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McDonald's names CEO after Easterbrook's 'consensual relationship' with employee

McDonald's has announced a leadership shake-up, following what former CEO Steve Easterbrook said was a "consensual relationship" with an employee that violated company policy.

New McDonald's board member President and CEO Chris Kempczinski. (Photo provided)

November 4, 2019 by S.A. Whitehead — Food Editor, Net World Media Group

New McDonald's U.S. President Joe Erlinger. (Photo provided)

Though McDonald's is saying little about what the company called "a recent consensual relationship with an employee" involving Steve Easterbrook, it has made very clear that the veteran CEO of the world's largest restaurant chain is no longer with the brand. 

In a series of press releases Sunday, the company relayed that Easterbrook "has separated from the company following the board's determination that he violated company policy and demonstrated poor judgment" in taking part in a relationship with an unidentified employee. McDonald's board has named former McDonald's U.S. President Chris Kempczinski to the position of board member, president and CEO, effective immediately. Additionally, the company has named former president of International Operated Markets Joe Erlinger to fill Kempczinski's former role of U.S. president. 

In an email sent to the chain's more than 38,000 employees in 100 countries, under the subject of "My Departure," Easterbrook said: 

"Dear McDonald's System,
Today is my last day at McDonald's as your CEO and member of the Board of Directors. It has been an honour (stet) to work alongside all of you as we reinvigorated the McDonald's brand. As I reflect on my tenure as CEO, these have been the most fulfilling years of my working life. Together, we have achieved 17 consecutive quarters of growth, made significant strides in brand Modernization (stet), and launched our ambitious Scale for Good vision. This is something for which we should all be proud.

Chris has been an important partner to me over the last four years and is the ideal person to take on the role of CEO. He's driven and forward-looking, and I am confident he will lead with great purpose and guide McDonald's to even greater heights.

As for my departure, I engaged in a recent consensual relationship with an employee, which violated McDonald's policy. This was a mistake. Given the values of the Company, I agree with the Board that it is time for me to move on. Beyond this, I hope you can respect my desire to maintain my privacy.

Please join me in congratulating Chris on his promotion. I know you will support him as you have supported me — he's lucky to have a team of your calibre (stet).

I will be cheering you on and know that McDonald's will continue to do great things.

Sincerely,
Steve"

QSRweb is awaiting response to a number of inquiries to the Chicago-based QSR around the relationship and its fallout. The company did provide complete information about the leadership changes that have ensued as a result of the departure of its highest-ranking leader. The board chair said Kempczinski was a natural fit for the top post. 

"Chris takes the reins of this great company at a time of strong, sustained performance, and the board has every confidence that he is the best leader to set the vision and drive the plans for the company's continued success," McDonald's Board Chairman Enrique Hernandez Jr. said in materials released to the media. 

"He has the right mix of skills and experience to lead us forward having run our U.S. business, where franchisees are delivering strong financial and operational results, and overseen global strategy, business development and innovation. In particular, 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."

As U.S. president, Kempczinski oversaw business operations of approximately 14,000 U.S. McDonald's restaurants after joining the brand in 2015 to oversee global strategy, business development and innovation. In his new role he will oversee nearly three times that many restaurants — 38,000 locations — in over 100 countries. 

"I'm thrilled to be leading this incredible company," Kempczinski said, in the media release. "As one of the world's leading brands, McDonald's makes a difference in the lives of people every day. We have a responsibility not only to serve great food, but to make it responsibly and to enrich the communities in which we operate. I am energized by this challenge and look forward to guiding McDonald's continued success."

Erlinger's new responsibilities include overseeing the brand's wholly owned markets outside the U.S. He is a 17-year veteran of the chain who started out in strategy and new business development before moving onto regional and international leadership positions.

"Joe is a respected leader who is returning to the U.S. after working around the world for McDonald's," Kempczinski said in the release. "He has a proven track record of driving strong results through collaboration with franchisees and a relentless focus on the customer."

Erlinger now oversees the 14,000 U.S. locations and reports to Kempczinski.

"Our U.S. business is the heartbeat of McDonald's," said Erlinger. "I look forward to working with our franchisees to build upon the transformational progress in our largest market."

Kempczkinski also sent an email to the chain's employees, with the subject line reading "Our Path Forward Together." In the email, he addressed his predecessor in an amicable fashion, saying, "I also want to thank Steve for his many contributions. Steve brought me into McDonald's and he was a patient and helpful mentor. I wish him all the best in his future endeavors."

Kempczinski went on in the email to rally some esprit de corps by recalling the brand's place in the lives of its customers. 

"I have been a lifelong fan of McDonald's. Like so many of our customers, some of my fondest childhood memories were of my experiences at a McDonald's. ... I'm happiest when I'm in our restaurants, visiting with franchisees, their crew and our customers. Listening to their stories, I'm reminded about the larger purpose that our brand plays in the lives of millions of people around the world. 

"Yes, we serve delicious food and offer great experiences, but our brand means so much more. We stand for opportunity and empowerment for everyone. McDonald's is a special company, and it's my privilege to work with all of you to make a difference in the lives of so many."

The company said it will, as required, file its form 10-Q with the SEC for the quarter that just ended on Sept. 30 by this Tuesday. It stressed that the leadership changes are not related to McDonald's operational or financial performance.

At investment research firm, Morningstar, Inc. this morning, Consumer Equity Strategist R.J. Hottovy said the company has not changed its $215 fair value estimate (wide-moat rating or standard stewardship rating) for McDonald's as a result of the leadership change since it sees Kempczinski as well-suited to lead the mammoth QSR chain. 

"While a high-profile leadership change tends to raise natural questions about leadership stability at a company, we believe that McDonald's under Kempczinski will be well-positioned to stay ahead of its industry peers through its latest menu and technology initiatives, including an opportunity to redefine the drive-thru experience for the category through the recently acquired Dynamic Yield (predictive ordering) and Apprente (voice), which offer both ticket and throughput benefits," Hottovy said in a statement sent to this website.

"While we'd prefer a bit wider margin of safety at current levels, we'd encourage investors to take advantage of any post-transition weakness in the stock."

At 10 a.m. today McDonald's was trading down from its close last Friday of $193.96, falling into the $1.89 range at 10 a.m.
 

About S.A. Whitehead

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Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.