Critics of supersized CEO pay face uphill fight at McDonald's

LOS ANGELES/BOSTON Tue May 20, 2014 11:39pm EDT

LOS ANGELES/BOSTON May 20 (Reuters) - The next big showdown in the running battle over U.S. executive pay is shaping up to be the annual meeting of McDonald's Corp on Thursday, but critics may have a tough time replicating their victory last week at Chipotle Mexican Grill.

McDonald's is a main target of protesters and labor groups, who criticize the world's biggest fast-food chain for paying millions of dollars to its chief executive while many front-line restaurant workers are scraping by at or near minimum wage.

"For too many CEOs, it's heads I win, tails I win," said New York City Comptroller Scott Stringer in an interview on Tuesday. CEOs often get well paid no matter how a company performs, Stringer said.

Stringer said his office would vote the 2.6 million shares of McDonald's held in the city's pension funds against an advisory measure on executive pay, and that some investors worry income inequalities could threaten profit.

"You can't grow the economy the way we need to if low-wage workers don't have the money to spend on goods and services," he said.

Stringer's funds also voted against the pay at Chipotle, whose co-CEOs Steve Ells and Monty Moran received total 2013 compensation of $25.1 million and $24.4 million, respectively. McDonald's Chief Executive Don Thompson made $9.5 million in 2013, down from $13.8 million in 2012.

Chipotle shareholders offered a scant 23 percent support for a similar advisory pay proposal at the popular burrito seller on May 15, which has earned praise for eye-popping stock gains and scorn for supersizing compensation for its co-CEOs.

But at least two big public pension fund managers that opposed Chipotle's pay proposal said they would support pay for McDonald's executives, including Thompson. The managers were the California State Teachers' Retirement System (CalSTRS) and the Florida State Board of Administration.

Aeisha Mastagni, a CalSTRS Investment Officer, said the pay contests are quite different and noted how McDonald's market capitalization of $100 billion is more than six times that of Chipotle's. "The compensation at McDonald's, in the grand scheme of things, it's quite reasonable," she said.

She also noted how Thompson must cope with different challenges including a turn to healthier diets and having many more stores. McDonald's, she said, "is a very different company than the growth story that's going on at Chipotle."

In addition, the influential proxy adviser Institutional Shareholder Services has recommended investors approve the pay at McDonald's, in contrast to its recommendation to vote against the Chipotle pay.

Pay consultants view results below 70 percent support for executive pay as a sign that boards should revamp compensation, so even a close vote could pressure on McDonald's to make changes.

McDonald's, in a proxy filing, asked shareholders to vote in favor of the pay proposal at its annual meeting, which will be closed to the media for the first time because of poor attendance. The vote comes as the chain battles market share losses to U.S. rivals and profit-squeezing spikes in beef costs.

Shares in Chipotle have vastly outperformed McDonald's since 2010, rising 469 percent versus a 64 percent gain for the Golden Arches. (Reporting by Lisa Baertlein in LOS ANGELES and Ross Kerber in BOSTON; Editing by Christopher Cushing)