The US fast-food giant on Sunday said Steve Easterbrook “demonstrated poor judgment”, since the company prohibits senior management from having relationships with other workers, whether they are under their direct supervision or not, Efe news reported.
According to MarketWatch, Easterbrook sent an e-mail with a memo to employees acknowledging the relationship and said it was a mistake.
“Given the values of the company, I agree with the board that it is time for me to move on,” he said in the letter.
McDonald’s said it voted to approve Easterbrook’s departure last Friday after conducting a thorough analysis of the situation, while the compensation’s payment details will be known on Monday after the submission of documents to federal authorities.
After Easterbrook’s dismissal, McDonald’s board appointed Chris Kempczinski, who until now headed McDonald’s USA and will take up his new position immediately as the new president and CEO.
Kempczinski was one of the key figures in the development of McDonald’s strategic plan and has overseen the most comprehensive transformation of the company in the US in the history of the fast-food chain, the company’s chairman, Enrique Hernandez, said in a statement.
“Steve brought me into McDonald’s and he was a patient and helpful mentor,” the new CEO said about Easterbrook.
The 52-year-old former CEO had led McDonald’s since March 2015. During his tenure, the company’s shares nearly doubled in value but traffic to US restaurants has continued to stagnate.
McDonald’s is reckoning with challenges reverberating throughout the food industry from meat producers to supermarkets as consumers switch to products that they view as more healthful and big companies sacrifice profit for technological upgrades and delivery.
McDonald’s has invested in updating its sandwiches and renovating its restaurants to keep up with those changes, but paid a price in profits. And US franchisees have balked at mandated investments in digital-ordering kiosks and new menu items like fresh-beef burgers. Franchisees started an independent association last year to push back against some of Easterbrook’s changes.
Easterbrook said earlier this year that he and other top executives, including Kempczinski, had been talking to franchisees in light of their concerns and had pushed back the timeline for owners making some capital investments as a result.
“Wouldn’t life be great if everyone was happy? Of course,” Easterbrook told investors. “Am I fundamentally concerned that it will derail us from the shared vision that we have? No, not at all.”
Easterbrook also rolled back offerings including premium burgers and parts of an all-day breakfast menu after they slowed down restaurant operations. Wait-times at McDonald’s drive-thrus have climbed in recent years as the company’s menu became increasingly complex.
Kempczinski, who helped implement many of the recent changes as head of US operations, said he would maintain Easterbrook’s focus on technology as CEO and believes the company’s investments will pay off.
“There isn’t going to be some radical, strategic shift. The plan is working,” Kempczinski said in an interview on Sunday.
Kempczinski said investors should feel confident in the succession and that he intends to listen to consumers. He also said he looked forward to continuing to discuss concerns with franchisees. “It’s something we need to solve together,” said Kempczinski, who will also join McDonald’s board.
McDonald’s said Joe Erlinger, most recently president of international operated markets, is succeeding Kempczinski to oversee McDonald’s roughly 14,000 domestic restaurants.
McDonald’s shares, up 9 percent this year, have trailed the broader S&P index tracking restaurants in that period, including other fast-food peers such as Wendy’s and Restaurant Brands International.
McDonald’s faces more challenges at the US restaurants that drives its sales. Labor organisers and some lawmakers have called on the company to address workplace harassment issues and raise its minimum wage to $15 an hour.
This year, McDonald’s strengthened workplace training and protocol for reporting potential employee misconduct. Kempczinski said the company had a responsibility to address workplace well-being. The company said this year that it would stop lobbying against federal minimum wage increases, and that it recognizes the rights of its employees to join labor organisations.
The company said details of Kempczinski’s and Easterbrook’s pay would be disclosed in a filing by Tuesday.
Easterbrook, who is divorced, had a long career at McDonald’s. Before becoming CEO, he worked as head of the company’s United Kingdom business, which he helped return to growth by modernizing its restaurants, revamping the menu and portraying McDonald’s as environmentally friendly e tactics he later employed at the company more broadly.
Easterbrook, who was born in Watford, England, was the second non-American to lead the company, after the late Charlie Bell of Australia.
Easterbrook left McDonald’s in 2011 to become CEO of Britain’s PizzaExpress and then Japanese-style noodle bar chain Wagamama. Two years later he returned, eventually becoming McDonald’s global chief brand officer.
Within months of becoming CEO, he enacted several changes, including committing to switch to cage-free eggs, antibiotic-free chicken and hormone-free milk; raising workers’ pay above minimum wage and giving different geographic markets more control over the menu.
His pay as CEO rose with McDonald’s share price, which closed Friday at $194. His compensation peaked in 2017 at a total of $21.8 million including $9.1 million in incentive-based pay. He received $15.9 million in total compensation last year. He also sits on the board of Walmart.
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