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How Romance Got A CEO Dumped

Big, successful organizations rarely make abrupt leadership changes without careful planning. So when McDonald’s Corp. recently announced the firing of its CEO, I immediately wondered what terrible thing had happened.

Nothing terrible at all, as it turned out. It was just love, or friendship, or sex, or some combination thereof. But at McDonald’s, what was described as a short-term, consensual relationship with a fellow employee was enough to sink the career of Steve Easterbrook. Easterbrook, a 52-year-old Briton, had headed the company since 2015. By all accounts, he was doing a good job leading the company in a choppy business environment of changing consumer tastes and rising minimum wages. Shares had roughly doubled in value during his tenure.

McDonald’s prohibits close personal relationships between employees and anyone who reports to them, directly or indirectly. For the CEO, this is covers the roughly 375,000 people who work for the corporation, including the employees of some 2,200 outlets it operates directly. Counting franchisees, this policy would extend to more than 35,000 outlets and 1.9 million people.

According to The Wall Street Journal, Easterbrook was fired within three weeks of the relationship being reported. (It is not known how, or by whom, the initial report was made.) After the report reached the board, they promptly conducted an investigation and hired an outside law firm to assess the legal risks of the situation. Easterbrook did not oppose his discharge and was not even given an opportunity to address the board. He did, however, send an email to staff saying that he agreed with the board’s decision. He will receive 26 weeks of salary as severance. A day after his firing became public, Easterbrook resigned a seat on the board at Walmart Inc.

Easterbrook is divorced. The relationship, by all accounts, was consensual. The other party has not been named but faces no discipline as far as is publicly known. (Nor do I think any is warranted.) So as I learned the details of this story, at least those that are public knowledge, I wondered: Was firing Easterbrook really necessary?

The short answer is that it was. If you have a policy against such relationships, you have to apply that policy to everyone, including the person at the top. McDonald’s prides itself on good corporate governance. Unlike at some other Fortune 500 companies – Boeing and its current travails immediately come to mind – the McDonald’s board is not a captive to or a collection of cronies of the CEO.

That’s the short answer. The longer, more nuanced answer is that I don’t believe this need to have happened. Nor do I think this is necessarily the best outcome for the company, its shareholders, or its franchisees and their workers.

If you want to take human emotions out of the workplace, deploy robots and computer algorithms. People are people. We will respond to those around us, positively or negatively, especially when we spend extended periods of time together, rely on one another and travel together. Often we will form friendships. Sometimes we fall in love. Consenting adults will on occasion act on those impulses, or others that are perhaps more basic. A 2017 survey from CareerBuilder found that 41% of respondents had dated a co-worker at some point. No policy is going to prevent this from happening.

Of course there are important and legitimate concerns about how to properly manage a workplace. Nobody should ever feel pressured or harassed into starting or maintaining a relationship, or into engaging in any other sort of personal conduct. Supervisors in particular need to ensure (and their employers need to ensure that they ensure) that the inevitable power imbalance does not create such pressure. Managers must also see to it that even a consensual relationship does not disrupt the business by causing distractions or resentment from other employees over favoritism, real or perceived.

Romantic or sexual relationships are not the only possible source of such disruption, even if they are the ones usually addressed through policies like the one at McDonald’s. A supervisor socializing after hours with certain employees, to the exclusion of others, can create the same sort of problems.

When we force inevitable relationships underground, we create space for other problems to surface. Actual favoritism may go unnoticed, at least for a while, when the relationship driving it is hidden. Personnel may become subject to blackmail; an employee may even be pressured into an unwanted relationship with a co-worker who discovers a preexisting secret, consensual relationship. This is not to mention the potential hazards when policies about such relationships are applied unfairly.

In a case like Easterbrook’s, would the McDonald’s board really have been happier if he had come to them one day and said, “Sorry, folks – it’s been fun, but I find myself falling in love with someone here, and so I guess this is the end of the road for me at this company?”

A CEO at a corporation the size of McDonald’s has only a handful of direct reports. For virtually everyone else, the CEO could recuse himself or herself from decisions affecting a romantic partner or, for that matter, a relative who also works at the company. For direct reports at such high levels, the chief operating officer and the board itself could handle any sensitive decisions.

There is no universally agreed best practice for how to handle these situations. I believe sunshine is always the best disinfectant, and so I tend to support policies like the sample offered by the Society for Human Resource Management. It calls for transparency when relationships arise, and for managers to recuse themselves from decisions in which they may be perceived to have a significant personal conflict of interest. It also reminds managers of the importance of maintaining a workplace that is safe, professional and fair to all employees.

I could never apply a policy like the one at McDonald’s at my company (which is less than one-thousandth its size); my wife works here. So I try to practice openness, trust and mutual respect. I want everyone at my firm to feel safe and comfortable in their workplace. I expect supervisors to maintain appropriate professional distance from those they supervise, and I won’t tolerate any sort of harassment. But if friendship, or even love, should happen to take root, I want to deal with it compassionately as well as fairly. We are only human, after all.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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