Issue of the week: the sex scandal at McDonald’s
The fast-food chain has sacrificed a talented boss. Is it a case of puritanism gone mad?
“The Big Mac is now served without the big cheese,” said Lex in the FT. Some $4bn was wiped off the value of McDonald’s on Monday after the fastfood chain fired its chief executive, Steve Easterbrook, for having a “consensual” relationship with another member of staff that “violated company policy”. The British-born executive, who has spent most of his career under the Golden Arches, is “widely credited with engineering a turnaround” since taking over in 2015. Despite upheaval in the fast-food industry, like-for-like sales rose for 17 straight quarters during his tenure, and profit margins nearly doubled. Shareholders were “lovin’ it”. No wonder his abrupt exit is now “causing some heartburn”. All the more so since he was swiftly followed by the group’s HR chief; in all, four top execs have left in recent weeks. What on earth is going on?
To European eyes, sacking a divorced CEO over a consensual affair with an employee “seems totally OTT”, said Jim Armitage in the London Evening Standard. “Surely a rap on the knuckles would suffice?” But although McDonald’s is a global giant, it is “highly reliant on franchisees in small-town America, where puritan Christianity runs deep”. Easterbrook would have been “well aware of the punishment for the crime”: in 2010, the hamburger giant booted out its then No. 2, Ralph Álvarez, over a relationship with the wife of one of its biggest franchisees. Like Alvarez, he “had to go”. Easterbrook, who earned £12m last year and is being allowed to retain stock awards vesting within three years, “can have no complaints”, said Ben Marlow in The Daily Telegraph. “Times have changed dramatically” since the #MeToo movement, which isn’t just about sexual harassment in the workplace, but also about abuse of power. “Scrutiny of management and their treatment of employees has never been more intense.” Particularly at McDonald’s, which has introduced a hotline after “dozens” of employees complained about sexual harassment.
Non-fraternisation rules are stricter in the US, said Dominic Walsh in The Times; a string of CEOs (most recently Brian Krzanich of Intel) have resigned following relationships with employees. In Britain, we do things differently. Fred Goodwin, the disgraced former boss of RBS, was able to deploy “a superinjunction to prevent his affair with a senior colleague, who was twice promoted under his tenure, from being made public”. Meanwhile, Easterbrook’s exit deal bars him from working for competitors of McDonald’s – but “he shouldn’t have too much trouble getting another job. It would be surprising if private equity had not already been in touch.”