McDonald's CEO Speaks Out on Employee Pay

While thousands of fast food workers around the country are protesting how little they are paid, McDonald's  CEO Donald Thompson defended his company's pay practices at the fast food giant's annual meeting Thursday.

With hundreds of protesters appearing outside the meeting Thompson told the crowd inside that the company has a heritage of providing job opportunities that lead to ''real careers.'' 

The protest at the annual meeting came a day after protesters began staking out the company's headquarters in Oak Brook, Illinois. Those protesters stormed through an entrance to one of the company's campuses holding signs that said, "We Are Worth More" and "My Union My Voice," according to Bloomberg.

The financial news site reported that the event organizers pegged the number of protesters at around 2,000 with more than 100 getting arrested for trespassing. The protests outside the annual meeting involved hundreds of people.

McDonald's has been a target

These protests come at a time when fast food workers around the country have been staging strikes to demand higher wages. Though protesters have targeted other chains, McDonald's has been a key target of the worker movement due to the sheer size of the company.

McDonald's protest issues began in 2012 when demonstrations seeking a $15 an hour wage started in New York City. That number came up again Thursday as chanters outside the shareholders meeting yelled ''I want, I want, I want my $15.''

Shawn Dalton, who traveled from Pittsburgh, told the Associated Press that her daughter is a recent high school graduate who can't afford to go to college right away so she'll likely wind up earning Pennsylvania's $7.25-an-hour minimum wage.

''That won't get her an apartment, that won't buy a bus pass, that won't buy food,'' Dalton said. ''She'll either have to depend on welfare or depend on me.''

Inside the meeting Thompson was not buying what the protesters were selling. "We pay fair, competitive wages ... and we provide job opportunities and training for those entering the work force. We're trying to be a really great employer," he said.

The wage issue is an especially challenging one for McDonald's as both side of the argument are correct. Protesters are right that most McDonald's workers make a wage that it's awfully hard to live on. Thompson is also right that his company provides a career path and opportunities to countless employees who would not have them otherwise.

McDonald's faces a war on multiple fronts

The wage controversy comes at a time when McDonald's has been battling slumping U.S. sales as the chain loses customers both to fast casual competitors like Chipotle and the fact that families with children are eating out less often in general (which I wrote about for the Fool here). The fast food giant also faces an assault on its lucrative breakfast business as Yum Brands's Taco Bell franchise has aggressively targeted the burger chain in its effort to win market share in the morning

McDoanld's has a 25% market share of the $50 billion fast food breakfast market, according to market researcher Technomic

While it faces all those issues McDonald's is also facing a backlash over how healthy (or unhealthy) its food is -- specifically in regards to its children's meals. Efforts to fix that include the recent introduction of yogurt as an option in Happy Meals. The company also recently introduced a new mascot -- Happy -- a talking take on its Happy Meal box that has received a very mixed reaction. Though the goal of the mascot is educating children on making healthy choices, that fact has been lost under the ocean of Twitter and Facebook posts that find the character creepy.


Like with the issue of employee pay, McDonald's has faced a backlash even when it tries to do the right thing. Certainly the company sells unhealthy food but it also sells the food kids like to eat. Adding yogurt and apple slices as alternatives to fries may not be popular options but at least the chain has made them available. 

McDonald's needs to weather the storm

Thompson is correct in what he says about his company providing a path to a career both inside and outside the company. What he's not saying is that entry-level fast food jobs are not supposed to pay enough to comfortably support a family. Working for minimum wage at McDonald's should be a stepping stone either to a better job elsewhere or a higher-paying job within the fast food giant.

McDonald's promotes aggressively from within and the chain is filled with success stories where entry level workers work their way up to managers, general managers, and even franchise owners.

The protesters have a sympathetic story but McDonald's should not cave to their pressure. The free market decides whether a company needs to pay more for unskilled labor. If McDonald's franchises can't find employees willing to take minimum wage jobs because there are higher paying or more pleasant alternate opportunities, then the company will have to pay more to hire workers. Until the happens Thompson should work on helping the chain's workers gain skills and advance because that's good for the employee and the company. But he should not pay above the going rate or give in to protests.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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