McDonald's Fired CEO Is Getting Millions, Putting Spotlight On Pay Gap - NPR

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Stephen Easterbrook was fired as CEO of McDonald's after his relationship with an employee was found to violate company policy. Richard Drew/AP hide caption

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Former McDonald's CEO Stephen Easterbrook is getting an exit package of almost $42 million after his relationship with an employee was found to violate company policy. The size of his compensation puts a new focus on the widening gap between the pay at the top and the bottom of the corporate ladder.

According to an analysis by executive compensation experts Equilar, Easterbrook's exit package totals $41.8 million, which includes six months of severance pay, shares he can cash out in the future and other equity. And that sum is in addition to $23.8 million in stock options that Easterbrook can exercise now.

"Wow, he is walking away with a lot of money," says Cornell Law School professor Stewart Schwab, an expert on employment law. "And it comes out as part of the story of just, wow, [the] 1% gets a lot more money than the rest of the workers in this economy."

It's relatively unusual for a CEO to receive a severance package after being fired. But McDonald's board of directors determined his firing to not be for cause — a threshold that varies by company. And litigation in a protracted dispute can be tricky and expensive.

Writing to employees earlier this week, Easterbrook said: "I engaged in a recent consensual relationship with an employee, which violated McDonald's policy. This was a mistake." No further details were disclosed, but McDonald's current policy prohibits employees who "have a direct or indirect reporting relationship" from dating or having a sexual relationship.

McDonald's latest disclosures show that in 2018 Easterbrook made $15.9 million. That's 2,124 times more than a McDonald's median employee — a part-time crew member working in Hungary. According to Glassdoor, a U.S. crew member at McDonald's makes an average of $9 an hour.

McDonald's did not respond to NPR's inquiries, including about median salary in the U.S.

"A big story of the income inequality and explanation for it is that top executives, and in particular the CEO, does have the exploding pay compared to the rank and file," Schwab says. "And this is an example of that."

Easterbrook joined McDonald's in 2015, and his tenure was praised by company watchers. The fast-food chain's stock price hit historic highs under his efforts to revamp both the restaurants and the menu.

But Easterbrook also presided over the company as it faced allegations of rampant sexual harassment of female employees by male coworkers and managers. (To be clear, his departure does not involve harassment allegations.)

In May, workers in 13 U.S. cities staged protests against low pay and the company's handling of alleged sexual harassment. In recent years, dozens of McDonald's workers filed sexual harassment complaints, alleging everything from lewd comments and groping to retaliation.

"What we see all the time from minimum-wage workers is that once you complain, retaliation is common," says Sharyn Tejani, director of the Time's Up Legal Defense Fund that works with victims who allege sexual harassment.

"That takes the form of losing shifts, losing your job, not being able to stay at your job, being disciplined. And ... they don't have any cushion," she says. "And when you compare that to what happens to somebody like the CEO, it's clear that there's a structural problem here."

Following worker complaints, McDonald's announced in August it would introduce a harassment training program for U.S. workers. The program, which began in October, trains restaurant supervisors and crew on how to create a safe workplace and diffuse difficult situations.

Earlier in the year, McDonald's also made an unexpected commitment to no longer lobby against minimum-wage hikes on federal, state or local levels. In mid-2015, McDonald's added at least $1 an hour more to the local minimum wage to employees of the restaurants owned by the corporation. The majority of McDonald's locations are owned by franchisees.

In 2015, research by the UC Berkeley Center for Labor Research and Education found that more than half of fast-food workers rely on public assistance programs like food stamps. The research did not specifically focus on McDonald's.

NPR's Peter Talbot contributed to this report.

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2019-11-05 19:59:00Z
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McDonald's falls to seven-month low – Jim Cramer and four other experts weigh in - CNBC

McDonald's stock tumbled to seven-month lows after CEO Steve Easterbrook was ousted for having a consensual relationship with an employee.

He led the company fore more than four years.

Five experts weigh in on what comes next for the fast-food giant.

Jeffrey Sonnenfeld, senior associate dean at Yale, says new CEO Chris Kempczinski's credentials are impressive.

"There is great continuity. The successor has been very well battled tested. In his short career he's been at Procter & Gamble, he has been at Boston Consulting Group, he's been at Kraft, very senior roles. At PepsiCo, he soared. He was head of North American beverages — the uncarbonated beverages. It did a great job by all accounts at PepsiCo."

RJ Hottovy, consumer equity strategist at Morningstar, says the new CEO makes for an easy transition.

"I'm pretty comfortable with Kempczinski as the new CEO. He co-authored a lot of the velocity initiatives that Steve Easterbrook put in place. He was a big proponent of the fresh beef initiative the company rolled out. Honestly, he did a lot behind the scenes with delivering digital so I think we'll see a lot of continuation of Steve's initiatives with Chris at the helm."

Jim Cramer, host of CNBC's "Mad Money," says there are questions around timing.

"The stock was down pretty badly on Friday and I'd like to know a little more about when and how long they've known this. This is one where it's pretty obvious that the stock has been under a lot of pressure. Some of it was because of Wendy's breakfast, some of it was because it missed [estimates] domestically and some of it was because of this. I don't know for sure."

Will Slabaugh, managing director of Stephens, says the outgoing CEO deserves due credit for the turnaround.

"Whenever Steve came in, McDonald's was ... somewhat stagnant around the world and so in the past, you know, five years, we've seen record results internationally — the UK, France, the U.S. had a tremendous turnaround. So, investors, franchisees have made a lot of money with Steve at the helm."

David Palmer, senior managing director at Evercore ISI, says McDonald's needs to step it up to compete.

"You have rivals showing that you can do some things — you can grow breakfast certainly, there's the chicken wars as we all know, and the fact that there's been some demand creation happening in the industry. The industry is doing over 4% comps right now so very strong results. McDonald's has outperformed generally but that that has compressed lately."

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https://www.cnbc.com/2019/11/05/jim-cramer-and-others-on-mcdonalds-fall-to-seven-month-low.html

2019-11-05 13:24:21Z
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Fired McDonald’s CEO steps down from Walmart board - Fox Business

Former Ted Cruz campaign pollster Chris Wilson, Stanford School of Business lecturer Dave Dodson and Politico congressional reporter Melanie Zanona discuss the firing of McDonald’s CEO Steve Easterbrook and Chief People Officer David Fairhurst over Easterbrook’s romantic relationship with a subordinate.

Ousted McDonald’s CEO Stephen Easterbrook has stepped down as a member of Walmart's board of directors.

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According to a Securities and Exchange Commission filing, Easterbrook informed the company Monday of his decision to resign effective immediately after joining the board in 2018.

Walmart has not immediately responded to FOX Business' request for comment.

Steve Easterbook (Credit: McDonald's)

Easterbrook is one of a dozen board members currently listed on the company's website who ensure "Walmart operates with integrity and accountability."

He was fired from McDonald's after violating company policy by engaging in a consensual relationship with an employee, the company said.

Ticker	Security	Last	Change	Change %
MCD	MCDONALD'S CORP.	188.66	-5.28	-2.72%

MCDONALD’S FIRES CEO FOR INAPPROPRIATE RELATIONSHIP WITH EMPLOYEE

The fast-food giant said Easterbrook demonstrated poor judgment, and that McDonald’s forbids managers from having romantic relationships with direct or indirect subordinates.

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In an email to employees, Easterbrook acknowledged he had a relationship with an employee and said it was a mistake.

According to Monday's filing, his decision to resign from Walmart was not due to "any disagreement with the company on any matter relating to its operations, policies or practice."

The Associated Press contributed to this report. 

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2019-11-05 11:37:42Z
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'We created a monster,' SoftBank CEO Masayoshi Son reportedly said of WeWork - Business Insider UK

• Masayoshi Son, CEO of Japanese mega-investor SoftBank, told colleagues that "we created a monster" in WeWork, the Financial Times reported.
• SoftBank will on Wednesday impose stricter governance standards on dual-class share structures after the WeWork fiasco, the FT said.
• SoftBank is expected to take a multibillion dollar writedown on WeWork, the FT said. 
• View Business Insider's homepage for more stories.

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Masayoshi Son, CEO of Japanese mega-investor SoftBank, told colleagues that "we created a monster" in WeWork after investing billions into the firm only to later bail it out, the Financial Times reported.

SoftBank last month bailed out the cash-strapped real estate firm to the tune of just over $8 billion, with an accelerated payment of $1.5 billion just to ensure the company didn't run out of money. SoftBank being one of the company's main backers, is now under scrutiny for the way it invests.

The FT also separately reported, citing unnamed sources, that SoftBank will on Wednesday impose stricter governance standards on dual-class share structures after the WeWork fiasco — an about-face for Son who the newspaper says is "known as a risk-addicted dealmaker." 

SoftBank is expected to take a multibillion dollar writedown on WeWork, the FT said. 

Prior to the bailout, SoftBank had invested more than $10 billion in WeWork and the office-sharing firm was valued at $47 billion at its peak. The firm planned to IPO and backers dreamed of a valuation of more than $100 billion.

But intense scrutiny over WeWork's governance and business model resulted in the firm indefinitely delaying its IPO, and its idiosyncratic cofounder Adam Neumann stepping down as CEO in September, followed by the bail out last month.

Son, the Financial Times cited a person close to him as saying, has been shaken by the ordeal. The Japanese magnate has said little publicly about WeWork since the funding deal, although he has said that he is "embarrassed" in general by SoftBank's missteps.

"We created a monster," Son told colleagues, according to the paper. And in reference to Neumann: "We gave him all the capital."

This, along with Uber, which has lost more than a quarter in value since going public, and according to CNBC cost the Japanese firm $600 million so far, is leading to investors worrying about the real value of SoftBank's ventures. 

"If SoftBank says this is the value, how much of that should you believe?" the FT cited Kirk Boodry, a technology analyst at Redex Holdings who publishes on Smartkarma, a research platform, as saying. 

WeWork and SoftBank did not immediately respond to a Business Insider request for comment. 

Read the Financial Times' report here.

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2019-11-05 10:50:42Z
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US futures point to higher open ahead of key economic data - CNBC

U.S. stock index futures were higher Tuesday morning after Wall Street posted a record close on Monday.

At around 5 a.m. ET, Dow futures rose 78 points and indicated a positive open of more than 62 points, while futures on the S&P 500 and Nasdaq were also higher.

Strong earnings, more promising economic data and optimism over a possible U.S.-China trade deal saw the Dow Jones Industrial Average join the S&P 500 and Nasdaq Composite at record highs on Monday.

The Dow's year-to-date gain now stands at around 18%, while the S&P 500 is up more than 22% and the Nasdaq more than 27% so far this year.

Market focus remains attuned to trade discussions, with Reuters reporting on Monday that China is pushing U.S. President Donald Trump to remove more tariffs imposed in September as part of the much touted "phase one" trade deal between the two nations.

Traders will also have eyes on a raft of economic data Tuesday morning. September balance of trade, import and export figures are due for release at 9:30 a.m. ET before November Redbook data at 9:55 a.m. ET.

Composite and services PMI (purchasing managers' index) numbers for October are expected at 10:45 a.m. ET, followed by non-manufacturing PMI and a host of other non-manufacturing figures at 11: a.m. ET.

On the earnings front, Allergan and Becton Dickinson are set to report before the bell on Tuesday.

- CNBC's Fred Imbert contributed to this report.

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2019-11-05 07:59:14Z
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McDonald’s CEO fired for consensual relationship with employee, company says - The Washington Post

The board of directors fired Easterbrook on Friday after concluding he had violated the company’s policy against manager relationships with direct or indirect reports and announced the decision Sunday. He was replaced by Chris Kempczinski, previously the president of McDonald’s USA.

Meanwhile, McDonald’s announced the departure of Chief People Officer David Fairhurst on Monday, effective immediately. The company declined to comment further, calling it a personnel matter.

Easterbrook joins a growing list of chief executives forced out over their personal relationships as more companies implement rules against dating subordinates in the #MeToo era.

“We are seeing substantially more interest” in these policies, Jonathan Segal, a Philadelphia-based employment lawyer, told The Washington Post last year, after Intel’s chief executive stepped down for breaking his company’s rules with a consensual relationship.

“I’m seeing more companies ask about them,” Segal said. “I’m seeing more companies add them to their anti-harassment policies. I’ve seen more companies look at them in their codes of conduct.”

McDonald’s has not shared further details of the relationship that led to the firing. Easterbrook, a former head of the company’s U.K. operations, is divorced, according to the Sunday Times of London.

In an email to employees, Easterbrook called the relationship “a mistake” and said he agreed with the board that “it is time for me to move on.”

Desiree Moore, a Chicago-based lawyer acting as a spokeswoman for Easterbrook, said he is “deeply grateful for his time at McDonald’s.”

“He acknowledges his error in judgment and supports the Company’s decision,” Moore said, adding that Easterbrook will be not be commenting further.

Easterbrook became chief executive in 2015 as McDonald’s struggled to keep its customers. After the chain announced a drop in U.S. sales as well as a 33 percent decline in global profit in the first quarter of that year, he promised to “better address today’s consumer needs, expectations and the competitive marketplace.”

Piper Jaffray downgraded McDonald’s stock after news of Easterbrook’s departure broke, noting “the potential lack of momentum and time involved in formalizing a new team.”

McDonald’s, a Dow component, shed nearly 3 percent Monday. The stock has soared under Easterbrook’s leadership, and the company retains its spot at the top of U.S. fast-food sales, even as the industry faces challenges.

Easterbrook propelled McDonald’s from a tough time, said Jonathan Maze, the editor of Restaurant Business. He improved sales — still on the upswing this year — and restructured the company, speeding up decision-making and cutting hundreds of millions in overhead costs, Maze said.

He also embraced technology in the form of in-store kiosks, online-order delivery and, in March, a $300 million start-up acquisition meant to speed up McDonald’s drive-through services.

“He’s been pretty consequential,” said Maze, who says that Easterbrook’s ouster signals that companies are taking relationship policy violations “a lot more seriously” than they used to.

Kempczinski became head of McDonald’s USA in 2016. Easterbrook told staff that Kempczinski was “an important partner to me over the last four years and . . . the ideal person to take on the role of CEO."

In his new role, Kempczinski will receive a base salary of $1.25 million. He could earn as much as $2.1 million in annual bonuses, according to Securities and Exchange Commission filings.

“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,” Enrique Hernandez Jr., chairman of the chain’s board of directors, said in a statement.

In an interview with the Wall Street Journal, Kempczinski said that he will continue Easterbrook’s investments in technology and that he looks forward to discussing franchisees’ concerns.

“There isn’t going to be some radical, strategic shift,” he told the Journal on Sunday. “The plan is working.”

Rachel Siegel contributed to this report.

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2019-11-04 19:26:00Z
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Apple is pledging $2.5 billion to tackle California’s housing crisis - The Verge

Apple today announced a pledge of $2.5 billion to combat the housing crisis in its home state of California. It’s the largest commitment of any of the Big Five in the tech industry, all of which have pledged various amounts of money toward helping build more affordable housing in and around the cities they operate near. The only major US tech company who has yet to pledge a significant amount of money toward the issue is Amazon, although Amazon did donate $8 million over the summer to nonprofits that provide housing for the homeless.

Apple, which is based in Cupertino outside of San Jose and is less than an hour’s drive from San Francisco, has more than 130,000 employees, many of which command high salaries and have, both directly and indirectly, contributed to the lack of affordable housing in Northern California. Last month, Facebook pledged $1 billion toward the issue, while Google pledged the same amount back in June.

Microsoft, which is based just outside Seattle, said in January it would spend $500 million to help ease similar housing issues in the city’s greater metropolitan area. Seattle has suffered from similar overcrowding and gentrification, as well as a lack of affordable housing, that comes with years upon years of high-paid labor increases and a lack of equally distributed housing options to help people of all incomes live in or near the city.

Yet regardless of location, the issues around the country — and especially in areas with high concentrations of tech workers — take the same shape. It is often much harder to build housing in cities faster than people move there, and the housing that is available tends to increase in price, where only higher-paid workers (like tech employees) can afford to move in. That results in less people working service and municipal jobs that keep a city running, or having to live farther away to perform those jobs, while homelessness rises and long-time residents get forced out of neighborhoods their families have lived in for generations.

“Before the world knew the name Silicon Valley, and long before we carried technology in our pockets, Apple called this region home, and we feel a profound civic responsibility to ensure it remains a vibrant place where people can live, have a family and contribute to the community,” Apple CEO Tim Cook said in a statement. “Affordable housing means stability and dignity, opportunity and pride. When these things fall out of reach for too many, we know the course we are on is unsustainable, and Apple is committed to being part of the solution.”

Apple breaks down its commitment into two large $1 billion funds, as well as a series of smaller donations and pledges to various other housing issues:

• $1 billion affordable housing investment fund: “The $1 billion commitment to the state of California is a first-of-its-kind affordable housing fund that will provide the state and others with an open line of credit to develop and build additional new, very low- to moderate-income housing faster and at a lower cost.”
• $1 billion first-time homebuyer mortgage assistance fund: “Working with the state, this first-time homebuyer fund will provide aspiring homebuyers with financing and down payment assistance. Apple and the state will explore strategies to increase access to first-time homeownership opportunities for essential service personnel, school employees and veterans.”
• $300 million Apple-owned land will be available for affordable housing: “Apple intends to make available land it owns in San Jose worth approximately $300 million for the development of new affordable housing.”
• $150 million Bay Area housing fund: “In a public-private partnership, Apple is launching a new $150 million affordable housing fund with partners including Housing Trust Silicon Valley to support new affordable housing projects. The fund will consist of long-term forgivable loans and grants.”
• $50 million to support vulnerable populations: “Apple will donate $50 million to support Destination: Home’s efforts to address homelessness in Silicon Valley. Apple will focus its contribution on driving systemic change across the many factors affecting homelessness. Apple will also be identifying similar efforts in Northern and Southern California, focusing on strategies that both end and prevent homelessness.”

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2019-11-04 18:48:47Z
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