Barely a month after sending former CEO Don Thompson packing for failing to turn around years of weak sales, McDonald’s has decided to pay him $3 million more to serve as a consultant over the rest of the year.
Thompson was chased out of the top job less than three years after taking it. His tenure was marred by weak performance in the stock market, slipping sales, and massive labor strife as worker strikes spread from New York City to all corners of the U.S.
When the company announced he would resign in January, multiple industry analysts praised the move by saying that getting Thompson out of the picture was essential to revitalizing the company’s financial performance. Now they’re keeping him firmly in the picture, and shelling out millions more to retain access to his advice and ideas. Between the $3 million consulting retainer, $27.4 million in total compensation from 2011 to 2013, and the as-yet-unknown pay package he received for 2014, Thompson likely earned something close to $40 million since taking the top job.
McDonald’s frontline workers earn between $8 and $8.70 an hour, according to Glassdoor. A McDonald’s fry cook earning $8.70 would have to work 6,631 hours to make what Thompson will be paid in a single week of consulting. A full-time worker who never misses a day or takes a vacation would earn barely $18,000 for the year. And that’s assuming she actually gets paid properly for every hour she works — something fast food workers would tell you is not a given, considering store managers’ proclivity for wage theft through manipulating time cards.
Thompson defended the company’s pay structure when he was CEO and earning more than 500 times the annual pay allotted to cashiers and cooks. But the company’s own actions revealed that McDonald’s is fully aware of the dire straits its low-wage workforce faces. On a now-private website for workers, McDonald’s provided a sample budget for how an employee could not only survive but thrive. It included various fanciful line items, like paying nothing for heat and just $600 for rent, and told workers to get a second job in order to make ends meet.
Thompson’s total 2014 compensation will remain unknown until a corporate filing deadline next month, but looking at how McDonald’s paid him in 2013 helps in understanding roughly how his successor, Steve Easterbrook, will be compensated. Base salary formed just 9 percent of Thompson’s $9.5 million total compensation package in 2013. The largest single chunk — 37 percent — came from the company’s annual performance-based cash compensation program, which it calls TIP. Easterbrook is set to make $1.1 million in base salary, and his TIP payment could be as large as $1.76 million if the company hits certain financial targets for the year. If those two chunks of money make up the same share of total pay for Easterbrook as they did for Thompson, he would earn about $6.2 million for the year.
The “golden handshake” deal to pay Thompson millions more after his resignation reflects a broad pattern in how large companies handle compensation for failed executives. Once a person makes it to the executive suite, screw-ups rarely cost him financially. McDonald’s takes performance-based pay somewhat more seriously than many companies do, and cut Thompson’s pay by $600,000 one year for missing stock price and sales targets. But the high-paying consulting deal is much more typical of how American corporations reward failure among CEOs and other senior officers.
Perhaps Thompson is staying on to help Easterbrook clean up the many serious messes the company faces, over and above the escalating worker campaign for a $15 wage and union representation. The company’s longstanding practice of using franchise agreements to limit corporate liability for labor violations at specific stores appears to be crumbling in the face of multiple lawsuits in America. Unions are asking the European Commission to investigate the company’s use of a tax haven in Luxembourg to allegedly deprive various European governments of a billion euros’ worth of tax payments in recent years. And in Brazil, the company may face massive fines stemming from a union lawsuit against the company’s largest franchisee over serious alleged violations of the country’s strong legal protections for workers.