Courtesy of Liberal America, with over 8,500 likes and 6,000 shares. This meme claims the McDonald’s CEO’s pay tripled to $13.9 million, and infers it’s hypocritical for them not to raise fast food workers wages to $15/hr.
This meme was posted on May 23, 2016, but after some digging it was found it’s recycled from 2013. The Facebook page The Other 98% first published it back then, and it was widely circulated by many left wing outlets like the Daily Kos. Therefore, the stats are not current or correct, but even the original meme was misleading.
The CEO pictured in the meme is Don Thompson, the former CEO of McDonald’s. The meme doesn’t mention his remarkable life story, but it’s worth briefly noting. He grew up poor in a Chicago housing project, got an electrical engineering degree from Purdue, and eventually got hired at McDonald’s as an engineer. He quickly switched career tracks into management, and learned and performed jobs at all levels, including being a fry cook and assistant manager at a South Chicago McDonald’s. He then climbed the ladder to regional manager, held several vice president positions, then president, and finally CEO in 2012. After some disappointing financial results, he stepped down in March 2015, after 25 years at McDonald’s.
The successor to Thompson, and current McDonald’s CEO is Steve Easterbrook (pictured below).
McDonald’s CEO Pay
Most executive compensation is quite volatile. Usually the majority of it includes stock options and bonuses that can vary substantially year to year. So, while it’s a catchy headline to say “McDonald’s CEO salary triples!” it’s important to step back and look at the context. If we look at McDonald’s executive compensation for the last 5 years, we find some interesting discoveries. It’s true that Thompson’s total compensation increased from $4.1 million in 2011 to $13.8 million in 2012 as the meme suggests. But remember, he got promoted to CEO in July 2012! This means his pay was raised because of his new position as head of one of the world’s largest corporations. The comparison between the two numbers is apples to oranges.
However, this $13.8 million was short-lived. The next year, Thompson’s compensation dropped to $9.5 million, a 31% drop. 2014 saw another drop to $7.3 million, a 47% drop from his 2012 salary. You remember all those headlines about McDonald’s CEO pay dropping in half, right?!
Easterbrook, the new CEO, also saw a similar spike in salary with his promotion, causing recent headlines like “McDonald’s CEO gets a 368% pay raise” to get circulated in the media. However, this increase was also due to his promotion, not something nefarious. Easterbrook’s compensation in 2015 was $7.9 million, which ironically is 43% less than Don Thompson’s in 2012.
Does CEO Pay Impact Fast Food Workers’ Wages?
No, they are different jobs and command different wages in the marketplace. The CEO of McDonald’s is responsible for an international corporation that has over $25 billion in revenue per year. His (or her) salary is determined by the board of directors and the shareholders, who’s goal is to have the best CEO to increase the profitability of the company, which is mostly based on the success of their franchises and the popularity of their product. If McDonald’s wants a good CEO, they must offer competitive wages in that market. Just like athletes, CEOs are free to work for whoever offers them the best deal. Surprisingly, McDonald’s has a fairly low executive compensation compared to other large companies. In fact, their CEO doesn’t even crack the top 200 CEO salaries, which is pretty amazing considering their size.
In comparison, an entry level fast food worker is generally hired by a franchise restaurant owner (not McDonald’s corporate), who is trying to maximize their restaurant’s profitability by hiring a worker to perform a low-skill job. These workers are obviously competing in a different labor market, but does the CEO’s high salary somehow come at the expense of the low skilled workers? The math doesn’t bear this view out.
McDonald’s has over 36,000 restaurants in over 100 countries. They have 1.9 million employees. That means even if we took all of the $13.8 million salary this meme talks about and divided it among the employees, it would only be $7.26 per employee. Assuming each employee works 25 hours a week, 52 weeks a year, that translates into just a 1/2 cent per hour raise!
If we went farther and spread the wealth of all the top executives ($24.36 million in 2015) to the hands of the employees, it would still be just $12.82 per employee, or about $.01/hr raise on average. Meanwhile, it would be pretty difficult to find executives with any talent at $0/hr! Clearly, the notion that CEO pay could make any dent in paying fast food workers $15/hr doesn’t add up.
It’s ironic this meme is being recycled, because it’s even less convincing than it was in 2013. The new McDonald’s CEO makes 43% less than 3 years ago, but his impact on the wages of fast wood workers remains negligible.