McDonald's CEO's $17 Million Pay Tied to Performance

McDonald's (MCD) CEO Jim Skinner's $17 million pay package is directly tied to the fast-food company's delivery of solid revenues and big returns for shareholders during an economic downturn.

The bulk of Skinner's take-home pay in 2009 came from a performance-based cash bonus. The 65-year-old Skinner, who also holds the title of vice chairman, earned a $1.4 million salary and $11.5 million in performance bonuses. The remainder came from his stock options, according to the fast food company's proxy report filed Friday.

No. 1 Shareholder Return

Compensation experts are not going to argue that $17 million isn't a lot of money, but given the company's performance, they do say that Skinner earned it for reaping solid gains for shareholders. The 2009 return for McDonald's shareholders last year was 16%, ranking No.1 among the companies included in the Dow Jones Industrial Average.

"Clearly he has done the right things -- cut costs, brought in new revenues streams and improved shareholder value," says compensation expert Paul Dorf. "If the opposite happened, his salary would have been much lower."

Dorf, managing director of New Jersey-based Compensation Resources, says that much of the shareholder outrage over exorbitant CEO pay is for executives who reap millions and offer little shareholder returns. It's been a particularly hot point with struggling financial institutions that have awarded big pay packages to executives while crashing the economy, then taking taxpayer bailout dollars.

$1 Value Meals Helped

Over the past two years, Skinner, a 38-year veteran of McDonalds, has rolled out new products and trimmed expenses at the world's largest fast-food chain. The company, for instance, saw revenue increase after expanding its value menu in response to a higher national unemployment rate.

Skinner's total 2009 pay package is a 29% increase from his 2008 compensation of $13.6 million, and more than double his pay in 2007. The 2009 package included about $700,000 in profit sharing and perks including financial counseling, annual physical examinations and personal use of the company's private aircraft. The cost to the company for the use of the planes was $71,562.

Added $8 Billion In Market Cap

Walt Riker, vice president of corporate media relations for McDonald's, says the company makes a conscious effort to be transparent with its executive pay packages, and it's by design that compensation is tied to performance.

"Eighty-one percent of our CEO's compensation was tied to performance and creating long-term shareholder value," Riker says.

Riker points out that a big indicator of Skinner's success is the fact that the market capitalization for McDonald's increased about $8 billion over the past two years. At the end of 2009, it was $67 billion.

McDonald's stock dipped 8 cents Friday to $68.68 a share. It is up 10% year-to-date.