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Fired McDonald’s CEO barred from working for rival for 2 years under severance agreement

Steven Easterbrook, whose consensual relationship with an employee violated company policy, also will receive 26 weeks of pay

McDonald's dismissed chief executive Steve Easterbrook on Nov. 3 over a recent consensual relationship with an employee. (Video: Reuters)

Ousted McDonald’s CEO Steve Easterbrook cannot take a job with a rival fast-food business for two years, according to a regulatory filing Monday, one day after the company announced he had shown “poor judgment” by engaging in a consensual relationship with an employee.

Easterbrook’s separation agreement temporarily prohibits him from working for such competitors as Burger King, Yum Brands and Starbucks, as well as convenience store giants such as 7-Eleven and Wawa. He also will receive 26 weeks of pay, though the value of the severance package was not immediately clear. Easterbrook earned nearly $16 million in 2018, including a base salary of $1.35 million.

The board of directors fired Easterbrook on Friday after concluding he had violated the company’s policy against manager relationships with direct or indirect reports and announced the decision Sunday. He was replaced by Chris Kempczinski, previously the president of McDonald’s USA.

Meanwhile, McDonald’s announced the departure of Chief People Officer David Fairhurst on Monday, effective immediately. The company declined to comment further, calling it a personnel matter.

Easterbrook joins a growing list of chief executives forced out over their personal relationships as more companies implement rules against dating subordinates in the #MeToo era.

“We are seeing substantially more interest” in these policies, Jonathan Segal, a Philadelphia-based employment lawyer, told The Washington Post last year, after Intel’s chief executive stepped down for breaking his company’s rules with a consensual relationship.

“I’m seeing more companies ask about them,” Segal said. “I’m seeing more companies add them to their anti-harassment policies. I’ve seen more companies look at them in their codes of conduct.”

McDonald’s has not shared further details of the relationship that led to the firing. Easterbrook, a former head of the company’s U.K. operations, is divorced, according to the Sunday Times of London.

In an email to employees, Easterbrook called the relationship “a mistake” and said he agreed with the board that “it is time for me to move on.”

Desiree Moore, a Chicago-based lawyer acting as a spokeswoman for Easterbrook, said he is “deeply grateful for his time at McDonald’s.”

“He acknowledges his error in judgment and supports the Company’s decision,” Moore said, adding that Easterbrook will be not be commenting further.

Easterbrook became chief executive in 2015 as McDonald’s struggled to keep its customers. After the chain announced a drop in U.S. sales as well as a 33 percent decline in global profit in the first quarter of that year, he promised to “better address today’s consumer needs, expectations and the competitive marketplace.”

Piper Jaffray downgraded McDonald’s stock after news of Easterbrook’s departure broke, noting “the potential lack of momentum and time involved in formalizing a new team.”

McDonald’s, a Dow component, shed nearly 3 percent Monday. The stock has soared under Easterbrook’s leadership, and the company retains its spot at the top of U.S. fast-food sales, even as the industry faces challenges.

Easterbrook propelled McDonald’s from a tough time, said Jonathan Maze, the editor of Restaurant Business. He improved sales — still on the upswing this year — and restructured the company, speeding up decision-making and cutting hundreds of millions in overhead costs, Maze said.

He also embraced technology in the form of in-store kiosks, online-order delivery and, in March, a $300 million start-up acquisition meant to speed up McDonald’s drive-through services.

“He’s been pretty consequential,” said Maze, who says Easterbrook’s ouster signals that companies are taking relationship policy violations “a lot more seriously” than they used to.

Kempczinski became head of McDonald’s USA in 2016. Easterbrook told staff that Kempczinski was “an important partner to me over the last four years and . . . the ideal person to take on the role of CEO."

In his new role, Kempczinski will receive a base salary of $1.25 million. He could earn as much as $2.1 million in annual bonuses, according to Securities and Exchange Commission filings.

“Chris was instrumental in the development of the Company’s strategic plan, which has enabled global growth and leadership, and has overseen the most comprehensive transformation of the U.S. business in McDonald’s history,” Enrique Hernandez Jr., chairman of the chain’s board of directors, said in a statement.

In an interview with the Wall Street Journal, Kempczinski said he will continue Easterbrook’s investments in technology and that he looks forward to discussing franchisees’ concerns.

“There isn’t going to be some radical, strategic shift,” he told the Journal on Sunday. “The plan is working.”

Rachel Siegel contributed to this report.