McDonald's Started Investigation of CEO's Relationship With Employee Three Weeks Ago
November 08 2019 - 03:01PM
Dow Jones News
By Heather Haddon and Suzanne Vranica
McDonald's Corp., which fired its chief executive last week over
a consensual relationship with a female employee, first learned of
the matter roughly three weeks ago, according to people familiar
with the matter.
After an internal investigation, the company's general counsel,
Jerry Krulewitch, informed the burger giant's board of the matter,
the people said. The board hired New York City law firm Wachtell,
Lipton, Rosen & Katz to assess the legal risk from the
relationship, the people said. Mr. Krulewitch didn't respond to a
request for comment. Wachtell didn't immediately respond to a
request for comment.
McDonald's has a longstanding policy against its employees
having relationships with direct and indirect reports at all
levels, which extends companywide for McDonald's CEO, company
representatives said.
The board eventually concluded that the relationship between the
CEO, Steve Easterbrook, and the unidentified employee was
short-term and consensual, the people said. But the situation also
raised questions about Mr. Easterbrook's judgment regarding his
personal affairs and corporate conduct in the board's view, one of
the people said.
Several years ago, before Mr. Easterbook became McDonald's chief
executive, he had a relationship with Denise Paleothodoros, a
staffer at Golin, a public relations firm owned by Interpublic
Group of Cos. that did work for McDonald's, and personally worked
on the account, according to people famliar with the matter. The
board was made aware of the relationship, according to some of
those people.
"Steve and I were in a relationship and that ended amicably a
while ago, " said Ms. Paleothodoros, currently an executive
director at Golin.
Mr. Easterbrook, 52 years old, was separated from his wife at
the time that he became CEO in March 2015. They are now
divorced.
The board determined that the relationship didn't violate
company policy, and signed off on the relationship under assurances
that Ms. Paleothodoros would be removed from the McDonald's
account, some of the people familiar with the matter said. She told
her employer about the relationship and was moved off the account,
according to a person familiar with the matter.
Golin said an employee informed it in 2015 of a relationship she
said she was having with Mr. Easterbrook. The public relations firm
said that, at the time, Mr. Easterbrook "had no working
relationship with our firm" and didn't oversee public relations.
Golin said the employee was removed from the McDonald's account to
"avoid any conflict of interest," and that it advised McDonald's of
the decision.
Mr. Easterbrook and the woman dated for more than two years,
some of the people said.
Mr. Easterbrook didn't immediately respond to a request for
comment.
McDonald's current and former executives said they take
seriously information about possible relationships between company
employees, especially after the company's then-chief operating
officer, Ralph Alvarez, left the firm in 1998 following a personal
relationship with a female subordinate while a regional director in
California.
The circumstances cemented the McDonald's policy against
relationships among co-workers, some of the people said. Mr.
Alvarez was later rehired and rose up the ranks before stepping
down as COO in 2009. He said at the time that no issues of improper
behavior prompted him to retire.
McDonald's had long prided itself on its family value image,
sponsoring the Ronald McDonald House Charities that its CEO
heads.
The McDonald's anonymous tip line for whistleblowers typically
received hundreds of complaints yearly, about half that didn't have
any merit, according to one former executive. The ones considered
to have merit were investigated, and the issues determined to be
credible were presented by the audit committee to the rest of the
board, the person said.
No other matter had formally risen to the full board level after
Mr. Easterbrook's relationship with the Golin staffer, people
familiar with the matter said.
When the most recent relationship rose to their level, the board
members held lengthy discussions and meetings and ultimately voted
unanimously to fire Mr. Easterbrook, who never personally appeared
before the board, one of the people said. Mr. Easterbrook agreed to
a settlement on Oct. 31 and he was terminated the next day,
according to a filing.
--Joann S. Lublin contributed to this article.
(END) Dow Jones Newswires
November 08, 2019 14:46 ET (19:46 GMT)
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