The McDonald’s CEO is out, and that’s raised a lot of questions. Over the weekend, McDonald’s CEO Steve Easterbrook lost his job — though he does get six months of his pay as severance. The cause? A consensual relationship with a coworker.
This could be a radical new path for one of America’s most globally-recognized franchises. Should consumers expect a different direction for the fast food empire? Let’s take a look at what happened first, and then go on from there.
The World of the CEO is Changing
Not too long ago, it was commonplace for CEOs and upper management to have relationships with their employees. Today, it’s under enhanced scrutiny. At McDonald’s, employees are not allowed to have any consensual relationship with those who directly or indirectly report to them. Regardless of how consensual or public the relationship was, it was forbidden.
This type of restriction is now popular, because it lowers the risk for the company. It’s difficult to prove whether a power dynamic is at play during a relationship, and when it’s a CEO, it’s easy to assume that someone could have acquired favoritism through a relationship rather than through their own merits. For the company, they don’t want to see employees being promoted or given benefits based on relationships rather than based on performance.
But more importantly, companies also don’t want to open themselves up to the possibility of lawsuits. Lawsuits can cost companies millions upon millions of dollars, especially if it is shown that the company has a pattern of hostile or discriminatory activity.
An Exit Package of $42 Million
Though the outgoing McDonald’s CEO certainly wanted to keep his job, his firing isn’t the worst thing on earth either. His exit package was a true golden parachute, at $42 million. And given that his highly public firing isn’t entirely damning to him — it was, after all, an entirely consensual relationship — this might not be a significant break in his career.
But some are concerned at the pay gap that this highlights. Easterbrook was, of course, making far more than most of the employees… even higher level managers. And when someone can get upwards of $40 million for getting fired and potentially opening a company up to lawsuits, it does tend to raise a few questions.
As for the actual indiscretion, there have been limited details about it released.
The New CEO of McDonald’s
Chris Kempczinski, also known as Chris K, is going to be taking over for Easterbrook. With a history that includes Kraft and PepsiCo, he’s a well-known and well-liked choice. Analysts are urging investors to think less about the exit of Steve Easterbrook, and more about whether Chris K is going to be able to fill his shoes.
As Bloomberg reports, Kempczinski doesn’t own any shares of McDonald’s. He did before, but he sold them in May. This may put him in an awkward position, as generally high level executives are required to own a certain amount of shares in a business to ensure that they are personally interested in moving forward. As a CEO, he’s expected to buy into at least $7.5 million in McDonald’s shares, though he does have some time to do this.
Of course, with the CEOs being so highly paid, that may not be a significant issue for him.
The McDonald’s CEO change is the beginning of a new world for CEOs. The fact that a standing CEO could be removed so quickly for something that CEOs have previously seen to be a minor infraction is telling, and it’s something that CEOs are going to need to consider moving forward.
However, it’s not necessarily a bad thing for McDonald’s, especially if another highly qualified CEO steps in. While some CEOs and high level managers may be hesitant at this new shift in management standards, it’s really a risk management proposition for the company, and a way for a company to ensure that it continuously retains the best talent.
McDonald’s stock did fall after the announcement of the CEO replacement, which is to be expected; company shares tend to fall any time there’s a significant disruption. But investors should consider whether this news is truly going to impact McDonald’s at all long-term, because if it isn’t, it’s the prime time to get some McDonald’s shares at a discount.