McDonalds Shares Tumble in Wake of CEO Firing

McDonalds shares tumbled to a 7-month low dropping nearly 16% from its highs made in September follow news that its CEO had been fired by the board of directors. McDonalds share trading brought extremely heavy volume following the announcement. While CEO Stephen Easterbrook was not fired for cause, he violated a company policy that prohibits having a relationship with a colleague. The severance package that Easterbrook is receiving has lifted some eyebrows and shines the light on the difference in pay between the CEO and the average employee at McDonalds.

Easterbrook’s Performance

Easterbrook had been leading the company to profitable levels. During his tenure, McDonalds stock price. His performance was irrelevant and could protect his job after he violated a company-wide policy that barred supervisors from having relationships with subordinates. Allowing Easterbrook to stay at the company would send the wrong message that the company’s policies don’t matter, and that the CEO was above the company policy. Easterbrook joined McDonald’s in 1993 worked his way up to become chief executive in 2015.

Pay Package Sticks Out

The severance package that former McDonald’s CEO Stephen Easterbrook is receiving is nearly $42 million. The policy at the firm which was violated by Easterbrook does not preclude him from receiving an exit package. While its very unusual for a CEO to receive a severance package after being fired, the the board of directors at McDonald’s determined his firing to not be for cause. The severance agreement which includes six months of severance pay, along with shares he can cash out in the future and other equity. The large amount of severance sticks out as it shines the light on the difference in pay throughout the company. McDonald’s latest disclosures show that in 2018, Easterbrook made $15.9 million. That’s 2,124 times more than the median income of a McDonald’s.

Changing Values

What is clear is that employees want a clear set of values. According to CBNC, 69% of workers say it’s very important to work for a company with clearly stated values. The Workplace Happiness Index, put out by Survey Monkey, show that 91% of workers say it is important to work for a company whose values are aligned with their own personal values.

Stock Prices Remains Under Pressure

Shares of McDonalds had been trading on the defensive before the news of the CEO firing. The stock prices have been in a downward trend since mid-October, following worse than expected financial results. Here’s what the company reported. McDonalds had earnings per share of $2.11 versus expectations of $2.21. Revenue for the company was $5.4 billion versus $5.5 billion expected. Global same-store sales came in at 5.9% versus 5.6% expected. There was a downshift in the US business, which accounts for 33% total revenue. Promotions are also a sore point. The recent buy one get one took generated a hit to the bottom line.