Last year illustrated both the benefits and drawbacks of being a public company CEO, at least in the restaurant space.
On one hand, the job is volatile. Nearly half of public company restaurant CEOs were new to the company within the past year, retired or kicked themselves upstairs to chairman in the midst of a federal investigation over use of company funds. That doesn’t include a pair of executives who were hired mid-year in 2022.
On the other, being a CEO pays well. And it paid a lot better in 2023 than it did in 2022.
Median total compensation for 32 CEOs of publicly traded restaurant chains increased 29% to $5.8 million, according to a Restaurant Business analysis of SEC filings.
That reflects an improving stock market. Median stock values for publicly traded restaurant chains increased 21% last year.
Restaurants were more generous than average last year. Pay for CEOs at the largest U.S. companies increased 11.4% in 2023, driven largely by a 21% increase in the value of stock awards, based on an early look at CEO pay by the executive data firm Equilar.
But overall, restaurant executives are paid less than those in other industries. Median pay for the 100 highest paid executives based on early data was $23.7 million—a number that will likely go up once all the data is compiled. Only one restaurant CEO topped that number last year.
The bulk of pay packages for most public company executives come in the form of stock and option awards, along with bonuses. Salaries typically represent a small percentage of total pay.
“Stock awards are the bread and butter of CEO pay,” said Amit Batish, senior director of content for Equilar. “That’s what’s really driving the jump in pay.”
The highest paid CEO last year was Josh Kobza, who helms Burger King owner Restaurant Brands International. He was paid $29 million last year, largely due to stock awards given him upon his promotion to the top job.
Josh Kobza, CEO of Burger King
Publicly traded companies believe they need rich packages to lure top talent into the CEO job, given the role’s importance in their direction and overall performance. And corporate boards like using stock as the bulk of their compensation to align executives’ interests with those of the companies’ shareholders.
The stock—along with bonus compensation—can act like a pay-for-performance vehicle. If the company does well and the stock follows right along, executives are rewarded in the form of higher valued stock.
Critics, however, have long argued that this forces CEOs to focus on short-term goals that boost stock value, rather than investment strategies that benefit a company over the long term.
Big packages
The biggest criticism over executive pay is the size of the packages themselves. Companies have long argued that impressive pay packages are necessary to lure top talent, which is crucial given the importance of the CEO to the overall direction of a company. Shareholders have generally agreed: Only 2.1% of “say on pay” votes failed last year, according to Harvard Law. That was down 160 basis points from 2022. Say on pay votes ask shareholders to vote on the compensation of top executives.
Nevertheless, the typical CEO makes a lot compared with lower-level workers, and that ratio increased last year generally. A select group of 10 of the top paid publicly traded restaurant executives received pay packages 790 times, on average, the pay of the median employee at their organization, up nearly 8% from 2022.
That was three times the average pay ratio, according to Equilar. But restaurant company pay ratios tend to be high because restaurants employ a lot of low-skill, low-wage workers.
The CEO pay ratio was highest at Chipotle Mexican Grill, where Brian Niccol’s $22.5 million pay package was 1,354 times that of the median employee at the company, a ratio that jumped 26% from a year earlier.
Brian Niccol, CEO of Chipotle
Niccol was the second highest paid CEO of a publicly traded restaurant chain last year.
Generally, larger restaurant companies pay larger packages, but those packages are not strictly based on a company’s size.
McDonald’s CEO Chris Kempczinski, who helms the world’s largest and most recognized restaurant brand, was the fourth highest paid chief executive, with a total package of $19.2 million. That was behind Kobza, Niccol and Yum Brands CEO David Gibbs, who received $21.2 million in total pay last year.
Chris Kempczinski, CEO of McDonald's
Job volatility
Last year demonstrated just how volatile this job can be. Kobza, Starbucks CEO Laxman Narasimhan, Darden Restaurants CEO Rick Cardenas, Red Robin CEO GJ Hart and Brinker International CEO Kevin Hochman were all appointed in their company’s last fiscal year.
Several others have either quit or moved onto other positions. Krispy Kreme’s Mike Tattersfield is now the chairman of Panera Brands. Wendy’s CEO Todd Penegor was replaced earlier this year, while longtime CEOs Sandy Cochran (Cracker Barrel), David Deno (Bloomin’ Brands), Randy Garutti (Shake Shack) and Joth Ricci (Dutch Bros) all retired.
Andy Wiederhorn, who created Fat Brands, was moved to chairman amid a federal investigation that has since become an indictment over tax evasion and other issues.
Volatility is common among public company CEOs. The median tenure among chief executives on the S&P 500 has fallen for years. In 2022 it was just 4.8 years, according to Equilar.
In other words, you can expect to last as CEO only moderately longer than a presidential election and less than the time it takes to finish elementary school.
White and male
A look at the roster of publicly traded CEOs also demonstrates the role’s painful lack of representation. For the most part, people holding the top job at publicly traded restaurant chains are overwhelmingly white and male.
The latter point appears to be changing. El Pollo Loco replaced a male CEO with former Taco Bell executive Liz Williams, for instance. And Dutch Bros’ Ricci was replaced with Christine Barone.
Julie Felss Masino, meanwhile, replaced Cochran at Cracker Barrel. That means there are now four women helming publicly traded restaurant companies, including Denny’s Kelli Valade.
But non-white chief executives remain underrepresented. The most prominent examples include Starbucks CEO Laxman Narasimhan and Taco Bell CEO Sean Tresvant, who works under Yum’s Gibbs.