Joseph Erlinger - President, McDonald's USA | MCDONALDS (MCD) Executive Profile & Compensation

About Joseph Erlinger

Joseph Erlinger, 51, is Executive Vice President – President, McDonald’s USA, a role he has held since November 2019; he previously served as President – International Operated Markets in 2019 and has served McDonald’s for 22 years . Company performance in 2024: revenues $25.9B, operating income $11.7B, diluted EPS $11.39, Systemwide sales $130.7B, and global comparable sales decreased 0.1% . Over 2019–2024, McDonald’s cumulative total shareholder return index rose from 100 to 165 (price + dividends), evidencing long-term value creation . The compensation framework tied to Erlinger’s incentives emphasizes the Accelerating the Arches strategy with objective metrics (Operating Income Growth, Systemwide Sales Growth, New Restaurant Openings, Strategic Scorecard), and PRSU metrics focused on EPS growth, ROIC, plus a TSR modifier .

Past Roles

Organization	Role	Years	Strategic Impact
McDonald’s Corporation	EVP – President, McDonald’s USA	Nov 2019–Present	Leads U.S. segment (13,557 U.S. restaurants at YE 2024), with heavy focus on drive-thru (>95% of U.S. locations) and digital engagement .
McDonald’s Corporation	President – International Operated Markets	Jan–Oct 2019	Oversaw IOM markets at a time of expanding development and franchised performance .

External Roles

Not disclosed in the 2024 10-K or 2025 Proxy for Erlinger .

Fixed Compensation

Summary Compensation (Erlinger)

Metric ($USD)	2022	2023	2024
Salary	835,833	840,000	869,167
Stock Awards (PRSUs, ASC 718)	1,750,034	1,875,238	1,875,265
Option Awards (ASC 718)	1,750,002	1,875,021	1,875,058
Non-Equity Incentive (STIP)	1,346,315	1,638,492	314,922
All Other Compensation	235,838	180,046	1,176,953
Total	5,918,022	6,408,797	6,111,365

Base salary as of 12/31/2024: $875,000 .
2024 STIP target: 120% of salary; target amount $1,050,000; maximum $2,100,000 .

Performance Compensation

2024 STIP Design and Payout (Erlinger)

Metric	Weight	Target	Actual Factor	Payout Details
Operating Income Growth	40%	Objective threshold/target per plan	Corporate factor 19.2 points	Incorporated into corporate payout calculus .
Systemwide Sales Growth	30%	Objective threshold/target per plan	Corporate factor 19.2 points	Incorporated into corporate payout calculus .
New Restaurant Openings	15%	Objective threshold/target per plan	Corporate factor 19.2 points	Incorporated into corporate payout calculus .
Strategic Scorecard	15%	Qualitative scorecard	75% (11.3 points)	Governance/values/franchising execution .
Segment factor (U.S.)	—	—	23.0	Segment weighting (63.75%) for Erlinger .
2024 Payout as % of Target	—	100% baseline	30.0%	2024 STIP payout percent of target .
2024 STIP Target ($)	—	$1,050,000	—	As granted .
2024 STIP Paid ($)	—	—	—	$314,922 .

Corporate STIP payout factor for NEOs (context): 27.6% reflecting below-target performance in 2024 .

Long-Term Incentives (PRSU) – Structure and Outcomes

Attribute	Details
Form	PRSU (50% of LTI mix) .
Primary Metrics	EPS Growth (75%), ROIC (25%); 3-year performance period; relative TSR modifier +/- 25 points .
Caps	200% max; if absolute TSR is negative, cap 100% .
2022–2024 Performance	PRSU payout factor 170.2%; Erlinger’s 2022 grant vested 2/14/2025 with 11,748 shares delivered .
Future Scheduled Vests	2023 grant: vests 2/13/2026 (7,107 PRSUs scheduled if 100% targets achieved); 2024 grant: vests 2/12/2027 (6,298 PRSUs scheduled if 100% targets achieved) .

Long-Term Incentives (Options) – Structure and 2024 Grants

Attribute	Details
Option Terms	10-year term; vest 25% per year over four years; value only if share price appreciates; exercise price equals grant-date close .
2024 Grant (Erlinger)	31,345 options at $289.44 exercise price; grant-date fair value $1,875,058 .

2024 Exercises and Vests (Realized)

Item	Shares	Value ($)
Options Exercised	0	0
Stock Awards Vested	20,775	6,066,716

Equity Ownership & Alignment

Beneficial Ownership (as of March 1, 2025)

Holder	Common Stock	Stock Equivalents	Total
Joseph Erlinger	246,002	0	246,002

Unvested PRSUs/RSUs: 25,153 units; market/payout value $7,291,603 (12/31/2024 pricing) .
Stock ownership guidelines: 4x salary for other NEOs; executives have five years to comply; all NEOs are in compliance .
Hedging/pledging: Prohibited for executives .

Outstanding Options (Erlinger) – Year-End 2024

Grant Exercise Price	Expiration	Exercisable (#)	Unexercisable (#)
$157.79	2/19/2028	31,513	0
$174.15	2/13/2029	33,204	0
$216.15	2/18/2030	38,266	0
$215.03	2/16/2031	54,594	18,198
$253.39	2/14/2032	20,774	20,774
$266.20	2/13/2033	8,627	25,872
$289.44	2/12/2034	0	31,345

Employment Terms

Tenure and Role: EVP – President, McDonald’s USA since Nov 2019; Company service 22 years; age 51 .
Employment agreements: Company does not use employment agreements for executives .
Severance (Officer Severance Plan): If terminated without cause, Erlinger receives cash severance equal to one year of current salary plus target STIP; COBRA subsidy for 12 months; prorated STIP based on actual performance; unused sabbatical and outplacement . Illustrative values as of 12/31/2024: Cash severance $1,925,000; Benefits continuation $18,473; Other $149,315; Total $2,092,788 .
Equity on termination: Retirement/without cause—continued vesting or pro rata vesting per age/service; death/disability—PRSUs vest at target; for cause—awards forfeited .
Change-in-control: No change-in-control agreements; equity subject to double-trigger provisions; hypothetical accelerated equity value for Erlinger at 12/31/2024: stock options $2,747,566; RSUs/PRSUs (target) $5,887,086; total $8,634,652 .
Clawbacks and restrictive covenants: SEC/NYSE-compliant clawback policy; award recoupment for willful fraud; restrictive covenant violations cause forfeiture and recoupment .
Deferred compensation: 2024 contributions—executive $250,766; registrant $132,913; aggregate earnings $689,721; year-end balance $6,560,354 .

Compensation Structure Analysis

Mix shift and pay-for-performance: 2024 STIP payout sharply reduced (30% of target for Erlinger) due to below-target operating income and Systemwide sales, evidencing sensitivity of cash incentives to one-year performance . Multi-year PRSUs paid at 170.2% for the 2022–2024 cycle, aligning equity payouts with stronger three-year EPS/ROIC and TSR outcomes .
LTI design: Balanced PRSU/options mix (50/50), with PRSUs tied to EPS/ROIC and a TSR modifier, and options requiring share price appreciation—supports alignment and discourages short-term risk-taking .
Governance and practices: No employment/change-in-control agreements; double-trigger equity, robust ownership requirements, hedging/pledging prohibitions, and clawbacks—shareholder-friendly design .
Peer group calibration: Committee updated the compensation peer group for 2025 decisions (added The Walt Disney Company; removed Johnson & Johnson and Walgreens Boots Alliance), reflecting relevancy adjustments .

Performance & Track Record

Company-level results during Erlinger’s current role (context): 2024 revenues $25.9B (+2%), operating income $11.7B (+1%), Systemwide sales $130.7B (+1%), diluted EPS $11.39 (-1%); ~2,116 openings and ~461 closures in 2024; free cash flow $6.7B (81% conversion) .
Strategic execution: Acceleration in development and digital/drive-thru capabilities; U.S. drive-thru presence >95%; loyalty/delivery initiatives scaling to top markets .
TSR context: 5-year cumulative total return index to 165 vs DJIA 165 and S&P 500 197 (McDonald’s remains competitive though lagging S&P 500 over the period) .

Equity Ownership & Alignment (Skin-in-the-game)

Item	Status
Beneficial ownership	246,002 shares (as of March 1, 2025) .
Unvested equity	25,153 PRSUs/RSUs ($7,291,603) .
Options	Significant outstanding; none exercised in 2024 .
Ownership guidelines	4x salary; compliant .
Hedging/pledging	Prohibited .

Employment & Contracts (Retention risk)

Term	Provision
Severance multiple	1.0x salary + target STIP; 12 months COBRA subsidy .
Change-in-control	No CIC agreements; double-trigger equity; hypothetical accelerated equity value $8.63M .
Clawbacks	SEC/NYSE-compliant; additional fraud/restrictive covenant recoupment .
Non-compete/Non-solicit	Executives are subject to restrictive covenants; specific durations not disclosed .

Investment Implications

Alignment and downside sensitivity: 2024 STIP payout compression (30% of target) signals cash incentives are tightly linked to one-year execution; multi-year PRSU payout at 170.2% underscores longer-term EPS/ROIC/TSR delivery—overall pay-for-performance alignment appears strong .
Potential near-term selling pressure: 2022 PRSUs vested in Feb 2025 (11,748 shares for Erlinger); additional PRSU vests scheduled in 2026 and 2027—these events can create supply, though 2024 showed zero option exercises by Erlinger and hedging/pledging is prohibited, moderating risk .
Retention/transition risk: Severance economics are moderate (1.0x), with double-trigger equity and robust clawbacks/restrictive covenants—constructed to protect shareholders while not overpaying for retention .
Strategic execution exposure: U.S. segment leadership ties Erlinger’s incentives to operating income, Systemwide sales, development, and strategic initiatives—continued progress on digital/drive-thru and restaurant expansion is key to future payouts and equity value realization .

Compensation governance features (no employment/CIC agreements, double-trigger equity, ownership policies, clawbacks) and the mix of PRSUs/options support long-term alignment while limiting shareholder-unfriendly practices **[63908_0001558370-25-004544_mcd-20250520xdef14a.htm:9]** **[63908_0001558370-25-004544_mcd-20250520xdef14a.htm:11]** **[63908_0001558370-25-004544_mcd-20250520xdef14a.htm:81]**.