MCD McDonalds Corp

By Heather Haddon and Suzanne Vranica 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 6, 2020).

McDonald's Corp.'s new CEO is determined to make changes at the top to move the company away from a culture that tolerated partying and fraternizing between some senior managers and rank-and-file employees.

Chris Kempczinski, the new chief executive, is seeking to restore a more professional culture at McDonald's after what some current and former employees described as an environment influenced by his predecessor's late-night socializing with some executives and staffers at bars and flirtations with female employees. Mr. Kempczinski is looking for a top human-resources executive to help him change that culture, people familiar with the matter said.

Mr. Kempczinski, who is also focused on improving restaurant performance, has met with employees and franchisees in the U.S., U.K., Germany, France and Switzerland in his first two months as CEO, in part to gather input on the company's culture and values, one of the people said. He is expected to share some of what he has learned with the company this month.

"There is a cultural shift here now," another person familiar with the new CEO's plans said. "Some people perceived there was this macho, guys club. That has now progressed to a more open leadership under Chris." This person and some others said Mr. Kempczinski, who was previously president of McDonald's USA, wasn't part of the executive group that did most of the late-night socializing.

McDonald's board fired its former chief, Steve Easterbrook, 52 years old, in November after he acknowledged having a consensual relationship with an unnamed company staffer. Mr. Easterbrook apologized for conduct that he said violated company values and rules barring employees from dating direct or indirect reports.

Some women in the company have praised the board for firing Mr. Easterbrook, people familiar with the matter said. During a town-hall meeting that Mr. Kempczinski held soon after moving into the CEO job, the 51-year-old father of two spoke at length about his family and his Catholic upbringing. A committed runner who has completed numerous marathons, Mr. Kempczinski said he would hold executives to high standards.

"I have to be able to look at every single one of my senior leadership team members and say, 'Do I believe that they personify the values of our company?' " Mr. Kempczinski said during the town-hall meeting, according to a video recording viewed by The Wall Street Journal. "And if they don't, they're not on the senior leadership team."

A representative for Mr. Easterbrook said he wasn't available to comment. When he was terminated, his representative said in a statement that he "acknowledges his error in judgment and supports the Company's decision."

Many U.S. companies are rethinking their stance on personal relationships in the workplace and reviewing efforts to combat harassment. At least two senior executives at BlackRock Inc. and Intel Corp. have left their posts over consensual relationships involving employees in the past two years.

McDonald's employees have fraternized at headquarters and at the burger giant's frequent conventions and meetings for decades. Many of the thousands of employees, franchisees and vendors who have attended those events often drank heavily and socialized late into the night -- sometimes with senior McDonald's executives participating and sometimes not, according to many current and former employees.

What several people said they found particularly troubling was that Mr. Easterbrook and former human-resources chief David Fairhurst participated in the partying after they took their roles in 2015. They often frequented local bars and drank with staffers after work hours, some of the current and former employees said.

Mr. Fairhurst couldn't be reached for comment.

Mr. Easterbrook had worked his way up at McDonald's European business over nearly two decades. When he became CEO, he brought with him to the U.S. some executives who had worked with him in the U.K., including Mr. Fairhurst, who was named "global chief people officer."

Mr. Easterbrook set to work improving restaurant operations and organizational structure. He moved McDonald's headquarters from suburban Oak Brook, Ill., to Chicago's trendy West Loop neighborhood to draw in younger talent. McDonald's offered buyouts to hundreds of Oak Brook employees before the move. Operational changes and cost cuts were boosting sales and profits.

The top floor of the nine-story West Loop building has a corporate cash bar that hosts Thursday happy hours for employees. Messrs. Easterbrook and Fairhurst on occasion would be there, the current and former employees said.

As CEO, Mr. Easterbrook developed a reputation for flirting with female employees, according to some former and current employees. "There were a couple of women who talked to me about his flirting. It was enough for them to feel uncomfortable," said one former McDonald's executive who had seen Mr. Easterbrook flirting with employees a couple of times.

Rumors about Mr. Easterbrook's alleged conduct had reached the company's highest levels, one person said. A formal complaint triggered an investigation in October, which resulted in the board voting on Oct. 31 to terminate Mr. Easterbrook because of a consensual relationship.

At a gathering in late 2018 at a restaurant near headquarters where some human-resources staffers drank heavily, Mr. Fairhurst and one of his subordinates were openly making physical contact, people familiar with the matter said.

An employee filed a complaint about that late-night drinking, the people said, and McDonald's legal counsel conducted an investigation that year. An executive told employees who attended the gathering that such excessive drinking was inappropriate and should be reported if it happened again, those people said.

Mr. Fairhurst stayed in his job. The day after Mr. Easterbrook stepped down, Mr. Fairhurst resigned. McDonald's said the two departures weren't connected. In a LinkedIn post about his departure, Mr. Fairhurst said it was time for another challenge after contributing to the company's growth and talent development.

"My world-class team have created the people strategies which will drive the business forward," he wrote.

Romantic relationships within McDonald's are fairly common, and at times have existed between senior executives in different departments, according to current and former employees. People who tied the knot after meeting at McDonald's were said to have "McMarriages," one former executive said. The company bars managers from dating direct or indirect reports.

Not all employees are aware of or understand the policy, half a dozen current and former executives said. The dating policy is listed on McDonald's corporate website under "codes of conduct."

During the recent town-hall meeting, McDonald's executives said many employees had asked if the dating policy applied to everyone. They said it did.

Mr. Kempczinski has told Wall Street analysts that he would push ahead with McDonald's investments in technology and work to boost sales and reverse fallen customer counts in the U.S.

But McDonald's mission isn't "just selling more burgers and fries," he said in the town-hall meeting. "We're going to be a lot better, a lot closer to where we want to be, where we aspire to be as a company."

Write to Heather Haddon at heather.haddon@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

(END) Dow Jones Newswires

January 06, 2020 02:47 ET (07:47 GMT)

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