MCDONALDS CORP

5. Compensation Setting Process

The Committee reviews our overall executive compensation program to evaluate whether it remains aligned with current business objectives and evolving best practices, including seeking feedback from our shareholders, as described in more detail below. The following highlights the Committee’s annual review process.

Input from our compensation consultant

The Committee’s independent compensation consultant reviews and provides input on overall compensation design and NEO target compensation opportunities.

Market considerations

The Committee considers peer data and market benchmarking pay data obtained from various sources.

Role of management

Management provides the Committee with its perspectives on compensation matters. No member of management is involved in decisions regarding their own compensation.

In determining the compensation for NEOs other than himself, Mr. Kempczinski provides input and recommendations on the performance of each NEO. The Committee Chair, along with our independent Chairman, leads the independent directors in the evaluation of Mr. Kempczinski’s performance. Based upon the results of this performance evaluation and informed by input from the Committee’s independent compensation consultant, the Committee reviews and approves the NEOs compensation, including Mr. Kempczinski. The Committee Chair regularly reports to our Board following Committee meetings.

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Internal Pay Equity

The Committee considers the following in determining our executives’ direct compensation opportunities: competitive pay levels; relative scope of responsibilities; individual performance; tenure in position; and the effect on our general and administrative expenses. In addition, as circumstances warrant, we may provide compensation to executives outside of our regular compensation structure in connection with their hiring, promotion, or retention (see “New Hire Compensation” below for more information related to sign-on long-term incentive awards received by Ms. McDonald and Mr. Banner). This approach permits us to meet specific business objectives without distorting pay equity. In line with our core values, our global pay principles emphasize the importance of compensation that is competitive, non-discriminatory, performance-based, transparent, and compliant with legal and regulatory standards.

Independent Compensation Consultant

The Committee has the sole authority to retain and dismiss an independent compensation consultant. The Committee has engaged Semler Brossy Consulting Group LLC (“Semler Brossy”) as its independent compensation consultant. Consistent with its Charter, the Committee regularly considers its compensation consultant’s independence. In October 2023, the Committee concluded that Semler Brossy is independent and that its work for the Committee did not raise any conflicts of interest. Management may not engage the Committee’s consultant for any purpose.

Peer Companies

Consistent with our goal of providing competitive compensation to motivate and retain executive talent, we review compensation practices and levels for a group of peer companies that we believe best reflect our business. In setting target compensation levels for our executives, we use the market median for each compensation element as a reference point; however, we do not specifically target any element of compensation at a particular percentile.

Annually, based on input from Semler Brossy and management, the Committee selects a peer group comprised of companies with which we compete for talent, including our direct competitors, major retailers, producers of consumer branded goods and companies with a significant global presence, based on the following screens:

The following table sets forth our 2023 peer group, which was the same peer group used to evaluate executive compensation decisions for 2022. The graphic below compares the market capitalization of these companies to McDonald’s.

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