Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) Compensatory Arrangements of Certain Officers
On
The target 2022 TIP awards for the Company's named executive officers, as reflected in the Company's most recent proxy statement, are as shown in the table below.
Name Position
Target TIP Award as a Percentage
of Base Salary Christopher Kempczinski President and Chief Executive Officer 200% Kevin Ozan Executive Vice President and Chief Financial 120% Officer Joseph Erlinger President,McDonald's USA 110% Ian Borden President, International 110% Heidi Capozzi Executive Vice President and Chief People 80% Officer TIP payouts will be TIP payouts will be primarily determined by the Company's 2022 performance on two key financial performance metrics: operating income and Systemwide sales (which include sales at all restaurants, whether operated by the Company or by franchisees). Each of these metrics is viewed as a critical driver of the Company's success. Operating income is a key component of the Company's strategy because it requires the Company to balance increases in revenue with financial discipline to produce strong margins and Systemwide sales is important in our franchise model because income generation is closely correlated to sales growth. We believe that Systemwide sales is also a good measure of franchisee health given our large percentage of franchised restaurants. Each of these metrics is measured on a consolidated or business segment level basis, as applicable to each individual. For Messrs. Kempczinski and Ozan andMs. Capozzi , the payout will be based on consolidated performance. ForMr. Erlinger , the payout will be based on a combination of the performance ofMcDonald's USA and consolidated performance, and forMr. Borden , the payout will be based on a combination of the performance ofMcDonald's international markets and consolidated performance. In addition to the above financial metrics, 2022 TIP payouts to the named executive officers listed above will also include metrics that measure the Company's success in certain aspects with respect to human capital. In addition to strong financial performance, the Company believes it is important to hold executives accountable for making progress in diversity, equity and inclusion. Therefore, for 2022 TIP, executives will be measured on four quantitative metrics related to championing the Company's core values, improving diversity representation for women and underrepresented groups, and creating a strong culture of inclusion among employees. Further, in order to accelerate diversity across our global franchisee base, Messrs. Erlinger and Borden have the opportunity to receive an increased 2022 TIP payout if they increase the diversity in the franchisee pipeline to a specified level. The primary 2022 TIP metrics will be operating income growth (42.5%), Systemwide sales growth (42.5%) and human capital metrics (15%). In addition, Messrs. Erlinger and Borden have a franchisee diversity modifier that could increase the payout of their 2022 TIP award by 15 TIP points. The maximum 2022 TIP award that any of the above individuals can earn is 200% of the target award. For compensation purposes, performance results may be adjusted from those reported in our financial statements in order to focus our executives on the fundamentals of the Company's underlying business performance. For example, results are expressed in constant currencies to neutralize the impact of foreign currency translation.
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