McDonald's First Sales Drop in 4 Years: How Do Sales Generally Affect Shareholders and Directors?

The fast-food giant recently experienced its first global sales decline since 2020 with a 1% drop in comparable sales for the quarter ending in June 2024.

Continual sales growth in four years is impressive, but what does this decline mean for their shareholders vs board of directors?

If you buy McDonalds, then you are a consumer.

McDonalds CEO Chris Kempczinski suggested that consumers have apparently decided that there is food at home and opted to eat at home over McDonalds

Kempczinski says this is due to increasing food prices not matching minimal wage increases AKA cost of living.

Who is affected by this 1% drop?

Shareholders are directly affected by changes in the company’s financial health and stock price as it’s their money on the line.

McDonald's have been increasing in sales for the last 4 years, this has allowed them to continually and predictably pay their shareholders a dividends.

A dividends is (usually) paid to shareholders from company profits. It is a way for companies to share their earnings with the people who own its stock.

Shareholders play a crucial role in businesses by providing the money (capital) for operations and growth. Because they provide all this money, they expect a return on their investment into the company (dividends).

They Can only get these dividends if the company is doing well financially

What about board of directors?

Board of directors on the other hand, are responsible for overseeing the company’s management on a day to day. Because it is not their investment, that is put into the company, they are not directly affected.

They are, however, accountable to the shareholders for the company’s performance. If the company underperforms, the board might face pressure from shareholders to make changes, such as altering the company's strategy or replacing executives using their voting rights.

Ultimately, shareholders can be more immediately impacted by a company’s financial results as they directly affect the dividends they can receive.

However, the board of directors can also be significantly affected, especially if poor performance leads to shareholder dissatisfaction and changes in the board's composition or company leadership.

In McDonald's case, regardless of the sale drop, there was a slight rise in share price which indicates that shareholders may not be overly concerned yet, but continued poor performance could heighten their scrutiny of the board's decisions and the company's leadership.