to U.S.-based employees.
SEVERANCE AND CHANGE IN CONTROL
ARRANGEMENTS
NEOs participate in our U.S.
broad-based severance plan. Benefits under the severance plan are described
under Potential Payments Upon Termination of Employment on page 51.
The Company no longer has any change of
control agreements and will not enter into new change in control agreements
going forward.
PERQUISITES AND OTHER
BENEFITS
McDonalds provides the following
limited perquisites to NEOs: car allowance, financial planning, physical
examination (which are also available for the NEOs spouses), life insurance,
executive security (for select NEOs), matching charitable donation, limited
personal items and, generally in the case of the CEO only (and the CAO prior to
retirement), personal use of the Companys aircraft, subject to reimbursement of
a portion of the cost of personal use. 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.
RETIREMENTS OF MICHAEL ANDRES AND PETER
BENSEN
Messrs. Andres and Bensen retired
on December 31, 2016 and September 2, 2016, respectively. In connection with
each executives retirement, the Committee agreed to waive certain notice and
service requirements pursuant to the terms of their respective equity awards.
These waivers permitted each executive to vest in all outstanding RSU awards
upon retirement, subject to the original performance-based vesting conditions.
Each executive will also continue to vest in their respective outstanding options pursuant
to the original vesting schedules and such options shall remain outstanding until their
original expiration dates. In addition, Messrs. Andres and Bensen received
service credit through March 1, 2017, enabling them to fully vest in their
2016 option awards. In exchange for these additional benefits, each agreed to extend
the non-compete period following their retirement, from the Companys customary
eighteen month period (twenty months for Mr. Andres and twenty-four months for
Mr. Bensen).
See pages 51 and 52 for information
regarding the Companys customary treatment of equity awards upon
termination.
RESIGNATION OF DAVID
HOFFMANN
Mr. Hoffmann resigned from the
Company on September 30, 2016. Mr. Hoffmann did not receive severance and, upon
his resignation, he forfeited his 2016 STIP award, his Cash LTIP awards and all
unvested option and RSU awards. Pursuant to an existing tax equalization
arrangement, the Company made certain foreign tax payments on behalf of Mr.
Hoffmann arising from his exercise of options granted during his international
assignment.
McDonalds Corporation |
|
|
|
41 |
Table of Contents
COMPENSATION POLICIES AND
PRACTICES
POLICY REGARDING MANAGEMENTS 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
executives 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 (prior to retirement, Mr. Bensens ownership
requirement was 5x) |
|
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. 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.
The Company has adopted restrictions that
prohibit executives from engaging in 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 fees. Consistent with its Charter, the Committee regularly
considers FW Cooks independence and, in 2016, 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 Committees consultant for
any purpose.
CLAWBACKS AND FORFEITURE
PROVISIONS
The Companys 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, (ii) similar rules under the laws of any other jurisdiction
and (iii) any policies adopted by the Company to implement such requirements,
all to the extent determined by the Company in its discretion to be applicable
to the award recipient.
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.
42 |
|
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|
2017 Proxy
Statement |
Table of Contents
INTERNAL 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 or promotion. These awards permit us to meet
one-time business objectives with minimum impact to long-term pay
equity.
POLICY WITH RESPECT TO TAX DEDUCTIBILITY OF
COMPENSATION
Our compensation programs are
designed to permit the Company to deduct compensation expense under Section
162(m) of the Internal Revenue Code (Code), which limits the tax deductibility
of annual compensation paid to executives to $1 million, unless the compensation
is performance-based. However, the Company may, from time to time, pay
compensation that does not qualify as performance-based compensation under
Section 162(m) of the Code.
POLICIES AND PRACTICES REGARDING EQUITY
AWARDS
We have a policy to not grant
equity awards when the Company possesses material non-public information. The
Company generally makes broad-based equity grants at approximately the same time
each year following our release of financial information; however, the Company
may choose to make equity awards outside of the annual broad-based grant (e.g.,
for certain new hires or promotions). Stock options may be granted only with an
exercise price at or above the closing market price of the Companys stock on
the date of grant.
McDonalds Corporation |
|
|
|
43 |
Table of Contents
COMPENSATION
TABLES
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation earned by
our NEOs in 2016, 2015 and 2014.
Name
and principal position (a) |
Year (b) |
|
Salary ($)(c) |
(4) |
|
Bonus ($)(d) |
|
Stock awards ($)(e) |
(5)(6) |
|
Option awards ($)(f) |
(5)(7) |
|
|
|
Non-equity incentive
plan compensation ($)(g) |
(5)(8) |
|
All
other compensation ($)(i) |
(9) |
|
Total ($)(j) |
Stephen
Easterbrook President and Chief Executive Officer(1) |
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 |
|
|
|
|
|
|
|
2014 |
|
633,333 |
|
|
0 |
|
535,453 |
|
|
386,627 |
|
|
Annual: |
|
0 |
|
|
134,449 |
|
|
1,689,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
0 |
|
|
|
|
|
|
Kevin
Ozan Corporate
Executive Vice President
and Chief Financial Officer |
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 |
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 |
|
|
|
|
|
|
|
2014 |
|
570,000 |
|
|
0 |
|
624,611 |
|
|
451,055 |
|
|
Annual: |
|
0 |
|
|
1,259,655 |
|
|
2,905,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
0 |
|
|
|
|
|
|
Michael
Andres President, McDonalds
USA(2) |
2016 |
|
636,667 |
|
|
0 |
|
919,691 |
|
|
701,610 |
|
|
Annual: |
|
1,080,720 |
|
|
107,769 |
|
|
3,517,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
70,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
1,151,700 |
|
|
|
|
|
|
Silvia
Lagnado Corporate
Executive Vice President and Global Chief Marketing Officer(3) |
2016 |
|
615,000 |
|
|
337,500 |
|
1,138,466 |
|
|
350,805 |
|
|
Annual: |
|
966,552 |
|
|
54,848 |
|
|
3,463,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
966,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
Bensen Former
Chief Administrative Officer(2) |
2016 |
|
653,333 |
|
|
0 |
|
1,839,263 |
|
|
1,403,206 |
|
|
Annual: |
|
1,601,457 |
|
|
207,092 |
|
|
5,868,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
164,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
1,765,907 |
|
|
|
|
|
|
|
2015 |
|
941,667 |
|
|
0 |
|
1,068,782 |
|
|
757,635 |
|
|
Annual: |
|
1,021,558 |
|
|
186,424 |
|
|
3,976,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
1,021,558 |
|
|
|
|
|
|
|
2014 |
|
858,333 |
|
|
0 |
|
1,026,200 |
|
|
741,028 |
|
|
Annual: |
|
0 |
|
|
168,735 |
|
|
2,794,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
0 |
|
|
|
|
|
|
David
Hoffmann Former
President, High Growth Markets(2) |
2016 |
|
454,167 |
|
|
0 |
|
911,938 |
|
|
695,754 |
|
|
Annual: |
|
0 |
|
|
1,567,704 |
|
|
3,629,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
0 |
|
|
|
|
|
|
|
2015 |
|
586,667 |
|
|
0 |
|
534,434 |
|
|
378,818 |
|
|
Annual: |
|
227,462 |
|
|
1,200,155 |
|
|
2,927,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
227,462 |
|
|
|
|
|
|
|
2014 |
|
533,333 |
|
|
0 |
|
490,832 |
|
|
354,401 |
|
|
Annual: |
|
0 |
|
|
1,381,119 |
|
|
2,759,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
0 |
|
|
|
|
|
|
44 |
|
|
|
2017 Proxy
Statement |
Table of Contents
(1) |
Mr. Easterbrook was
promoted to CEO in 2015. In connection with this promotion, Mr.
Easterbrooks 2015 compensation increased significantly, as reflected in
the table. |
(2) |
Mr. Andres retired
from the Company, effective December 31, 2016. Mr. Bensen retired from the
Company, effective September 2, 2016. Mr. Hoffmann resigned from the
Company on September 30, 2016. |
(3) |
As an incentive to
join the Company, Ms. Lagnado received a cash sign-on bonus, $337,500 of
which was paid in 2016. Ms. Lagnado also received sign-on equity grants,
as described in Footnote 7 to the Grants of Plan-Based Awards table on
page 47. |
(4) |
Reflects annual
increases in base salary that took effect during 2016. Annual base
salaries as of December 31, 2016 were as follows: Messrs. Easterbrook:
$1,300,000; Ozan: $700,000; Goare: $685,000; and Andres: $640,000; and Ms.
Lagnado: $618,000. The base salary of each of Messrs. Bensen and Hoffmann
as of the last day of employment was $975,000 and $610,000,
respectively. |
(5) |
In 2016, the Committee
eliminated the Cash LTIP and replaced the value with additional
performance-based RSUs and options in generally equal proportions. As a
result, the Summary Compensation Table reflects higher RSU and option
awards in 2016 than in prior years. The 2014-2016 Cash LTIP was paid in
March 2017 and is reflected in the "Long-term" row of column (g). The
2015-2017 Cash LTIP remains outstanding, and will be paid in 2018, subject
to the achievement of threshold levels of performance. Any such payout
will be disclosed in the 2018 Proxy Statement. For more information
regarding this transition, see pages 36 and 40. |
(6) |
Computed in accordance
with ASC 718, this represents the aggregate grant date fair value based on
the probable outcome of the applicable performance conditions and
excluding the effect of estimated forfeitures during the applicable
vesting periods of RSUs granted under the McDonalds Corporation 2012
Omnibus Stock Ownership Plan (2012 Plan). Values are based on the closing
price of the Companys 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 net
income, ROIIC and relative TSR targets over the performance period running
from January 1, 2016 to December 31, 2018 (as described on page 40). For
Ms. Lagnado, this also includes the additional grant of service-based RSUs
that vested on February 11, 2017. Additional information is disclosed in
the Grants of Plan-Based Awards table on pages 46 and 47 and the
Outstanding Equity Awards at 2016 Year-end table on pages 48 and 49. 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 page 46 of the Companys Annual Report
on Form 10-K for the year ended December 31, 2016. |
(7) |
Computed in accordance
with ASC 718, this represents the aggregate grant date fair value
excluding the effect of estimated forfeitures during the applicable
vesting periods of options. Options have an exercise price equal to the
closing price of the Companys 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 2016 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 19.2%; an expected
annual dividend yield of 3.0%; a risk-free return of 1.2%; 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 46 and 47 and the Outstanding Equity Awards at 2016
Year-end table on pages 48 and 49. 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 35 and 46 of the Companys Annual Report on Form
10-K for the year ended December 31, 2016. |
(8) |
Our annual cash
incentive plan is referred to as STIP and our long-term cash incentive
plan, which was discontinued in 2016, is referred to as Cash LTIP. Mr.
Bensens STIP award was prorated through September 2,
2016. |
(9) |
All other
compensation for 2016 includes the Companys contributions to the 401k
Plan and Deferred Compensation Plan as
follows: |
Stephen Easterbrook |
|
$191,552 |
Kevin Ozan |
|
$83,059 |
Douglas Goare |
|
$91,562 |
Michael Andres |
|
$78,420 |
Silvia Lagnado |
|
$0 |
Peter Bensen |
|
$117,242 |
David Hoffmann |
|
$50,834 |
Also included are the following
categories of perquisites: car allowance; financial planning; annual physical
examinations for the executives and their spouses; executive security (for
select executives); matching charitable donations; Company-paid life insurance;
limited personal items; storage of household goods for Ms. Lagnado in the amount
of $35,000 related to her relocation to the U.S from the United Kingdom; and
personal use of the Companys aircraft by the CEO and former Chief
Administrative Officer (CAO), with a net cost to the Company in 2016 for Mr.
Easterbrook of $302,279 and for Mr. Bensen of $53,802. In 2016, the CEO and CAO
were the only executives permitted to use the aircraft for personal travel.
However, in certain circumstances the CEO may at his discretion permit other
executives to use the aircraft for personal travel. In addition, at the
discretion of the CEO, other executives may be joined by their spouses on the
aircraft. The Company does not provide any tax gross-ups on the perquisites
described above.
The incremental cost of perquisites is
included in the amount provided in the table and based on actual charges to the
Company, except that corporate aircraft includes fuel, on-board catering,
landing/handling fees, maintenance costs and crew costs and excludes fixed
costs, such as pilot salaries and the cost of the aircraft. In accordance with
Company policy, any executive who is permitted per the above to use the
Companys aircraft for personal use reimburses the Company for a portion of
personal use of the corporate aircraft, calculated as the lower of (i) amount
determined under the Code based on two times the Standard Industry Fare Level
(SIFL) rate per person or (ii) 200% of the actual fuel cost.
In the case of the Companys NEOs based
overseas, Mr. Goare and, prior to his departure, Mr. Hoffmann, the amount in
this column for 2016 also includes certain benefits in connection with their
international assignments, as follows:
For Mr. Goare: Company-provided housing
(in the amount of $130,237), which includes: rent, rental furniture, utilities,
cleaning and a lease renewal fee; a cost-of-living adjustment (in the amount of
$112,263); home leave travel allowance; tax preparation services; and tax
equalization (in the amount of $835,774), which is designed to satisfy tax
obligations arising solely as a result of his international
assignment.
For Mr. Hoffmann: Company-provided
housing (in the amount of $346,389), which includes: rent, rental furniture,
utilities, maintenance, a security deposit and tenancy management; a
cost-of-living adjustment; home leave travel allowance; educational expenses;
transportation expenses; relocation expenses and related allowances; membership
in an expatriate organization; tax preparation services; and tax equalization
(in the amount of $894,685), which is designed to satisfy tax obligations
arising solely as a result of his international assignment.
For each of Messrs. Goare and Hoffmann,
certain amounts were paid in local currency. In these cases, when the
information is available, the amounts reported reflect the exchange rate on the
date the respective payments were made, and when the information is not
available, the amounts reported reflect the average monthly exchange
rate.
McDonalds Corporation |
|
|
|
45 |
Table of Contents
GRANTS OF PLAN-BASED AWARDS
Name
(a) |
|
Plan |
|
Grant date (b) |
|
Estimated
future payouts under non-equity incentive plan
awards(2) |
|
Estimated future payouts under equity incentive plan
awards(3) |
|
All
other stock awards: number of shares of stock or
units (#)(i) |
|
All
other option awards: number
of securities underlying option (#)(j) |
|
Exercise or base price
of option awards ($/Sh)(k) |
|
Grant date
fair value of stock
and option awards ($)(l) |
(4) |
Threshold ($)(c) |
|
Target
($)(d) |
|
Maximum
($)(e) |
Threshold (#)(f) |
|
Target
(#)(g) |
|
Maximum (#)(h) |
Stephen Easterbrook |
|
STIP |
|
|
|
0 |
|
2,275,000 |
|
4,550,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
0 |
|
42,834 |
|
85,668 |
|
|
|
|
|
|
|
5,108,811 |
|
|
|
Plan(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
285,552 |
|
116.73 |
|
3,897,785 |
|
|
|
Plan(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
Ozan |
|
STIP |
|
|
|
0 |
|
700,000 |
|
1,400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
0 |
|
10,709 |
|
21,418 |
|
|
|
|
|
|
|
1,277,262 |
|
|
|
Plan(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,388 |
|
116.73 |
|
974,446 |
|
|
|
Plan(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas Goare |
|
STIP |
|
|
|
0 |
|
616,500 |
|
1,233,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
0 |
|
8,567 |
|
17,134 |
|
|
|
|
|
|
|
1,021,786 |
|
|
|
Plan(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,111 |
|
116.73 |
|
779,565 |
|
|
|
Plan(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Andres(1) |
|
STIP |
|
|
|
0 |
|
576,000 |
|
1,152,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
0 |
|
7,711 |
|
15,422 |
|
|
|
|
|
|
|
919,691 |
|
|
|
Plan(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,400 |
|
116.73 |
|
701,610 |
|
|
|
Plan(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silvia Lagnado |
|
STIP |
|
|
|
0 |
|
494,400 |
|
988,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
0 |
|
3,856 |
|
7,712 |
|
|
|
|
|
|
|
459,905 |
|
|
|
Plan(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,700 |
|
116.73 |
|
350,805 |
|
|
|
Plan(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,997 |
|
|
|
|
|
678,561 |
|
|
|
Plan(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
Bensen(1) |
|
STIP |
|
|
|
0 |
|
819,160 |
|
1,638,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
0 |
|
15,421 |
|
30,842 |
|
|
|
|
|
|
|
1,839,263 |
|
|
|
Plan(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,799 |
|
116.73 |
|
1,403,206 |
|
|
|
Plan(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Hoffmann(1) |
|
STIP |
|
|
|
0 |
|
411,000 |
|
822,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
0 |
|
7,646 |
|
15,292 |
|
|
|
|
|
|
|
911,938 |
|
|
|
Plan(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
2/11/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,971 |
|
116.73 |
|
695,754 |
|
|
|
Plan(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In connection with
Messrs. Andres and Bensens retirements, the Committee waived certain
notice and service requirements pursuant to their equity awards, so that
each executive will vest in all outstanding RSU awards, subject to the
original performance-based vesting conditions. Each executive will also
continue to vest in outstanding options pursuant to their original vesting schedule
and such options shall remain outstanding until the original expiration
date. Mr. Hoffmann forfeited certain benefits, including all unvested
equity awards, in connection with his resignation. |
(2) |
In 2016, 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 Mr. Bensen was prorated to reflect service during 2016, and Mr.
Hoffmanns award was forfeited upon his resignation. |
|
STIP awards for
2016 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 page 39 for a
discussion of operating income targets, as adjusted for turnaround-related
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 2016, these modifiers included
comparable guest count growth and, for the U.S. segment, customer
satisfaction. The target amount is multiplied by the team factor, which
includes the modifiers. The maximum STIP payout is 200% of
target. |
(3) |
In 2016, the NEOs
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)). |
46 |
|
|
|
2017 Proxy
Statement |
Table of Contents
(4) |
The values in this
column for RSUs and options were determined based on the assumptions
described in footnotes 6 and 7, respectively, to the Summary Compensation
Table. |
(5) |
Reflects grants of
RSUs subject to performance-based vesting conditions. The RSUs vest on
February 11, 2019, subject to achievement of 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 and ROIIC performance is
either above or below the target range, the awards will vest
proportionally, as determined by the Committee. 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 40 for more information. |
(6) |
Reflects grants of
options in 2016. For details regarding options, refer to footnote 7 to the
Summary Compensation Table. |
(7) |
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 2016 award is reflected in this
table (see column (i)). |
2016 STIP
The target STIP awards, the team factors (including the impact of the
modifiers), and the final payouts for the NEOs in 2016 are summarized
below:
Named executive officer |
|
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 ($) |
(2) |
Stephen Easterbrook |
|
175 |
|
Corporate |
|
205.0 |
|
-9.5 |
|
4,447,625 |
|
Kevin Ozan |
|
100 |
|
Corporate |
|
205.0 |
|
-9.5 |
|
1,368,500 |
|
Douglas Goare |
|
90 |
|
Corporate (25%) |
|
205.0 |
|
-9.5 |
|
1,057,760 |
|
|
|
|
|
International Lead Markets (75%) |
|
163.2 |
|
0.4 |
|
|
|
Michael Andres |
|
90 |
|
Corporate (25%) |
|
205.0 |
|
-9.5 |
|
1,080,720 |
|
|
|
|
|
U.S. (75%) |
|
185.0 |
|
0.0 |
|
|
|
Silvia Lagnado |
|
80 |
|
Corporate |
|
205.0 |
|
-9.5 |
|
966,552 |
|
Peter Bensen(1) |
|
84 |
|
Corporate |
|
205.0 |
|
-9.5 |
|
1,601,457 |
|
David
Hoffmann |
|
67 |
|
Corporate (25%) |
|
205.0 |
|
-9.5 |
|
0 |
|
|
|
|
|
High Growth Markets (75%) |
|
215.0 |
|
-9.2 |
|
|
|
(1) |
The target award was prorated
for Mr. Bensen for his service through September 2, 2016. |
(2) |
These amounts are also
reflected in column (g) to the Summary Compensation Table. Mr. Hoffmann
forfeited his 2016 STIP payment upon his
resignation. |
McDonalds Corporation |
|
|
|
47 |
Table of Contents
OUTSTANDING EQUITY AWARDS AT 2016
YEAR-END
|
|
Option
awards |
|
Stock
awards |
|
Name
(a) |
|
Number
of securities underlying unexercised options exercisable (#)(b) |
(2) |
|
Number
of securities underlying unexercised options unexercisable (#)(c) |
(2) |
|
Option exercise price ($)(e) |
|
Option expiration date (f) |
|
Number of
shares or units of stock
that have not vested (#)(g) |
(3) |
|
Market value
of shares or units
of stock that have
not vested ($)(h) |
(4) |
|
Equity incentive plan
awards: number of unearned shares,
units or other rights
that have not
vested (#)(i) |
(5) |
|
Equity incentive plan
awards: market or payout
value of unearned shares,
units or other rights that
have not vested ($)(j) |
(4)(5) |
Stephen Easterbrook |
|
35,235 |
|
|
11,744 |
|
|
98.42 |
|
06/14/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,807 |
|
|
15,806 |
|
|
94.89 |
|
02/12/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,444 |
|
|
151,332 |
|
|
97.15 |
|
03/16/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
285,552 |
|
|
116.73 |
|
02/11/2026 |
|
|
|
|
|
|
|
83,470 |
|
|
10,159,968 |
|
Kevin
Ozan |
|
12,875 |
|
|
0 |
|
|
57.08 |
|
02/11/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,447 |
|
|
0 |
|
|
63.25 |
|
02/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,755 |
|
|
0 |
|
|
75.93 |
|
02/09/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,291 |
|
|
0 |
|
|
100.05 |
|
02/08/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,980 |
|
|
2,659 |
|
|
94.00 |
|
02/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,667 |
|
|
5,662 |
|
|
94.89 |
|
02/12/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,080 |
|
|
27,240 |
|
|
97.15 |
|
03/16/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
71,388 |
|
|
116.73 |
|
02/11/2026 |
|
2,108 |
|
|
256,586 |
|
|
16,886 |
|
|
2,055,364 |
|
Douglas Goare |
|
17,286 |
|
|
0 |
|
|
75.93 |
|
02/09/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,481 |
|
|
0 |
|
|
100.05 |
|
02/08/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,932 |
|
|
8,643 |
|
|
94.00 |
|
02/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,441 |
|
|
18,440 |
|
|
94.89 |
|
02/12/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,594 |
|
|
31,779 |
|
|
97.15 |
|
03/16/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
57,111 |
|
|
116.73 |
|
02/11/2026 |
|
|
|
|
|
|
|
23,150 |
|
|
2,817,818 |
|
Michael Andres(1) |
|
16,668 |
|
|
16,666 |
|
|
93.75 |
|
09/16/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,080 |
|
|
27,240 |
|
|
97.15 |
|
03/16/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
51,400 |
|
|
116.73 |
|
02/11/2026 |
|
|
|
|
|
|
|
20,555 |
|
|
2,501,955 |
|
Silvia
Lagnado |
|
5,205 |
|
|
15,609 |
|
|
98.92 |
|
08/07/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
25,700 |
|
|
116.73 |
|
02/11/2026 |
|
5,997 |
|
|
729,955 |
|
|
7,395 |
|
|
900,119 |
|
Peter
Bensen(1) |
|
46,105 |
|
|
0 |
|
|
75.93 |
|
02/09/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,996 |
|
|
0 |
|
|
100.05 |
|
02/08/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,894 |
|
|
13,298 |
|
|
94.00 |
|
02/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,297 |
|
|
30,294 |
|
|
94.89 |
|
02/12/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,160 |
|
|
54,480 |
|
|
97.15 |
|
03/16/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
102,799 |
|
|
116.73 |
|
02/11/2026 |
|
|
|
|
|
|
|
39,894 |
|
|
4,855,898 |
|
David
Hoffmann(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In connection with
Messrs. Andres and Bensens retirements, the Committee waived certain
notice and service requirements pursuant to their equity awards, so that
each executive will vest in all outstanding RSU awards, subject to the
original performance-based vesting conditions. Each executive will also
continue to vest in outstanding options pursuant to their original vesting schedule
and such options shall remain outstanding until the original expiration
date. Mr. Hoffmann forfeited certain benefits, including all unvested
equity awards, in connection with his resignation. |
(2) |
In general, options
expire on the tenth anniversary of grant. For details regarding customary
equity treatment upon termination, see pages 51 and
52. |
48 |
|
|
|
2017 Proxy
Statement |
Table of Contents
(3) |
Our typical
practice is to grant RSUs subject to performance-based vesting conditions
to our NEOs. Mr. Ozans RSUs shown in columns (g) and (h) were not subject
to performance-based vesting conditions as they were granted prior to Mr.
Ozans promotion to CFO. These RSUs vested on February 12, 2017. Ms.
Lagnados RSUs shown in columns (g) and (h) reflect a sign-on grant of
service-based RSUs, which vested on February 11, 2017. |
(4) |
Calculated by
multiplying the number of shares covered by the award by $121.72, the
closing price of Company stock on the New York Stock Exchange on December
30, 2016, the last trading day in 2016. |
(5) |
Reflects unvested
performance-based RSUs that are scheduled to be paid out as follows if the
targets are met (or were paid out, in the case of awards that vested in
early 2017): |
Named executive
officer |
Vesting
date |
|
Number
of performance-based RSUs |
|
Stephen Easterbrook |
2/12/2017 |
|
6,324 |
(1) |
|
3/16/2018 |
|
34,312 |
|
|
2/11/2019 |
|
42,834 |
|
Kevin
Ozan |
3/16/2018 |
|
6,177 |
|
|
2/11/2019 |
|
10,709 |
|
Douglas Goare |
2/12/2017 |
|
7,377 |
(1) |
|
3/16/2018 |
|
7,206 |
|
|
2/11/2019 |
|
8,567 |
|
Michael Andres |
9/16/2017 |
|
6,667 |
|
|
3/16/2018 |
|
6,177 |
|
|
2/11/2019 |
|
7,711 |
|
Silvia
Lagnado |
8/7/2018 |
|
3,539 |
|
|
2/11/2019 |
|
3,856 |
|
Peter
Bensen |
2/12/2017 |
|
12,120 |
(1) |
|
3/16/2018 |
|
12,353 |
|
|
2/11/2019 |
|
15,421 |
|
(1) 35% of these shares vested as
a result of the Companys performance during the 2014-2016 performance
period. |
OPTION EXERCISES AND STOCK VESTED FISCAL
2016
|
|
Option
awards |
|
Stock
awards |
Name (a) |
|
Number of shares acquired on
exercise (#)(b) |
|
Value realized on exercise ($)(c) |
|
Number of shares acquired on
vesting (#)(d) |
|
Value realized on
vesting ($)(e) |
Stephen Easterbrook |
|
0 |
|
0 |
|
2,350 |
|
287,899 |
Kevin Ozan |
|
13,007 |
|
944,265 |
|
2,128 |
|
250,955 |
Douglas Goare |
|
32,230 |
|
1,941,253 |
|
1,135 |
|
133,851 |
Michael Andres |
|
0 |
|
0 |
|
532 |
|
61,329 |
Silvia Lagnado |
|
0 |
|
0 |
|
7,077 |
|
843,649 |
Peter Bensen(1) |
|
129,507 |
|
7,333,317 |
|
1,746 |
|
205,906 |
David Hoffmann(1) |
|
86,368 |
|
2,655,987 |
|
655 |
|
77,244 |
(1) Mr. Bensen exercised 114,350
stock options, and Mr. Hoffmann exercised 56,023 stock options, following
their respective departures from the
Company. |
McDonalds Corporation |
|
|
|
49 |
Table of
Contents
NON-QUALIFIED DEFERRED
COMPENSATION FISCAL 2016
Name
(a) |
|
Executive contributions in last
FY ($)(b) |
(1) |
Registrant contributions in last
FY ($)(c) |
(1)
|
Aggregate earnings in last FY ($)(d) |
|
Aggregate withdrawals/ distributions ($)(e) |
(2)
|
Aggregate balance
at last FYE ($)(f) |
(3) |
Stephen
Easterbrook |
|
123,573 |
|
173,002 |
|
4,709 |
|
0 |
|
490,846 |
|
Kevin
Ozan |
|
213,311 |
|
74,659 |
|
162,408 |
|
0 |
|
2,845,530 |
|
Douglas
Goare |
|
172,204 |
|
80,362 |
|
254,862 |
|
0 |
|
3,471,752 |
|
Michael
Andres |
|
777,950 |
|
75,060 |
|
66,773 |
|
(345,172) |
|
4,035,313 |
|
Silvia
Lagnado |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
Peter
Bensen |
|
143,489 |
|
100,442 |
|
131,096 |
|
0 |
|
8,530,112 |
|
David
Hoffmann |
|
54,621 |
|
38,234 |
|
(48,216) |
|
(19,930) |
|
1,264,318 |
|
(1) |
Represents salary deferrals
which are also reported as compensation for 2016 in the Summary
Compensation Table. |
(2) |
The amount for Mr. Andres
reflects his deferred compensation plan account balance prior to his
rejoining the Company, and the payments are being made in accordance with
the required schedule. The amount for Mr. Hoffmann reflects the balance
paid upon his resignation. |
(3) |
Includes the following
aggregate amounts reported in the Summary Compensation Table in prior
years: |
Stephen Easterbrook |
$187,586 |
Kevin
Ozan |
$95,900 |
Douglas
Goare |
$532,385 |
Michael
Andres |
$0 |
Silvia
Lagnado |
$0 |
Peter
Bensen |
$5,407,557 |
David
Hoffmann |
$299,834 |
DEFERRED COMPENSATION
PLAN
Effective January 1, 2017, the
Companys Excess Benefit and Deferred Bonus Plan was renamed the Deferred
Compensation Plan (Deferred Plan). The Deferred Plan is a non tax-qualified,
unfunded deferred compensation plan that allows senior management and certain
highly compensated staff employees to: (i) make tax-deferred contributions from
their salary, STIP and, for performance periods beginning prior to January 1,
2017, 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 Companys 401k Plan.
At the time of deferral, participants may
elect to receive distributions either in a lump-sum or in regular installments
over a period of up to 15 years following separation from service. Commencement
of distributions are delayed for six months following separation from
service.
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 Plans Capital Preservation Fund, Large
Cap Equity Index Fund, and the Companys Common Stock Fund.
SUPPLEMENTAL PROFIT
SHARING AND SAVINGS PLAN
Prior to the
adoption of the Excess Benefit and Deferred Bonus Plan in 2005, the Companys
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. 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
participants choice or in an initial lump-sum payment with subsequent
installment payments.
50 |
|
|
|
2017 Proxy
Statement |
Table of
Contents
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 participants 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
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
Messrs. Andres, Bensen, and Hoffmann, who were either not employed with the
Company on December 31, 2016 or who retired on that date, are discussed
separately at the end of this section.
TERMINATION OF
EMPLOYMENT
SEVERANCE
PLAN
Messrs. Easterbrook, Ozan, Goare and Ms.
Lagnado would have received severance benefits under the McDonalds Corporation
Severance Plan (Severance Plan) if they were terminated by the Company without
cause, due to a reduction in work force or job elimination on December 31,
2016. 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, 2016, are set forth below.
Name |
|
Salary continuation ($) |
|
Benefit continuation ($) |
|
Cash
LTIP ($) |
|
Other (sabbatical
and transition assistance) ($) |
|
Total
($) |
Stephen Easterbrook |
|
650,000 |
|
2,591 |
|
2,126,543 |
|
25,000 |
|
2,804,134 |
Kevin Ozan |
|
511,538 |
|
3,787 |
|
383,333 |
|
119,692 |
|
1,018,351 |
Douglas Goare |
|
685,000 |
|
17,670 |
|
390,000 |
|
12,000 |
|
1,104,670 |
Silvia Lagnado |
|
309,000 |
|
6,842 |
|
195,972 |
|
12,000 |
|
523,814 |
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), 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, 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 Company may elect to waive
that forfeiture.
McDonalds Corporation |
|
|
|
51 |
Table
of Contents
RSUs
Unvested RSUs are generally forfeited on
termination of employment. As discussed on page 40, the Companys 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
Company 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 is based not only on the portion of the
vesting period in which the NEO remained employed, but also on the Companys
actual performance through the entire performance period.
Mr. Ozan held service-based RSUs, which
were granted to him prior to his promotion to Corporate Executive Vice President
and CFO. If Mr. Ozan were terminated by the Company on December 31, 2016, he
would have realized a value of $249,526 as a result of the accelerated pro-rata
vesting of these RSUs. If Mr. Ozan retired on December 31, 2016, he would have
realized a value of $256,586. In each case, amounts are based on the closing
price of the Companys common stock on December 30, 2016.
Per the terms of her sign-on arrangement,
Ms. Lagnado was granted service-based RSUs. In the event Ms. Lagnados
employment is involuntarily terminated by the Company without cause prior to the
vesting date of this award, she will vest in a pro-rata portion of the RSUs
granted based on the number of months worked during the vesting period, with a
minimum prorated vesting equal to 6 months of service. If Ms. Lagnados
employment had been involuntarily terminated by the Company on December 31,
2016, she would have realized a value of $669,217.
CHANGE IN
CONTROL
A change in control is generally
defined 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, and Goare 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.
In addition, each NEO would have been entitled to a prorated Cash LTIP payment
following a change in control based on actual performance through the date of
the change in control for the year ended December 31, 2016. Assuming that a
change in control occurred on December 31, 2016, the NEOs would have been
entitled to the following Cash LTIP payments: Messrs. Easterbrook: $3,473,514;
Ozan: $626,625; and Goare: $651,690; and Ms. Lagnado: $327,470, based on actual
performance through such date.
CHANGE IN CONTROL
AGREEMENT
The Company no longer has any change in
control agreements.
Prior to his retirement, the Company was
party to a change in control agreement with Mr. Bensen, which provided for: (i)
a lump-sum cash payment equal to three times the sum of his salary, target
annual bonus and contribution received under the Companys deferred compensation
plan; (ii) a pro-rata portion of the annual bonus based upon actual performance,
reduced (but not below zero) by any portion of the annual bonus for that year
previously paid to him, if any; (iii) a lump-sum payment equal to continued
medical, life insurance, fringe and other benefits for three years after the
termination; and (iv) a lump-sum cash payment for any accrued sabbatical leave.
Mr. Bensens receipt of these benefits would have been subject to execution of
an agreement that included restrictive covenants and a release of claims.
Payment of these benefits would have been delayed for six months to the extent
required under Code Section 409A. Mr. Bensen was also entitled to be reimbursed
for excise tax payments that were considered to be contingent upon a change in
control if the aggregate after-tax amount of benefits was at least 110% of what
he would receive if benefits were reduced to a level that would not be subject
to excise taxes. This agreement expired upon Mr. Bensens retirement.
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TREATMENT OF EQUITY
AWARDS UPON A CHANGE IN CONTROL
Under the Companys 2012 Omnibus Stock
Ownership Plan (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 grantees 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 NEOs 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.
If a change in control had occurred on
December 31, 2016 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 vested 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, 2016 are set forth in
the Outstanding Equity Awards at 2016 Year-end table on pages 48 and
49.
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 Companys common stock on December 30, 2016 (the last trading day
in 2016) and (ii) in the case of RSUs, the target number of shares, multiplied
by the closing price of the Companys common stock on December 30, 2016. 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.
Named executive
officer |
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Stock
options (closing price on 12/30/16 minus exercise price)
($) |
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RSUs (target number
of shares multiplied by closing price on 12/30/16)
($) |
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Total
($) |
Stephen Easterbrook |
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5,840,842 |
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10,159,968 |
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16,000,810 |
Kevin Ozan |
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1,251,132 |
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2,311,950 |
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3,563,082 |
Douglas Goare |
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1,800,123 |
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2,817,818 |
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4,617,941 |
Silvia Lagnado |
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484,128 |
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1,630,074 |
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2,114,202 |
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 50.
POST-TERMINATION
ARRANGEMENTS FOR MESSRS. ANDRES, BENSEN AND HOFFMANN
In connection with Mr. Andres retirement on December 31,
2016, Mr. Andres received a 2016 STIP of $1,080,720 and also received $20,560 of
a continued subsidy of health benefits for 18 months and $12,500 towards
retirement planning. In connection with Mr. Bensens retirement in September,
2016, Mr. Bensen received a prorated 2016 STIP of $1,601,457 and $150,000 in
lieu of untaken sabbatical, both of which were paid in March 2017. Mr. Bensen
also received $20,618 of a continued subsidy of health benefits for 18 months
and $12,500 towards retirement planning. As described in further detail on page
41, the Committee waived certain notice and service requirements for both
Messrs. Andres and Bensen pursuant to their 2016 RSU and option awards in
exchange for an extended non-compete provision. As a result, each executive
will vest in all outstanding RSU awards, subject to the original
performance-based vesting schedule and each will continue to vest in his
outstanding options subject to their original vesting schedule. Outstanding
options will remain outstanding until their original expiration dates. Mr.
Hoffmann did not receive any additional payments and forfeited all unvested
equity awards in connection with his departure from the Company.
McDonalds
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Advisory vote to approve executive
compensation |
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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 2016, as described in the Executive Compensation section, beginning
on page 34, 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
Companys 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 2016, the Companys turnaround efforts
yielded strong results that support the above-target payouts under our annual
cash incentive plan. However, as a result of performance challenges in prior
years, payouts under the long-term plans were significantly below target levels.
The Company believes that these pay outcomes demonstrate the appropriate mix of
both short- and long-term plans as well as the rigorous target-setting process
that highlights the programs success in aligning pay and
performance.
The Board believes that the Companys
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.
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The Board of Directors recommends that shareholders
vote FOR the approval, on an advisory basis, of the
compensation awarded to McDonalds named executive officers for 2016, as
disclosed under SEC rules, including the Compensation Discussion and
Analysis and the compensation tables and related narrative discussion
included in this Proxy Statement. |
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Advisory vote on the frequency of future advisory votes to
approve executive compensation |
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In addition to providing shareholders with
the opportunity to cast an advisory vote to approve executive compensation, the
Company is also asking its shareholders to provide an advisory, nonbinding vote
on how frequently the advisory vote to approve executive compensation should be
presented to shareholders, as required pursuant to Section 14A of the Securities
Exchange Act of 1934. You may vote your shares to have the advisory vote held
annually, every two years or every three years, or you may abstain.
After careful consideration of this
proposal, the Board recommends an annual vote. When the Companys shareholders
last voted on this matter, a majority of shareholders voted in favor of an
annual vote, and the Board adopted an annual frequency for executive
compensation advisory votes. The Company respects the shareholders preference,
and the Board believes that an annual frequency vote will allow shareholders to
provide the Company with their input on the Companys compensation philosophy,
policies and practices as disclosed in the Proxy Statement every
year.
While this vote is advisory and not
binding on the Company, the Board expects to take into account the outcome of
the vote, along with other relevant factors, when considering how frequently to
present future advisory votes to approve executive compensation.
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The Board of Directors recommends that shareholders
vote in favor of the option of advisory votes every ONE YEAR to approve executive compensation. |
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Approval of the material terms of the performance goals for
awards under the McDonalds Corporation 2012 Omnibus Stock Ownership
Plan |
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The Company is asking its shareholders to
approve the material terms of the performance goals (Performance Goals) for
awards under the McDonalds Corporation 2012 Omnibus Stock Ownership Plan
(Plan). We are not amending or altering the Performance Goals or any other
provision of the Plan.
BACKGROUND
Section 162(m) of the Internal Revenue
Code (Section 162(m)) limits the deductibility of certain executive compensation
paid to the Companys Chief Executive Officer and the three highest compensated
executive officers (other than the Chief Financial Officer), as determined
pursuant to the executive compensation disclosure rules under the Securities
Exchange Act of 1934. These executive officers are referred to as covered
employees. An exemption from this limitation (the Performance Exception) applies
to performance-based compensation as defined in the regulations under Section
162(m).
The Plan gives the Boards Compensation
Committee (Committee) the ability to grant equity incentive awards based upon
the achievement of Performance Goals during specified periods that are designed
to qualify for the Performance Exception, assuming the regulatory requirements
are satisfied. One of the requirements under the Performance Exception is
shareholder approval of the Performance Goals pursuant to which compensation is
paid. The regulations under Section 162(m) require that, in order for awards
under the Plan to qualify for the Performance Exception, shareholders must
approve the material terms of the applicable Performance Goals every five years.
The Performance Goals for awards under the Plan were last approved by
shareholders on May 24, 2012. Therefore, the Company is asking for your approval
of the Performance Goals again this year.
Nothing in the Plan or this Proxy
Statement is intended to guarantee that the Company will always seek to ensure
that its compensation qualifies as performance-based compensation, and no
guarantee can be given that the terms of the Plan do in fact comply with the
requirements for performance-based compensation, as they exist today or as they
may change from time to time.
MATERIAL TERMS OF
PERFORMANCE GOALS
PERFORMANCE MEASURES
For awards (other than stock options and stock appreciation
rights) intended to qualify for the Performance Exception, the Performance Goals
shall be based upon the attainment of specified levels of performance with
respect to one or more of the following measures, applied to the Company as a
whole or to any subsidiary, division or other unit of the Company: revenue;
operating income; net income; basic or diluted earnings per share; return on
revenue; return on assets; return on equity; return on total capital; total
shareholder return; or any other measure of financial performance that can be
determined pursuant to U.S. generally accepted accounting principles. These
Performance Goals may be absolute or relative to the performance of one or more
other companies comparable to the Company or of an index covering multiple
companies. In establishing Performance Goals, the Committee may specify that
there shall be excluded the effect of restructuring charges, discontinued
operations, extraordinary items, cumulative effects of accounting changes, and
other unusual or nonrecurring items, and asset impairment and the effect of
foreign currency fluctuations, in each case as those items are defined under
generally accepted accounting principles and provided in each case that such
excluded items are objectively determinable by reference to the Companys
financial statements, notes to the Companys financial statements and/or
managements discussion and analysis in the Companys financial
statements.
ELIGIBLE EMPLOYEES
The Plan may be used to grant performance-based awards to any
employee of McDonalds and its subsidiaries. Officers, other employees and
non-employee directors of the Company and its subsidiaries are eligible to
participate in the Plan, in the sole discretion of the Committee. As of December
31, 2016, approximately 375,000 employees, including the Companys executive
officers, and all non-employee directors were eligible to participate in the
Plan, with approximately 200 officer level employees receiving awards with
Performance Goals in recent years. The Committee anticipates that a comparable
number of individuals will be selected for awards in the future.
McDonalds Corporation |
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MAXIMUM AWARDS
Subject to the adjustment provisions included in the Plan, the maximum
number of shares that may be granted to any grantee in any one-year period in
the form of stock options or stock appreciation rights is 2,000,000 and the
maximum number of shares that may be granted to any grantee in any one-year
period in the form of restricted stock or other stock-based awards, in each case
that are performance-based compensation awards under Section 162(m), is
500,000.
SUMMARY DESCRIPTION OF
THE PLAN
AWARDS
The Plan provides for the granting of stock options, restricted stock
units, stock bonuses, dividend equivalents and other stock-based awards. The
closing price for the common stock on the New York Stock Exchange on March 1,
2017 was $129.05.
PLAN ADMINISTRATION
The Plan is administered by the Committee. Subject to the
terms of the Plan, the Committee may delegate certain of its administrative
responsibilities, and its powers may also be exercised by the full Board.
Subject to the Plan, the Committee has the authority to administer the Plan,
including the right to: approve the persons to whom, and the times when, awards
are to be granted, as well as the type, size and terms of such awards and to
modify such grants; interpret the Plan; accelerate the exercisability of and
waive the restrictions and conditions applicable to, awards; and extend the time
during which awards may be exercised (but not beyond 10 years).
AMENDMENT AND TERMINATION
The Plan and awards under it may be amended by our Board or
the Committee, subject to shareholder approval if required by applicable law or
stock exchange rules or to the extent the Board or the Committee seeks to amend
the option repricing prohibition including in the Plan. No amendment may
adversely affect outstanding awards without the consent of the affected grantee,
unless the amendment does not materially decrease the value of the awards or is
made to comply with applicable law, stock exchange rules or accounting rules.
Moreover, in no event may any award be amended in any manner that would cause it
to cease to qualify for the Performance Exception. The Plan will terminate on
the 10th anniversary of its effective date, unless terminated earlier
by the Board.
NEW PLAN BENEFITS
Because the grant of awards pursuant to the Plan is within the
discretion of the Committee, it is not possible to determine the awards that
will be made under the Plan. Please see the 2016 Summary Compensation Table
and 2016 Grants of Plan-Based Awards Table for the grant date fair values of
the equity-based awards granted to our named executive officers during 2016. In
addition, during 2016, all executive officers of the Company as a group
(including the current named executive officers) were granted awards under the
Plan with aggregate share targets of 657,851 shares.
The foregoing summary is qualified in its
entirety by the full text of the Plan. The Plan is not part of this Proxy
Statement. A copy of the Plan is available on the Companys website
at
http://corporate.mcdonalds.com/mcd/investors.html, by clicking on 2017 Proxy Statement, and the Securities and Exchange
Commissions website at www.sec.gov, where it is an exhibit to
an electronic version of this Proxy Statement. We will provide you with a copy
without charge if you call McDonalds Corporation Shareholder Services at
800-228-9623, or write to us at McDonalds Corporation, Shareholder Services,
Department 720, One McDonalds Plaza, Oak Brook, IL 60523-1928. Copies of the
Plan will also be available at the Annual Shareholders Meeting.
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES
The following describes the principal
United States federal income tax consequences related to options granted under
the Plan.
Non-qualified Options. A grantee will not
be subject to tax at the time a non-qualified option is granted, and no tax
deduction is then available to the Company. Upon the exercise of a non-qualified
option, an amount equal to the difference between the option price and the fair
market value of the shares acquired on the date of exercise will be included in
the grantees ordinary income and the Company will generally be entitled to
deduct the same amount. Upon disposition of shares acquired upon exercise,
appreciation or depreciation after the date of exercise will be treated by the
grantee or transferee of the non-qualified option as either capital gain or
capital loss.
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Incentive Stock Options. A grantee will
not be subject to tax, and no tax deduction is available to the Company, at the
time an incentive stock option is granted or exercised; however, the excess of
the fair market value of the shares received upon exercise of the incentive
stock option over the option price on the date of exercise is included in the
grantees alternative minimum taxable income subject to the alternative minimum
tax. Upon disposition of the shares acquired upon exercise of an incentive stock
option, capital gain or capital loss will generally be recognized in an amount
equal to the difference between the sale price and the option price, as long as
the grantee has not disposed of the shares within two years of the date of grant
or within one year from the date of exercise. If the grantee disposes of the
shares without satisfying the holding period (a disqualifying disposition), the
grantee will recognize ordinary income at the time of the disqualifying
disposition to the extent of the difference between the option price and the
fair market value of the shares on the date the incentive stock option is
exercised, or the amount realized on such disqualifying disposition (if less).
Any remaining gain or loss is treated as a capital gain or capital
loss.
The Company is not entitled to a tax
deduction upon either the exercise of an incentive stock option or upon
disposition of the shares acquired pursuant to such exercise, except to the
extent that the grantee recognized ordinary income in a disqualifying
disposition.
THE BOARDS
RECOMMENDATION
The Board believes that the approval of
the material terms of the Performance Goals under the Plan will permit the
Committee to continue to grant performance-based equity incentive awards
designed to qualify for the Performance Exception to those employees upon whose
judgment and efforts the Company is largely dependent for the successful conduct
of its operations. The Board believes that this is in the best interest of the
Company.
If shareholders do not approve the
material terms of the Performance Goals, management and the Committee will
examine all of the available alternatives, including, but not limited to,
granting equity compensation that does not qualify for the Performance
Exception.
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The Board of Directors recommends that shareholders
vote FOR the approval of the material terms of the
Performance Goals for awards under the McDonalds Corporation 2012 Omnibus
Stock Ownership Plan. |
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EQUITY
COMPENSATION PLAN INFORMATION
The following table summarizes information
about the Companys equity compensation plans as of December 31, 2016. All
outstanding awards relate to the Companys common stock. Shares issued under all
of the following plans may be from the Companys treasury, newly issued or
both.
Plan
category |
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Number of
securities to be issued
upon exercise
of outstanding
options, warrants and
rights (a) |
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Weighted-average exercise
price of outstanding
options, warrants and rights (b) |
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Number of
securities remaining available
for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
Equity compensation plans approved by security
holders |
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23,430,608(1) |
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$92.40 |
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34,112,990 |
Equity compensation plans not approved by security
holders |
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Total |
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23,430,608 |
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$92.40 |
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34,112,990 |
(1) |
Includes 8,407,342 options
granted under the McDonalds Corporation 2001 Omnibus Stock Ownership Plan
and 13,102,849 options and 1,920,417 restricted stock units granted under
the McDonalds Corporation 2012 Omnibus Stock Ownership
Plan. |
McDonalds Corporation |
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AUDIT & FINANCE
COMMITTEE
MATTERS |
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AUDIT
& FINANCE COMMITTEE REPORT
The role of the Audit & Finance
Committee is to assist the Board of Directors in fulfilling its responsibility
to oversee the Companys financial reporting process. Management is primarily
responsible for the Companys financial statements, including the Companys
internal control over financial reporting. Ernst & Young LLP (Ernst &
Young), the Companys independent auditor, is responsible for performing an
audit of the Companys annual consolidated financial statements in accordance
with generally accepted accounting principles and for issuing a report on those
statements. Ernst & Young also reviews the Companys interim financial
statements in accordance with applicable auditing standards. The Audit &
Finance Committee oversees the Companys financial reporting process and
internal control structure on behalf of the Board of Directors. The Audit &
Finance Committee met regularly with Ernst & Young and the head of internal
audit, both privately and with management present, during 2016.
In fulfilling its oversight
responsibilities, the Audit & Finance Committee reviewed and discussed with
management and Ernst & Young the audited and interim financial statements,
including Managements Discussion and Analysis, included in the Companys
Reports on Form 10-K and Form 10-Q.
In connection with its review of the
Companys 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
& Youngs 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 2016 and 2017. In that connection,
the Audit & Finance Committee reviewed Ernst & Youngs independence from
the Company and management, including Ernst & Youngs written disclosures
described above.
Based on the reviews and discussions
referred to above, the Audit & Finance Committee recommended to the Board of
Directors that the audited financial statements be included in the Companys
Annual Report on Form 10-K for the year ended December 31, 2016 for filing with
the SEC.
Respectfully submitted,
The Audit & Finance
Committee
John Mulligan, Chair
Lloyd Dean
Margaret
Georgiadis
Walter Massey
Sheila Penrose
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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 its independent auditor. 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 the independent auditor 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 2015 and 2016 were
pre-approved by the Audit & Finance Committee.
The policy is available on the Companys
website at http://corporate.mcdonalds.com/mcd/investors/corporate-governance/
governance-principles-policies-and-guidelines.html.
AUDITOR
FEES AND SERVICES
The following table presents fees billed
for professional services rendered for the audit of the Companys annual
financial statements for 2016 and 2015 and fees paid for other services provided
by our independent auditor in those years:
(In
millions) |
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2016 |
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2015 |
Audit fees(1) |
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$12.0 |
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$11.0 |
Audit-related fees(2) |
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1.7 |
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0.5 |
Tax fees(3) |
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0.5 |
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0.8 |
Total |
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$14.2 |
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$12.3 |
(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. |
(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
Companys refranchising related initiatives. |
(3) |
Primarily fees for tax
compliance in various international
markets. |
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Audit &
Finance Committee Matters |
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Advisory vote to approve the appointment of Ernst &
Young LLP as independent auditor for 2017 |
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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 Companys independent external audit firm
for 2017. In executing its responsibilities, the Committee engages in a thorough
annual evaluation of Ernst & Youngs 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 Companys 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
Companys 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 firms
effectiveness and independence and for consideration of rotating audit
firms.
Ernst & Young or its predecessor,
Arthur Young & Company, has been retained as the Companys external audit
firm continuously since 1964. In accordance with SEC rules and Ernst & Young
policies, the firms lead engagement partner rotates every five years. The Audit
& Finance Committee and its Chairman are directly involved in the selection
of Ernst & Youngs 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 Companys independent external audit firm
for 2017 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 Shareholders 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.
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The Board of Directors recommends that shareholders
vote FOR the appointment of Ernst & Young LLP as
independent auditor for 2017. |
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SHAREHOLDER
PROPOSALS |
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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 Boards 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 McDonalds Corporation, Shareholder Services, Department 720, One
McDonalds Plaza, Oak Brook, IL 60523.
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Advisory vote on a
shareholder proposal requesting a change to the vote-counting standard for
shareholder proposals. |
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The Equality Network Foundation,
represented by Investor Voice, SPC, has notified the Company that it intends to
submit the following proposal at this years Annual Shareholders Meeting. As
explained below, the Board recommends that you vote AGAINST this shareholder proposal. The
proponent states that it beneficially owns 30 shares of McDonalds common stock,
and there were 816,753,115 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
RESOLVED: |
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McDonalds Corporation
(McDonalds) shareholders ask the Board to take or initiate steps to
amend Company governing documents to provide that all non-binding matters
presented by shareholders shall be decided by a simple majority of the
votes cast FOR and AGAINST an item. This policy would apply to all such
matters unless shareholders have approved higher thresholds, or applicable
laws or stock exchange regulations dictate
otherwise. |
SUPPORTING STATEMENT:
This proposal seeks transparency, clarity,
and understanding around how informed stockholders vote on shareholder
proposals. In voting, the Oxford English dictionary defines Abstain
as:
To formally decline to vote either
FOR or AGAINST a proposal
A simple majority formula, therefore,
includes votes cast FOR and AGAINST (but not abstentions). It provides the most
democratic, clear, and accurate picture of the intent of shareowners who are
both informed and decided, while excluding the votes of those who, by
definition, have declined to express an opinion.
When voters choose to mark ABSTAIN
(whether they are confused, disinterested, or lack time to become fully
informed), it is apparent their votes should be regarded as neither FOR nor
AGAINST a proposal.
● |
A majority of McDonalds peers
choose simple majority. |
McDonalds Corporation |
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However, McDonalds unilaterally counts
ABSTAIN votes as if AGAINST every shareholder proposal. Notice of this Company
decision is buried on page 65 of 2016s 67-page proxy.
● |
Is it reasonable for
McDonalds to assert it knows the will of undecided voters (and to
artificially construe abstentions in favor of
management)? |
Companies often write as if the Delaware
default standard (which includes abstentions) is obligatory. However, Delaware
does not mandate this formula - it is merely assigned when companies make no
other election.
Research demonstrates that the so-called
default formula systematically disadvantages shareholders:
http://bit.ly/Voting-Research_Corporate-Secretary.
How? Counting
abstentions:
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Depresses the
appearance of support for stockholder concerns. When abstaining shareholders decline to express an opinion, but
instead are treated as if they voted AGAINST a proposal, the tally is
reduced and McDonalds benefits (because it routinely opposes stockholder
proposals). |
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Subverts vote
outcomes. Historically, these practices have
allowed companies to describe numerous true majority votes on shareholder
proposals as, instead, having failed. |
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Distorts
communication. Annual meetings offer the sole
opportunity for most shareholders to communicate with Boards. Counting
abstentions as de facto votes AGAINST shareholder proposals, management
changes the outcome and the perception of support for stockholder
concerns. |
McDonalds proxy falsely headlined that
McDonalds Vote-Counting Methodology Applies Equally to Management and
Shareholder Proposals. This is factually untrue because management-sponsored
director elections (where management prefers the appearance of strong support)
excludes abstentions.
Because the pertinent focus here involves
shareholder proposals that are non-binding, the Companys stated arguments are
essentially not applicable, and the higher-value considerations of transparency,
accuracy, and fairness (so vital to elections), should prevail.
For reasons like these, the
Council of Institutional Investors formally declares: ...abstentions should be counted only for purposes of a
quorum.
THEREFORE: |
Support fairness,
accuracy, and good governance at McDonalds - vote FOR simple majority
voting on non-binding shareholder
proposals. |
THE BOARDS STATEMENT
IN OPPOSITION
The Board recommends
voting AGAINST this proposal. The Board regularly reviews the Companys governance
practices, including vote-counting methodologies. Management has engaged with
the shareholder proponent on this topic for several years, and the Governance
Committee has considered the issue this year, as it has in the past; however,
the Board continues to believe that the proposed vote-counting standard is not
in the best interests of the Company or its shareholders. Moreover, our
shareholders expressed their opposition to this measure by rejecting a
nearly-identical proposal last year, receiving support of approximately 12% of
votes cast (representing less than 9% of our outstanding shares).
McDonalds Vote-Counting Methodology is
Fair and Consistent with Delaware Law. The
Board is committed to strong governance practices, including by facilitating
consistency, fairness and transparency in the application of its vote-counting
standard. McDonalds By-laws provide that matters presented to shareholders
(except the election of Directors) are approved with the affirmative vote of the
majority of shares represented at the Annual Shareholders Meeting and entitled
to vote on the matter. This standard is consistent with the default provisions
of Delaware law for vote counting, which the Board understands are followed by a
majority of Delaware corporations in the S&P 500. Under both the Companys
By-laws and Delaware law, abstentions are counted as present and entitled to
vote; therefore, the practical effect is that those shares are counted as voting
against the matter.
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McDonalds Vote-Counting Methodology
Applies Equally to Management and Shareholder Proposals. The Board believes that consistency is critical when applying
a vote-counting standard to proposals presented to the Companys shareholders.
As a result, McDonalds treats abstentions the same way for both management and
shareholder proposals. There is no differencea vote to abstain on a
particular matter (except the election of Directors) will have the effect of a
vote against a proposal, whether it is sponsored by management or a
shareholder. Therefore, the existing vote-counting methodology
does not favor management proposals over the shareholder proposals. They are
treated equally. The proposed voting standard, on the other hand, would, in
fact, result in disparate treatment of management proposals (except the election
of Directors) and shareholder proposals.
McDonalds Clearly Discloses the
Treatment and Effect of Abstentions; Counting Abstentions Honors the Intent of
the Shareholders. Shareholders typically have
three voting choices for a particular proposal: for, against and abstain.
In the Companys Proxy Statement, McDonalds clearly describes how each of these
voting choices will be treated in tabulating votes, including the counting of
abstentions, and when the Company discloses voting results, it reports the raw
vote totals for each voting choice. This transparency gives a voice to
shareholders who affirmatively choose to vote abstain. In fact, proxy voting
guidelines published by some shareholders contemplate abstentions under
specified circumstances. The proponents proposed voting methodology would
disregard such abstentions, thus potentially disenfranchising these
shareholders. To review the Companys description of vote counting, including
the treatment of abstentions, see Voting Tabulation on page 83 of this Proxy
Statement.
Supermajority Voting Provisions
Eliminated Following 2011 Shareholder Vote.
The Board took steps in 2011 to eliminate historic supermajority voting
provisions in the Companys Certificate of Incorporation following significant
shareholder feedback. Following shareholder votes in favor of the changes, we
eliminated supermajority voting provisions for (i) removal of directors; (ii)
mergers; and (iii) amending the Certificate of Incorporation. These steps
demonstrated the Boards responsiveness to shareholder input on the matter of
shareholder voting rights and reflect McDonalds commitment to implementing
majority voting standards consistent with a broad set of our shareholders
views.
A Change in Vote-Counting Methodology
is Unnecessary at McDonalds. The Board notes
that there has not been a particularly close voting result on any matter
presented to McDonalds shareholders in the last decade, and our treatment of
abstentions has not had any effect on whether such proposals were approved or
not. Indeed, the proponent submitted a nearly-identical proposal for our 2016
Annual Shareholders Meeting that garnered only 12% support under both the
proponents proposed voting standard and McDonalds current standard. The Board
prides itself on evaluating and, when appropriate, adapting to emerging
corporate governance practices. Whenever any proposal receives a high degree of
shareholder support or opposition, even if not enough to determine the voting
result, the Board carefully evaluates the issue and engages further with
shareholders to discuss the matter. Thus, the Board presently sees this proposal
as a solution in search of a problem.
In summary, McDonalds is firmly
committed to strong corporate governance practices. The Board believes that our
existing standards related to vote tabulation and transparent reporting are
fair, consistent and appropriate. They empower and appropriately recognize all
shareholders, including those who affirmatively choose to vote abstain. For
these reasons, implementation of the proponents vote-counting standard is
neither necessary nor in shareholders best interests.
Therefore, your Board of Directors
recommends that you vote AGAINST this proposal.
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The Board of Directors recommends that shareholders
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this proposal. |
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Advisory vote on a
shareholder proposal regarding the threshold to call special shareholder
meetings. |
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John Chevedden has notified the Company
that he intends to submit the following proposal at this years Annual
Shareholders Meeting. As explained below, the Board recommends that you
vote AGAINST this shareholder proposal. The proponent states that he beneficially owns
50 shares of McDonalds common stock, and there were 816,753,115 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
Proposal 7 - Special Shareholder
Meetings
Resolved,
Shareowners ask our board to take the steps necessary (unilaterally if possible)
to amend our bylaws and each appropriate governing document to give holders in
the aggregate of 15% of our outstanding common stock the power to call a special
shareowner meeting. This proposal does not impact our boards current power to
call a special meeting.
Dozens of
Fortune 500 companies allow 10% of shares to call a special meeting and this
proposal is only asking that 15% of our shares be enabled to call a special
meeting. Special meetings allow shareowners to vote on important matters, such
as electing new directors that can arise between annual meetings. Shareowner
input on the timing of shareowner meetings is especially important when events
unfold quickly and issues may become moot by the next annual meeting. This is
important because there could be 15-months or more between annual
meetings.
This proposal
is particularly important because we do not have the opportunity to act by
written consent. A majority of Fortune 500 companies provide for shareholders to
call special meetings and to act by written consent. Perhaps a proxy advisory
firm will recommend that companies like ours, with no written consent
opportunity for shareholders, in turn allow for 10% or 15% of shareholders to
call a special meeting. If our management adopts this proposal it will be one
sign that management values our shareholder input.
This proposal
is also more important at our company because management seems careless in
certain areas of governance practices. GMI Analysis said overburdened
(overboarded) and long-tenured Chairman Mr. Hernandez also served on our Audit
Committee. In 2015, our company was involved in $1.3 million of related party
transactions with Inter-Con Security Systems, where Mr. Hernandez is the
president and CEO, as well as a 51% shareholder. McDonalds corporate
headquarters received security services from Inter-Con Security Systems, Inc.
There were also related party transactions with entities affiliated with certain
directors and executives.
Please vote to enhance shareholder
value:
Special Shareowner Meetings -
Proposal 7
THE BOARDS STATEMENT
IN OPPOSITION
The Board recommends
voting AGAINST this proposal requesting that the Company take steps (unilaterally, if
possible) to amend our By-laws with respect to our shareholders right to call
special meetings. The Board regularly reviews the Companys governance practices
and believes that we have solid and efficient mechanisms in place to allow
shareholders to communicate with the Board and bring items to its attention,
including at annual and special shareholders meetings. Further, for the reasons
below, the Board believes that reducing the threshold needed to call a special
meeting is not in the best interests of the Company or its
shareholders.
Our Shareholders Have a Meaningful
Right to Call a Special Meeting. Our By-laws
currently provide that shareholders holding 25% or more of our outstanding stock
may call a special meeting. After careful consideration and consultation with
numerous shareholders, our Board presented, and shareholders approved, this
meaningful right in 2012 by a vote of 99%. Since then, shareholders have
not identified this threshold percentage as a concern to our Board or to
management during our ongoing shareholder outreach and engagement. The Board,
therefore, continues to believe that our existing By-law provision is the
appropriate mechanism for shareholders to call a special meeting in the event of
an extraordinary matter that cannot wait until the next annual
meeting.
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Special Meetings Require Substantial
Resources; Current Threshold Strikes the Right Balance. Convening a special meeting of shareholders is a significant
undertaking that requires a substantial commitment of time and financial
resources, particularly given the number of Company shareholders. The Board and
management would also be required to divert time from the business to prepare
for and conduct the meeting. Because of these burdens and costs, special
shareholder meetings should be extraordinary events that occur only when there
are urgent and important strategic matters or profound fiduciary concerns. The
current threshold strikes the appropriate balance, as it allows for shareholders
to call a special meeting when such an extraordinary matter arises, without
enabling a small minority of shareholders to call unnecessary meetings for less
significant matters. If the proposal were adopted, a small minority of
shareholderspotentially with narrow, short-term interestscould call special
meetings to present proposals with little likelihood of success, without regard
to how the costs and other burdens might impact the Companys future success or
the interests of the vast majority of shareholders.
McDonalds is Committed to Shareholder
Engagement and Sound Governance Practices.
Company leaders meet regularly with shareholders to discuss our strategy,
operational performance and business practices. We also meet with shareholders
throughout the year to share perspectives on corporate governance, executive
compensation and sustainability matters, among other topics (see Shareholder
Engagement on page 31 of this Proxy Statement). We strongly believe that this
commitment to ongoing dialogue with our shareholders, together with practices
such as annual Director elections, a proxy access right for nominating
Directors, no supermajority voting provisions, and shareholders existing right
to call special meetings, protects shareholder rights without the expense and
risk associated with a lower special meeting threshold.
For these reasons, the proponents new
threshold for shareholders to convene a special shareholders meeting is neither
necessary nor in shareholders best interests.
Therefore, your Board of Directors
recommends that you vote AGAINST this proposal.
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The Board of Directors recommends that shareholders
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this proposal. |
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Advisory vote on a
shareholder proposal to issue a class of preferred stock with the right to
elect its own Director. |
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Marco Consulting Group Trust I has
notified the Company that it intends to submit the following proposal at this
years Annual Shareholders Meeting. As explained below, the Board recommends
that you vote AGAINST this shareholder proposal. The proponent states that it
beneficially owns 5,546 shares of McDonalds common stock, and there were
816,753,115 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
RESOLVED, that shareholders of McDonalds
Corporation (McDonalds or the Company) request that the Board take the
necessary steps (including initiating appropriate amendments to the certificate
of incorporation and bylaws and excluding those steps that must be taken by
shareholders) to adopt a plan to give the Owner/Operators of McDonalds
restaurants who pay royalties to McDonalds (hereinafter, Franchisees) the
power to elect one new member of the Board, by issuing to Franchisees shares of
a new series of preferred stock (Franchisee Preferred), whose holders are
entitled to elect the new director (the Franchisee Director).
Shareholders request that the Companys
amended governing documents provide that:
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(i) |
one share of the Franchisee
Preferred should be issued to each Franchisee, for each franchised
restaurant; |
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(ii) |
consideration for the Franchisee
Preferred should be a minimal amount; |
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(iii) |
the Franchisee Preferred should
be redeemable by the Company at nominal cost when a Franchisee ceases to
own a franchised restaurant; |
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(iv) |
the Franchisee Preferred should
entitle the holder to no amount upon liquidation, termination or
dissolution of the Company; |
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(v) |
the Franchisee Preferred should
not be transferable to anyone other than McDonalds and should not entitle
its holder to vote on any matter other than the election of the new
Franchisee Director; and |
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(vi) |
the Franchisee Preferred holders
have the authority to nominate and elect the Franchisee Director, who may
be required to satisfy director qualifications applicable generally to
independent directors. |
This proposal should be implemented in a
way that does not violate the terms of any existing agreement.
SUPPORTING STATEMENT
Restaurant franchisees create a great deal
of value for franchisors and their shareholders. While corporate franchisors
provide the overall architecture, marketing and strategic vision for
franchisees, franchise restaurants are the main revenue and profit drivers
creating shareholder value.
According to McDonalds 2015 annual
report, conventional franchisees operated a combined 30,081 of McDonalds 36,525
restaurants worldwide. Moreover, the Company provides information on franchised
sales in its annual report to shareholders because management believes they are
important in understanding the Companys financial performance. McDonalds
acknowledged in the 2015 annual report that [t]he strength of the alignment
among the Company, its franchisees and suppliers ... has been key to McDonalds
long-term success. Thus, the Companys relationship with franchisees is
critical to long-term shareholder value.
Franchisee representation on McDonalds
Board could help strengthen the alignment between the Company and its
franchisees by ensuring that the perspective of franchisees is fairly
represented, and would appropriately provide a voice for these critical
stakeholders among McDonalds top policy leadership. Our proposal uses the
Franchisee Preferred to provide an independent selection mechanism for the
Franchisee Director that would not require membership in any franchisee
association or other organization. Our proposed terms of the Franchisee
Preferred are intended to provide no financial benefit, such as dividends or a
liquidation preference, to holders.
We urge shareholders to vote for this
proposal.
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THE BOARDS STATEMENT
IN OPPOSITION
The Board recommends voting
AGAINST this
proposal requesting that the Company take steps to create a dual-class structure
that would give the Companys franchisees, for a nominal amount, a new class of
preferred stock with the power to elect one new member of the Board of Directors
without the consent of common shareholders. The Board strongly believes in the
fundamental right of shareholders to elect the Companys Board of Directors. The
Board also believes that each Director should represent all shareholders and is
opposed to having a separate election of a Director to represent a limited
constituency, especially given that the proponents scheme would issue shares to
individuals with long-term franchising arrangements with the Company. The Board
regularly reviews the Companys governance practices and capital structure and
believes that the proposed issuance of preferred stock is not in the best
interests of shareholders and the Company.
Shareholders Right to Elect
All Directors. In keeping with its strong
corporate governance practices, the Board believes that each shareholder should
be able to cast an annual vote FOR
or AGAINST
all Director nominees in the Companys Proxy Statement.
The advisory proposal, if implemented, would eliminate shareholders right to
elect the full Board. As the Board has a fiduciary responsibility to act in the
best interests of all shareholders, all shareholders should be enfranchised to elect
our Directors.
Independent and Diverse
Board. In selecting candidates for Board
membership, the Board endeavors to find individuals who, among other things,
display the independence of mind and strength of character to effectively
represent the best interests of all shareholders. The Companys Governance
Principles define an independent Director as one who is free of any relationship
with the Company or its management that may impair, or appear to impair, the
Directors ability to make independent judgments. With a Board currently
comprised of 11 independent Directors out of 12, from different professional and
personal backgrounds, the Board believes it has achieved its objective. This
highly-unusual proposal would give franchisees preferred stock to elect a
Director who would likely not be independent due to the direct economic
relationship that exists between the Company and franchisees. The Board is
against any plan to give one group or constituency the right to elect its own
Director to represent limited interests, which could be contrary to the
long-term, best interests of shareholders.
Robust Lines of
Communication. Our Board receives input and
feedback from various stakeholders on an ongoing basis through a variety of
channels. Importantly, our President and Chief Executive Officer reports to the
Board at each of its meetings, sharing an important Company perspective as well
as viewpoints from a variety of stakeholders, including our global network of
franchisees. The Directors also have direct engagement with franchisees - for
example, at the Companys Worldwide Convention, market visits and as customers
at their local McDonalds. Moreover, all stakeholders are able to communicate
directly with the Board (see Communications with the Board of Directors and
non-management Directors on page 80 of this Proxy Statement). The proponents
desire to have one constituency share its perspective with the Board vis-à-vis a
new class of preferred stock and its own elected Director is extreme and
unnecessary in light of the existing robust lines of communication that promote
alignment among the Board, management and franchisees.
In summary, the Board is proud of its
governance practices and is firmly committed to a strong and independent Board
of Directors that serves the interests of all shareholders, and not, in fact
or appearance, any particular constituencys specified interests. Moreover,
there are well-established lines of communication through which our franchisees,
shareholders and other stakeholders share their views with our Board. For these
reasons, the creation of a new class of preferred stock with the right to elect
its own Director is neither necessary nor in the best interests of the
shareholders or the Company.
Therefore, your Board of Directors
recommends that you vote AGAINST this proposal.
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The Board of Directors recommends that shareholders
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this proposal. |
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Advisory vote on a
shareholder proposal requesting that the Board make all lawful efforts to
implement and/or increase activity on the Holy Land
Principles. |
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The Holy Land Principles, Inc. has
notified the Company that it intends to submit the following proposal at this
years Annual Meeting. As explained below, the
Board recommends that you vote AGAINST this shareholder proposal. The
proponent states that it beneficially owns 47 shares of McDonalds common stock,
and there were 816,753,115 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
HOLY LAND PRINCIPLES McDONALDS
RESOLUTION
WHEREAS, McDonalds Corporation has
operations in Palestine-Israel;
WHEREAS, achieving a lasting peace in the
Holy Land with security for Israel and justice for Palestinians encourages
us to promote a means for establishing justice and equality;
WHEREAS, fair employment should be the
hallmark of any American company at home or abroad and is a requisite for any
just society;
WHEREAS, Holy Land Principles Inc., a
non-profit organization, has proposed a set of equal opportunity employment
principles to serve as guidelines for corporations in Palestine-Israel. These
are:
1. |
Adhere to equal and fair
employment practices in hiring, compensation, training, professional
education, advancement and governance without discrimination based on
national, racial, ethnic or religious identity. |
2. |
Identify underrepresented
employee groups and initiate active recruitment efforts to increase the
number of underrepresented employees. |
3. |
Develop training programs that
will prepare substantial numbers of current minority employees for skilled
jobs, including the expansion of existing programs and the creation of new
programs to train, upgrade, and improve the skills of minority
employees. |
4. |
Maintain a work environment that
is respectful of all national, racial, ethnic and religious
groups. |
5. |
Ensure that layoff, recall and
termination procedures do not favor a particular national, racial, ethnic
or religious group. |
6. |
Not make military service a
precondition or qualification for employment for any position, other than
those positions that specifically require such experience, for the
fulfillment of an employees particular responsibilities. |
7. |
Not accept subsidies, tax
incentives or other benefits that lead to the direct advantage of one
national, racial, ethnic or religious group over another. |
8. |
Appoint staff to monitor,
oversee, set timetables, and publicly report on their progress in
implementing the Holy Land Principles. |
RESOLVED: Shareholders request the Board of Directors to:
Make all possible lawful efforts to
implement and/or increase activity on each of the eight Holy Land
Principles.
SUPPORTING STATEMENT
The proponent believes that McDonalds
Corporation benefits by hiring from the widest available talent pool. An
employees ability to do the job should be the primary consideration in hiring
and promotion decisions.
Implementation of the Holy Land Principles
which are both pro-Jewish and pro-Palestinian will demonstrate concern for
human rights and equality of opportunity in its international
operations.
Please vote your proxy FOR these
concerns.
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THE BOARDS STATEMENT IN
OPPOSITION
The Board recommends voting
AGAINST
this proposal. Contrary to the proponents assertions, the Company has no direct
operations or employees in Israel, and thus it is unable to take any action to
effectuate the proposal. The Company is primarily a franchisor. Approximately
85% of McDonalds restaurants worldwide are owned and operated by independent
franchisees or developmental licensees, including McDonalds restaurants in
Israel, which are independently owned and operated under a developmental license
arrangement.
Under a developmental license arrangement,
the licensee generally provides capital for the entire business. The Company
maintains a business relationship with a developmental licensee through a
contractual agreement. The developmental licensee retains full control and
authority over staffing, purchasing, marketing and pricing decisions. The
Company has no ability to control, nor does it exercise control over, the
employment practices of a developmental licensee. For more information on the
developmental license business model, see the Companys Form 10-K filing at
http://corporate.mcdonalds.com/mcd/investors/financial-information/sec-filings.html.
The Company recognizes the importance of human capital to
the McDonalds brand around the world and continually works to identify, analyze
and assess the impact of its business on human rights. The Board also
understands the significance of this issue and, in 2013, the Board tasked the
Sustainability and Corporate Responsibility Committee to review the Companys
human rights risks and prepare a report to shareholders on this topic. Among
other things, the report documents the Companys efforts to inform its
franchisees of its commitment to human rights and to encourage them to adopt
appropriate policies for their businesses across the globe. Franchisees, like
developmental licensees, are responsible for the day-to-day operations of their
restaurants and are exclusively responsible for employment matters in their
organizations, including the recognition of which practices or principles
constitute best practices and warrant consideration by their organizations. This
report is available at http://corporate.mcdonalds.com/mcd/investors/corporate-governance/board_and_committee_reports.html.
Further, our shareholders expressed their
opposition to this proposal last year. At the 2016 Annual Shareholders Meeting,
the proposal received just over 3% of the votes cast (approximately 2% of our
outstanding shares).
For the reasons outlined above, we
continue to believe that adoption of this proposal is not possible and not in
the best interests of the Company and its shareholders.
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The Board of Directors recommends that shareholders
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McDonalds Corporation |
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Table of
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Advisory vote on a
shareholder proposal requesting the Board to update the Companys policy
regarding use of antibiotics by its meat suppliers. |
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The Benedictine Sisters of Boerne, Texas
and certain co-filers have notified the Company that they intend to submit the
following proposal at this years Annual Meeting. As explained below, the Board
recommends that you vote AGAINST this shareholder proposal. The
lead proponent states that it beneficially owns 52 shares of McDonalds common
stock, and there were 816,753,115 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
Phase Out Routine Use of
Antibiotics
RESOLVED: Shareholders request that the Board update the 2015 McDonalds Global
Vision for Antimicrobial Stewardship in Food Animals by adopting the following
policy regarding use of antibiotics by its meat suppliers:
Set global sourcing targets with timelines
for pork and beef raised without the non-therapeutic use of medically-important
antibiotics.
WHEREAS:
The World Health Organization and the U.S. Centers for Disease Control
and Prevention have reported antibiotic resistance is a global public health
crisis that threatens to overturn many of the medical advances made over the
last century. In Europe, there is a review of the Veterinary Medicinal Products
and Medicated Feed Regulations, which may lead to a ban of the routine
administration of antibiotics to animals. Experts estimate antibiotic-resistant
infections will kill 10 million people per year worldwide by 2050.
A major factor in the spread of antibiotic
resistance is its overuse in food-producing animals. Over 70% of medically
important antibiotics in the U.S. are sold for livestock use (FDA, 2012), often
given to promote animal growth or to prevent rather than to treat
illness.
McDonalds has phased out medically
important antibiotics in its poultry supply chains in the U.S. in 2015. However,
McDonalds has not committed to a similar sourcing policy for poultry outside
the U.S., for beef or for pork.
In its annual report, McDonalds
acknowledges continued business success depends on our Systems ability to
anticipate and respond effectively to continuously shifting consumer
demographics, trends in food sourcing, food preparation and consumer preferences
in the IEO segment. In a recent survey of American adults, Crains Chicago
Business found that at least 34 percent would be more likely to eat at
McDonalds if they served meat raised without antibiotics and
hormones.
Subway announced a policy to serve beef
and pork without routine antibiotic use by 2025; Panera Bread and Chipotle
already serve meat raised without routine use of antibiotics. CKE Restaurants
Inc. introduced the All-Natural Burger made from grass-fed, free-range cattle
raised without antibiotics. Producers including Tyson, Applegate, and Niman
Ranch supply beef and pork raised without antibiotics. Failure to offer
antibiotic-free products endangers McDonalds market share.
In April 2016, investors holding over $1
trillion in assets called on McDonalds to set timelines to prohibit the use of
medically important antibiotics in its global meat and poultry supply chains
as they view its use as a risk to public health as well as the brand.
SUMMARY:
Given growing health concerns, changing consumer preferences and industry
trends, shareholders would benefit from more detailed plans that sets McDonalds
on a course to phase-out the non-therapeutic use of medically important
antibiotics in meat production.
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Table of
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THE BOARDS STATEMENT IN
OPPOSITION
The Board recommends that you vote
AGAINST the
proposal requesting that the Board update the Companys 2015 Global Vision for
Antimicrobial Stewardship in Food Animals (the Global Vision for
Antibiotics).
Global Vision on
Antibiotics. McDonalds began its focus on
antibiotic use in food animals in 2003. The Companys vision has been - and
continues to be - the preservation of antimicrobial effectiveness in the future
through ethical and evolving practices today. The 2015 Global Vision for
Antibiotics (outlined below) builds on these efforts and applies to all food
animals (poultry, beef, pork, dairy and eggs) served in McDonalds restaurants
throughout the world.
The Global Vision for Antibiotics
incorporates the following criteria, which serve as goals for McDonalds global
supply chain: (i) classes of antimicrobials that
are currently approved as dual use (for use in both human and veterinary
medicine) for the treatment or prevention of animal disease should only be used
in conjunction with a veterinary-developed animal health care program, (ii)
antimicrobials in food animals that are by the World Health Organization (WHO)
definition critically important to human medicine, and not presently approved
for veterinary use, should never be used on animals within McDonalds supply
chain, (iii) medically important antimicrobials for growth promotion in food
animals, as defined by WHO, should not be used within McDonalds supply chain,
and (iv) utilize animal production practices that reduce, and where possible,
eliminate the need for antimicrobial therapies. The Global Vision for
Antibiotics may be found on the Companys website at http://corporate.mcdonalds.com/mcd/sustainability/sourcing/animal-health-and-welfare/issues-we-re-focusing-on/vision-for-antimicrobial-stewardship-for-food-animals.html.
Strong Track Record of Progress in
Poultry. The Company believes that the
McDonalds System has made good progress in implementing its Global Vision for
Antibiotics, focusing first on the application of this vision to poultry. Due to
the unique, vertically-integrated poultry supply chain, the Company is able to
more easily work with farmers and producers to raise chicken specific to
McDonalds requirements. In furtherance of the Global Vision for Antibiotics,
McDonalds USA announced in March 2015 that it would only source chicken not
treated with antibiotics important to human medicine. At that time, McDonalds
USA committed to working with its approved suppliers to implement this policy by
2017. Through collaboration with its suppliers and farmers, McDonalds USA
fulfilled its vision with respect to chicken nearly a year ahead of schedule,
and no longer serves chicken treated with antibiotics that are important to
human medicine. Work is currently in progress to develop policies to implement
the Global Vision for Antibiotics in McDonalds poultry supply chains in other
markets, taking into account issues such as different local legislation and the
availability of other alternatives to ensure the health and welfare of the
chickens.
Premature to Set Timelines for Pork and
Beef. The beef and pork supply chains present
unique challenges as we look to translate our Global Vision for Antibiotics into
action for these food animals, especially given our size and geographic scope.
Notably:
(1) |
Limited Purchases of Pork and
Beef Cuts. Unlike chicken, McDonalds
does not purchase the entire food animal in the pork and beef supply
chains, which limits our ability to directly influence
change. |
(2) |
Sourcing Complexity.
Within the pork and beef supply chains,
animals may move from farm to farm, resulting in less visibility into
their origin. Adding to the complexity, there is currently a lack of
traceability from farm to farm in a number of key sourcing regions around
the world, including the U.S. This is the opposite of poultry, where the
Company has a clear line of sight from farm to table. |
(3) |
Guaranteed Supply.
As we implement the Global Vision on
Antibiotics for other food animals, we need to ensure that any change is
purposeful, acceptable to customer preferences, and is designed for a
continuous and assured supply of products for McDonalds restaurants. The
Company continues to work with farmers, producers and other purchasers of
food animals to influence meaningful change across the agricultural
sector. |
Therefore, although we are making
progress, it is premature to set time-bound targets for updating the Global
Vision for Antibiotics. The Company continues to work with our suppliers and
other stakeholders to determine the appropriate courses of action going
forward.
Commitment to Sustainable Beef.
As an example of the Companys efforts to
drive meaningful change in this area more broadly, we are a founding member of
the Global Roundtable for Sustainable Beef, working closely with beef industry
leaders and other experts to collectively define principles and criteria for
what sustainable beef should be, and to help advance beef sustainability
around the world. A report on our progress in this regard, including our further
involvement in on the ground country level industry platforms to drive progress,
may be found on the Companys website at http://corporate.mcdonalds.com/mcd/sustainability/signature_programs/beef-sustainability.html.
McDonalds Corporation |
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Table of
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Engagement with the
Proponent. The Company has engaged on this
topic with the proponent and other interested shareholders for several years and
has made subject matter experts available to discuss their questions and
concerns. In addition, at the 2016 Annual Shareholders Meeting, the Companys
shareholders expressed their opposition to a similar proposal.
For all of the reasons discussed
above, the Board believes that the request is premature, and has the potential
for a diversion of resources with no corresponding benefit to the Company, our
customers and our shareholders.
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The Board of Directors recommends that shareholders
vote AGAINST
this proposal. |
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Table of
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Advisory vote on a shareholder proposal requesting a report
assessing the environmental impacts of polystyrene foam
beverage cups. |
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The Gun Denhart Living Trust, represented
by As You Sow Foundation, and a co-filer have notified the Company that it
intends to submit the following proposal at this years Annual Meeting. As
explained below, the Board recommends that you vote AGAINST this shareholder proposal. The
lead proponent states that it beneficially owns 81 shares of McDonalds common
stock, and there were 816,753,115 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
WHEREAS: McDonalds Corp. has stated its aspiration to source all of
our food and packaging sustainably, yet continues to use polystyrene-based foam
beverage cups in some overseas markets years after phasing them out in the
United States.
The Sustainable Packaging Coalition, of
which McDonalds is a member, defines sustainable packaging as beneficial, safe
and healthy for individuals and communities throughout its life cycle. The
International Agency for Research on Cancer has determined that styrene, used in
the production of polystyrene, is a possible human carcinogen. Epidemiologic
studies suggest an association between occupational styrene exposure and an
increased risk of leukemia and lymphoma.
Polystyrene foam used for coffee cups,
takeout containers and packing materials, is rarely recycled. It is often swept
into waterways and is one of the top items found in ocean beach cleanups. Foam
packaging materials break down into small indigestible pellets which animals
mistake for food. Ingestion can result in death as demonstrated in birds,
turtles, and whales.
Foam has also been shown to transfer
hazardous chemicals to wildlife. Plastics absorb toxics like PCBs, pesticides,
and metals from water, transferring them to the marine food web and potentially
to human diets, increasing risk of adverse effects to wildlife and humans. Foam
may pose a higher risk to marine animals than other plastics due to its
hazardous constituent chemicals and research showing it can accumulate high
concentrations of water borne toxins in a short time frame. Polystyrene has
caused decreased reproduction in laboratory populations of oysters and
fish.
Antigua and Barbuda, Bangladesh, Barbados,
France, Guyana, Haiti, Rwanda, Taiwan and states in India and Malaysia have
enacted bans on foam packaging. More than 100 U.S. cities or counties have
banned or restricted foam packaging. The problem can be exacerbated in
developing countries with less sophisticated solid waste management systems.
Recent scientific research estimates that one half of ocean plastic deposition
comes from several rapidly developing Asian countries including China and the
Philippines where McDonalds still uses foam cups in some areas.
Fresh waters are also threatened by
plastics like polystyrene. A recent study of 29 rivers flowing into the Great
Lakes found that every sample carried microplastics, often in concentrations far
larger than detected in the lakes themselves.
BE IT RESOLVED THAT: Shareowners of McDonalds request that the board of directors
issue a report at reasonable cost, omitting confidential information, assessing
the environmental impacts of continued use of polystyrene foam beverage cups,
including quantifying the amount that could reach the environment, and assessing
the potential for increased risk of adverse health effects to marine animals and
humans.
SUPPORTING
STATEMENT:
Proponents believe the report
should include an assessment of the reputational, financial and operational
risks associated with continuing to use foam cups and a timeline to phase out
their use. We believe the requested report is in the best interest of McDonalds
and its shareholders. Leadership in this area will protect our brand and enhance
the companys reputation.
McDonalds
Corporation |
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Table of
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THE BOARDS STATEMENT IN
OPPOSITION
The Board recommends voting
AGAINST
this proposal. The Board has carefully considered the proposal and, for the
reasons described below, believes that the report requested is unnecessary, and
has the potential for a diversion of resources with no corresponding benefit to
the Company, our customers, and our shareholders, particularly in light of
McDonalds ongoing packaging sustainability efforts and reporting in an open and
transparent way.
Strong Track Record of Packaging
Sustainability. The Companys ultimate vision
is to avoid waste in the first place and to source all packaging sustainably. As
packaging is key for quality and food safety, we continually research and test
more environmentally friendly alternatives while balancing customers
preferences. The Company has a strong track record of progress in
sustainability. Over the last several decades, the Company has collaborated with
dozens of organizations to develop programs that create lasting change for
society and our business. An important milestone in the Companys sustainability
journey dates back over 25 years ago, when we partnered with the Environmental
Defense Fund to reduce the environmental impact of our packaging. The success of
this partnership provides a model that the Company uses to advance progress on
numerous social and environmental issues. The Company plans to continue making
progress toward sourcing sustainable packaging, driven by this collaborative
approach - working closely with experts, industry leaders and suppliers to
identify lasting solutions.
Most recently, the Company published the
McDonalds Journey Towards Sustainable Fiber-Based Packaging report, which
outlines the Companys progress toward its stated goal of sourcing 100 percent
of fiber-based packaging from recycled or certified sustainable sources.
Importantly, the Company is more than half way to achieving this goal. This
report is available on the Companys website at http://corporate.mcdonalds.com/mcd/sustainability/sustainability_CR_reports.html.
For more information on the Companys
packaging sustainability initiatives generally, please see the Companys website
at http://corporate.mcdonalds.com/mcd/sustainability.html.
Limited Use of
Polystyrene. Polystyrene foam cups comprise a
limited amount of McDonalds packaging. At this time, approximately 2% of the
packaging used in McDonalds restaurants worldwide (by weight) is comprised of
polystyrene foam. When considering packaging options, the Company considers the
environmental impact of packaging, along with functionality, affordability,
availability of materials, impact on operations and customer acceptance.
Ongoing Dialogue with
Proponent. The Company has engaged on this
topic with the proponents representative and has also provided access to the
Companys subject matter experts to address questions and concerns. We have been
transparent about our progress and the challenges with addressing the
proponents request. This dialogue has also focused on McDonalds continuing
efforts to address these challenges in the best interest of our customers,
suppliers and shareholders.
Therefore, in light of McDonalds
ongoing sustainability efforts and transparent reporting, we believe that the
request is unnecessary and has the potential for a diversion of resources with
no corresponding benefit to the Company, our customers and our
shareholders.
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The Board of Directors recommends that shareholders
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this proposal. |
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Table of
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Advisory vote on a
shareholder proposal requesting a report on charitable contributions.
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Mr. John Harrington has notified the
Company that he intends to submit the following proposal at this years Annual
Meeting. As explained below, the Board recommends that you vote AGAINST this shareholder
proposal. The proponent states that he beneficially owns 100 shares of
McDonalds common stock, and there were 816,753,115 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
RESOLVED, shareholders of McDonalds
Corporation (the Company) hereby request
that the Company prepare and annually update a report to shareholders, at
reasonable expense and excluding proprietary information, listing and analyzing
charitable contributions during the prior year. The report should:
1. |
Identify organizational or
individual recipients of donations, whether cash or in-kind, in excess of
$500 and aggregate of smaller contributions by categories of recipients
such as community organizations, schools, dietary organizations, medical
groups, environmental, churches, etc.; |
2. |
Identify areas of alignment and
potential conflict between the Companys charitable contributions and the
Companys key stated ambitions, values and mission as stated in its
corporate social responsibility reports and SEC filings; |
3. |
Include managements analysis of
any risks to the Companys brand, reputation, or shareholder value posed
by public controversies associated with contributions or any
incongruencies with corporate values; |
4. |
Include coherent criteria for
assessing congruency and brand risk, such as identifying philanthropic
areas or initiatives considered most germane to corporate values and types
of donations that may be contrary to company values or reputation;
and |
5. |
Based on the above, evaluate and
state justification for any identified incongruent
activities. |
SUPPORTING STATEMENT
Research by the Proponent uncovered
charitable activities that may pose a risk to the Companys reputation and brand
by undermining the Companys stated commitments. Examples include:
● |
McTeachers
Nights. The Companys Ambition
includes using our reach to be a positive force and being a Good
Neighbor because we champion happy, healthy kids.1 Yet
teachers unions have stated that the Companys McTeachers Nights program
exploits the trust families place in schools to promote junk food to
children, undermining teachers efforts to teach students healthy habits.
Other school programs have faced similar criticisms. |
● |
Sponsorship of health
organizations. The Company has made
contributions to health-related organizations, including the American
Academy of Pediatrics,2 the California Dietetic
Association,3 and the Michigan Academy of Nutrition and
Dietetics conference,4 among others. Because of our companys
association with foods high in fat, sugar and salt, a number of these
contributions were criticized by Dieticians for Public Integrity and other
observers, leading to detrimental media coverage for our
Company. |
As long-term shareholders of McDonalds
Corporation, we believe the Company should ensure that its practices minimize
risk to its reputation and brand. Thus, the Company should disclose and review
its charitable activities to ensure they are congruent with its stated values
and avoid unnecessary risk to shareholder value.5 Vote yes if you
agree with this view.
____________________
1 |
http://corporate.mcdonalds.com/mcd/our_company/our-ambition.html |
2 |
http://web.archive.org/web/20131019182904/http://www.aapexperience.org/2013/onsiteprogram.pdf |
3 |
http://www.shape.com/blogs/shape-your-life/mcdonalds-sponsors-nutrition-convention;
http://www.motherjones.com/environment/2014/05/my-trip-mcdonalds-sponsored-nutritionist-convention
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4 |
http://integritydietitians.org/2016/02/19/mcdonalds-sponsors-michigan-academy-of-nutrition-and-dietetics-conference/
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5 |
http://well.blogs.nytimes.com/2015/08/09/coca-cola-funds-scientists-who-shift-blame-for-obesity-away-from-bad-diets/ |
McDonalds Corporation |
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Table of
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THE BOARDS STATEMENT IN
OPPOSITION
The Board recommends voting
AGAINST
this proposal requesting the Board to publish an annual report identifying
virtually all of the Companys charitable contributions and providing a
congruency analysis between its corporate values and those contributions. The
Company has meaningful, efficient processes in place for corporate governance
and oversight of charitable contributions at the management and Board levels.
After careful review of this proposal, the Board has determined that providing
the requested disclosures would incur unnecessary expense without providing any
meaningful benefit to shareholders.
McDonalds Guidelines for Charitable
Contributions. Giving back to local
communities is one of our core values. While charitable initiatives vary country
to country, the Company is globally aligned around two main giving priorities:
improving the lives of children and their families primarily through support of
Ronald McDonald House Charities (as more fully described below), and
strengthening communities by addressing local needs. The Company has in place
global compliance guidelines for approval of charitable contributions, which are
designed to ensure that corporate funds are allocated appropriately, and that
contributions are aligned with the Companys giving priorities, core values and
Brand image. Also, as part of its oversight responsibilities related to Brand
trust, the Boards Sustainability & Corporate Responsibility Committee
regularly reviews reports on the Companys charitable contributions and
philanthropy initiatives. Further information regarding the Companys giving
philosophy and activities is available on the Companys website at
http://corporate.mcdonalds.com/mcd/sustainability/community.html. Accordingly, providing a detailed report including the
amount of, and rationale behind, each individual contribution as requested by
the proponent, would serve no useful purpose, while causing the Company to incur
the unnecessary burden and expense of administering a complicated global
reporting system, without providing any real value to shareholders.
McDonalds Employee Matching Gift
Program. For U.S. based employees, the
Company encourages individual giving by matching certain charitable
contributions dollar for dollar (up to $5,000 annually for most staff employees
and $10,000 annually for officers and members of the Companys Board of
Directors). The Company has established qualification criteria for the
not-for-profit organizations, which are designed to ensure that each matching
contribution made by the Company will be consistent with the Companys core
values and Brand image. The proposed cataloging and disclosure of these matching
gift contributions as requested by the proponent would not be an efficient or
appropriate use of the Companys resources, and, as stated above, would not
provide any real value to shareholders.
McDonalds Support of Ronald McDonald
House Charities (RMHC). The Companys
charity of choice is RMHC, whose mission is to create, find and support
programs that directly impact the health and well-being of children. At its
corporate headquarters and in markets around the world, the Company provides
direct financial support and in-kind support through use of Company facilities
and resources. Of equal importance, Company employees have provided countless
hours of volunteer support, not only to local chapter programs but through
sharing knowledge and expertise in areas such as technology, accounting,
marketing and legal, all intended to help reduce administrative expenses for
RMHC. We are proud to have supported the growth of RMHC from one Ronald McDonald
House in 1974 to a network of over 290 chapters spanning over 63 countries and
regions.
Given the nature and scope of the
Companys giving programs and the strong governance surrounding charitable
contributions as described above, the Board believes that the annual report and
analysis requested by the proponent would incur cost without commensurate
benefit to shareholders. We also point to similar congruency analysis
proposals related to corporate spending submitted by the same proponent in 2015
and 2016, which received support of approximately 7.50% and 5.41% of the votes
cast, respectively.
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The
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AGAINST this proposal. |
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Table of
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STOCK
OWNERSHIP |
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DIRECTOR
STOCK OWNERSHIP GUIDELINES AND STOCK
OWNERSHIP AND RETENTION POLICY FOR SENIOR
OFFICERS
The Company has established stock
ownership guidelines for Directors, which are regularly reviewed by the
Governance Committee. Under the guidelines, Directors should own Company stock
at least equal in value to the lesser of (i) five times the annual cash Board
retainer or (ii) 10,000 shares within five years of joining the Board. All
Directors currently meet the guidelines. Directors are prohibited from entering
into any hedging or pledging arrangement with respect to Company stock. The
Company also imposes stock ownership and retention requirements for senior
officers through its Stock Ownership and Retention Policy. The requirements for
senior officers are discussed in the Compensation Discussion and Analysis
section, on page 42. The guidelines and the policy are available on the
Companys website at http://corporate.mcdonalds.com/mcd/investors/corporate-governance/governance-principles-policies-and-guidelines.html.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our executive officers and Directors and
persons who beneficially own more than 10% of our common stock (Reporting
Persons) must file reports with the SEC about their ownership of and
transactions in our common stock and our securities related to our common stock.
Reporting Persons must furnish us with copies of these reports. Based on our
review of those reports provided to us and inquiries we have made, we believe
that all Section 16(a) filing requirements applicable to these Reporting Persons
were timely met during the year ended December 31, 2016.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows all beneficial
owners of more than five percent of the Companys common stock outstanding as of
December 31, 2016:
Name and address of
beneficial owner |
Amount and nature
of beneficial ownership |
|
Percent of
class |
The Vanguard Group, Inc.(1) 100 Vanguard
Blvd. Malvern, PA 19355 |
61,310,856 |
|
7.4% |
BlackRock, Inc.(2) 55 East 52nd
Street New York, NY 10055 |
53,973,135 |
|
6.5% |
State Street
Corporation(3) One Lincoln Street Boston, MA
02111 |
42,658,113 |
|
5.1% |
(1) |
Reflects shares deemed to be
beneficially owned by The Vanguard Group, Inc., directly or through its
subsidiaries, as of December 31, 2016, according to a statement on
Schedule 13G/A filed with the SEC on February 10, 2017, which indicates
that Vanguard, an investment adviser, has sole voting power with respect
to 1,307,582 of the shares, shared voting power with respect to 178,522 of
the shares, sole dispositive power with respect to 59,836,117 of the
shares and shared dispositive power with respect to 1,474,739 of the
shares. The Schedule 13G/A certifies that the securities were acquired in
the ordinary course and not with the purpose or with the effect of
changing or influencing the control of the
Company. |
McDonalds Corporation |
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(2) |
Reflects shares deemed to be
beneficially owned by BlackRock, Inc., directly or through its
subsidiaries, as of December 31, 2016, according to a statement on
Schedule 13G/A filed with the SEC on January 25, 2017, which indicates
that BlackRock, a parent holding company, has sole voting power with
respect to 46,278,027 shares and sole dispositive power with respect to
all of the shares. The Schedule 13G/A certifies that the securities were
acquired and are held in the ordinary course and not with the purpose or
with the effect of changing or influencing the control of the
Company. |
(3) |
Reflects shares deemed to be
beneficially owned by State Street Corporation, directly or through its
subsidiaries, as of December 31, 2016, according to a statement on
Schedule 13G filed with the SEC on February 8, 2017, which indicates that
State Street, a parent holding company, has shared voting power and shared
dispositive power with respect to all of the shares. The Schedule 13G
certifies that the securities were acquired and are held in the ordinary
course and not with the purpose or with the effect of changing or
influencing the control of the Company. |
SECURITY
OWNERSHIP OF MANAGEMENT
The following table shows the ownership of
the common stock and common stock equivalent units for the named individuals and
all Directors and executive officers as a group. Except as indicated below,
information reflected in the following table is as of March 1, 2017. Directors
and executive officers as a group owned (directly, indirectly and through
benefit plans) less than one-percent of the Companys common stock:
Name |
|
Common
stock |
(1)(2)(3)(4) |
Stock
equivalents |
(5) |
Total |
Directors |
|
|
|
|
|
|
Lloyd Dean |
|
0 |
|
2,981 |
|
2,981 |
Robert Eckert |
|
5,000 |
|
52,151 |
|
57,151 |
Margaret Georgiadis |
|
2,130 |
|
2,369 |
|
4,499 |
Enrique Hernandez,
Jr. |
|
2,000 |
|
72,573 |
|
74,573 |
Jeanne Jackson |
|
1,666 |
|
63,619 |
|
65,285 |
Richard Lenny |
|
2,288 |
|
29,382 |
|
31,670 |
Walter Massey |
|
5,045 |
|
38,502 |
|
43,547 |
John Mulligan |
|
0 |
|
1,743 |
|
1,743 |
Sheila Penrose |
|
3,000 |
|
22,167 |
|
25,167 |
John Rogers, Jr. |
|
87,500 |
|
48,656 |
|
136,156 |
Miles White |
|
5,000 |
|
12,335 |
|
17,335 |
Named executive
officers |
|
|
|
|
|
|
Michael
Andres(6) |
|
62,137 |
|
3,752 |
|
65,889 |
Peter
Bensen(6) |
|
324,687 |
|
23,663 |
|
348,350 |
Stephen Easterbrook |
|
234,020 |
|
0 |
|
234,020 |
Douglas Goare |
|
179,213 |
|
5,873 |
|
185,086 |
David
Hoffmann(6) |
|
63,638 |
|
2,380 |
|
66,018 |
Silvia Lagnado |
|
20,611 |
|
0 |
|
20,611 |
Kevin Ozan |
|
127,236 |
|
2,415 |
|
129,651 |
All
Directors and executive officers as a group
(the Group) (26 persons) |
|
1,608,041 |
|
387,925 |
|
1,995,966 |
(1) |
Includes unallocated shares
held in the Companys 401k Plan as follows: Messrs. Bensen: 7; Goare: 427;
Hoffmann: 187; Ozan: 74; and the Group: 736. |
(2) |
Includes shares that could be
purchased by exercise of stock options on or within 60 days after March 1,
2017 under the Companys equity plans as follows: Messrs. Easterbrook:
231,221; Goare: 153,470; and Ozan: 112,512; Ms. Lagnado: 11,630 and the
Group:1,326,043. Includes 55,264 shares for Mr. Andres: 308,802 shares for
Mr. Bensen and 56,023 shares for Mr. Hoffmann that could be purchased by
exercise of stock options on or within 60 days after the date last served
with the Company. |
(3) |
Directors and executive
officers as a group have sole voting and investment power over shares of
common stock listed in the above table except as follows: (i) shared
voting and investment powers for shares held by Messrs. Hernandez: 2,000;
Lenny: 2,288; Ms. Georgiadis: 2,130; and Ms. Jackson: 1,174; and (ii) for
the benefit of children, shares held by Ms. Jackson: 492. |
(4) |
For Mr. Rogers, includes
87,500 shares of common stock held in a margin account, which amount was
pledged prior to the adoption of the Companys current policy with respect
to hedging and pledging McDonalds stock. |
(5) |
Includes common stock
equivalent units credited under certain of the Companys retirement plans
and the Directors Plan, which are payable in cash. |
(6) |
Amounts for Messrs. Andres and
Bensen are as of December 31, 2016 and September 2, 2016, their respective
retirement dates and for Mr. Hoffman are as of September 30, 2016, when he
resigned from the Company. |
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TRANSACTIONS
WITH RELATED
PERSONS |
|
POLICIES
AND PROCEDURES FOR RELATED PERSON TRANSACTIONS
The McDonalds System has over 36,000
restaurants worldwide, most of which are independently owned and operated.
Within this extensive System, it is not unusual for our business to touch many
companies in many industries, including suppliers of food and other products and
services. The Board of Directors reviews and approves (or ratifies), as
appropriate, transactions, relationships or arrangements in which the Company is
a participant and that involve Directors, nominees for Director, executive
officers, beneficial owners of more than 5% of our common stock, their immediate
family members, including domestic partners, and companies in which they have a
material interest.
The Board has a policy that sets out
procedures for the reporting, review and ratification of related person
transactions. The policy operates in conjunction with other aspects of the
Companys compliance program, including a requirement that Directors and
employees report any circumstances that may create or appear to create a
conflict, regardless of the amount involved. Directors and executive officers
must also confirm information about related person transactions, and management
reviews its books and records and makes other inquiries as
appropriate.
Under the policy, the Board evaluates
related person transactions for purposes of recommending to the disinterested
members of the Board whether or not the transactions are fair, reasonable and
within Company policies and should be approved or ratified. Related person
transactions involving Directors are reviewed by the Board at least
annually.
The Board has considered certain types of
potential related person transactions and pre-approved them as not presenting
material conflicts of interest. Those transactions include (i) compensation paid
to Directors and executive officers that has been approved by the Board or the
Compensation Committee; (ii) Company contributions to Ronald McDonald House
Charities, Inc. and certain other contributions made in limited amounts to other
charitable or not-for-profit organizations; and (iii) transactions in which the
related persons interest arises solely from ownership of the Companys common
stock and all holders of the common stock receive the same benefit on a pro-rata
basis. The Board considers the appropriateness of any related person transaction
not within the pre-approved classes in light of all relevant factors,
including:
● |
the terms of the transaction and
whether they are arms-length and in the ordinary course of McDonalds
business; |
● |
the direct or indirect nature of the
related persons interest in the transaction; |
● |
the size and expected duration of
the transaction; and |
● |
other facts and circumstances that
bear on the materiality of the related person transaction under applicable
law and listing standards. |
Related person transactions involving
Directors are also subject to approval or ratification by the disinterested
Directors when so required under Delaware law.
RELATED
PERSON TRANSACTION
In 2016, Inter-Con Security Systems, Inc.
(Inter-Con) provided physical security services for the Companys home office
campus. Enrique Hernandez, Jr., a Director of the Company, is the Chairman,
President and Chief Executive Officer, as well as a 51.44% shareholder of
Inter-Con. Payments by the Company to Inter-Con for 2016 for such services
totaled approximately $1,372,900. The Company believes that these services,
which represent less than 2% of the gross revenues of Inter-Con, were made on
terms at least as favorable as would have been available from other parties. The
disinterested Directors ratified this transaction for 2016. The contract for
Inter-Cons services expired on December 31, 2016 and was not
renewed.
McDonalds Corporation |
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COMMUNICATIONS |
|
COMMUNICATIONS WITH THE BOARD OF DIRECTORS AND
NON-MANAGEMENT
DIRECTORS
Interested persons wishing to communicate
directly with the Board or the non-management Directors, individually or as a
group, may do so by sending written communications addressed to them at Board of
Directors of McDonalds Corporation, c/o Office of the Corporate Secretary,
McDonalds Corporation, Department 010, One McDonalds Plaza, Oak Brook, IL
60523-1928 or by e-mail at bod@us.mcd.com. Under the Boards
policy for communications addressed to the Board, the Office of the Corporate
Secretary collects mail and e-mail, forwards correspondence directed to an
individual Director to that Director, and screens correspondence directed to
multiple Directors or the full Board in order to forward it to the most
appropriate person. Communications to the Board, the non-management Directors or
to any individual Director that relate to the Companys accounting, internal
accounting controls or auditing matters are referred to the Chair of the Audit
& Finance Committee.
CONSIDERATION OF DIRECTOR NOMINATIONS FOR THE 2018
ANNUAL
SHAREHOLDERS MEETING
SUGGESTIONS FOR
DIRECTOR CANDIDATES NOMINATED BY THE BOARD
Shareholders can suggest Director
candidates for consideration for nomination by the Board by writing to the
Governance Committee, c/o Office of the Corporate Secretary, McDonalds
Corporation, Department 010, One McDonalds Plaza, Oak Brook, IL 60523-1928 or
by e-mail to corporatesecretary@us.mcd.com.
Shareholders should provide the candidates name, biographical data,
qualifications and the candidates written consent to being named as a nominee
in the Companys Proxy Statement and to serve as a Director, if
elected.
DIRECTOR CANDIDATES
NOMINATED BY A SHAREHOLDER
The Companys By-Laws permit shareholders
to nominate Directors for election at an annual meeting. A nominating
shareholder must provide the information required by the By-Laws and give timely
notice of the nomination to the Office of the Corporate Secretary in accordance
with the By-Laws, and each nominee must meet the qualifications required by the
By-Laws. Notice of the nomination must be received by the Office of the
Corporate Secretary, McDonalds Corporation, Department 010, One McDonalds
Plaza, Oak Brook, IL 60523-1928 or by e-mail to corporatesecretary@us.mcd.com, and
delivered on or after 5:00 p.m. Central Time on January 24, 2018 and on or
before 5:00 p.m. Central Time on February 23, 2018.
For more information, see the Companys
By-Laws, which are available on the Companys website at http://corporate.mcdonalds.com/mcd/investors/corporate-governance/certificate_of_incorporation_and_by_laws.html.
PROXY ACCESS
CANDIDATES
The Companys By-Laws also provide that,
under certain circumstances, a shareholder or group of shareholders may include
Director candidates that they have nominated in the Companys Annual
Shareholders Meeting Proxy Statement. These proxy access provisions of the
By-Laws provide, among other things, that a shareholder or group of up to twenty
shareholders seeking to include Director candidates in the Annual Shareholders
Meeting Proxy Statement must own 3% or more of the Companys outstanding common
stock continuously for at least the previous 3 years. The number of
shareholder-nominated candidates appearing in any Annual Shareholders Meeting
Proxy Statement cannot exceed the greater of two Directors and 20% of the number
of Directors
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then serving on the Board. If 20% is not a
whole number, the maximum number of shareholder-nominated candidates would be
the closest whole number below 20%, and may be reduced under certain
circumstances, as described in the By-Laws. The nominating shareholder or group
of shareholders also must deliver the information required by the By-Laws and
satisfy the other applicable requirements of the By-Laws, and each nominee must
meet the qualifications required by the By-Laws.
Requests to include shareholder-nominated
candidates in the Companys Proxy Statement for the 2018 Annual Shareholders
Meeting must be received by the Office of the Corporate Secretary, McDonalds
Corporation, Department 010, One McDonalds Plaza, Oak Brook, IL 60523-1928 or
by e-mail to corporatesecretary@us.mcd.com, and
delivered on or after 5:00 p.m. Central Time on January 24, 2018 and on or
before 5:00 p.m. Central Time on February 23, 2018.
For more information, see the Companys
By-Laws, which are available on the Companys website at http://corporate.mcdonalds.com/mcd/investors/corporate-governance/certificate_of_incorporation_and_by_laws.html.
SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEARS
PROXY
STATEMENT
To be considered for inclusion in the
Companys Proxy Statement for the 2018 Annual Shareholders Meeting, shareholder
proposals must be received by the Office of the Corporate Secretary no later
than 5:00 p.m. Central Time on December 14, 2017. These proposals must be sent
to the Office of the Corporate Secretary, McDonalds Corporation, Department
010, One McDonalds Plaza, Oak Brook, IL 60523-1928 or by e-mail to
corporatesecretary@us.mcd.com. This notice requirement is in addition to the SECs other
requirements that a shareholder must meet in order to have a shareholder
proposal included in the Companys Proxy Statement.
OTHER
SHAREHOLDER PROPOSALS FOR PRESENTATION AT THE
2018 ANNUAL SHAREHOLDERS
MEETING
For any proposal not properly submitted
for inclusion in the Proxy Statement for the 2018 Annual Shareholders Meeting
under SEC rules and that is sought to be presented directly from the floor of
the 2018 Annual Shareholders Meeting, the Companys By-Laws require that timely
notice must be given in writing to the Office of the Corporate Secretary. To be
timely, the notice must be delivered to the Office of the Corporate Secretary,
McDonalds Corporation, Department 010, One McDonalds Plaza, Oak Brook, IL
60523-1928 or by e-mail to corporatesecretary@us.mcd.com on or
after 5:00 p.m. Central Time on January 24, 2018 and on or before 5:00 p.m.
Central Time on February 23, 2018. The By-Laws also provide that the proposal,
as determined by the Chairman of the meeting, must be a proper subject for
shareholder action under Delaware law, and the proposal must satisfy certain
other requirements set forth in the By-Laws.
McDonalds Corporation |
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SOLICITATION
OF PROXIES
AND VOTING |
|
NOTICE AND ACCESS
The Company follows the SECs Notice and
Access rule. Most shareholders will receive a notice of Internet availability
of proxy materials (Notice) in lieu of a paper copy of the Proxy Statement and
the Companys Annual Report on Form 10-K. The Notice provides instructions on
how shareholders can access the proxy materials online, describes matters to be
considered at the Annual Shareholders Meeting and gives instructions on how
shares can be voted. Shareholders receiving the Notice can request a paper copy
of the proxy materials by following the instructions set forth in the
Notice.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS
THE
PROXY STATEMENT AND OUR 2016 ANNUAL REPORT ON FORM 10-K TO SHAREHOLDERS ARE
AVAILABLE AT:
WWW.INVESTOR.MCDONALDS.COM
RECORD DATE
Shareholders owning McDonalds common
stock at the close of business on March 27, 2017 (the record date), may vote at
the 2017 Annual Shareholders Meeting. On that date, 816,753,115 shares of
common stock were outstanding and there were approximately 1,750,000
shareholders of McDonalds common stock. Each share is entitled to one vote on
each matter to be voted upon at the Annual Shareholders Meeting.
VOTING PRIOR TO THE ANNUAL SHAREHOLDERS MEETING
Most shareholders have a choice of voting
prior to the meeting by proxy over the Internet, by telephone or by using a
traditional proxy card. Refer to the Notice or your proxy or voting instruction
card to see which options are available to you and how to use them. The Internet
and telephone voting procedures are designed to authenticate shareholders
identities and to confirm that their instructions have been properly
recorded.
VOTING AT THE ANNUAL SHAREHOLDERS MEETING
Ballots will be available for shareholders
to vote at the meeting. Shareholders who listen to the audiocast will not be
able to vote their shares unless they vote by proxy prior to the
meeting.
QUORUM
A quorum will be present if the holders of
a majority of the shares of common stock entitled to vote are present in person
or represented by proxy at the Annual Shareholders Meeting. The Companys
independent inspector of election, Broadridge Financial Solutions, Inc., will
determine whether or not a quorum is present.
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Solicitation
of Proxies and Voting |
VOTING TABULATION
All votes cast at the Annual Shareholders
Meeting will be tabulated by Broadridge.
Directors will be elected by majority
vote, which means that a nominee is elected only if the votes cast for his or
her election exceed the votes cast against his or her election (with
abstentions and broker non-votes having no effect on the outcome of the
election). Each of the incumbent Directors has tendered an irrevocable
resignation that will be effective if (i) the nominee does not receive a
majority of the votes cast and (ii) upon the recommendation of the Governance
Committee, the Board accepts the resignation following the meeting.
With respect to the advisory vote to
approve executive compensation, the vote to approve the material terms of the
performance goals for awards under the McDonalds Corporation 2012 Omnibus Stock
Ownership Plan, the advisory vote to approve the appointment of Ernst &
Young LLP as independent auditor for 2017, and the advisory votes on each of the
shareholder proposals, shareholders may (i) vote in favor; (ii) vote against; or
(iii) abstain from voting. Under the Companys By-Laws, to be approved, these
proposals must receive the affirmative vote of a majority of the voting power of
the shares represented at the Annual Shareholders Meeting and entitled to vote
thereon. With respect to the advisory vote on the frequency of future advisory
votes to approve executive compensation, shareholders may vote to hold such
votes (a) each year, (b) every two years, (c) every three years or (d) may
abstain from voting. Under the By-Laws, the voting option, if any, that receives
the affirmative vote of a majority of the voting power of the shares represented
at the Annual Shareholders Meeting and entitled to vote thereon will be deemed
to be approved by the shareholders.
Broadridge will treat abstentions on any
one or more of the proposals submitted for shareholder action as shares present
for purposes of determining a quorum, but an abstention on any proposal (other
than Director elections) will have the effect of a vote against approval of that
proposal, including having the effect of a vote against each voting option with
respect to the advisory vote on the frequency of future advisory votes to
approve executive compensation.
REGISTERED SHAREHOLDERS
All valid proxies properly executed and
received by the Company prior to the Annual Shareholders Meeting will be voted
as directed by shareholders.
Registered shareholders who submit an
executed proxy, but do not specify how they want their shares voted, will have
their shares voted as follows: FOR
the election of the Boards nominees for Director as set
forth under Election of Directors, FOR the approval of executive
compensation, in favor of a ONE
YEAR advisory vote on executive
compensation, FOR the approval of the material terms of the performance goals for awards
under the McDonalds Corporation 2012 Omnibus Stock Ownership Plan,
FOR the approval
of the appointment of Ernst & Young LLP as independent auditor for 2017,
and AGAINST all of the shareholder proposals.
Registered shareholders may revoke their
proxy and change their vote at any time before the Annual Shareholders Meeting
by submitting written notice to the Corporate Secretary, by submitting a later
dated and properly executed proxy (by Internet, telephone or mail) or by voting
in person at the Annual Shareholders Meeting.
BENEFICIAL HOLDERS
Shareholders who hold their shares through
an intermediary, such as a bank or broker, are deemed to be beneficial holders
and will receive a voting instruction form from their intermediary. Each
intermediary is subject to certain NYSE rules regarding voting and votes
according to its own procedures.
Under NYSE rules, the proposal to approve
the appointment of independent auditors is considered a discretionary item.
This means that brokerage firms may vote in their discretion on behalf of
clients who have not furnished voting instructions at least 15 days before the
date of the Annual Shareholders Meeting. In contrast, all of the other
proposals set forth in this Proxy Statement are non-discretionary items.
Brokerage firms that have not received voting instructions from their clients on
these matters may not vote on these proposals. These so-called broker
non-votes will not be considered in determining the number of votes necessary
for approval and, therefore, will have no effect on the outcome of the votes for
these proposals. Broker non-votes with respect to any proposal will be treated
as shares present for purposes of determining a quorum at the Annual
Shareholders Meeting.
McDonalds Corporation |
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Solicitation
of Proxies and Voting |
PROXY
SOLICITATION
The Company will provide the Notice,
electronic delivery of the proxy materials or mail the 2017 Proxy Statement, the
2016 Annual Report on Form 10-K and a proxy card to shareholders beginning on or
about April 13, 2017, in connection with the solicitation of proxies by the
Board of Directors to be used at the Annual Shareholders Meeting. The cost of
soliciting proxies will be paid by the Company. The Company has retained
Kingsdale Advisors for certain advisory and solicitation services at a fee of
approximately $70,000. Proxies also may be solicited by employees and Directors
of the Company by mail, telephone, facsimile, e-mail or in person.
CONFIDENTIAL VOTING
It is the Companys policy to protect the
confidentiality of shareholder votes. Throughout the voting process, votes will
not be disclosed to the Company, its Directors, officers or employees, except to
meet legal requirements or to assert or defend claims for or against the Company
or except in those limited circumstances where (i) a proxy solicitation is
contested; or (ii) you authorize disclosure. The inspector of election has been
and will remain independent of the Company. Nothing in this policy prohibits you
from disclosing the nature of your vote to the Company, its Directors, officers
or employees, or impairs voluntary communication between you and the Company;
nor does this policy prevent the Company from ascertaining which shareholders
have voted or from making efforts to encourage shareholders to vote.
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ADDITIONAL
INFORMATION |
|
MCDONALDS CORPORATION ANNUAL REPORT ON FORM 10-K,
OTHER REPORTS
AND POLICIES
Shareholders may access financial and
other information on the investor section of the Companys website at
www.investor.mcdonalds.com. Also available, free of charge, are copies of the Companys Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably
practicable after filing such material electronically or otherwise furnishing it
to the SEC. Also posted on McDonalds website are the Companys Corporate
Governance Principles; the Boards Committee Charters; the Standards on Director
Independence; the Standards of Business Conduct, which apply to all officers and
employees; the Code of Conduct for the Board of Directors; the Policy for
Pre-Approval of Audit and Non-Audit Services Provided by External Audit Firm,
the Political Contribution Policy and our Certificate of Incorporation and
By-Laws. Copies of these documents and other information are also available free
of charge by calling 800-228-9623 or by sending a request to McDonalds
Corporation, Shareholder Services, Department 720, One McDonalds Plaza, Oak
Brook, IL 60523.
HOUSEHOLDING OF ANNUAL SHAREHOLDERS MEETING
MATERIALS
Shareholders who share the same last name
and address will receive one package containing a separate Notice for each
individual shareholder at that address. Shareholders who have elected to receive
paper copies and who share the same last name and address will receive only one
set of the Companys Annual Report on Form 10-K and Proxy Statement, unless they
have notified us that they wish to continue receiving multiple copies. This
method of delivery, known as householding, will help ensure that shareholder
households do not receive multiple copies of the same document, helping to
reduce our printing and postage costs, as well as saving natural
resources.
If you hold McDonalds stock certificates
or have book-entry shares at Computershare, you can opt out of the householding
practice and receive prompt delivery of a separate copy of the materials by
calling 800-621-7825 (toll-free) from the U.S. and Canada, or 312-360-5129 from
other countries, or by writing to McDonalds Shareholder Services, c/o
Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078. If
you would like to opt out of this practice and your shares are held in street
name, please contact your bank or broker.
If you are receiving multiple copies of
proxy materials at your household and would prefer to receive a single copy of
these materials, please contact Computershare at the above numbers or address.
If your shares are held in street name, please contact your bank or
broker.
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INFORMATION ABOUT REGISTERING
FOR AND ATTENDING THE ANNUAL
SHAREHOLDERS MEETING |
Date: Wednesday, May 24, 2017
Time: 8:30 a.m. Central Time
Place: McDonalds Office Campus, The Lodge, Prairie Ballroom, 2815
Jorie Blvd., Oak Brook, Illinois 60523
Directions: Available at www.investor.mcdonalds.com
Parking: Very limited
parking is available on Campus |
Audiocast:
To listen to the
live audiocast of the Annual Shareholders Meeting, go to
www.investor.mcdonalds.com on May 24 just prior to 8:30 a.m.
Central Time and click on the appropriate link. The audiocast will be
available for a limited time after the
meeting. |
PRE-REGISTRATION AND
ADMISSION POLICY
As seating in the Prairie Ballroom is
very limited, we encourage shareholders to listen to the meeting via the live
audiocast. Only shareholders and duly appointed proxyholders may attend the
meeting in person. To request to attend the meeting, please send the
pre-registration form and proof of share ownership to McDonalds Shareholder
Services by U.S. mail or e-mail as described below.
● |
A registered shareholder (i.e.,
shares held through McDonalds transfer agent, Computershare), may request
a ticket to attend the meeting by sending the completed form on page
87 and proof of share ownership, such as a copy of the meeting notice or
the proxy card, by U.S. mail or by scanning and attaching the documents to
an e-mail. |
● |
If shares are held through an
intermediary, such as a bank or broker, send the completed form on page
87 and proof of share ownership, such as a copy of your meeting notice,
the voting instruction form or a brokerage statement reflecting the same
name and McDonalds holdings (as of the meeting record date of March 27,
2017), by U.S. mail or by scanning and attaching the documents to an
e-mail. Requesting a legal proxy from an intermediary does not constitute
pre-registering with McDonalds. Anyone who wishes to attend the meeting
must pre-register directly with McDonalds. |
● |
A duly appointed proxy for a shareholder must
send the completed form on page 87, proof of proxy power and proof of share ownership (as of the meeting record date of March
27, 2017) for the shareholder for whom he/she is a proxy, by U.S. mail or by
scanning and attaching the documents to an e-mail. |
● |
Shareholders holding shares in a
joint account may request tickets to the meeting if they provide proof of
joint ownership and both shareholders follow the pre-registration and
admission requirements described above. |
Requests for
tickets must be sent by e-mail to shareholder.services@us.mcd.com or by U.S. mail to
McDonalds Corporation, Shareholder Services, Department 720, One McDonalds
Plaza, Oak Brook, IL 60523 between April 20, 2017 and May 10, 2017. Requests for
tickets must be received no later than 5:00 p.m. Central Time on May 10,
2017.
All attendees must pre-register for
the meeting. Preference will be given to shareholders, followed by proxyholders
requests to the extent space remains. If
space is available, confirmation letters will be sent after May 10, 2017. A
government-issued photo identification, as well as the confirmation letter, must
be shown at the meeting registration desk. Overflow rooms will not be available
to view the meeting. In order to accommodate as many shareholders as possible,
we will not be able to allow non-shareholder guests to attend the meeting in
person. For special assistance on the day of the meeting, please contact
McDonalds Shareholder Services in advance at 630-623-7428. If space is not
available when pre-registration materials are received, you will be notified
that space is no longer available for the meeting. Due to space constraints and other considerations, only those persons
with confirmation letters to attend the meeting will be allowed on the Companys
campus.
The registration desk will open at 7:30
a.m. Central Time on May 24, 2017.
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2017 Proxy
Statement |
Table of
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Information
about Registering for and Attending the Annual Shareholders
Meeting |
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Pre-registration form for 2017
Annual Shareholders Meeting of McDonalds Corporation
I am a shareholder (or duly
appointed proxy for a shareholder) of McDonalds Corporation and I request
to attend the Annual Shareholders Meeting to be held on May 24,
2017. |
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Name (please
print) |
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Phone |
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Address |
City |
State
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Zip
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●Space is limited. Preference will be given to
shareholders, followed by proxyholders requests to the extent space
remains.
●All shareholders and proxyholders must provide proof of
share ownership as of the record date of March 27, 2017 that meets the
requirements set forth in the Pre-Registration and Admission Policy on
page 86.
●To avoid delay in the receipt of a confirmation letter,
please do not return this form with a proxy card or mail it in the
business envelope received with the proxy materials.
This form and
proof of share ownership must be returned by e-mail to shareholder.services@us.mcd.com or by
mail to McDonalds Corporation, Shareholder Services, Department 720, One
McDonalds Plaza, Oak Brook, IL 60523 beginning April 20, 2017 and no
later than 5:00 p.m. Central Time on May 10,
2017. |
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McDonalds Corporation |
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Table of
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HOME OFFICE
McDonalds Corporation
One McDonalds Plaza
Oak Brook, IL
60523
630-623-3000
http://corporate.mcdonalds.com
All trademarks used herein
are the
property of their
respective owners.
© 2017
McDonalds
MCD15-4858
Table of Contents
McDONALDS
CORPORATION
2012 OMNIBUS STOCK
OWNERSHIP PLAN
Approved by shareholders May 24, 2012
THE PLAN
McDonalds Corporation, a Delaware
corporation (the Company), established the McDonalds Corporation 2012 Omnibus
Stock Ownership Plan, and the Plan was approved by the Companys shareholders at
the May 24, 2012 Annual Meeting. The Plan became effective as of June 1, 2012
and permits the grant of stock options, stock bonuses, dividend equivalents,
restricted stock units and other stock-based awards. The Plan replaces the
Amended and Restated 2001 Omnibus Stock Ownership Plan, as amended through
February 9, 2011, and applies to all Awards (as hereinafter defined) granted on
or after June 1, 2012, subject to variations as required to comply with local
laws and regulations applicable outside the United States.
1. Purpose
The purpose of this Plan is to
advance the interest of the Company by encouraging and enabling the acquisition
of a larger personal financial interest in the Company by those Employees and
non-Employee directors upon whose judgment and efforts the Company is largely
dependent for the successful conduct of its operations. It is anticipated that
the acquisition of such financial interest and Stock ownership will stimulate
the efforts of such Employees and directors on behalf of the Company, strengthen
their desire to continue in the service of the Company, and encourage
shareholder and entrepreneurial perspectives through Stock ownership. It is also
anticipated that the opportunity to obtain such financial interest and Stock
ownership will prove attractive to promising new Employees and will assist the
Company in attracting such Employees.
2. Definitions
As used in this Plan, the terms set
forth below shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) Award means any
stock options, restricted stock units, stock bonuses, dividend equivalents and
other stock-based awards granted under this Plan. In addition, for purposes of
Section 3(d) only, Award means any award granted under any Prior Plan.
(b) Award
Agreement has the meaning specified in
Section 4(c)(iv).
(c) Board means the
Board of Directors of the Company.
(d) Business Combination has the meaning specified in Section 2(g)(iii).
(e) Business
Day means any day on which the
principal securities exchange on which the shares of the Companys common stock
are then listed or admitted to trading is open.
(f) Cause means (i)
in the case of a Grantee who is an Employee of the Company or a Subsidiary, the
Grantees commission of any act or acts involving dishonesty, fraud, illegality
or moral turpitude, and (ii) in the case of a Grantee who is a non-Employee
director or senior director of the Company, cause
pursuant to Article Twelfth (c) of the Companys Restated Certificate of
Incorporation.
Table of Contents
(g) Change in
Control means the happening of any of
the following events:
(i) the acquisition by any Person of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of 20% or more of either (A) the then-outstanding shares of Stock
(Outstanding Company Common Stock) or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the Outstanding Company Voting Securities);
provided, however, that, for purposes of this Section 2(g)(i), the following
acquisitions shall not constitute a Change in Control: (1) any acquisition
directly from the Company, (2) any acquisition by the Company, (3) any
acquisition by any Employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company or (4) any
acquisition by any entity pursuant to a transaction that complies with Sections
2(g)(iii)(A), (B) and (C); or
(ii) individuals who, as of the date
hereof, constitute the Board (the Incumbent Board) cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Companys shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) consummation of a
reorganization, merger, statutory share exchange or consolidation or similar
corporate transaction involving the Company and/or any entity controlled by the
Company, or a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or stock of another entity
by the Company or any entity controlled by the Company (each, a Business
Combination), in each case, unless, following such Business Combination, (A)
all or substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, an entity that, as a result of such transaction,
owns the Company or all or substantially all of the Companys assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any entity resulting
from such Business Combination or any employee benefit plan (or related trust)
of the Company or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the members of
the board of directors of the entity resulting from
such Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
- 2 -
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(iv) approval by the shareholders of
the Company of a complete liquidation or dissolution of the Company.
(h) Code means the
U.S. Internal Revenue Code of 1986, as amended, and regulations and rulings
thereunder. References to a particular section of, or rule under, the Code shall
include references to successor provisions.
(i) Committee has
the meaning specified in Section 4(a).
(j) Company has the
meaning specified in the first paragraph.
(k) Disability as it
regards Employees, shall mean (a) a mental or physical condition for which the
Employee is receiving or is eligible to receive benefits under the McDonalds
Corporation Long-Term Disability Plan or other long-term disability plan
maintained by the Employees employer or (b) a mental or physical condition
which, with or without reasonable accommodations, renders an Employee
permanently unable or incompetent to carry out the job responsibilities he held
or tasks to which he was assigned at the time the condition was incurred, with
such determination to be made by the Committee on the basis of such medical and
other competent evidence as the Committee in its sole discretion shall deem
relevant.
Disability as it
regards non-Employee directors and senior directors means a physical or mental
condition that prevents the director from performing his or her duties as a
member of the Board or a senior director, as applicable, and that is expected to
be permanent or for an indefinite duration exceeding one year.
(l) Dividend
equivalent means an Award made pursuant
to Section 6(d).
(m) Employee means
any individual designated as an employee of the Company, its Affiliate, and/or
its Subsidiaries who is on the current payroll records thereof; an Employee
shall not include any individual during any period he or she is classified or
treated by the Company, Affiliate, and/or Subsidiary as an independent
contractor, a consultant, or any employee of an employment, consulting, or
temporary agency or any other entity other than the Company, Affiliate, and/or
Subsidiary, without regard to whether such individual is subsequently determined
to have been, or is subsequently retroactively reclassified as a common-law
employee of the Company, Affiliate, and/or Subsidiary during such period.
Employment shall have the correlative meaning. The Committee in its
discretion may, in the applicable Award Agreement, adopt a different definition
of Employee and Employment for Awards granted to Grantees working outside
the United States.
(n) Effective
Date means June 1, 2012.
(o) Fair Market
Value of any security of the Company
means, as of any applicable date, the closing price of the security at the close
of normal trading hours on the New York Stock Exchange, or, if no such sale of the security shall have
occurred on such date, on the next preceding date on which there was such a
sale.
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(p) Foreign Equity
Incentive Plan has the meaning
specified in Section 14.
(q) Grant Date has
the meaning specified in Section 6(a)(i).
(r) Grantee means an
individual who has been granted an Award.
(s) including or
includes means including, without limitation, or includes,
without limitation.
(t) Incumbent
Board has the meaning specified in
Section 2(g)(ii).
(u) Minimum
Consideration means $.01 per share or
such larger amount determined pursuant to resolution of the Board to be
capital (within the meaning of Section 154 of the Delaware General Corporation
Law).
(v) Minimum Vesting
Requirement means that Awards subject
to the Minimum Vesting Requirement shall not become nonforfeitable prior to the
first anniversary of the Grant Date, subject to Sections 12, 13 and 21.
(w) 1934 Act means the Securities Exchange Act of 1934, as amended, and regulations and rulings thereunder. References to a particular section of, or rule under, the 1934 Act shall include references to successor provisions.
(x) non-Employee
director means a member of the Board
who is not an Employee of the Company.
(y) Option
Price means the per-share purchase
price of Stock subject to a stock option.
(z) other stock-based
award means an Award made pursuant to
Section 6(f).
(aa) Outstanding
Company Common Stock has the meaning
specified in Section 2(g)(i).
(bb) Outstanding
Company Voting Securities has the
meaning specified in Section 2(g)(i).
(cc) Person means any
individual, entity or
group, within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act.
(dd) Prior
Plan means the McDonalds Corporation
Amended and Restated 2001 Omnibus Stock Ownership Plan, as amended and restated,
the McDonalds Corporation 1992 Stock Ownership Incentive Plan, as amended and
restated, and the McDonalds Corporation 1975 Stock Ownership Option Plan, as
amended and restated.
(ee) Qualified
Performance-Based Award means any Award
that is intended to qualify for the Section 162(m) Exemption, as provided in
Section 23.
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(ff) Qualified
Performance Goal means a performance
goal established by the Committee in connection with the grant of a Qualified
Performance-Based Award, which (i) is based on the attainment of specified
levels of one or more Specified Performance Goals, and (ii) is set by the
Committee within the time period prescribed by Section 162(m) of the Code;
provided, that in the case of a stock option or stock appreciation right, the
Qualified Performance Goal shall be considered to have been established without
special action by the Committee, by virtue of the fact that the Stock subject to
such Award must increase in value over its Fair Market Value on the Grant Date
(or over a higher value) in order for the Grantee to realize any compensation
from exercising the stock option or stock appreciation right.
(gg) Restricted Stock
Unit or RSU means an Award made
pursuant to Section 6(e).
(hh) Section 16
Grantee means an individual subject to
potential liability under Section 16(b) of the 1934 Act with respect to
transactions involving equity securities of the Company.
(ii) Section 162(m)
Exemption means the exemption from the
limitation on deductibility imposed by Section 162(m) of the Code that is set
forth in Section 162(m)(4)(C) of the Code.
(jj) Service-Vesting
Award means an Award, the vesting of
which is contingent solely on the continued service of the Grantee as an
Employee of the Company and its Subsidiaries or as a non-Employee director of
the Company.
(kk) Specified
Performance Goal means any of the
following measures as applied to the Company as a whole or to any Subsidiary,
division or other unit of the Company: revenue; operating income; net income;
basic or diluted earnings per share; return on revenue; return on assets; return
on equity; return on total capital; total shareholder return; or any other
measure of financial performance that can be determined pursuant to U.S.
generally accepted accounting principles.
(ll) Stock means the
common stock of the Company, par value $.01 per share.
(mm) Subsidiary means
any entity in which the Company directly or through intervening subsidiaries
owns 25% or more of the total combined voting power or value of all classes of
stock, or, in the case of an unincorporated entity, a 25% or more interest in
the capital and profits.
(nn) Termination of
Directorship means the first date upon
which a non-Employee director is neither a member of the Board.
(oo) Termination of
Employment of a Grantee means the
termination of the Grantees Employment with the Company
and the Subsidiaries, as determined by the Company.
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Table of Contents
3. Scope of this Plan.
(a) As of December 31, 2011,
27,610,823 shares were available for future grant under Prior Plans. If this
Plan is approved, those shares (including any portion of those shares subject to awards granted from December 31, 2011 through
May 31, 2012), an additional 27,500,000 shares, and any shares returned to the
Prior Plans as described in (d) below, will become available for future grants
under this Plan, up to a total number of shares of Stock delivered to Grantees
pursuant to this Plan of 56 million, subject to the other provisions of this
Section 3 and to adjustment as provided in Section 22. Such shares may be
treasury shares or newly-issued shares or both, as may be determined from time
to time by the Board or by the Committee appointed pursuant to Section 4.
(b) Subject to adjustment as provided
in Section 22, the maximum number of shares of Stock for which stock options and
stock appreciation rights may be granted to any Grantee in any one-year period
shall be 2 million, and the maximum number of shares of Stock that may be
granted to any Grantee in any one-year period in the form of restricted stock,
and other stock-based awards, in each case that are Qualified Performance-based
Awards, shall be 500,000. Subject to the other provisions of this Section 3 and
subject to adjustment as provided in Section 22, not more than 1,000,000 bonus
shares of Stock may be granted under this Plan.
(c) If and to the extent an Award
granted under this Plan shall, after the Effective Date, expire or terminate for
any reason without having been exercised in full, or shall be forfeited or
settled for cash, the shares of Stock (including restricted stock) associated
with the expired, terminated or forfeited portion of such Award shall become
available for other Awards. In no event shall the number of shares of Stock
considered to be delivered pursuant to the exercise of a stock appreciation
right include the shares that represent the grant or exercise price thereof,
which shares are not delivered to the Grantee upon exercise.
(d) If and to the extent an Award
granted under a Prior Plan shall, after the Effective Date, expire or terminate
for any reason without having been exercised in full, or shall be forfeited or
settled for cash, the shares of Stock (including restricted stock) associated
with the expired, terminated or forfeited portion of such Award shall become
available for Awards under this Plan. If, after the Effective Date, a Grantee
uses shares of Stock owned by the Grantee (by either actual delivery or by
attestation) to pay the Option Price of any stock option granted under this Plan
or a Prior Plan or to satisfy any tax-withholding obligation with respect to an
Award granted under this Plan or a Prior Plan, the number of shares of Stock
delivered or attested to shall be added to the number of shares of Stock
available for delivery under this Plan. To the extent any shares of Stock
subject to a stock option granted under this Plan are withheld, after the
Effective Date, to satisfy the Option Price of that stock option, or any shares
of Stock subject to an Award granted under this Plan are withheld to satisfy any
tax-withholding obligation, such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of Stock
available for delivery under this Plan. To the extent any shares of Stock
subject to an Award granted under a Prior Plan are withheld, after the Effective
Date, to satisfy any tax-withholding obligation, such shares shall be added to
the maximum number of shares of Stock available for delivery under this Plan.
Notwithstanding the foregoing, no shares of Stock that become available for
Awards granted under this Plan pursuant to the foregoing provisions of this
Section 3(d) shall be available for grants of incentive stock options pursuant
to Section 6(f).
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4. Administration
(a) Subject to Section 4(b), this
Plan shall be administered by a committee appointed by the Board (the
Committee). All members of the Committee shall be outside directors (as
defined or interpreted for purposes of the Section 162(m) Exemption). The
composition of the Committee also shall be subject to such limitations as the
Board deems appropriate to permit transactions in Stock pursuant to this Plan to
be exempt from liability under Rule 16b-3 under the 1934 Act and to satisfy the
independence requirements of any national securities exchange on which the
Stock is listed.
(b) The Board may, in its discretion,
reserve to itself any or all of the authority and responsibility of the
Committee. To the extent that the Board has reserved to itself the authority and
responsibility of the Committee, all references to the Committee in this Plan
shall be deemed to refer to the Board.
(c) The Committee shall have full and
final authority, in its discretion, but subject to the express provisions of
this Plan (including without limitation Section 23(e)), as follows:
(i) to grant Awards,
(ii) to determine (A) when Awards may
be granted, and (B) whether or not specific Awards shall be identified with
other specific Awards, and, if so, whether they shall be exercisable
cumulatively with or alternatively to such other specific Awards,
(iii) to interpret this Plan,
(iv) to determine all terms and
provisions of all Awards, including without limitation any restrictions or
conditions (including specifying such performance criteria as the Committee
deems appropriate, and imposing restrictions with respect to Stock acquired upon
exercise of a stock option, which restrictions may continue beyond the Grantees
Termination of Employment or Termination of Directorship, as applicable), which
shall be set forth in a written (including in an electronic form) agreement for
each Award (the Award Agreements), which need not be identical, and, with the
consent of the Grantee, to modify any such Award Agreement at any time,
(v) to adopt or to authorize foreign
Subsidiaries to adopt Foreign Equity Incentive Plans as provided in Section 14,
(vi) to delegate any or all of its
duties and responsibilities under this Plan to any individual or group of
individuals it deems appropriate, except its duties and responsibilities with
respect to Section 16 Grantees and with respect to Qualified Performance-Based
Awards, and (A) the acts of such delegates shall be treated hereunder as acts of
the Committee and (B) such delegates shall report to the Committee regarding the
delegated duties and responsibilities,
(vii) to accelerate the
exercisability of, and to accelerate or waive any or all of the restrictions and
conditions applicable to, any Award or any group of Awards, other than the
Minimum Vesting Requirement, for any reason, solely to the extent that any such
acceleration or waiver would not cause any tax to become due under Section 409A
of the Code,
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(viii) subject to Section 6(a)(ii),
to extend the time during which any Award or group of Awards may be exercised or
earned, solely to the extent that any such extension would not cause any tax to
become due under Section 409A of the Code,
(ix) to make such adjustments or
modifications to Awards granted to or held by Grantees working outside the
United States as are necessary and advisable to fulfill the purposes of this
Plan or to accommodate the specific requirements of local laws, procedures or
practices,
(x) to impose such additional
conditions, restrictions and limitations upon the grant, exercise or retention
of Awards as the Committee may, before or concurrently with the grant thereof,
deem appropriate, including requiring simultaneous exercise of related
identified Awards and limiting the percentage of Awards that may from time to
time be exercised by a Grantee,
(xi) notwithstanding Section 8, to
prescribe rules and regulations concerning the transferability of any Awards,
and
(xii) to make all other decisions and
determinations that may be required pursuant to the Plan or as the Committee
deems necessary or advisable to administer the Plan.
(d) The determination of the
Committee on all matters relating to this Plan or any Award Agreement shall be
made in its sole discretion, and shall be conclusive and final. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to this Plan or any Award.
5. Eligibility
Awards may be granted to any Employee
(including any officer) of the Company or any of its domestic Subsidiaries, any
Employee, officer or director of any of the Companys foreign Subsidiaries
(provided, that in the case of an Employee, officer or director of a domestic or
foreign Subsidiary in which the Company owns less than 50% of the total combined
voting power or value of all classes of stock, Awards may be granted only where
there is a sufficient nexus between such Employee, officer or director and the
Company so that the grant serves a genuine business purpose of the Company) and
to any non-Employee director of the Company. In selecting the individuals to
whom Awards may be granted, as well as in determining the number of shares of
Stock subject to, and the other terms and conditions applicable to, each Award,
the Committee shall take into consideration such factors as it deems relevant in
promoting the purposes of this Plan.
6. Conditions to Grants
(a) General
conditions.
(i) |
The Grant Date of
an Award shall be the date on which the Committee grants the Award or such
later date as specified in advance by the
Committee. |
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(ii) |
The term of each
Award shall be a period not longer than 10 years from the Grant
Date. |
|
(iii) |
A Grantee may, if
otherwise eligible, be granted additional Awards in any
combination. |
(b) Grant of Stock Options and
Option Price. A stock option represents
the right to purchase a share of Stock at a predetermined Option Price. No later
than the Grant Date of any stock option, the Committee shall establish the
Option Price of such stock option. The per-share Option Price of a stock option
shall not be less than 100% of the Fair Market Value of a share of the Stock on
the Grant Date. Such Option Price shall be subject to adjustment as provided in
Section 22. The applicable Award Agreement may provide that the stock option
shall be exercisable for restricted stock. The Committee shall not without the
approval of the Companys shareholders, other than pursuant to Section 22, (i)
reduce the per-share Option Price of a stock option after it is granted, (ii)
cancel a stock option when the per-share Option Price exceeds the Fair Market
Value of a share of the Stock in exchange for cash or another Award (other than
in connection with a Change in Control), or (iii) take any other action with
respect to a stock option that would be treated as a repricing under the rules
and regulations of the New York Stock Exchange.
(c) Grant of Stock
Bonuses. The Committee may, in its
discretion, grant shares of Stock to any Employee eligible under Section 5 to
receive Awards, other than executive officers of the Company.
(d) Grant of Dividend
Equivalents. The Committee may, in its
discretion, grant dividend equivalents, which represent the right to receive
cash payments or shares of Stock measured by the dividends payable with respect
to specific shares of Stock or a specified number of shares of Stock. Dividend
equivalents may be granted as part of another type of Award, and shall be
subject to such terms and conditions as the Committee shall determine; provided,
that the Committee shall not provide for payment of dividend equivalents in a
manner that would cause any tax to become due under Section 409A of the Code.
(e) Grant of Restricted Stock
Units (RSUs). The Committee may, in
its discretion, grant RSUs, which Awards are denominated in, payable in, and
valued, in whole or in part, by reference to, shares of Stock. An RSU shall
represent the right to receive a payment, in cash, shares of Stock or both (as
determined by the Committee), and shall be subject to such terms and conditions
as the Committee shall determine.
(f) Grant of Other Stock-Based
Awards. The Committee may, in its
discretion, grant other stock-based awards. These are Awards, other than stock
options (not including incentive stock options), stock bonuses, dividend
equivalents and restricted stock units that are denominated in, valued, in whole
or in part, by reference to, or otherwise based on or related to, Stock. The
purchase, exercise, exchange or conversion of other stock-based awards granted
under this Section 6(f) shall be on such terms and conditions and by such
methods as shall be specified by the Committee. If the value of any other
stock-based award is based on the difference between the excess of the Fair
Market Value, on the date such Fair Market Value is determined, over such
Awards exercise or grant price, the exercise or grant price for such an Award
will not be less than 100% of the Fair Market Value on the Grant Date. If the
value of such an Award is based on the full value
of a share of Stock, and the Award is a Service-Vesting Award, then such Award
shall be subject to the Minimum Vesting Requirement. The Committee shall not
without the approval of the Companys shareholders, other than pursuant to
Section 22, (i) lower the exercise price of a stock appreciation right after it
is granted, (ii) cancel a stock appreciation right when the exercise price
exceeds the Fair Market Value of a share of the Stock in exchange for cash or
another Award (other than in connection with a Change in Control), or (iii) take
any other action with respect to a stock appreciation right that would be
treated as a repricing under the rules and regulations of the New York Stock
Exchange.
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7. Grantees Agreement to
Serve
The Committee may, in its discretion,
require each Grantee who is granted an Award to, execute such Grantees Award
Agreement, and to agree that such Grantee will remain in the employ of the
Company or any of its Subsidiaries or remain as a non-Employee director, as
applicable, for at least one year after the Grant Date. No obligation of the
Company or any of its Subsidiaries as to the length of any Grantees employment
or service as a non-Employee director shall be implied by the terms of this
Plan, any grant of an Award hereunder or any Award Agreement. The Company and
its Subsidiaries reserve the same rights to terminate employment of any Grantee
as existed before the Effective Date.
8. Non-Transferability
No Award granted hereunder shall be
assigned, encumbered, pledged, sold, transferred, or otherwise disposed of other
than by will or the laws of descent and distribution; provided however, that
unless otherwise determined by the Committee, a Grantee may designate in writing
a beneficiary to exercise or hold, as applicable, his or her Award after such
Grantees death. In the case of a holder after the Grantees death, an Award
shall be transferable solely by will or by the laws of descent and distribution.
9. Exercise
(a) Exercise of Stock
Options. Subject to Sections 4(c)(vii),
12, 13 and 21 and such terms and conditions as the Committee may impose, each
stock option shall be exercisable as and when determined by the Committee;
provided that, unless the Committee determines otherwise, each stock option
shall be exercisable in one or more installments commencing not earlier than the
first anniversary of the Grant Date of such stock option.
Each stock option shall be exercised
by delivery of notice of intent to purchase a specific number of shares of Stock
subject to such stock option. Such notice shall be in a manner specified by and
satisfactory to the Company. The Option Price of any shares of Stock as to which
a stock option shall be exercised shall be paid in full at the time of the
exercise. Payment may, at the election of the Grantee, be made in any one or any
combination of the following:
(i) |
cash, |
|
(ii) |
unless otherwise
determined by the Committee, Stock owned by the Grantee, valued at its
Fair Market Value at the time of
exercise, |
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(iii) |
with the approval of
the Committee, shares of restricted stock held by the Grantee, each valued
at the Fair Market Value of a share of Stock at the time of exercise,
or |
|
(iv) |
unless otherwise
determined by the Committee, through simultaneous sale through a broker of
shares acquired on exercise, as permitted under Regulation T of the Board
of Governors of the Federal Reserve
System. |
If shares of Stock are used to pay
the Option Price, such shares of Stock must have been held by the Grantee for
more than six months prior to exercise of the stock option, unless otherwise
determined by the Committee. Such payment may be made by actual delivery or
attestation.
(b) Time of
Exercise/Expiration. Notwithstanding
anything to the contrary herein, in the event that the final date on which any
stock option would otherwise be exercisable in accordance with the provisions of
this Plan (including without limitation Section 12 hereof) is not a Business
Day, the last day on which such stock option may be exercised is the last
Business Day immediately preceding such date.
10. Notification under Section
83(b)
The Committee may, on the Grant Date
or any later date, prohibit a Grantee from making the election described below.
If the Committee has not prohibited such Grantee from making such election, and
the Grantee shall, in connection with the exercise of any stock option, or the
grant of any share of restricted stock, make the election permitted under
Section 83(b) of the Code (i.e., an election to include in such Grantees gross
income in the year of transfer the amounts specified in Section 83(b) of the
Code), such Grantee shall notify the Company of such election within 10 days of
filing notice of the election with the U.S. Internal Revenue Service, in
addition to complying with any filing and notification required pursuant to
regulations issued under the authority of Section 83(b) of the Code.
11. Withholding Taxes
(a) Whenever, under this Plan, cash or Stock is to be
delivered upon exercise or payment of an Award, or any other event occurs that
results in taxation of a Grantee with respect to an Award, the Company shall be
entitled to require (i) that the Grantee remit an amount sufficient to satisfy
all U.S. federal, state and local withholding tax requirements related thereto,
(ii) the withholding of such sums from compensation otherwise due to the Grantee
or from any shares of Stock due to the Grantee under this Plan, (iii) any other
method prescribed by the Committee from time to time or (iv) any combination of
the foregoing.
(b) If any disqualifying disposition (as defined in Section
421(b) of the Code) is made with respect to shares of Stock acquired under an
incentive stock option granted pursuant to this Plan or any election described
in Section 10 is made, then the individual making such disqualifying disposition
or election shall remit to the Company an amount sufficient to satisfy all U.S.
federal, state and local withholding taxes thereby incurred; provided, that in
lieu of or in addition to the foregoing, the Company shall have the right to
withhold such sums from compensation otherwise due
to the Grantee or from any shares of Stock due to the Grantee under this Plan.
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Table of Contents
(c) Notwithstanding the foregoing, in no event shall the
amount withheld or remitted in the form of shares of Stock due to a Grantee
under this Plan exceed the minimum required by applicable law, except in the
case of amounts due to a Grantee working outside the United States where the
amount withheld may exceed such minimum, provided that it is not in excess of
the actual amount required to be withheld with respect to the Grantee under
applicable tax law or regulations.
(d) Although the Company may endeavor to qualify an Award for
favorable tax treatment under the laws of the United States or jurisdictions
outside of the United States or to avoid adverse tax treatment, the Company
makes no representation to that effect and expressly disavows any covenant to
maintain favorable or avoid unfavorable tax treatment, notwithstanding anything
contrary in this Plan and the Company will have no liability to a Grantee or any
other party if a payment under an Award does not receive or maintain such
favorable treatment or does not avoid such unfavorable treatment. The Company
shall be unconstrained in its corporate activities without regard to the
potential tax impact on Grantees.
12. Termination of Employment
(a) The applicable Award Agreement shall specify the
treatment of such Award upon the Grantees Termination of Employment. Unless
otherwise provided in the applicable Award Agreement, all unvested Awards shall
forfeit upon the Grantees Termination of Employment, and vested stock options
shall remain exercisable until the 90th day following Termination of
Employment.
(b) Committee
Discretion. Notwithstanding the
foregoing, the Committee may determine that the consequences of a Termination of
Employment for a particular Award will differ from those in the applicable Grant
Agreement after it is granted if the change is favorable to the Grantee, unless
otherwise required to comply with applicable laws; provided, that the Committee
shall have no authority (i) after the Grant Date, to extend the time to exercise
unexercised stock options or stock appreciation rights to any date later than
the 10th anniversary of the Grant Date (or, if earlier, the original expiration
date of the Award) or (ii) otherwise to provide for terms of an Award that would
cause any tax to become due under Section 409A of the Code.
13. Termination of Directorship
(a) The applicable Award Agreement shall specify the
treatment of such Award upon the Directors Termination of Directorship with the
Company. Unless otherwise provided in the applicable Award Agreement, all
unvested Awards shall forfeit upon the Directors Termination of Directorship.
(b) Committee
Discretion. Notwithstanding the
foregoing, the Committee may determine that the consequences of Termination of
Directorship for a particular Award will differ from those in the Applicable
Award Agreement after the Award is granted, if the change is favorable to the Grantee; provided, that the Committee
shall have no authority (i) after the Grant Date, to extend the time to exercise
unexercised stock options or stock appreciation rights to any date later than
the 10th anniversary of the Grant Date (or, if earlier, the original expiration
date of the Award) or (ii) otherwise to provide for terms of an Award that would
cause any tax to become due under Section 409A of the Code.
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14. Equity Incentive Plans of
Foreign Subsidiaries
The Committee may adopt or authorize
any foreign Subsidiary to adopt a plan for granting Awards (a Foreign Equity
Incentive Plan). All awards granted under such Foreign Equity Incentive Plans
shall be treated as grants under this Plan. Such Foreign Equity Incentive Plans
shall have such terms and provisions as the Committee permits not inconsistent
with the provisions of this Plan.
15. Securities Law Matters
(a) If the Committee deems it necessary to comply with the
Securities Act of 1933, as amended, and the regulations and rulings thereunder,
the Committee may require a written investment intent representation by the
Grantee and may require that a restrictive legend be affixed to certificates for
shares of Stock.
(b) If, based upon the opinion of counsel for the Company,
the Committee determines that the exercise or nonforfeitability of, or delivery
of benefits pursuant to, any Award would violate any applicable provision of (i)
U.S. federal, state, foreign or local securities law or (ii) the listing
requirements of any national securities exchange on which are listed any of the
Companys equity securities (together, referred to herein as Securities Law
Requirements), then the Committee may (A) postpone any such exercise,
nonforfeitability or delivery, as the case may be, for not more than 30 days
after the date on which such exercise, nonforfeitability or delivery would no
longer violate such law or requirements, or (B) amend or cancel some or all of
the Awards affected by such Securities Law Requirements, with or without
consideration to the relevant Grantees.
16. Funding
Benefits payable under this Plan to
any person shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for payment of,
benefits under this Plan.
17. No Employment Rights
Neither the establishment of this
Plan, nor the granting of any Award, shall be construed to (a) give any Grantee
the right to remain employed by the Company or any of its Subsidiaries or to any
benefits not specifically provided by this Plan or (b) in any manner modify the
right of the Company or any of its Subsidiaries to modify, amend, or terminate
any of its employee benefit plans.
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Table of Contents
18. Rights as a
Stockholder
A Grantee shall not, by reason of any
Award (other than restricted stock), have any right as a stockholder of the
Company with respect to the shares of Stock that may be deliverable upon
exercise or payment of such Award until such shares have been delivered to him
or her.
19. Nature of Payments
Any and all grants, payments of cash,
or deliveries of shares of Stock hereunder shall constitute special incentive
payments to the Grantee, and shall not be taken into account in computing the
amount of salary or compensation of the Grantee for the purposes of determining
any pension, retirement, death or other benefits under (a) any pension,
retirement, profit-sharing, bonus, life insurance or other employee benefit plan
of the Company or any of its Subsidiaries or (b) any agreement between the
Company or any Subsidiary, on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.
20. Non-Uniform Determinations
Neither the Committees nor the
Boards determinations under this Plan need be uniform, and may be made by the
Committee or the Board selectively among individuals who receive, or are
eligible to receive, Awards (whether or not such individuals are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, to enter into non-uniform and selective Award Agreements as to
(a) the identity of the Grantees, (b) the terms and provisions of Awards, and
(c) the treatment, under Section 12, of Terminations of Employment.
21. Change in Control Provisions
Notwithstanding any other provision
of this Plan to the contrary, the provisions of this Section 21 shall apply in
the event of a Change in Control, unless otherwise determined by the Committee
in connection with the grant of an Award (as reflected in the applicable Award
Agreement).
(a) Upon a Change in Control, each
then-outstanding stock option and stock appreciation right, and each other
then-outstanding Award that is a Service-Vesting Award (each, a Replaced
Award), shall be replaced with another Award meeting the requirements of
Section 21(b) (a Replacement Award); provided that (i) if a Replacement Award
meeting the requirements of Section 21(b) cannot be issued (because, for
example, there are no publicly traded equity securities available, such that the
requirement described in clause (iii) of the first sentence of Section 21(b)
cannot be met), or (ii) the Committee so determines at any time prior to the
Change in Control, upon a Change in Control each Replaced Award shall instead
become fully vested, exercisable and free of restrictions. The treatment of any
Awards which are not Replaced Awards (i.e., Awards other than stock options and
stock appreciation rights, which are not Service-Vesting Awards) shall be as
determined by the Committee in connection with the grant thereof, as reflected
in the applicable Award Agreement.
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(b) An Award shall meet the
conditions of this Section 21(b) (and hence qualify as a Replacement Award) if:
(i) it is of the same type as the Replaced Award; (ii) it has a value at least
equal to the value of the Replaced Award; or (iii) it relates to publicly traded
equity securities of the Company or its successor in the Change in
Control or another entity that is affiliated with the Company or its successor
following the Change in Control; (iv) its terms and conditions comply with
Section 21(c) below; and (v) its other terms and conditions are not less
favorable to the Grantee than the terms and conditions of the Replaced Award
(including the provisions that would apply in the event of a subsequent Change
in Control). Without limiting the generality of the foregoing, the Replacement
Award may take the form of a continuation of the Replaced Award if the
requirements of the preceding sentence are satisfied. The determination of
whether the conditions of this Section 21(b) are satisfied shall be made by the
Committee, as constituted immediately before the Change in Control, in its sole
discretion. Without limiting the generality of the foregoing, the Committee may
determine the value of Awards and Replacement Awards that are stock options by
reference to either their intrinsic value or their fair value.
(c) Upon a Termination of Employment
or Termination of Directorship of a Grantee occurring in connection with or
during the period of two years after such Change in Control, other than for
Cause, (i) all Replacement Awards held by the Grantee shall become fully vested
and (if applicable) exercisable and free of restrictions, and (ii) all stock
options and stock appreciation rights held by the Grantee immediately before the
Termination of Employment or Termination of Directorship that the Grantee held
as of the date of the Change in Control or that constitute Replacement Awards
shall remain exercisable for not less than two years following such termination
or until the expiration of the stated term of such stock option, whichever
period is shorter (provided, that if the applicable Award Agreement provides for
a longer period of exercisability, that provision shall control). The treatment
described in the preceding sentence shall not apply if the Termination of
Employment is initiated by the Employee.
22. Adjustments Upon Certain
Changes
The following shall be subject to any
action by the shareholders of the Company required by law, applicable tax rules
or the rules of any exchange on which shares of Stock of the Company are listed
for trading:
(a) Shares Available for Grants. In the event of any change in the number of shares of
Stock of the Company outstanding by reason of any stock dividend or split,
recapitalization, merger, consolidation, combination or exchange of shares or
similar corporate change, the maximum aggregate number of shares of Stock with
respect to which the Committee may grant Awards and the maximum aggregate number
of shares of Stock with respect to which the Committee may grant Awards to any
individual Grantee in any year shall be appropriately adjusted by the Committee.
In the event of any change in the number of shares of Stock of the Company
outstanding by reason of any other event or transaction, the Committee may, to
the extent deemed appropriate by the Committee, make such adjustments in the
number and class of shares of Stock with respect to which Awards may be granted.
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(b) Increase or Decrease in Issued Shares Without
Consideration. In the event of any
increase or decrease in the number of issued shares of Stock of the Company
resulting from a subdivision or consolidation of shares of Stock of the Company
or the payment of a stock dividend (but only on the shares of Stock of
the Company), or any other increase or decrease in the number of such shares
effected without receipt or payment of consideration by the Company, the
Committee may, to the extent deemed appropriate by the Committee, adjust the
number of shares of Stock subject to each outstanding Award and the exercise
price per share of Stock of each such Award.
(c) Certain Mergers.
In the event of any merger, consolidation or similar transaction as a result of
which the holders of shares of Stock receive consideration consisting
exclusively of securities of the surviving corporation in such transaction, the
Committee may, to the extent deemed appropriate by the Committee, adjust each
Award outstanding on the date of such merger or consolidation so that it
pertains and applies to the securities which a holder of the number of shares of
Stock subject to such Award would have received in such merger or consolidation.
(d) Certain Other Transactions. In the event of (i) a dissolution or liquidation of the
Company, (ii) a sale of all or substantially all of the Companys assets (on a
consolidated basis), (iii) a merger, consolidation or similar transaction
involving the Company in which the holders of shares of Stock receive securities
and/or other property, including cash, other than shares of the surviving
corporation in such transaction, the Committee shall, in its sole discretion,
have the power to:
(i) cancel, effective immediately
prior to the occurrence of such event, each Award (whether or not then
exercisable or vested), and, in full consideration of such cancellation, pay to
the Grantee to whom such Award was granted an amount in cash, for each share of
Stock subject to such Award, equal to the value, as determined by the Committee,
of such Award, provided that with respect to any outstanding stock option such
value shall be equal to the excess of (A) the value, as determined by the
Committee, of the property (including cash) received by the holder of a share of
Stock as a result of such event over (B) the exercise price of such stock
option; or
(ii) provide for the exchange of each
Award (whether or not then exercisable or vested) for an Award with respect to
some or all of the property which a holder of the number of shares of Stock
subject to such Award would have received in such transaction and, incident
thereto, make an equitable adjustment as determined by the Committee in the
exercise price of the Award, or the number of shares or amount of property
subject to the Award or provide for a payment (in cash or other property) to the
Grantee to whom such Award was granted in partial consideration for the exchange
of the Award.
(e) Other Changes. In
the event of any change in the capitalization of the Company or corporate change
other than those specifically referred to in paragraphs 22(b), (c) or (d), the
Committee may make such adjustments in the number and class of shares subject to
Awards outstanding on the date on which such change occurs and in such other
terms of such Awards as the Committee may consider appropriate, provided that if
any such Award is intended to be a Qualified Performance-Based Award such
adjustment is consistent with the requirements of Section 162(m) Exemption.
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(f) No Other Rights.
Except as expressly provided in the Plan, no Grantee shall have any rights by
reason of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend, any increase or decrease in the number of shares of
stock of any class or any dissolution, liquidation, merger or consolidation of
the Company or any other corporation. Except as expressly provided in the Plan,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number of shares or amount
of other property subject to, or the terms related to, any Award.
(g) Savings Clause.
No provision of this Section 22 shall be given effect to the extent that such
provision would cause any tax to become due under Section 409A of the Code.
23. Qualified Performance-Based
Awards
(a) The provisions of this Plan are
intended to ensure that all stock options and stock appreciation rights granted
hereunder to any Grantee who is or may be a covered employee (within the
meaning of Section 162(m)(3) of the Code) at the time of exercise qualify for
the Section 162(m) Exemption, and all such Awards shall therefore be considered
Qualified Performance-Based Awards and this Plan shall be interpreted and
operated consistent with that intention. The provisions referred to in the
preceding sentence include without limitation the limitation on the total amount
of such Awards to any Grantee set forth in Section 3(b); the requirement of
Section 4(a) that the Committee satisfy the requirements for being outside
directors for purposes of the Section 162(m) Exemption; the limitations on the
discretion of the Committee with respect to Qualified Performance-Based Awards;
and the requirements of Sections 6(b) that the Option Price of stock options be
not less than the Fair Market Value of the Stock on the Grant Date (which
requirement constitutes the Qualified Performance Goal). The base price for
determining the value of stock appreciation rights shall not be less than the
Fair Market Value of the Stock on the Grant Date (which requirement constitutes
the Qualified Performance Goal).
(b) The Committee may designate any
Award (other than a stock option or stock appreciation right) as a Qualified
Performance-Based Award upon grant, in each case based upon a determination that
(i) the Grantee is or may be a covered employee (within the meaning of Section
162(m)(3) of the Code) with respect to such Award, and (ii) the Committee wishes
such Award to qualify for the Section 162(m) Exemption. The provisions of this
Section 23 shall apply to all such Qualified Performance-Based Awards,
notwithstanding any other provision of this Plan, other than Section 21.
(c) Each Qualified Performance-Based
Award (other than a stock option or stock appreciation right) shall be earned,
vested and payable (as applicable) only upon the achievement of one or more
Qualified Performance Goals, together with the satisfaction of any other
conditions, such as continued employment, as the Committee may determine to be
appropriate; provided that (i) the Committee may provide, either in connection
with the grant thereof or by amendment thereafter, that achievement of such
Performance Goals will be waived upon the death or Disability of the Grantee,
and (ii) the provisions of Section 21 shall apply notwithstanding this
sentence.
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(d) Qualified Performance Goals may
take the form of absolute goals or goals relative to the performance of one or
more other companies comparable to the Company or of an index covering multiple
companies. In establishing Qualified Performance Goals, the Committee may
specify that there shall be excluded the effect of restructuring charges,
discontinued operations, extraordinary items, cumulative effects of accounting
changes, and other unusual or nonrecurring items, and asset impairment and the
effect of foreign currency fluctuations, in each case as those terms are defined
under generally accepted accounting principles and provided in each case that
such excluded items are objectively determinable by reference to the Companys
financial statements, notes to the Companys financial statements and/or
managements discussion and analysis in the Companys financial statements.
(e) Except as specifically provided
in Section 23(d), no Qualified Performance-Based Award may be amended, nor may
the Committee exercise any discretionary authority it may otherwise have under
this Plan with respect to a Qualified Performance-Based Award under this Plan,
in any manner to waive the achievement of the applicable Qualified Performance
Goals or to increase the amount payable pursuant thereto or the value thereof,
or otherwise in a manner that would cause the Qualified Performance-Based Award
to cease to qualify for the Section 162(m) Exemption.
24. Amendment of this
Plan
The Board or the Committee may from
time to time in its discretion amend this Plan or Awards, without the approval
of the shareholders of the Company, except (i) to the extent required under the
listing requirements of any national securities exchange on which are listed any
of the Companys equity securities and (ii) to the extent the amendment would
result in (A) the reduction of the Option Price of any stock option, (B)
cancellation of a stock option when the Option Price exceeds the Fair Market
Value of a share of Stock in exchange for cash or another Award (other than in
connection with a Change in Control), or (C) any other action with respect to a
stock option that would be treated as a repricing under the rules and
regulations of the New York Stock Exchange. No such amendment shall adversely
affect any previously-granted Award without the consent of the Grantee, except
for (x) amendments made to comply with applicable law, stock exchange rules or
accounting rules, and (y) amendments that do not materially decrease the value
of such Awards. In addition, no such amendment may be made that would cause a
Qualified Performance Based Award to cease to qualify for the Section 162(m)
Exemption.
25. Termination of this
Plan
This Plan shall terminate on the 10th
anniversary of the Effective Date or at such earlier time as the Board may
determine. Any termination, whether in whole or in part, shall not affect any
Award then outstanding under this Plan.
26. No Illegal
Transactions
This Plan and all Awards granted
pursuant to it are subject to all laws and regulations of any governmental
authority that may be applicable thereto; and, notwithstanding any provision of
this Plan or any Award, Grantees shall not be entitled to exercise Awards or
receive the benefits thereof and the Company shall not be obligated to deliver
any Stock or pay any benefits to a Grantee if such
exercise, delivery, receipt or payment of benefits would constitute a violation
by the Grantee or the Company of any provision of any such law or regulation.
Such circumstances or the inability or impracticability of the Company to obtain
or maintain authority from any regulatory body (which authority is deemed by the
Company to be necessary for the lawful issuance and/or sale of Stock hereunder)
shall relieve the Company of any liability for the failure to issue and/or sell
such Stock and shall constitute circumstances in which the Committee may
determine to amend or cancel Awards pertaining to such Stock, with or without
consideration to the affected Grantees.
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27. Controlling Law
The law of the State of Illinois,
except its law with respect to choice of law, shall be controlling in all
matters relating to this Plan.
28. Severability
If all or any part of this Plan is
declared by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any portion of this
Plan not declared to be unlawful or invalid. Any Section or part of a Section so
declared to be unlawful or invalid shall, if possible, be construed in a manner
that will give effect to the terms of such Section or part of a Section to the
fullest extent possible while remaining lawful and valid.
29. Section 409A
No provision of this Plan shall be
given effect to the extent that such provision would cause any tax to become due
under Section 409A of the Code. No action, or failure to act, pursuant to this
Section 29 or to any other provision of the Plan that references Section 409A of
the Code shall subject the Committee, the Board or the Company to any claim,
liability or expense, and neither the Committee, the Board nor the Company shall
have any obligation to indemnify or otherwise protect any Grantee from the
obligation to pay any taxes pursuant to Section 409A of the Code.
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C/O McDONALD'S CORPORATION
POST OFFICE BOX 9112
FARMINGDALE, NY
11735-9544
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McDONALD'S
CORPORATION ANNUAL SHAREHOLDERS'
MEETING FOR HOLDERS AS OF 3/27/17 TO BE HELD ON 5/24/17 AT 8:30 A.M.
CENTRAL TIME |
|
Your vote is important. Thank
you for voting. |
Read the Proxy Statement and have
the proxy card in hand. Please note that the telephone and Internet voting
turns off at 11:59 p.m. Eastern Time the night before the meeting or
cutoff date. |
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Vote by
Internet: |
www.proxyvote.com or scan the QR
code above with your smartphone. |
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Vote by Phone: |
1-800-690-6903 |
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Vote by
Mail: |
Complete this proxy card, sign and
return it using the enclosed
envelope. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS: |
E21301-P89092-Z69611 |
McDONALD'S
CORPORATION |
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THIS PROXY CARD IS VALID ONLY
WHEN SIGNED AND DATED. |
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A Proposals |
This proxy is solicited on behalf
of the Board of Directors of McDonalds Corporation. If this signed card
contains no specific voting instructions, the shares will be voted with
the Boards recommendations, except for 401k Plan participants (see
reverse side). |
The Board of Directors recommends a
vote FOR the nominees identified on this proxy.
1. |
Election of Directors: (each for
a one-year term expiring in 2018) |
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For |
Against |
Abstain |
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1a. |
Lloyd Dean |
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1b. |
Stephen Easterbrook |
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1c. |
Robert Eckert |
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1d. |
Margaret Georgiadis
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1e. |
Enrique Hernandez,
Jr. |
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1f. |
Jeanne Jackson |
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1g. |
Richard Lenny |
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1h. |
John Mulligan |
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1i. |
Sheila Penrose |
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1j. |
John Rogers, Jr. |
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1k. |
Miles White |
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The Board of Directors recommends
a vote FOR proposal 2. |
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2. |
Advisory vote to approve
executive compensation. |
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The Board of Directors recommends
a 1 Year vote on proposal 3. |
1 Year |
2 Years |
3 Years |
Abstain |
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3. |
Advisory vote on the frequency of
future advisory votes to approve executive compensation. |
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B Authorized Signatures This section MUST be completed for
your vote to be counted. Sign and Date Below |
I (we) hereby revoke any proxy
previously given, and appoint Stephen Easterbrook, Jerome Krulewitch and
Kevin Ozan, and each of them, as proxies with full power of substitution
to vote in the manner provided above, all shares the undersigned is
entitled to vote at the McDonalds Corporation 2017 Annual Shareholders
Meeting, or any postponement or adjournment thereof, and further authorize
each such proxy to vote at his or her discretion on any other matter that
may properly come before the meeting or any adjournment or postponement
thereof, including, without limitation, to vote for the election of such
substitute nominee(s) for Director as such proxies may select in the event
that any nominee(s) named above become(s) unable to serve. (401k Plan
participants are appointing Plan Trustee see reverse side.)
Please sign as your name(s) appear(s) above and return the card promptly. If
signing for a corporation or partnership, or as agent, attorney or
fiduciary, indicate the capacity in which you are signing. If you attend
the meeting and decide to vote in person by ballot, such vote will
supersede this proxy. |
The Board of Directors recommends a
vote FOR proposals 4 and 5. |
For |
Against |
Abstain |
|
|
|
|
4. |
Approval of the
material terms of the performance goals for awards under the McDonald's
Corporation 2012 Omnibus Stock Ownership Plan. |
☐ |
☐ |
☐ |
|
|
|
|
|
5. |
Advisory vote to
approve the appointment of Ernst & Young LLP as independent auditor
for 2017. |
☐ |
☐ |
☐ |
|
|
|
|
|
The Board of Directors recommends a
vote AGAINST proposals 6 through 12. |
|
|
|
|
|
|
|
6. |
Advisory vote on a
shareholder proposal requesting a change to the vote-counting standard for
shareholder proposals, if properly presented. |
☐ |
☐ |
☐ |
|
|
|
|
|
7. |
Advisory vote on a
shareholder proposal regarding the threshold to call special shareholder
meetings, if properly presented. |
☐ |
☐ |
☐ |
|
|
|
|
|
8. |
Advisory vote on a
shareholder proposal to issue a class of preferred stock with the right to
elect its own Director, if properly presented. |
☐ |
☐ |
☐ |
|
|
|
|
|
9. |
Advisory vote on a
shareholder proposal requesting that the Board make all lawful efforts to
implement and/or increase activity on the Holy Land Principles, if
properly presented. |
☐ |
☐ |
☐ |
|
|
|
|
|
10. |
Advisory vote on a
shareholder proposal requesting the Board to update the Company's policy
regarding use of antibiotics by its meat suppliers, if properly
presented. |
☐ |
☐ |
☐ |
|
|
|
|
|
11. |
Advisory vote on a
shareholder proposal requesting a report assessing the environmental
impacts of polystyrene foam beverage cups, if properly
presented. |
☐ |
☐ |
☐ |
|
|
|
|
|
12. |
Advisory vote on a
shareholder proposal requesting a report on charitable contributions, if
properly presented. |
☐ |
☐ |
☐ |
|
|
|
|
|
If you have comments, please
check this box and write them on the back where indicated. |
☐ |
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX] |
Date |
|
Signature [JOINT OWNERS] |
Date |
|
Table of Contents
McDonalds Corporation Annual Shareholders
Meeting Information
Wednesday, May 24,
2017
8:30 a.m. Central Time
Prairie
Ballroom at The Lodge
McDonalds Office Campus
2815 Jorie Boulevard
Oak
Brook, Illinois 60523
Admission: Please review
the Pre-registration and Admission Policy regarding meeting attendance in the
Proxy Statement. Shareholders and proxyholders
must pre-register for the meeting. Preference
will be given to shareholders, followed by proxyholders' requests to the extent
space remains. If space is available, you will receive a confirmation letter by
U.S. mail. You must show government-issued photo identification, as well as the
confirmation letter, at the meeting registration desk. Overflow rooms will not
be available to view the meeting. In order to accommodate as many shareholders
as possible, we will not be able to allow non-shareholder guests to attend the
meeting in person. The registration desk will open at 7:30 a.m. Central
Time.
Voting at the Meeting:
Shareholders attending the live meeting may submit this proxy card or complete a
ballot at the meeting.
Directions: Directions to
McDonald's Annual Shareholders' Meeting can be viewed online at
www.investor.mcdonalds.com.
Audiocast: To listen to the
live audiocast of McDonalds Annual Shareholders Meeting, go to
www.investor.mcdonalds.com, then select the appropriate link. After the
meeting, this audiocast will be available on demand for a limited time. Please
note that if you participate in the meeting by live audiocast, the shares of
stock will not be voted or deemed present at the meeting unless you submitted a
proxy via mail, the Internet or telephone before the meeting.
Important Notice Regarding the
Availability of Proxy Materials for
McDonalds Annual Shareholders Meeting
to be Held on May 24, 2017:
The Proxy Statement and the 2016
Annual Report to Shareholders are available at
www.proxyvote.com.
Proxy McDONALD'S
CORPORATION |
Voting
Instructions for McDonalds 401k Plan Participants
When casting your vote, you are
directing the Trustee of the trust funding the McDonald's 401k Plan (the "Plan")
in which you participate to vote the McDonald's shares credited to the
account(s) under the Plan. When you vote these shares, you should consider your
own long-term best interests as a Plan participant. In addition, you are
directing the Trustee to vote shares held in the Plan that have not been voted
by other participants and/or vote Plan shares that have not yet been credited to
participants' accounts. When you direct the vote of these shares, you have a
special responsibility to consider the long-term best interest of other Plan
participants.
Your vote on the front page will
direct the Trustee to vote:
● |
Shares credited to the account(s)
under the Plan; |
● |
Shares not voted and shares that
have not yet been credited to Plan participants' accounts, if
applicable. |
If you do NOT want to vote all shares
in the same way, please contact Broadridge via email at
mcdonalds@broadridge.com, or indicate that you want to vote the Plan shares and
registered shares separately in the comments area below and check the
corresponding comments box on the front page of the proxy card. Your directions to
vote shares held in the Plan will be kept confidential by Broadridge, the
independent inspector of election.
(If you noted any comments above, please
check the corresponding box on the front page.)
This regulatory filing also includes additional resources:
mcd_courtesy-pdf.pdf
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