McDonald’s pays ousted chief $675,000 in severance deal

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Steve Easterbrook, who had relationship with employee, also gets two-year ban on working for competitor

Steve Easterbrook, the British-born chief executive fired by McDonalds for having a consensual relationship with an employee, will be allowed to keep stock awards worth more than $37m as well as about $675,000 (524,000) in severance pay, the fast food firm said on Monday.

The relationship, about which little is known, contravened McDonalds company policy. The termination was categorized as without cause, the Chicago-based firm said, signaling that the transgression wasnt so severe as the prevent him from receiving exit payments.

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The company said on Monday its global chief people officer, David Fairhurst, would also leave but did not give any reasons.

Easterbrook, 52, was born in Watford and joined McDonalds in 1993. He left in 2011 to become chief executive of Pizza Express and later Wagamama, before rejoining McDonalds in its head office in Illinois as global chief brand officer in 2013. He became chief executive two years later. He also has a seat on the board at Walmart.

According to his LinkedIn profile, Fairhurst has been with McDonalds for nearly 15 years, holding key human resources positions. Like Easterbrook, he ascended to the upper reaches of McDonalds US operation via the UK office.

The termination of the two executives speaks to increasing pressure on large corporations to act decisively in instances where executives conduct threatens the reputation of the company.

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CEOs are the face of the company, and stake holders expect them to be aligned with its core values, noted Jordan Cohen, marketing officer at North 6th Agency. This goes against the perception of the McDonalds brand identity and the company is going to need to navigate this carefully.

The subsequent firing of the McDonalds head of HR, Cohen added, suggests a broader breakdown at executive levels of the company.

These types of scandals dont come out of nowhere so clearly there was a breakdown there. Someone was aware of the situation and did not act to address it, didnt surface it to the board, or was acting to protect the CEO and not the interests of the company.

McDonalds response, Cohen added, shows the board took the misconduct seriously.

News of Easterbrooks departure broke on Sunday afternoon in the US. By midday on Monday, the Chicago-based companys shares had fallen by more than 3%. The stock is up around 6% this year.

Given Easterbrooks 2018 base salary of $1.35m, his severance pay would amount to around $675,000. He received total compensation of $15.9m in 2018, according to a regulatory filing which showed he was also eligible for 18 months of health benefits.

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In consideration for [severance] benefits, Mr Easterbrook has agreed to a release of claims in favour of the company, McDonalds said in the regulatory filing.

The new chief executive, Chris Kempczinski, would have an annual base salary of $1.25m, with a target-based bonus of 170% of his annual base salary, McDonalds said.

Easterbrooks separation agreement contains a two-year post-termination non-competition clause, which is six months longer and more expansive in scope than his existing agreements.

An exhaustive list of companies for which Easterbrook may not work in that period was included in the separation agreement. Burger King, Five Guys, Checkers, Tim Hortons, Pizza Hut, Kentucky Fried Chicken, Subway, Chick-fil-A, Chipotle and Dominos Pizza were among fast food companies named. The list also included coffee outlets Starbucks, Caffe Nero and Costa.

Easterbrooks time at the top of McDonalds has featured a drive to use more technology in restaurants and to offer customers more fresh ingredients. The company has faced challenges negotiating with franchisees and a push by employees for union rights and protection against such issues as sexual harassment and discrimination.

Jonathan Maze, the editor of Restaurant Business magazine, told the Washington Post that Easterbrook had been pretty consequential to the business. In a note quoted by the Wall Street Journal, analysts at investment bank Piper Jaffray & Co advised investors to look to other fast food stocks, because changes of this magnitude tend to be disruptive.

In an email to McDonalds staff, the divorced father of three acknowledged 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, Easterbrook wrote.

Desiree Moore, a Chicago-based lawyer acting as spokeswoman for Easterbrook, said he was deeply grateful for his time at McDonalds and would not comment further.

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