New McDonald’s CEO Doesn’t Own a Single Share of the Company

(Bloomberg) -- Chris Kempczinski's rapid ascent to the top job at McDonald's Corp. has left him in a slightly awkward situation for a big-company leader: He doesn't hold a single share in the restaurant chain.

In May, Kempczinski sold the entire stake he had accumulated since he started at McDonald's in 2015 -- roughly 10,900 shares, regulatory filings show. He also exercised almost 27,900 options and liquidated that holding. The transactions netted him $4.44 million before taxes.

He still owns additional options -- some of which he could exercise immediately to buy shares at a discount -- as well as unvested restricted shares that could be canceled under certain circumstances. But he owns no regular common stock, according to the latest filings.

Some investors closely monitor executive stock sales, particularly at companies in turmoil. That said, Kempczinski's scant ownership doesn't necessarily mean he's pessimistic about McDonald's prospects, and equity awards he'll receive as CEO will help him reach the required level of ownership.

Kempczinski, 51, left Kraft Foods four years ago and joined McDonald's as part of a sweeping management shakeup. About a year later, he was tapped to run its U.S. business. On Sunday, he was promoted to CEO to succeed Stephen Easterbrook, who was fired for having a consensual relationship with an employee.

A representative for Chicago-based McDonald's didn't immediately respond to a request for comment.

Aligning Fortunes

McDonald's, like most other large companies, requires senior executives to own a certain amount of stock at all times -- an investor-friendly policy meant to ensure their personal fortunes are aligned with the interests of shareholders. An executive usually has a few years to reach the required level of ownership, commonly set as a multiple of the base salary.

Prior to his promotion, Kempczinski was required to own $2.9 million of stock -- four times his $725,000 salary -- by October 2020, his five-year anniversary at McDonald's, according to filings. The threshold for the CEO is $7.5 million, or six times his new $1.25 million salary.

Senior executives can meet ownership thresholds by purchasing stock on the open market or hoarding shares they receive from various equity grants built into their compensation packages.

Such equity grants often vest gradually over years, sometimes depending on the company's financial results. Most firms don't allow executives to count unexercised stock options or performance-based restricted stock toward ownership requirements, said Steven Hall Jr., a managing director at executive compensation consulting firm Steven Hall & Partners.

McDonald's doesn't specify in regulatory filings whether executives can count unvested equity toward the ownership requirements, but the promotion does give Kempczinski additional time to get there.

Upfront Cost

He currently owns about 36,800 options that he could exercise now. Those shares would be worth $6.94 million as of Monday's close, putting him close to the threshold. But doing so would cost him $5 million upfront. He holds an additional 115,900 options that he'll be able to exercise within a few years.

He'll likely get big equity awards going forward that will help him meet the ownership requirements. Last year, Easterbrook received awards of restricted stock and options worth $11.5 million. McDonald's allowed him to keep $37 million of such awards when he left.

--With assistance from Leslie Patton and Thomas Buckley.

To contact the reporter on this story: Anders Melin in New York at amelin3@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net, Jonathan Roeder

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