Why time ran out for McDonald’s CEO

January 29, 2015, 2:26 PM UTC

Just last week McDonald’s CEO Don Thompson made the case for more time to turnaround the troubled company during his year-end earnings calls.

His board, it appears, gave him a resounding “no.” Yesterday Thompson announced he will step down from the job after two-and-a-half years, a period marked by sliding sales and mounting pressure on the brand. Fortune chronicled McDonald’s (MCD) woes in November, which you can read about here. The company’s stock was up more than 3% in after-hours trading yesterday.

The official word out of McDonald’s Oak Brook, Ill., headquarters is that Thompson, 51, is “retiring.” But it’s pretty clear that he didn’t make this choice alone. When the company reported earnings last week, 2014 became the first year since 2002 that the fast-food behemoth suffered a global decline in sales at outlets open for at least a year. As Sanford Bernstein analyst Sara Senatore wrote in a note today: “While we understand that the timing was determined by Thompson, there is no doubt in our mind that he was under increasing scrutiny by investors and therefore the board.”

So after five quarters of declining same-store sales in the U.S. market, why now? Nonexecutive chairman Andrew McKenna told Fortune in the fall, “We’re very supportive of Don. We see the leadership team moving forward with a sense of urgency, which is good.” But McKenna and his fellow directors were starting to feel the pressure as the press increasingly focused on its role in the company’s struggles. On Friday, for example, Jim Cramer took the board to task on CNBC, demanding, “When will someone finally be held accountable for this kind of sub-par performance and why do corporate boards tolerate these mistakes, keeping the flailing CEOs of these two companies [McDonald’s and UPS] around for still more earnings seasons?” He concluded that both companies would create value immediately if their CEOs left.

Thompson’s successor, SVP and chief brand officer Steve Easterbrook, joined the company in 1993 but left in 2011 to become CEO first of Pizza Express and then Wagamama, both UK-based restaurant brands. Thompson brought him back in 2013, telling Fortune in October, “I love the fact that he had experience sitting in a CEO chair. It broadened his purview of business in general.” Two years away may very well give him an outsider’s perspective at a notoriously insular company like McDonald’s, but it might not be enough time away to give him the kind of fresh thinking that the chain needs to accomplish an incredibly daunting task. As we wrote in November:

[McDonald’s] has risen to the top of the fast-food chain by being comfortably, familiarly, iconically “mass market” and so ubiquitous as to be the Platonic ideal of “convenient.” Neither of these selling points, however, is as high as it was even a decade ago on Americans’ list of dining priorities. A growing segment of restaurant goers are choosing “fresh and healthy” over “fast and convenient,” and McDonald’s is having trouble convincing consumers that it’s both. Or even can be both.

In recent months, as the problems became more evident, Thompson took the tack of trying everything all at once. He was pushing digital investments, a build-your-own-burger platform, and a simplified menu, while also allowing regions to localize their offerings. To be fair, Thompson inherited plenty of the company’s issues, like menu bloat, but he certainly didn’t make them better and made some of them, like issues involving pricing, he made worse.

One big advantage Easterbrook has over Thompson is that he faces a completely different set of expectations. Thompson had the unenviable job of taking over the company after it enjoyed an incredible run. His predecessor, Jim Skinner, had eight years of consecutive positive same-store sales growth, a nearly 50% increase in revenue, and a more than doubling of profits. In 2011 McDonald’s was the top-performing stock in the Dow for the one- and five-year periods. By contrast, Easterbrook takes the helm during an historically abysmal time for the brand. As Nation’s Restaurant News has reported, this year was the first time in at least 30 years that sales at the company’s U.S. business declined, ending the longest run ever of domestic restaurant sales growth for a single chain.

On his very first earnings call after he was announced as CEO in 2012, Thompson was asked what he thought his legacy would be. “First of all, I hope that retirement point is quite a few years down the road. Otherwise, that might mean it was induced by something other than me,” he said, adding, “I’ve been around McDonald’s for over 20 years now and I think what’s most important for everyone is to understand that a change in leadership doesn’t mean a change in strategy.”

This time, investors have to hope, a change in leadership will mean a change in strategy.

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