McDonald's relationship rule stinks

Editorial | Mary Ma 6 Nov 2019

The ousting of McDonald's chief executive Steve Easterbrook comes at a time when the US company's performance couldn't have been better.

The incident begs the question of why a consensual relationship Easterbrook has had with an employee was so grave as to warrant an immediate career death sentence for someone who has brought the fast-food chain around from a low over four years.

Isn't it normal for two adults to have a consensual relationship?

McDonald's announcement of its breakup with Easterbrook suggested there wasn't anything criminal like sexual harassment or anything unethical like an extramarital affair in his relationship with his colleague. The relationship, it said, was a consensual one between two adults.

Despite that, it is against the company's regulations for a manager to have a relationship with a staff member, and Easterbrook breached that rule.

The case is curious in at least four aspects.

First, McDonald's is a long-time American icon and often thought to be representative of US values.

While Americans are popularly perceived, both within and without its borders, to be liberal minded and supporters of freedom, it's hard to imagine such an iconic US company being unable to accept its workers developing normal, adult relationships.

Second, instead of a warning, a death sentence for Easterbrook's career was meted out even though this will reportedly cost the company tens of millions of US dollars, including shares and cash in compensation. That is an unexpected cost to shareholders.

Third, it has been reported that McDonald's has secured Easterbrook's agreement not to work for a competitor for at least two years. Does this reflect, on the one hand, a recognition by the board of the fired CEO's ability and his potential value to rivals.

Unless new accusations surface, which is unlikely at this stage, Easterbrook would have been able to switch camps fairly easily in light of his performance since becoming the CEO in 2015.

Fourth, McDonald's appointed Easterbrook's deputy, Chris Kempczinski, who has been overseeing the US business as the new chief. Though Kempczinski has contributed to revitalizing the US business, it will take a while to gauge if the succession will be successful. Would this mean uncertainty between now and then?

Once news of Easterbrook's sacking broke, McDonald's shares traded down by over 2 percent. Investors were obviously concerned.

Since 2015, McDonald's share price has doubled. Its latest third-quarter results also marked the 17th consecutive quarter of same-store sales growth.

So, it has left many wondering if a lesser penalty would have been more appropriate or whether the company could have used the opportunity to do away with an antiquated rule.

An American employment lawyer was of the view that Easterbrook could have been a victim of the #MeToo movement - not in the sense that he had done something improper but that the corporate atmosphere it created has spooked US firms into dealing with relationship issues with an excess of caution.

According to the Harvard Business Review, sexual harassment is commonplace in the restaurant industry and McDonald's, in view of its large size, has consistently come under close scrutiny in federal states and the Capitol Hill.

McDonald's said Easterbrook had shown "poor judgment" in the matter. Maybe that, ultimately, is the corporate "sin" that Easterbrook committed in the company's eyes.

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