McDonald’s Offers Executive Bonuses to Meet Diversity Goals

Following a string of recent discrimination lawsuits, McDonald's has pledged to increase the representation of historically underrepresented groups in roles at the senior director level and above to 35% by the end of 2025, according to a Thursday announcement. The chain also aims to grow representation of women in leadership roles to 45% in 2025, and to reach gender parity in leadership by the end of 2030. 

McDonald’s ‘Allyship Through Accountability’ Incentive

To help achieve these diversity goals, the company is attaching 15% of executives' annual incentive bonuses to "human capital metrics," McDonald’s said in an email to 1851. This means that in addition to the company’s financial performance, executives will be measured on their ability to improve representation within leadership roles for both women and underrepresented groups, the company said. 

"We're serious about holding ourselves and our leaders accountable to these foundational commitments, and doing so with respect to local regulations and employment laws around the world," CEO Chris Kempczinski shared in a letter Thursday. "That’s why we are adding annual targets designed to meet these five-year goals to our annual compensation incentive metrics for Executive Vice Presidents. These targets are endorsed by our Board of Directors and extend to our most senior leaders — including me."

Kempczinski has stated from the beginning of his tenure at McDonald’s that he intends to create a more inclusive culture, but the chain has continued to see consistent accusations of racism since he came onboard in late 2019. 

McDonald’s Recent Discrimination Lawsuits

These hiring targets come just a few days after former Oakland A’s player and multi-unit McDonald’s franchisee Herb Washington filed a lawsuit against the Chicago-based burger giant claiming the company forced him to sell a number of his restaurants to white owners. 

Washington also accused McDonald’s of preventing him from purchasing more locations in suburban areas, raising the rents in Cleveland locations shortly after he bought them in 2007 and “pigeonholing” him into operating poorly-performing stores. 

McDonald’s has been in a growing number of lawsuits claiming similar racial discrimination against Black franchisees and Black employees, with Washington’s being the third discrimination lawsuit filed from McDonald’s operators within the past several months. The first was filed in September by over 50 former Black franchisees, and the second filed in October by a pair of existing franchisees in Nashville. 

Dr. Marcia Chatelain, author of Franchise: The Golden Arches in Black America, notes that these lawsuits are a prime example of McDonald’s complicated relationship with Black entrepreneurs and disenfranchised communities.

“On one hand, since 1968, McDonald’s has successfully recruited and promoted African-American franchise owners as well as African-American executives and managers within its corporate structure,” Chatelain told 1851. “The fundamental problem with that is that even while McDonald’s has been a space for the creation of opportunities for Black franchisees, there has been inequality in the distribution of resources to support and maintain the store owners.”

Each of the three recent lawsuits all argue that McDonald’s drove Black franchisees into poorly-performing, crime-ridden markets that are more expensive to operate than the markets offered to their white counterparts. The operators also quote figures from the National Black McDonald’s Owners Association, which claim Black operators’ cash flow was $700,000 lower than the system average in 2018. 

“There have long been formal and informal accusations of limiting Black franchisees to certain areas or creating more barriers for success within the system,” Chatelain noted. “Hopefully this time around McDonald’s will not only do justice to franchisees but also feel inspired to make sure that all of its workers of color are treated with respect and dignity.”

How Brands are Promoting Diversity  

Although McDonald’s consistently denies these allegations of discrimination, it has also publically recognized the need to improve the culture of diversity within its system. In November, the company hired Reginald Miller as its new global chief diversity and inclusion officer. In July, the chain publicly pledged to bolster diversity within its system, including an effort to recruit diverse franchisees and suppliers.

In October, Starbucks announced that pay for senior vice presidents and above will be linked in part to diversity metrics as the company aims to achieve BIPOC representation of at least 30% at all corporate levels and at least 40% at all retail and manufacturing roles by 2025. Last summer, Yum! Brands also committed to “increasing representation of Black, Latinx, people of color and women among executive and management ranks, franchisees and suppliers” over the next five years. 

“If a franchise or franchisor really wants to uplift a Black community, the way they do that is for leadership to support policies for universal healthcare, pay living wages, make sure their workforce has access to such important resources as paid sick leave and child care benefits, and other benefits that working people deserve,” said Chatelain. “As long as the franchise industry adheres to business practices that hurt workers, they can never fully uplift the communities in which they draw their employees and customers.”