Wires

UPDATE 2-McDonald's ousts CEO over consensual relationship with employee

Mike Spector

(Adds background on Easterbrook's tenure, email to employees from Kempczinski)

Nov 3 (Reuters) - McDonald's Corp dismissed Chief Executive Steve Easterbrook over a recent consensual relationship with an employee, which the board determined violated company policy, the fast-food giant said on Sunday.

The board determined that Easterbrook had "demonstrated poor judgment" involving the relationship, McDonald's said in a news release. Easterbrook relinquished his seat on the company's board as well.

"This was a mistake," Easterbrook, 52, said of the relationship in an email to employees on Sunday released by the company. "Given the values of the company, I agree with the board that it is time for me to move on."

The departure of Easterbrook, who had led McDonald's since 2015, is among the most significant in corporate America in the past several years over relationships deemed inappropriate.

Scrutiny of executives and their treatment of employees has intensified amid the #MeToo social media movement, which highlighted instances of sexual harassment in the workplace. In June 2018, Intel Corp CEO Brian Krzanich resigned after an investigation found he had a consensual relationship with an employee that breached company policy.

Chris Kempczinski, 51, most recently president of McDonald's USA, was named the company's new CEO, effective immediately. He also joined the McDonald's board.

In his own message to employees, Kempczinski thanked Easterbrook for recruiting him to McDonald's and said he expected the company to continue its customer-focused growth plan. McDonald's Chairman Enrique Hernandez Jr. called Kempczinski "instrumental" in developing the company's strategic plan.

McDonald's, which recently celebrated the 40th anniversary of its Happy Meal for children, is known for its family-friendly reputation.

The company did not provide further details on the circumstances surrounding Easterbrook's departure. McDonald's is expected to disclose financial information related to Easterbrook's dismissal in a securities filing as soon as Monday, the company said.

The company named Joe Erlinger, who has been president of international operated markets, as president of McDonald's USA, succeeding Kempczinski.

RIVALS CHALLENGE DOMINANCE

McDonald's shares more than doubled during Easterbrook's tenure. But the chain in October missed Wall Street profit estimates for the first time in two years as it spent money remodeling U.S. restaurants and speeding up service to address declining customer visits.

Rival fast-food chains in the United States have challenged McDonald's dominance with value meals and new menu items, including plant-based burgers and meat substitutes launched by rivals including Restaurant Brands International Incs Burger King and Yum Brands Incs KFC. McDonalds is seen late in reintroducing chicken sandwiches and rival Wendys Co has started serving breakfast.

The remodeling of the company's 14,000 U.S. restaurants includes introducing digital ordering kiosks, mobile ordering as well as pay-and-pickup services, while partnering with app-based delivery services GrubHub Inc, Uber Eats and DoorDash.

The world is different than it was in 1955, Easterbrook said during an October call with investors.

Easterbrook turned around McDonalds operations in the UK, where he was born, by refocusing on burgers and burnishing the brand with an ad campaign that sought to debunk unflattering rumors about its food.

A cricket enthusiast who earned a reputation among former UK colleagues for being funny, fair and a lover of simplicity, Easterbrook was also the rare McDonalds CEO with experience running other restaurant chains. (Reporting by Mekhla Raina in Bengaluru and Mike Spector and Anna Driver in New York; Editing by Peter Cooney)