Introduction: The Ownership Revolution
An excerpt from Big Macs & Our Pensions: Who Gets McDonald's Profits?
Ever sit over a Big Mac in McDonald's, watching order after order fly over the counter and
wonder who makes all the profits? You might presume the profits end up in the wallets of millionaires; after
all, that’s the way it always goes, right?
But....
The McDonald's Corporation mostly belongs to working people, middle-class citizens. That's you and me and
hundreds of millions of others around the world.
Few of us became owners because we wanted a piece of the company or its profits. Instead, becoming owners was a
side-effect of saving for retirement. But what a side effect! It turned out to be what I call the Ownership
Revolution.
Over the past 60 years or so (depending on which country you live in), ownership of big corporations has shifted
from rich people to working people. At the beginning of the Ownership Revolution, the rich owned almost all of the
stock in big companies. Today, that's reversed, with the majority of stocks in most big corporations belonging to
working, or middle class people, through pension funds and mutual funds.
Put another way, we see working people who need to fund and grow their retirement income, and we see companies
that need to sell stocks to expand. When these two sides began satisfying the needs of the other, a new era of
corporate growth and better retirement incomes emerged.
But what about the rich you ask, the 1% as some would call them? Well, we may have less money per person than
the rich, but we really outnumber them. When hundreds of millions of us contribute modest amounts each payday, the
sums quickly multiply into the billions and trillions.
As Davis, Lukomnik, and Pitt-Watson put it in their book, The New Capitalists: How Citizen Investors are
Reshaping the Corporate Agenda, "Who are these new capitalists we're talking about? Corporate power used to be
wielded by wealthy tycoons or by the state.... in North America, Europe, Japan, and increasingly throughout the
world, the owners of multinational corporations are the tens of millions of working people who have their pensions
and other life savings invested through funds in shares of the world's largest companies. Their nest eggs
constitute majority ownership of our corporate world. Each pensioner owns a tiny sliver of vast numbers of
companies." (Harvard Business School Press, page xi)
According to nasdaq.com (December 18, 2013), institutional investors (primarily pension funds and mutual funds)
and mutual funds owned 65% of McDonald's shares. So, we can safely presume working people own at least two-thirds,
and probably more, of McDonald's shares. I say presume because some millionaires may have stakes in pension or
mutual funds, and at the same time, some middle class people buy McDonald's stock on their own.
Ownership of stock in big corporations has two dimensions: first, sharing in the profits, and second,
controlling operations. We'll focus on the profits in Big Macs & Our Pensions, but it's worth noting we also
share control, indirectly, through the pension fund trustees we elect, and as individuals by buying and selling
specific mutual funds.
The dean of business thinkers, Peter F. Drucker, has written, "The rise of pension funds as dominant owners and
and lenders represents one of the most startling power shifts in economic history." (The Pension Fund Revolution,
Transaction Publishers, 1996, page 208)
In this booklet, we explore the Ownership Revolution through McDonald's shares. I chose McDonald's as an example
because of its iconic status. Everyone knows the company, almost everyone has eaten its food, and millions have
even worked for it. Exploring this revolution through McDonald's also allows us to look at a controversial issue
connected with ownership: fast food wages.
Oh yes, we’ll also estimate how much of your lunch tab ends up as a profit for McDonald’s.
How just another burger joint reinvented itself to create the fast food industry comprises the first part of
Chapter 1. Later in the chapter, we explore how McDonald’s went from local attraction to worldwide icon, how it
makes money selling food and renting real estate, and how it returns money to shareholders through dividends, share
buybacks, and reinvestments.
In Chapter 2 we ask why pension funds would buy stocks, and specifically McDonald's stock. After that, a look at
the many hats we wear, and at three groups of working people who became owners and now receive McDonald’s profits:
the California Public Employees Retirement System, the British Columbia Investment Management Corporation (for an
international perspective), and a mutual fund, the Vanguard Total Stock Market Index.
In Chapter 3, we examine the contentious issue of fast food wages, through through the accusations of a protest
campaign and a research report. As owners, we wouldn't want to think our retirement income comes from exploitation.
So, we'll listen to the messages of protesters, and analyze. We'll also explore how we, wearing our different hats,
will determine the future of fast food wages.
I've written this booklet for those of us who enjoy reading magazines and the editorial pages of newspapers, for
those who take an interest in public affairs programs on radio and television, and for those who follow online
blogs. It makes no attempt to serve experts or specialists in any area. In taking this approach, I hope we can all
contribute more to political conversations, enjoy a better understanding of the economic world, and help create
better public policy.
The author is neither pro- nor anti-McDonald's, and has no connection with the company, except to buy a few Big
Mac combos a year. I am an active stock and options trader, but do not own any McDonald's stocks or options, and
will not for at least one year after publication of this booklet.
I do not have any direct connection with the pension funds or mutual funds named here, though you will see one
indirect connection disclosed later. The funds selected came up somewhat randomly; thousands of others might have
illustrated the same points.
Now, let's find out how the Ownership Revolution and a Fast Food Revolution came together to profoundly change
our world.
[End of Introduction]
Big Macs & Our Pensions: Who Gets McDonald's Profits?: a 3-chapter, 3-buck book (Kindle
version at Amazon.com)
Contents
Chapter 1: From Drive-In to Driving Force
- Meet Richard and Maurice McDonald
- Rethinking the Restaurant Model
- Expanding the Vision
- McDonald’s Today
- So, How Much did We Make?
- What’s the profit on your lunch?
Chapter 2: Meet the New Owners
- Why would a pension fund buy stocks?
- Who is “We”
- California Public Employees’ Retirement System
- British Columbia Investment Management Corporation
- Mutual Funds & ETFs: Vanguard
Chapter 3: Fast Food Fracases
- Unfair Wages?
- Our Many Hats
- Hidden Subsidies?
- Who Ultimately Decides on McDonald's Wages
Conclusion: Two Extraordinary Revolutions
Postscript:
- The McDonald Brothers Go Home
3 chapters, $3-bucks: the Kindle version of Big Macs & Our Pensions: Who Gets McDonald's
Profits? is available at Amazon.com. Also available at Amazon.com in paperback.
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