Activist investment group Change to Win (CtW) is calling for the salary of McDonalds’ CEO Donald Thompson to be slashed, due to the chain’s poor performance as well as the gross inequity between CEO and worker pay. This is a good opportunity to discuss intra-company pay gaps as it affects all of us who work for a living.
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According to Payscale’s Career Research Center, McDonald’s restaurants pay their employees seven percent below the market. A cashier at McDonald’s earns between $7.13 and $8.84 an hour, and has a high stress level and a relatively poor level of job satisfaction.
McDonald’s has come up with ways to ensure the CEO remains extremely well-paid, however. While Thompson’s salary fell by $4 million in 2013, due mostly to the expiration of a bonus plan, he still earned $9.5 million in total compensation, including generous stock options and bonuses. Meanwhile, workers’ salaries remain stagnant.
The Guardian quotes a recent letter from CtW to McDonald’s shareholders:
As you are no doubt aware, McDonald’s financial and operational performance has been disappointing for several years: its share price has trailed the S&P500 over each of the past 5-, 3-, and 1-year periods, by 45%, 20%, and 20% respectively.
At the same time, doubts about the company’s business model have mounted: McDonald’s restaurants have been the site of growing strikes and protests by food service employees, its long-standing disavowal of responsibility for workplace standards at its franchised restaurants faces a serious legal challenge, and the company itself acknowledges that growing public concern over income inequality poses a risk to its business.
The Myth of Meritocracy
A meritocracy is a system in which people get ahead via hard work, ability, and achievement. The idea is you may come from humble roots, but if you work hard and do well you will be promoted and make money.
Unfortunately, our economy is not really a meritocracy. No matter how honest and hardworking those McDonald’s employees are, they are not going to pull their families out of poverty on such low wages.
The Pay Gap
Part of CtW’s argument that Thompson’s pay should be slashed is based on his job performance, but part of it is due to gross inequity. If CEOs were only allowed to make a set percentage more than the lowest paid worker, perhaps workers would be better able to support their families. If the ability to make more money was contingent upon the ability to pay workers better, there would be more incentive at the CEO level to keep the company healthy.
Tell Us What You Think
Do you think CEO pay should be capped based on worker pay? We want to hear from you! Leave a comment or join the discussion on Twitter.