Hours After McDonalds Fires Its CEO, The Company’s Head Of HR Quits

Just hours after McDonalds unexpectedly fired its CEO late on Sunday because of his relationship with an employee, the company also announced that its top human-resources executive also left the company.

McDonald’s said its Chief People Officer David Fairhurst had left the company on Monday, without providing any details. Fairhurst, a 15-year veteran of the company, had worked with Easterbrook for McDonald’s in the U.K. and was promoted to the top human-resources job soon after Easterbrook became CEO in 2015, the WSJ first reported.

The company declined to comment on the nature of Fairhurst’s departure. Mason Smoot, an SVP who oversees strategic alignment and staff, will replace Fairhurst on an interim basis.

Earlier this year and following an inquiry from U.S. Senator Tammy Duckworth, McDonald’s said it was training workers to deal with harassment and starting a hotline for victims. In a response to Duckworth, an Illinois Democrat, Easterbrook said the company’s new strategy creates “a clear message that we are committed to creating and sustaining a culture of trust where employees feel safe, valued and respected.”

Separately, McDonalds reported in a Monday 8K that it would pay now former CEO Easterbrook six months in severance, and would grant him 18 months of health benefits. It wasn’t clear if Easterbrook would also get free hamburgers for life to make sure he uses those health benefits ASAP.

McDonalds also said the agreement absolved the company of any liability resulting from Easterbrook’s termination and barred him from working for another fast-food company for two years.

As part of the agreement, the former CEO will also will keep stock awards vesting within three years of his firing and forfeit later awards. He will be eligible for a prorated bonus for the current fiscal year determined by the company’s performance. This means that Easterbrook will get to keep unvested stock options worth about $23.5 million and possibly benefit from grants of restricted shares tied to the company’s performance that are worth roughly $13.8 million at their target payouts, according to calculations by Bloomberg. He’s also eligible for a pro-rated bonus for his work in fiscal 2019.

In return Easterbrook agreed to refrain from making disparaging comments about the company and would cooperate with any investigations or litigation arising from matters he has knowledge about.

As Bloomberg notes, not all CEOs who lose their jobs under similar circumstances fare so well. Brian Krzanich, who was fired by Intel last year after the board learned he had a consensual relationship with an employee, surrendered equity awards worth tens of millions of dollars and received no severance. A McDonald’s representative didn’t immediately respond to a request for comment about why the board opted against terminating Easterbrook “for cause.”

Easterbrook, who received $15.9 million in total compensation last year, will receive the severance six months after his termination date, Nov. 1. McDonald’s said on Sunday that it had appointed Chris Kempczinski, its former head of U.S. operations, to succeed Easterbrook immediately.

As the WSJ notes, Kempczinski, 51, and Easterbrook, 52, worked closely on a strategy in recent years to try to boost traffic at US restaurants through spending on new technology and menu items with fresher ingredients. As MCD’s recent press release showed, the company’s sales had risen thanks to those efforts and price increases, but traffic in the U.S. has remained largely flat and franchisees have pushed back at the costs of renovating restaurants and changing operations. Kempczinski said in an interview on Sunday that he would stick with the strategy and continue to discuss it with franchisees.

McDonald’s said Monday that it set Mr. Kempczinski’s base salary at $1.25 million. Mr. Easterbrook’s base salary last year was $1.35 million.

While investors were displeased with the unexpected CEO departure, pushing MCD stock lower on Monday, the burger chain faces other, more pressing problems: as traffic to burger chains slows generally in the US, McDonald’s is also facing threats to other parts of its business such as breakfast. A part of the day it once dominated with Egg McMuffins and hash browns has seen rival chains pile in as they also hunt for growth. The chain has still posted same-store sales growth in the U.S. and globally under Easterbrook’s watch.

As we reported last month, McDonald struck a number of technology deals to try to boost sales and improve operations. Those deals are driving up expenses. Kempczinski said in an interview Sunday that he expects them to eventually pay off, and he intends to keep Mr. Easterbrook’s focus on technology.