McDonald’s delivered strong performance and returns to shareholders in 2007. We have continued to build on our success as a trusted global consumer brand and grow our business by creating outstanding restaurant experiences for our customers. We have designed our executive compensation program to attract and retain excellent management and to motivate our executives and reward them for superior performance. We believe that our compensation program has played an important role in the Company’s success. We describe below our executive compensation program and how it worked in 2007. Among other matters, we address the following: •The principles underlying our executive compensation program, which we refer to in this report as the “key objectives,” and which are described on page 12 of this Proxy Statement. >How each of the key objectives is integrated with our business strategy and our corporate culture.
>Highlights of how executive compensation in 2007 was driven by performance, consistent with the key objectives.
>The group of comparator companies we use as a benchmark to ensure that our executive compensation program is competitive and in line with market practices, and how we select those companies. •The elements of compensation that make up our program.
>A summary of how each element reflects the key objectives.
>Our practice for allocating each element of compensation among the total compensation.
>Quantitative performance measures we use to determine payouts of performance-based compensation and why we chose each one.
>The target levels of performance under the relevant quantitative measures for performance-based awards in 2007.
>Qualitative performance factors and how they can affect payouts to our executives. •The process by which the Compensation Committee of the Board of Directors (the Committee) sets and reviews executive compensation.
>The role of management in the process.
>The role of the Committee’s independent compensation consultant. •Detailed information about each of the individual elements of compensation. II.SITUATIONAL ANALYSIS
In 1954, at the age of 52, Ray Kroc began a new age in franchising when he became the national agent for McDonald's. Kroc, making his rounds as a milk shake mixer salesman, came across the McDonald brothers' (Richard and Maurice) small hamburger shop in Southern California. The establishment was simple, serving only a few items: hamburgers, french fries, soft drinks, and milk shakes. These two brothers became one of Kroc's best customers as they purchased several of his machines in his otherwise dying business. Kroc, curious about why the McDonalds were purchasing so many mixers, investigated the establishment further. With his keen sense of what American consumers were looking for in eating out, Kroc suggested that the brothers expand their presence. As they asked how they could do so, he offered his services as their agent. That is how the little restaurants with the bright yellow arches began. The First McDonald's
The first shop opened in 1955 in Chicago as the organization became the McDonald's Corporation. Six years later Ray bought out the founding brothers. By 1965 there were more than 700 sites in existence across the United States. It wasn't long before McDonald's also caught on in several other countries. By 2003, the corporation held over 31,000 sites in 119 countries. Forty seven million people were being served every day and sales were at a hefty $17 billion. Although Kroc did not create the concept of the chain restaurant, he saw a niche and developed the plan to transform burgers, fries and shakes into a huge empire. Kroc was a stickler for consistency and cleanliness in all of his establishments. In addition, he did everything he could to keep costs down so that even low income people could afford a meal out at McDonald's. Kroc Improves the System
Kroc also had the insight to standardize cooking and...