H&R Block Orders Up McDonalds Smyth

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H&R Block Orders Up McDonalds' Smyth
Miriam Marcus, 07.28.08, 1:21 AM ET

Tax preparer H&R Block is looking to a former executive of McDonald's for brand-building and diversification expertise.

Last week, H&R Block (nyse: HRB - news - people ) appointed McDonald's (nyse: MCD - news - people ) veteran Russell Smyth as its new president and chief executive, effective Aug. 1, replacing Alan M. Bennett, who has served as interim CEO since November 2007.

Smyth's appointment comes about eight months after former CEO Mark A. Ernst, who oversaw the tax preparer's failed subprime lending strategy, resigned last fall following the election of activist shareholder Richard Breeden to the board of directors.

From July 2005, shares of Kansas City, Mo.-based H&R Block have dropped 19.5% while the company dealt with issues as diverse as the bursting of the housing bubble and an embarrassing gaffe on its own taxes.

"Nothing is certain in life, but death and taxes, which bodes well for the nation's largest tax preparation company H&R Block, which delivered a record setting tax season," wrote value adviser John Buckingham of Laguna Beach, Calif.-based Al Frank Asset Management in a July 7 missive to his Prudent Speculator newsletter subscribers.

The company hopes Smyth's experience in franchise networks will boost H&R Block's traditionally seasonal-performance. Smyth will take over H&R Block, with around 13,000 company-owned and franchised offices, as the company is attempting to return the focus to tax preparation after years of diversifying into mortgage lending, investment advising and banking.
The company earlier this year sold its struggling Option One Mortgage unit and has said other non-tax operations, such as the 2-year-old H&R Block Bank, could be jettisoned if results don't improve.

"Russ has excellent experience working with a powerful brand and delivering consistently high quality performance across a vast retail network," said H&R Block Chairman Breeden. He added that "Russ will help H&R Block utilize more effectively the power of its brand in growing market share, and also in improving efficiency and developing new distribution channels in the United States and internationally.

Smyth, 51, has served as a consultant, equity owner, active board member for private equity firms and several privately held companies since 2005. He stepped down as president of McDonald's European operations in 2005, ending a 21-year career with the restaurant chain. As head of European operations, he oversaw 6,300 stores and $6.7 billion in annual revenue, and previously served in other finance and global brand-building positions with the Big Mac purveyor.

H&R Block said Smyth agreed to a three-year contract with the Kansas City, Mo.-based company with a starting annual salary of $950,000. He will also be eligible for short-term incentives and bonuses, and will receive the option to buy 900,000 H&R Block shares at varying prices. Shares in H&R Block have traded between $24.64 and $16.89 in the trailing 12 months, rising 0.2%, or 5 cents, to close at $23.79 in trading in New York on Friday.

The Associated Press and Reuters contributed to this article

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