Yesterday, McDonald’s (NYSE: MCD) fired CEO David Fairhurst for having a consensual relationship with an employee. Inter-office romances, while less common than movies and television shows would have you believe, still happen. And usually, they’re completely harmless to the integrity of a company if handled properly.
But when the CEO of a major corporation gets caught up in one, the board is forced to take disciplinary action.
Sorry, David.
Fairhurst, who served as CEO for more than four years, captained the helm during an impressive run for McDonald’s. Since he was hired for the job, MCD shares rose over 100%, outpacing the general market significantly.
In many ways, it’s a shame that he had to go. Long-term shareholders are especially disappointed to see Fairhurst leave after raking in the dough during his tenure.
That’s not to say it’s been all “butterflies and rainbows” at the burger giant’s corporate headquarters, though. Since August, MCD shares have sunk over 15%.
Some are wondering if the affair may have simply been an excuse to terminate Fairhurst for cause after McDonald’s ran off the rails in Q3.
And right after Fairhurst’s firing, McDonald’s announced that Chris Kempczinski, former Kraft Foods executive vice president of growth initiatives, would become the new CEO of the fast-food chain.
Analysts – like Jeffery Sonnenfeld, senior associate dean at Yale – were quick to point out Kempczinski’s storied resume.
“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,” he said.
“At PepsiCo, he soared. He was head of North American beverages — the uncarbonated beverages. It did a great job by all accounts at PepsiCo.”
Others agreed with Sonnenfeld’s sentiment that Kempczinski’s integration with McDonald’s would be a smooth one.
“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,” said RJ Hottovy, consumer equity strategist at Morningstar.
Mad Money’s Jim Cramer perhaps had the most intriguing observations, recognizing that Fairhurst’s firing came at a perfect time for the company.
“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,” he said.
“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.”
McDonald’s stock, even in the wake of a big hire, remains down since last Friday before the news broke. That doesn’t mean it will stay there, though. If MCD can tick back upwards, it’ll start looking significantly undervalued.
Especially if Q4 earnings show improvement under Kapczinski’s regime.
So, while bulls may be bailing on MCD after the Fairhurst removal, the fact remains that the company may have turned over a new leaf. They got their “has-been” executive out of a leadership role, replaced by a younger, hungrier model.
Don’t be surprised if shares end up soaring over the next few weeks as a result.
