McDonald's CEO fired over relationship with employee

San Francisco: Fast food giant McDonald's has fired its CEO Steve Easterbrook after its board of directors found that he "demonstrated poor judgment" in a consensual relationship with an unidentified employee, the media has reported.

McDonald's Corporation on Sunday announced that its Board of Directors has named Chris Kempczinski, most recently President, McDonald's USA, as President and CEO, effective immediately. Kempczinski has also been elected to the McDonald's Board of Directors.

"Kempczinski succeeds Steve Easterbrook, who has separated from the company following the board's determination that he violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee," the fast-food giant said in a statement.

According to MarketWatch, Easterbrook sent an e-mail with a memo to employees acknowledging the relationship and said it was a mistake, Efe news agency reported.

"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, and his compensation details will be known on Monday after the submission of documents to federal authorities.

The company added that details of Kempczinski's and Easterbrook's pay would be disclosed in a filing by Tuesday.

Kempczinski, who replaces Easterbrook, 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.

Easterbrook, a 52-year-old divorcee, who had led McDonald's since March 2015 enacted several changes during his tenure, 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.

During Easterbrook's tenure, McDonald'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 healthier products and big companies sacrifice profit for technological upgrades and delivery.

To keep up with these changes, McDonald's has invested in updating its sandwiches and renovating its restaurants, but paid a price in profits. The brand's US franchisees have balked at mandated investments in digital-ordering kiosks and new menu items like fresh-beef burgers. Franchisees even started an independent association last year to push back against some of Easterbrook's changes.

Earlier this year, Easterbrook said he and other top executives, including Kempczinski, had been talking to franchisees in the 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-throughs 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.

He insisted that the 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.

McDonald's said Joe Erlinger, most recently president of international operated markets, is succeeding Kempczinski to oversee its roughly 14,000 domestic restaurants.

The brand's shares, up 9 per cent this year, have trailed the broader S&P index tracking restaurants, including other fast-food peers such as Wendy's and Restaurant Brands International, in that period.

McDonald's faces more challenges at the US restaurants that drive its sales. Labour 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 its workplace training and protocol for reporting potential employee misconduct. Kempczinski said the company had a responsibility to address workplace well-being.

This year, the company said it would stop lobbying against federal minimum wage increases, and that it recognises the rights of its employees to join labour organisations.