When Steve Easterbrook was fired as CEO of McDonald’s on Sunday over a personal relationship with an employee, it was yet another reminder that even though rules for corporate leadership have changed in the era of #metoo, some business chiefs are having a hard time getting the message, despite the enormous potential consequences.
The board of the fast-food giant terminated Easterbrook, and he resigned from McDonald’s board, after an investigation of a consensual relationship with an unnamed employee. “This was a mistake,” Easterbrook wrote in an e-mail to McDonald’s employees on Sunday conceding that he had violated company policy on personal conduct. “Given the values of the company, I agree with the board that it is time to move on.”
McDonald’s forbids managers from having romantic relationships with direct or indirect subordinates. Easterbrook is divorced, but Sunday’s developments were a remarkable admission that he hadn’t heeded the company’s clear policy on personal relationships in the office or society’s intensified focus on CEO behavior and the possibilities for abusing their power.
He’s hardly alone. Intel’s Brian Krzanich, Boeing’s Harry Stonecipher, Best Buy’s Brian Dunn are just a few of the CEOs who have been forced to resign because of improper relationships with employees. “We do see a trend here,” Jeffrey Sonnenfeld, CEO of the Yale Chief Executive Leadership Institute, and Chief Executive columnist told CNBC. “Of these roughly 90 CEOs who left office last year, 40 percent of them were for misconduct.”
Easterbrook was replaced by Chris Kempczinkski, who was president of McDonald’s USA and an Easterbrook protégé. On Sunday, Kempczinski told the Wall Street Journal that McDonald’s has a responsibility to address workplace well-being. The company had strengthened workplace training and protocol for reporting potential employee misconduct earlier this year, the newspaper said.
The “great news,” said Sonnenfeld, is that “this is a board that has been prepared for unexpected crises” and was ready with a seasoned executive to take over the top job.
The bad news? This is the company’s seventh CEO in 13 years. “The transitions have been pretty smooth,” said Sonnenfeld, “even though they’ve been way too frequent for this amount of time.”
Sunday’s termination brought to an end a long career at McDonald’s in which Easterbroook eventually headed the company’s U.K business and returned it to growth. His four-year stint atop the entire company began when he replaced the largely ineffectual Don Thompson in 2015. McDonald’s was mired in slowing sales and greater competition at that time, and Easterbrook took several steps that re-energized the chain for a while.
But while building on success for McDonald’s used to be as simple as introducing a new sandwich or a new product line — such as the establishment of the McCafe coffee brand on U.S. national menus a decade ago — Easterbrook took over at a time when that was never going to be enough anymore. He faced issues including greater criticism of the health of McDonald’s food, the incursion of online ordering, increased consumer demands for delivery service, labor protests over its wage rates, and franchisee disenchantment over operational demands for fulfilling the changing palates and technological demands of the American and global consumer.
Easterbrook got some initial juice with moves such as making many breakfast items available at McDonald’s restaurants 24 hours a day and de-complicating some operational initiatives. He committed the chain to switch to cage-free eggs, antibiotic-free chicken and hormone-free milk and raised workers’ pay above minimum wage. More recently, Easterbrook pulled the trigger on the acquisition of Dynamic Yield Ltd., an Israeli digital startup that is supposed to improve in-store ordering and online marketing, in McDonald’s biggest acquisition in two decades.
But at the same time Easterbrook wasn’t able to elevate McDonald’s clearly above the vast secular changes that are challenging not only the world’s leading fast feeder but also every part of the global restaurant business. Now it will be up to Kempczinski—who told the Journal that “there isn’t going to be some radical, strategic shift” under his command—to pick up where Easterbrook involuntarily left off.