You would think that executive pay would’t be all that different between Costco and McDonald’s, would you? You might even think that Costco might pay a little better. But you’d be so wrong. It turns out that McDonald’s doesn’t think Costco pays executives enough anymore. That’s right, you read that correctly, McDonald’s is basically calling Costco cheap!
To assess their executive pay levels, McDonald’s uses a selection of around 24 different companies that fall into their competitive niche of consumer product companies and retailers. A lot of analysts and even the SEC is not fond of the practice of using peer groups to determine executive pay because they feel like it is creating artificially high executive pay packages. And that might well be the case. Not to mention, it doesn’t seem that they use this same method when determining pay levels for the rest of the workers.
McDonald’s didn’t come right out and say that Costco is a bunch of cheapskates, but they just played it off as different pay and compensation philosophies. Um, yeah. What that really means is that the CEO at Costco made what would seem to be a very decent salary of $4.8 million in 2012. While in the same year, McDonald’s CEO made a whopping $17.1 million in total compensation (salary, bonuses, and equity), and in addition they paid him another $10.6 million to step down in July. Who wouldn’t like that kind of payout just for leaving? In the previous five years, McDonald’s CEO pay averaged around $13.4 million, while Costco paid their CEO on average just $3.4 million.
As HuffPo points out the difference in CEO pay could have allowed McDonald’s to buy a dollar-menu breakfast burritos for every child in New York City’s public schools, every month of the school year. Or, alternatively, just think of all the workers that they could pay better if they weren’t paying so much to their executive team. Maybe they could even be like Costco and pay good wages to the average worker and provide decent benefits.
It doesn’t seem like the McDonald’s CEO is worth 3.5 times as much as Costco’s CEO, does it? I mean, their revenue and gross profits in 2012 weren’t 3.5 times better than Costco, they actually weren’t even as high as Costco’s revenue or gross profits for FY2012. I guess they’re using some new math.
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