McDonald’s outlined its separation from chief executive officer Steve Easterbrook Monday in a securities filing. In a separate story, the company confirmed to multiple outlets that global chief people officer David Fairhurst has left McDonald’s, effective immediately. He’s been with the company since 2005, heading up its global HR department for the past four years. Before, Fairhurst served as chief people officer for McDonald’s European business.
The departure continues a string of recent shakeups. Global CMO Silvia Lagnado and chief communications officer Robert Gibbs left last month.
McDonald’s agreement with Easterbrook “provides that he will be eligible for the severance benefits contemplated by the company’s benefit plans upon a termination of employment.”
Easterbrook, whose firing was announced Sunday, is eligible for 26 weeks of severance, served in a lump sum within six months of his November 1 termination date. The severance plan includes $675,000 in salary continuation, $2.855 in benefit continuation, and $24,400 in sabbatical and “transition assistance.” He is also eligible for 18 months of health benefits, per the filing.
Easterbrook collected a total of $21.8 million in 2017 ($9.1 million in incentive-based pay). He then received $15.9 million in compensation last year.
In addition, the agreement contains a two-year post-termination noncompetition covenant, which is six months longer and more expansive in scope than his existing agreements. McDonald’s provided a list of “competitive companies.”
“Arby’s, Bojangles’, Burger King/Hungry Jacks, Caffè Nero, Checker’s, Chick-fil-A, Chipotle, Costa, Culver’s, Denny’s, Domino’s Pizza, Dunkin’ Brands, Five Guys, Greggs, Hardee’s, In-N-Out Burger, Jack-in-the-Box, Jamba Juice, Long John Silver’s Quick Service Restaurant Holdings [and all of its brands and subsidiaries], Panera Bread, Papa John’s, Popeyes, Potbelly, Qdoba, Quiznos, 7-Eleven, Sonic, Starbucks, Subway, Tim Horton’s, WaWa, Wendy’s, Yum! Brands, Inc. (including, but not limited to, Taco Bell, Pizza Hut, Kentucky Fried Chicken and all of Yum! Brands, Inc.’s subsidiaries) and their respective organizations, partnerships, ventures, sister companies, franchisees, affiliates or any organization in which they have an interest and that are involved in the restaurant industry [whether informal eating out or ready-to-eat] anywhere in the world, or that otherwise compete with McDonald’s.”
Easterbrook also agreed to consult with McDonald’s general counsel for clarification as to whether or not the chain views a prospective employer, consulting client or other business relationship, as part of that set.
“You agree that you shall notify McDonald’s prior to engaging in any way with a competitive company, and you further acknowledge and agree that McDonald’s may contact the competitive company and reveal the terms of the restrictive covenants in this Agreement. This agreement is not meant to prevent you from earning a living or fostering your career, but rather to prevent any competitive business from gaining any unfair advantage from your knowledge of McDonald’s confidential information, trade secrets and/or proprietary information,” the company said to Easterbrook in the filing. He also gave up all claims against McDonald’s by signing the deal.
McDonald’s revealed in Monday’s filings that Easterbrook’s successor, Chris Kempczinski, the company’s former USA president, will make an annual base salary of $1.25 million (Easterbrook’s base salary last year was $1.35 million). Kempczinski’s target annual bonus opportunity was set at 170 percent of his annual salary. Joseph Erlinger, who is stepping in for Kempczinski after leading international operated markets, had his annual base salary marked at $775,000 with a target annual bonus opportunity at 100 percent of his annual figure.
Kempczinski has held the USA president position since January 2017. He previously worked as corporate EVP of strategy, business development, and innovation from October 2015 to December 2016. Kempczinski joined McDonald’s from Kraft Heinz, where he most recently held the title of EVP of growth initiatives and was president of Kraft International from December 2014 to September 2015.
McDonald’s said Sunday that its board of directors voted to fire Easterbrook after he violated company policy, and that he “demonstrated poor judgment involving a recent consensual relationship with an employee.”
Easterbrook took McDonald’s CEO reins in March 25, succeeding Don Thompson. Born in England, Easterbrook worked up the McDonald’s ranks before he spent nearly five years heading the company’s U.K. and Europe division. He then left McDonald’s for two separate CEO stints—first at Pizza Express, then at Wagamama, both U.K.-based restaurant companies—before rejoining McDonald’s in 2013.
During Easterbrook’s tenure, McDonald’s stock has nearly doubled in value. The company’s global same-store sales gains of 5.9 percent in the third quarter that ended September 30 marked 17 consecutive periods of global gains. While U.S. traffic has stagnated, McDonald’s has been able to grow top-line performance through higher checks and digital expansion. Domestic comps lifted 4.8 percent in Q3, driven by product mix changes (two-thirds) and menu pricing (one-third as domestic pricing was up nearly 3 percent). Traffic remained negative.
The company was training down about 3 percent mid-day Monday.
BTIG analyst Peter Saleh wrote in a note that while “we are certainly disappointed by the circumstances of Mr. Easterbrook’s departure given the success McDonald’s has seen in recent years and the greater alignment and urgency he brought to major initiatives like technology. That said, we are unsure how McDonald’s strategy might change under Mr. Kempczinski’s leadership as most major initiatives are already well underway.”
“We are definitely surprised by the news and view Mr. Easterbrook’s departure as a loss but also believe the company’s strategy is on very solid footing and the McDonald’s system is much more than just one man,” Saleh added.