McDonald's Corporation (MCD) Earnings Call Transcript & Summary

The information in this presentation contains certain forward-looking statements that reflect management's expectations regarding future events and operating performance and speaks only as of May 20, 2021. These forward-looking statements are not guarantees of performance and involve a number of risks and uncertainties. Except as required by law, we do not undertake to update these statements. A list of the factors that could cause actual results to differ materially from those expressed in these statements is included in our SEC filings, such as our annual and quarterly reports. You can access these reports on McDonald's website. Our website also includes reconciliations of any non-GAAP financial measures mentioned in our presentation to their corresponding GAAP measures. At the request of McDonald's Corporation, this meeting will be recorded and available for replay by those who are not able to attend and for later reference by attendees. If you do not consent to this recording, please disconnect immediately.

Good morning. My name is Rick Hernandez, and I'm honored to serve as Chairman of your Board of Directors and to welcome you all to McDonald's Corporation's 2021 Annual Shareholder Meeting. Thank you for joining us today. We at McDonald's hope that you and your loved ones are safe and healthy. I now call this meeting to order. On your screen, you can see the agenda for our meeting today, Thursday, May 20. Information about meeting conduct standards and procedures can be found in the meeting materials box on your screen. Captioning is also available and can be turned on below the video player. Also attending the meeting are the McDonald's Board of Directors, our Chairman Emeritus, Andy McKenna. Director, President and Chief Executive Officer, Chris Kempczinski, who will offer remarks later in the meeting; and Executive Vice President, General Counsel and Corporate Secretary, Desiree Ralls-Morrison. I'll first provide a few comments before we turn to the presentation of the proxy proposals and hear from Chris. This time last year, we discussed the unprecedented challenges presented by the pandemic, causing unimaginable disruption to daily life and shaping a different world for our business and society. The challenges we faced at that time only intensified throughout the year. And since then, our world and our communities have been tested in ways like never before. How the McDonald's system has adapted to this new environment reinforces my belief that this company has the leadership, the resources and the strategic vision to overcome just about anything. It confirms the important role that McDonald's plays in communities, locally and globally. These challenges have also reaffirmed the core values and principles that apply to employees at every level of the company. When the Board was made aware of new allegations regarding additional misconduct by the company's former CEO, the Board quickly and unanimously took further action, freezing accounts, continuing the seamless transition to a new leader, Chris Kempczinski, and bringing in new members of the leadership team who have reemphasized our values, the backbone of our brand. These actions set a clear signal that this misconduct, which clearly deviated for McDonald's values, would not be ignored. And we remain steadfast in our commitment to always operate with this mindset and to use our values as our guide. This past year, we did not simply settle for navigating challenging circumstances. Instead, we moved the business forward. We entered 2020 in a strong financial position, and the brand was well positioned to manage through the pandemic. All 3 legs of our stool remained focused on protecting the health and safety of our people and our customers while continuing to serve our communities. As a result, the business delivered nearly $20 billion in revenues and more than $90 billion in system-wide sales in 2020. These are significant results in a historically difficult year. In addition to the unwavering dedication of the McDonald's System, the company's performance last year benefited from the deep experience and diverse perspectives represented across our Board and the senior leadership team. Our Board has been actively involved in overseeing management's response to the pandemic. And it's our view that Chris and his leadership team have skillfully stewarded McDonald's through the most challenging period in our history. We've been guided by McDonald's redefined purpose and refreshed values, which are central to the brand's bold growth strategy, Accelerating the Arches. And we took decisive steps throughout the year to further strengthen our leadership. This includes the appointments of Desiree Ralls-Morrison as General Counsel and Corporate Secretary; Heidi Capozzi as our Global Chief People Officer; and Katie Fallon, to lead our new global impact team. As well as the promotion of Alistair Macrow, to Global Chief Marketing Officer; and the selections of Reggie Miller as Global Head of Diversity, Equity and Inclusion; and Tiffany Boyd as U.S. Chief People Officer. Bolstered by these talented appointments and a new holistic growth strategy rooted in our values, McDonald's is writing its next great chapter. On behalf of the Board, I would like to offer my deep gratitude to every single member of the McDonald's System, from our company's employees to our owner operators and their crew members and our suppliers for their tireless efforts, particularly in the past year. Their dedication to our brand, customers and communities in such challenging circumstances reinforce the Board's confidence that McDonald's is well positioned to thrive both in the near term and beyond. At this time, I will turn to our General Counsel, Desiree Ralls-Morrison, to describe our procedures for the business of the meeting.

Thank you, Rick. I have been advised by Broadridge Financial Solutions, our inspector of elections, that a quorum of the company's shares outstanding is present to conduct the meeting. Broadridge has joined the meeting as well as a representative from our independent auditor, Ernst & Young LLP. If this meeting ends unexpectedly before the polls close and we are unable to reestablish the webcast within 30 minutes, the meeting will be adjourned to a new date and time. The polls are now open. Shareholders who logged in using their control number may vote online. If you voted before the meeting, your vote has been received. You do not need to vote now unless you wish to revoke or change your vote. If you have not already voted your shares, please vote using the online ballot on your screen. The polls will close following the presentation of the proposals. Broadridge will receive and tally all the votes. As Rick mentioned, you will find the meeting agenda and meeting conduct standards and procedures in the meeting materials box on your screen. Here is our order of events. The Chairman will introduce each proposal and the presenters of the shareholder proposals. The presenters will be asked to present their proposals in 2 minutes or less. We respectfully request that their remarks be related to the proposal they are presenting. Preliminary voting results will be announced following the presentation of the proposals and after the polls close. Official results will be filed on a Form 8-K with the SEC and posted on our corporate website. Following the meeting and the CEO's remarks, I will facilitate a question-and-answer session. [Operator Instructions] Similar questions may be combined so that we may answer questions on a variety of topics. Due to time constraints, we may not be able to answer all questions. All questions and answers relevant to the meeting matters will be posted to the Investor Relations section of our website after the meeting. I will now turn the meeting back to our Chairman for the presentation of the proposals. Rick?

Thank you, Desiree. Our first order of business is the election of the following directors: Lloyd Dean, Robert Eckert; Catherine Engelbert, Margaret Georgiadis, myself, Chris Kempczinski; Richard Lenny, John Mulligan, Sheila Penrose, John Rogers Jr., Paul Walsh and Miles White. The second item is an advisory vote to approve executive compensation. The third item is an advisory vote to ratify the appointment of Ernst & Young LLP as independent auditors for 2021. The fourth item is an advisory vote on a shareholder proposal requesting a report on sugar and public health. The fifth item is an advisory vote on a shareholder proposal requesting a report on antibiotics and public health costs. The sixth item is an advisory vote on a shareholder proposal requesting the ability for shareholders to act by written consent. Before I call the speakers to present their proposals, I want to reiterate that in accordance with the stated meeting conduct standards and procedures, we request that the proponents limit their remarks to the presentation of the proposals and keep their presentations to the 2-minute limit. At this time, I call on Mr. Terrence Wise, who will present proposal #4 and an advisory vote on a shareholder proposal requesting a report on sugar and public health. Mr. Wise, in 2 minutes or less, please?

Good morning, good morning. Good morning, CEO Kempczinski, trustees and shareholders. My name is Terrence Wise, and I'm proud to be here representing Harrington Investments and proxy item #4 [ TK ], a proposal that will require McDonald's to level with the investors about the harms of its sugar saturated products. This is a resolution that is growing support from your partner, Coca-Cola as well as Pepsi. Our breadth at McDonald's is having trouble finding workers to sell those sugary drinks. Well, yesterday, McDonald's workers in 15 cities across the U.S. went on strike with one simple solution to the problem: Pay us $15, respect our right to union. Now how does this relate to an issue on reporting McDonald's business and sugar saturated products? Target promotion of these products to kids and children of color in particular, and levels with the stakeholders about all the harms of the all the above mention. Well, in every way, we continue to exploit workers by paying poverty wages, when you yourself have acknowledged that higher wages, the corporation will be doing just fine. When a company like McDonald's worsens health in equities during a pandemic, someone has to pick up the tab, and it's our workers and customers that are dying. I've been homeless, had to go through nights of hunger with my kids, and you should never have to do that when you live in the United States of America. McDonald's doesn't value the health of the people it serves, its workers and the customers. But it can and must change. When shareholders vote yes on this resolution, they will be demanding a culture shift at McDonald's. For the corporation to absorb, as it says it can, the cost of doing business. By paying its workers $15 an hour and making clear the high...

Mr. Wise. Mr. Wise, you have used your 2 minutes. Can you please come to a close.

Oh, yes. Everyone who works and lives in this country deserves to be healthy.

Mr. Wise. I'm sorry, we have to move on to the next proposal. Thank you. Thank you, Mr. Wise. The fifth item is an advisory vote on the shareholder proposal requesting a report on antibiotics and public health costs. At this time, I call on Ms. Sarah Murphy, who will present proposal #5. In 2 minutes or less, Ms. Murphy.

Thank you. Shareholders request that the Board report on the environmental and public health costs created by the use of antibiotics in McDonald's supply chains, which contributes to the growing problem of antimicrobial resistance or AMR for short. AMR is a serious systemic threat to the global economy. The increase in AMR arising from overuse of antibiotics has been projected to cause up to 10 million deaths annually and to decrease global GDP by almost 4% by 2050. That's a terrible deal for McDonald's diversified shareholders, because a healthy global economy is the key driver of long-term investment success and a far greater value booster for diversified portfolios than the profits of any one company within those portfolios. Healthy systems supersize portfolios, not individual company returns. Yet McDonald's provides shareholders no information on the cost it externalizes or the risks it creates for the global economy by sourcing animals treated with antibiotics. Yum! Brands, the company that owns competitors pizza Hut, Taco Bell and KFC has agreed to prepare the requested report. McDonald's current disclosure on AMR is siloed and vague and provides no information as to how much the business is contributing to the growing AMR crisis or how that contribution could be reduced. The request of report will address the full true costs of antimicrobials in McDonald's supply chains, and will illuminate the gap between the company's current efforts and what it could do if it chose to optimize for public health outcomes and thus for its diversified shareholders' broad portfolio returns. This proposal has this public support of Amundi Asset Management and Legal and General Investment Management, among others, with combined assets under management of more than $3.9 trillion. Please join them in voting for item 5.

Thank you, Ms. Murphy. The sixth item is an advisory vote on a shareholder proposal requesting the ability for shareholders to act by written consent. At this time, I call upon Mr. James McRitchie, who will present Proposal #6. Mr. McRitchie, again, 2 minutes or less.

Thank you. Reading the presentation of John Chevedden, shareholders request that our Board of Directors take the necessary steps to permit written consent by the shareholders entitled to cast a minimum number of votes that would be necessary to authorize an action at a meeting. If you have voted against this proposal, please consider changing your vote now before the polls close, which is going to be very, very shortly. I won't give you time after I present. This proposal topic won 42% support in 2019 Annual Meeting, which is pretty close to the number of shares that had proxy voting advice. Unfortunately, most small shareholders don't have access to objective proxy voting advice. Management is getting a free ride because those shareholders are forced to rely on self-serving management recommendations. The 2019 proposal did not point out that Mr. White, Chair of the Governance Committee, was apparently ignorant of the basic fact that written consent can be structured so that all shareholders get notice of a proposed action, plus Mr. White may not know that written consent would require a 73% approval from the shares normally voted at McDonald's. How can a 73% vote represent special interest? Management promotes the fallacy that shareholders should be complacent about improving management accountability to shareholders with this proposal simply because we have an average list of standard governance practices that a lot of other companies have. And management now suspiciously claims that it's more in favor of a special shareholder meeting at a time that shareholder meetings are losing their impact. For instance, the Kohl's annual meeting last week was held in 9 minutes. Written consent is a super-democratic process.

Okay. Thank you, Mr. McRitchie. The Board of Directors recommends a vote in favor of the election of all director nominees, in favor of approving executive compensation, and in favor of the ratification of Ernst & Young LLP as independent auditors for 2021. The Board recommends a vote against the 3 shareholder proposals. The reasons for the Board's recommendations are outlined in the proxy statement. If you are voting at the meeting, please complete the online ballot. Again, if you have already voted, you do not need to vote online but -- or submit an additional ballot. Okay. The polls are now closed. The preliminary results are as follows: Shareholders have elected each of the director nominees. Shareholders have approved the advisory proposal relating to executive compensation. Shareholders have approved Ernst & Young as the company's independent auditor for 2021. The advisory vote on a shareholder proposal requesting a report on sugar and public health has not been approved. The advisory vote on a shareholder proposal requesting a report on antibiotics and public health costs has not been approved. The advisory vote on a shareholder proposal requesting the ability for shareholders to act by written consent has not been approved. Again, The final voting results of today's meeting will be reported on a Form 8-K filed within 4 business days of this meeting. This concludes the formal business of the meeting, and the Annual Shareholders Meeting is adjourned. It's now my pleasure, my privilege, to introduce McDonald's President and CEO, Chris Kempczinski.

Thank you, Rick, and thank you to the Board of Directors for your ongoing partnership. It's a pleasure to be with all of you today. As ever, we sincerely appreciate everyone listening in and participating. And to all our shareholders joining online, we are grateful for your investment and your continued belief in McDonald's. We're a stronger brand for the challenges we have faced together in the past year. We also recognize that we're not at the end of the road when it comes to addressing the effects of the global pandemic. McDonald's would not have been able to serve our communities and deliver such a strong performance last year without harnessing the strength of our system and ensuring our values guide everything we do. Our success will depend on continuing to operate as a values-driven system. We will also continue to prioritize the safety of restaurant crew and customers, leverage the power of our supply chain and support our local communities in the best way we know how: by making delicious, feel-good moments easy for everyone, even when times are tough. Despite of the many challenges of the past year, McDonald's made significant progress. We introduced our growth strategy, Accelerating the Arches, and articulated a clear vision for how we intend to make a difference in the world. We also refreshed our core values that serve as the backbone of our brand. Together as a McFamily, we put our customers and people first. We do the right thing. We're good neighbors, and we get better together. Our fifth and last core value is focused on inclusion and the fact that we open our doors to everyone. We've made a foundational promise to all those who work under the Arches to provide a safe respectful and inclusive workplace, a critical commitment as we promote equitable opportunity throughout the system. Last summer, we set a global aspiration to use our influence and scale to accelerate meaningful and overdue societal change for our employees, franchisees, suppliers, customers and communities. Backed by real action across the McDonald's system, our aspiration is to ensure no hiring bias where barriers exist for underrepresented populations in order to increase the diversity of our leadership. We're going to enhance efforts to attract and recruit diverse franchisees. We're going to eliminate any potential barriers for diverse suppliers to enter the McDonald's system. We're going to assess our advertising and restaurant experiences to ensure they reflect the needs of all of our customers. As a result of this mutual commitment to diversity, equity and inclusion, this February, we established goals to increase women in leadership roles, to increase representation of historically underrepresented groups in leadership, and to hold leaders accountable for these goals and adherence to the company's values through annual compensation metrics for me and other members of my executive management team. Our restaurant crew and managers are the heart and soul of McDonald's, and they continue to deliver exceptional hospitality to their neighbors in these challenging times. Last year, we enhanced our benefits across U.S. McDonald's on restaurants. To promote the health and safety of employees and communities, we implemented paid time off for COVID-19-related reasons and offered additional paid sick days. We also continue to offer our industry-leading college tuition assistance program. In April, we announced global brand standards to reinforce a culture of safety and inclusion for everyone under the Arches, standards that all 39,000 McDonald's restaurants across the globe will be required to uphold. And recently, we announced that we are taking further action to recognize and reward hard-working restaurant employees at McDonald's owned restaurants. McDonald's will raise hourly wages for more than 36,500 crew and managers at U.S. McDonald's owned restaurants by an average of 10%. The entry-level range for crew will shift to at least $11 to $17 an hour, and the starting range for shift leaders will move to at least $15 to $20 an hour based on restaurant location. This reflects our commitment to offering industry-leading pay and benefits packages. I'm so proud of how our system has come together. With Accelerating the Arches as our guide, we are driving real change and making progress against bold business objectives guided by 3 growth pillars. We call them our M, C and Ds. With M, We're making strategic investments to maximize our marketing, staying relevant and connecting with our customers. With C, we're committed to our core menu, making the burgers, chicken and coffee our customers love even more delicious. And with D, we're doubling down on digital, delivery and drive-thru, what we refer to as the 3Ds. In 2020, digital sales exceeded $10 billion or nearly 20% of system-wide sales across our top 6 markets. Over the past 4 years, we've gone from just over 3,000 restaurants offering delivery to now more than 30,000 restaurants. That's 75% of our global footprint. We've continued to improve drive-thru service times, putting more emphasis on operations and reducing menu complexity. And we have 40 million active app users in just our top 6 markets and millions more around the world. Our investments in this space were a difference maker for us when the pandemic hit and remain at the heart of our combined efforts to create a faster, easier and better customer experience. The real power and impact of our growth pillars comes to life not in isolation, but by complementing each other. When activated together, the MCDs can have an incredible impact for our customers and the business. Our Famous Orders campaign, which launched in the U.S. last year and recently went global is one tangible example. We've taken the universal insight of everyone's unique go-to McDonald's order. We're celebrating our fans love of the core menu and bringing it to life through fun digital activations. Whether it's through successful programs building on the strength of core menu and equities or piloting new programs, we continue to deepen our connection with customers and create a consistent and enjoyable experience. This spirit to succeed, innovate, connect and convene, it all ladders up to our purpose: to feed and foster communities. We are privileged to be a central part of the thousands of local communities where we live, work and serve. Together with our customers, crew, farmers, franchisees, suppliers and key external stakeholders, we're making progress in the areas in which we can have the greatest impact. This includes food's quality and sourcing, our planet, our community connections and jobs, inclusion and empowerment. We've continued to support communities during this immense time of need, providing free meals to millions of frontline workers, donations to medical establishments around the world. And we're now working with the U.S. federal government to help promote COVID-19 vaccination education across the communities we serve. We're scaling our sustainability practices to improve the resilience of our global food supply chain, protect the planet and support farmer livelihoods. We're progressing against ambitious goals around packaging and recycling to help advance a circular economy and address concerns about plastics. We're broadening our renewable energy portfolio, catalyzing significant investments in the U.S. and abroad that are adding more renewable energy to the whole power grid. And we're pushing the boundaries when it comes to innovation, testing new restaurant concepts like our net zero energy-designed restaurant in Orlando, Florida, that will serve as a learning hub and showcase solutions to scale. With the passion of all 2.2 million McFamily members across the system and the guidance of our experienced Board and very talented senior leadership team, I am confident that we are taking the necessary actions to ensure that we are prepared for an ever-evolving business landscape. And I am certain that the future is very bright for the Golden Arches. Thank you for your continued support.

We'll now begin the question-and-answer portion of the meeting. We received numerous questions and comments in advance of the meeting and have received many others during the meeting as well. As I mentioned at the top of the meeting, we've grouped together questions and comments that are substantially similar, so Chris and Rick can get to a variety of topics. So let's get started. Chris, we received several questions about the status of reopenings in specific U.S. cities. What is the status of McDonald's dining room reopenings?

Thank you, Desiree, and thank you for the question. As you saw with the values, one of our first values, the first value, is that we put our customers and people first. And that means that we have to prioritize their safety. I've been really proud about how, through the pandemic, we have changed our restaurant configuration. We've gone to more limited menus to allow social distancing. We've leaned into things like curbside pickup, drive-thru. All of that has been designed to help keep our customers and help or keep our crews safe. And that's going to be what continues to guide us. We're certainly working and looking at local changes as those are being announced as more people get vaccinated. And I'm confident that over the next several months, we're going to be able to start opening up more and more of our dining rooms to provide the customers with that fantastic McDonald's hospitality that they're used to. So I think this is going to be something that's flexible, but I do expect you're going to see over the next several months, more and more of our restaurants coming back online in the United States.

Thanks, Chris. Our next question is, can we see more women and better representation on the Board to match the core of our employee base? How is the Board working to increase its diversity? Rick, I'll direct that one to you.

Thank you, Desiree. Well, let me first say that inclusion is a core value for the company as a whole. Inclusion provides a diversity of views, a diversity of thoughts, broad experiences and on the Board of Directors, that's particularly useful. It's kind of part of the fabric of the company. So if you were to go back and look at the McDonald's Board over the past decades, you would see that we have had women and underrepresented minorities on the board for literally decades. So while this is a topic that many people are talking about now, it is actually part of the fabric and the long-standing history and something that we're very proud of at McDonald's. So it's something that not only do we talk about, but that we practice. If you look at the Board that was just reelected, 50% of our Board -- of the independent members of the Board are gender, ethnic or racial minorities. I mean it's a good statistic. So when we talk about improving representation on the Board, we have a strong Board and it's very diverse now. One of the reasons for that is that in 2020, we had just -- we formalized some selection criteria for new Board members, which means as we look into the future, you can anticipate that, again, we will include diversity within the Board as an objective and something that we actually accomplish.

Chris, this next question is for you. What is McDonald's position on weighing in on political and societal matters?

Well, it's certainly a hot topic and has been getting a lot of discussion, particularly here in the United States over the last, call it, a year or so. For us, I think there's 2 things that are going on here. The first is that we're seeing, as it was evidenced in the most recent Edelman survey around customer trust, corporations are among the most trusted institutions in society. And I think the second thing that we're seeing is that both customers as well as employees are looking to make sure that the companies that they support, the companies that they work for, that their values align with the company's values and just that the 2 were in sync there. And so I think that's driving this discussion about where companies should weigh in. As far as how we think about it, it's all guided about making sure our brand continues to be among the most respected and admired brands in the world. And so what that means is that everything, what we do, where we speak out has to be rooted to either our business, our values, or the key pillars of our corporate social responsibility platform. And so you did see, for example, on Black Lives Matter, which goes to the heart of inclusion, one of our values that we came out and made a statement in that regard. You'll also have seen most recently that I made some statements related to climate change and our support for being part of the solution to help reduce greenhouse gas emissions. That goes to one of the key pillars in our corporate leadership platform, which is around protecting the planet. On many other topics, we have chosen not to speak out because they don't align with either our business, our values or the corporate leadership platform. So I think at the end of the day, McDonald's is a brand that is open to everybody. We support everyone. We don't pick sides. But we will speak out in instances where our voice can be helpful and where it goes squarely with either our business interests or the values that we stand for.

This next one, related to antibiotics, is also for you. The question is, what should customers know about antibiotics in our products?

Thanks for this question. I think certainly, we recognize that antimicrobial resistance is of great concern. It's a great public health concern that we all need to be attuned to. At the same time, we need to balance that concern with also our responsibility to make sure that we treat animals humanely. And so our approach, our policy on this is really about responsible use. We don't want to be over using antibiotics, but we also believe that sick animals do deserve the same types of treatment that are afforded to human beings. And so we have, working with veterinarians, prescribed with our ranchers and farmers a set of protocols that we have that will treat sick animals. But what we don't allow and what we don't have in our supply chain is the use of antibiotics that in any way prevents disease or is designed to promote growth. So we feel like that's the right balance of being humane to animals, but also recognizing the importance of protecting people's -- the effectiveness of antibiotics.

We received a number of comments on the dividend. Chris, does the company intend to issue a dividend this year?

The short answer is yes, just as we have for the last 45 years. And in fact, I'd go even one better. For the last 45 years, every single year, we have increased the dividend. When we think about our capital priorities, obviously, the first priority is about making sure that we can fund the business and drive its growth. But the second priority for us is the dividend. And so I think our track record through the pandemic where our business was under tremendous stress, we continued to pay the dividend. In fact, we announced a dividend increase last year as we were still in the middle of the pandemic. And that just speaks to the strength of the McDonald's system, the strength of our balance sheet, and that's going to continue to be a strategic advantage for us going forward. But as to the dividend, it's an important part of the McDonald's value proposition of shareholders, and you can expect it to continue.

We received a comment that addressing sexual harassment in the workplace and the culture that fosters it should be a top priority. Chris, what is McDonald's doing to take action on the issue?

Well, I absolutely agree. It's a top priority. And I think it starts with tone at the top, and that's something that I, as CEO, take very seriously. I need to set the right tone at the top that we will absolutely not allow sexual harassment of any kind in the workplace. And that's something that we've cascaded down through our own organization. As I announced in my prepared remarks, we've also gone one better in that we have introduced a set of global brand standards that now extends to our franchisees and the 39,000 restaurants that we operate with our system around the world. And those brand standards are going to govern harassment and discrimination. They're going to just cover workplace violence. They're going to include health and safety and, of course, sexual harassment. So this is something that we take very seriously. Beginning in January of next year, we're actually going to be assessing and making sure that all of our restaurants are upholding these standards because it's just so important and vital to our success as a business.

We received a number of questions and comments about executive compensation, particularly in the midst of a pandemic. Rick, can you speak to that?

Sure, Desiree. I guess there's 2 parts to that question. One part would have to do with compensation and then particularly with regard to the pandemic. Let me kind of describe how the compensation process works for executives, including Chris. So we have a compensation committee within the Board. It's all independent directors. The Compensation Committee is guided with and provided support by independent consultants. And the challenge that they have is that we're trying to attract the very best talent to our company. In fact, during earlier parts of this meeting, we talked about some of the new people who come into the company. We're not the only company that wants to attract the best talent in the world, really, to move our brand forward. We are competing with others. And so we have some -- we want to set our compensation levels so that we can attract and award the best people for doing a really good job for you, our shareholders. So we have something called a peer group, and we compare our compensation levels and structures against the peer group as part of our common practice. And so that's basically how compensation levels are set. With regard to the CEO, particularly Chris, for example, it all has to do with pay-for-performance. So in Chris' case, 90% of Chris' pay is at risk. I mean, that's a tremendous amount. Think about that for many of us, that 90% of your compensation is at risk based on how the business does. That extends to the executive group as well. And so there's very strong kind of motivation, financial motivation, compensation motivation for them to do a very good job. So with regard to how this kind of structure worked during the COVID crisis, look, again, Chris just mentioned a moment ago that kind of starts with the top. You kind of lead by example. Chris took a 50% salary reduction. And so did the other leaders, who took 25% salary reductions during portions of 2020, in April, when this thing started. Again, there were no payouts under the 2020 short-term incentive plan in 2018 to 2020 for performance-based RSUs that were awarded to execs vested at 0. Employees below the executive level received portions of their annual bonuses, but the executives themselves did not. So what I'm describing to you is kind of a structure, a carefully thought out way of attracting really good people and then the compensation committee working to adjust to the times, to the challenges that are ahead, and I think they've done an outstanding job. So as we go forward, executives are measured on quantitative metrics. They're also measured on how they carry out our core values. Chris described how individual compensation will be affected by incorporating these values as we go forward. So I think we have a relatively sophisticated but certainly a successful method of compensating people that is cognizant of the world around us and how it's -- how the world is changing and what we need to do. Thank you.

Thank you, Rick. Chris, what is the company doing to add more healthy choices to the menu?

Thanks, Desiree. Well, it starts as does everything in our business with listening to our customers. Our menu reflects the wishes and preferences of our customers. And so you'll see, in a number of markets, we always are continuing to offer new items that meet some of those healthier needs. McSpicy Paneer is something that we've launched recently. Veggie Dippers is another one. And that's going to be part of just how we operate. We're leaving it up to the markets to meet the needs of their customers. We've also, as I would remind you, announced several years ago, a number of changes that we've done with Happy Meals, where we've put into it more options for things like fruit, vegetables, low-fat dairy. We've created a water option as a drink. That also was part of a commitment that we made with Happy Meals to reduce the amount of sugar, added sugar in that by 1.4 grams, which we're well underway with. And then lastly, as I announced back at the end of last year, we also are making available for markets to pull down, at their discretion, McPlant, which is a plant-based protein that we've developed. That's another part of our commitment here. So I think for us, our business lives and dies on meeting the needs of customers. And I think we've shown, over time, our ability to offer a great suite of menu options that meet both healthy needs as well as perhaps an indulgent need with a McFlurry if someone wants to celebrate a special event.

Thank you, Chris. Our next question is when is McDonald's going to pay all employees at least $15 an hour? Chris, can you answer that one?

Sure. I think the question is probably most focused on the U.S. So I'm going to give my answer focused on the U.S. And as I said in my prepared remarks, we announced, just recently ,an increase for all 36,500 crew who work in our U.S. company-owned restaurants to an average pay increase of 10%. And that means that if the starting wage in our restaurants is going to range from anywhere to $11 to $17 depending on what part of the country you live in and the cost of living associated with that. That announcement also sets us on a path to be able to be at an average wage of $15 by 2024. And so I'm really proud about the progress, the announcement that we've made on this. And I would say what we've announced, while it's limited to company restaurants, many of our franchisees are already well within the range of what I've described. And for others who maybe aren't, I think our announcement serves as a template and certainly, what we're seeing out there in the market, we need to have the best people. And I know our franchisees are committed to offering a pay and benefits package that will ensure that we remain one of the leading companies in our space in terms of what we offer crew.

We have another question for you, Chris. How does McDonald's think about ESG and the environment in our decision-making?

Sure. So on this topic, we announced our corporate leadership platform, which has 4 pillars to it. The first is about supporting farmers and ranchers, particularly at the local level. The second is about creating jobs and opportunity. The third is about supporting our communities, particularly in times of crisis as we do with things like the Ronald McDonald House. And the last is about protecting our planet. We, McDonald's, believe that addressing the issue of climate change is central to our business success. And so we've done a number of things over the years to make sure that we are part of the solution on that. It started with our announcement that we would meet the Paris Treaty challenge of reducing our carbon emissions by 30% by 2030. It also goes to announcements that we've made around renewable energies. In the U.S., we're going to have about 8,000 of our restaurants powered by renewable energy. We have 9 countries in Europe that will be powered by renewable energy. And we've also done a number of things around packaging, both sustainable packaging as well as recycling, to ensure that we are part of the solution. And again, it goes back to -- this is what our customers are expecting us. Our customers are attuned to the issue of climate change. They are attuned to the issues of single-use plastic. And we, as a corporation, have an obligation to make sure we're doing our part to be part of that solution.

Thank you. That brings us to the end of the meeting. Chris?

Yes. Well, thank you for joining us. Thank you for your support. We've certainly appreciated all the feedback that we've gotten over the last year, and I think you can be proud about how your company has navigated through the pandemic. And as I said in my remarks, I'm incredibly optimistic about the future ahead of us. So thank you for tuning in.