Talking Points: Clawbacks

By Jane Zeis, McDonald’s Corporation

How did the idea of a Clawback come about?
a. Clearly “best practice” was to implement a clawback provision as evidenced by many other Companies
b. EVP – HR suggested that we put together a team to discuss a clawback provision and develop a recommendation
c. Team consists of members from both Global Compensation and Legal departments
What items were considered in developing the Clawback recommendation?
a. Greatest concern was how to make the clawback provision enforceable
b. Difficult decision was who should be affected by the clawback

i. Clearly Top Management should be included (approximately 60 executives) and inclusion of a clawback provision in our Cash Performance Unit Plan (CPUP) was needed
ii. Much discussion around including a clawback provision in our annual incentive program which is a broadbased program for individuals from around the world
iii. Also suggested that a clawback be implemented in our global equity program – technically this is challenging as over ½ of our LTI recipients are outside the U.S.

c. Wanted to make sure that reasons for a clawback were all inclusive thus current clawback provision in CPUP includes:

i. Violation of confidentiality, non-solicitation, non-competition or similar restrictive covenant
ii. Engagement in willful fraud that
iii. Detrimental Conduct – defined as acting contrary to the long-term interests of the Company
What was the outcome of our discussions and what are the next steps?
a. Currently we have a clawback provision in our Cash Performance Unit Plan

i. 2 year clawback after the end of the performance period
ii. Determination of detrimental conduct determined by Company
iii. Repayment due within 10 days after being served a Recapture notice

b. Clawback provisions have not yet been added to our Annual Incentive Plan or Equity Plan – working on this for 2008
c. Compensation Committee approved the CPUP Plan and was informed of the clawback provision