McDonald's CEO Speaks Out on Employee Pay

While thousands of fast food workers around the country are protesting how little they are paid, McDonald's (NYSE: MCD  )  CEO Donald Thompson defended his company's pay practices at the fast food giant's annual meeting Thursday.

With hundreds of protesters appearing outside the meeting Thompson told the crowd inside that the company has a heritage of providing job opportunities that lead to ''real careers.'' 

The protest at the annual meeting came a day after protesters began staking out the company's headquarters in Oak Brook, Illinois. Those protesters stormed through an entrance to one of the company's campuses holding signs that said, "We Are Worth More" and "My Union My Voice," according to Bloomberg.

The financial news site reported that the event organizers pegged the number of protesters at around 2,000 with more than 100 getting arrested for trespassing. The protests outside the annual meeting involved hundreds of people.

McDonald's has been a target

These protests come at a time when fast food workers around the country have been staging strikes to demand higher wages. Though protesters have targeted other chains, McDonald's has been a key target of the worker movement due to the sheer size of the company.

McDonald's protest issues began in 2012 when demonstrations seeking a $15 an hour wage started in New York City. That number came up again Thursday as chanters outside the shareholders meeting yelled ''I want, I want, I want my $15.''

Shawn Dalton, who traveled from Pittsburgh, told the Associated Press that her daughter is a recent high school graduate who can't afford to go to college right away so she'll likely wind up earning Pennsylvania's $7.25-an-hour minimum wage.

''That won't get her an apartment, that won't buy a bus pass, that won't buy food,'' Dalton said. ''She'll either have to depend on welfare or depend on me.''

Inside the meeting Thompson was not buying what the protesters were selling. "We pay fair, competitive wages ... and we provide job opportunities and training for those entering the work force. We're trying to be a really great employer," he said.

The wage issue is an especially challenging one for McDonald's as both side of the argument are correct. Protesters are right that most McDonald's workers make a wage that it's awfully hard to live on. Thompson is also right that his company provides a career path and opportunities to countless employees who would not have them otherwise.

McDonald's faces a war on multiple fronts

The wage controversy comes at a time when McDonald's has been battling slumping U.S. sales as the chain loses customers both to fast casual competitors like Chipotle (NYSE: CMG  ) and the fact that families with children are eating out less often in general (which I wrote about for the Fool here). The fast food giant also faces an assault on its lucrative breakfast business as Yum Brands's (NYSE: YUM  )  Taco Bell franchise has aggressively targeted the burger chain in its effort to win market share in the morning

McDoanld's has a 25% market share of the $50 billion fast food breakfast market, according to market researcher Technomic

While it faces all those issues McDonald's is also facing a backlash over how healthy (or unhealthy) its food is -- specifically in regards to its children's meals. Efforts to fix that include the recent introduction of yogurt as an option in Happy Meals. The company also recently introduced a new mascot -- Happy -- a talking take on its Happy Meal box that has received a very mixed reaction. Though the goal of the mascot is educating children on making healthy choices, that fact has been lost under the ocean of Twitter and Facebook posts that find the character creepy.

 

Like with the issue of employee pay, McDonald's has faced a backlash even when it tries to do the right thing. Certainly the company sells unhealthy food but it also sells the food kids like to eat. Adding yogurt and apple slices as alternatives to fries may not be popular options but at least the chain has made them available. 

McDonald's needs to weather the storm

Thompson is correct in what he says about his company providing a path to a career both inside and outside the company. What he's not saying is that entry-level fast food jobs are not supposed to pay enough to comfortably support a family. Working for minimum wage at McDonald's should be a stepping stone either to a better job elsewhere or a higher-paying job within the fast food giant.

McDonald's promotes aggressively from within and the chain is filled with success stories where entry level workers work their way up to managers, general managers, and even franchise owners.

The protesters have a sympathetic story but McDonald's should not cave to their pressure. The free market decides whether a company needs to pay more for unskilled labor. If McDonald's franchises can't find employees willing to take minimum wage jobs because there are higher paying or more pleasant alternate opportunities, then the company will have to pay more to hire workers. Until the happens Thompson should work on helping the chain's workers gain skills and advance because that's good for the employee and the company. But he should not pay above the going rate or give in to protests.

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Read/Post Comments (13) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 23, 2014, at 12:43 PM, jesterisdead wrote:

    $15/hr?? $15/hr = $10 hamburger. When a company's biggest cost (payroll) increases, they have to raise the prices of everything, just to stay in business.

    If the best job you are skilled enough or hard working enough to do is a burger flipper at Mickey D's, you deserve to be paid lower than everyone else. The rest of us work too hard to be forced to pay for your lack of skills.

  • Report this Comment On May 23, 2014, at 1:11 PM, AFMS wrote:

    ^ exactly.

  • Report this Comment On May 23, 2014, at 2:17 PM, anash91 wrote:

    Why should they be paid more than me when I work a much higher skilled job than they do? I never worked for minimum wage in my life because I looked for work that applied to skills I had or could offer to the company. I learned other languages and became valuable, I didn't just expect to be paid more because I can't live on minimum. I get paid just over 12 an hour and I bought my own home in CA as it was the best thing for me to do for myself. I also saved up as much money as possible and don't think I have to spend every cent I get. It takes discipline. Earning a little amount of money makes one have to use it better instead of spending it all, but some people don't get that. All that and I'm only college age myself.

  • Report this Comment On May 23, 2014, at 7:13 PM, jjmaiers wrote:

    A $10/hr minimum wage would be great for McDonalds, since more people would be able to afford fast food out, so sales would increase. The profit and income from business now goes almost exclusively to management and stockholders, but if the middle class had more purchasing power (higher wages) they would buy more cars, homes, restaurant meals etc. The "crush the poor" mentality that I see above is ultimately not good for anyone.

  • Report this Comment On May 23, 2014, at 8:25 PM, malclave wrote:

    Why stop at $10/ hour?

    Make minimum wage $50/ hour and we'll all be rolling in money.

  • Report this Comment On May 23, 2014, at 10:32 PM, classic216 wrote:

    The problem isn't just that minimum wage is too low........but that minimum wage remains stagnant while INFLATION RISES. Several states have indexed minimum wage to match the rate of inflation. Why is this common-sense idea not being adopted at the federal level? Just INDEX IT to MATCH INFLATION. I realize raising minimum wage to $15-20/hour would cause prices to rise.........but raising minimum wage at the SAME PACE OF INFLATION would be very simple, fair, and rational.

  • Report this Comment On May 23, 2014, at 11:12 PM, sethro5hc wrote:

    It's sad to me that these people seem to be oblivious to the fact that if the minimum wage is doubled, not only will their living expenses go up but the competition for minimum wage jobs will as well. Employers would cut back on hours and be more selective as to who they were giving those hours to. So then, you'd have people with better resumes suddenly showing interest in these jobs. That leaves the very real possibility that if these protesters get what they want, not only would their living expenses go up but they may lose the very job they had and be worse off than before.

    There IS a problem here, and minimum wage should be increased because it stopped keeping up with inflation long ago. However, you can't do it all at once and these protestors are going about it the wrong way.

  • Report this Comment On May 24, 2014, at 9:49 AM, allans123 wrote:

    Minimum wage causes higher unemployment amongst the unskilled and low skilled among our society. What is the unemployment rate today among 16 - 22 year olds? The real unemployment rate, the U6 number (look on Wikipedia) is north of 12% according to the US Bureau of Labor Statistics.

    Eliminating the artificial floor of minimum wage will encourage hiring and thereby lowering the U6 plus decreasing a contributing factor to inflation. I oppose the minimum wage since such jobs were always meant to be transition jobs while acquiring a skill for moving up the economic ladder.

  • Report this Comment On May 24, 2014, at 12:56 PM, WallaceNDavis wrote:

    McDonald's owes you at least minimum wage, nothing more. In fact, it pays above the minimum. You knew the wages when you took the job. If you didn't you're too stupid to handle a real job anyway.

  • Report this Comment On May 25, 2014, at 7:11 AM, Mathman6577 wrote:

    A small business owner that I know once told me: "I can hire 10 people at $7 per hour or 7 people at $10 per hour (and more likely only 6)". Take your pick.

  • Report this Comment On May 26, 2014, at 12:22 AM, daveandrae wrote:

    The problem isn't the wage. The "problem" is (obviously) the supply. Economics 101. When a zillion sixteen year old high school students can do what a single twenty year old Mother of two can only do, guess what? The 26 year old Mother goes on "strike," and to her own, further, detriment.

    Sad and simple.

  • Report this Comment On May 27, 2014, at 9:22 AM, KombatKarl wrote:

    Since it's a 50/50 shot on whether the idiots at McDonald's gets my order correct, I say they don't even deserve what the DO get. We've been to Five Guys many times. I don't know if they make minimum wage or not there as well, and I know it's not technically "fast food", but they have never, not once, messed up an order for us.

  • Report this Comment On May 27, 2014, at 10:22 AM, damilkman wrote:

    I have had this discussion's with TMF contributor Alyce many times. The case study I like to use is Zingermans in Ann Arbor Michigan. The owners have been very vocal about the fact that they pay their workers much more than the minimum wage and imply that everyone else should to.

    The problem is a Zingermans lunch can easily cost 20 dollars. Also the expectation of the employees is much higher and is a reflection of the student population. These guys have an employee base representative of the top 1% of students who are the brightest and most motivated to draw upon. A kid from the projects has no chance.

    There are some entities that have very low revenue and profit margin. If you warp the cost they are either going to have to automate or change their business model to justify higher margins. But every every food front can make a living on selling 20 dollar lunches just like not all of us can buy 100K luxury cars.

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