McDonald's Sues to Recover Severance From Fired CEO, Claiming He Lied About Affairs With Employees
By Heather Haddon
McDonald's Corp. said it is suing former Chief Executive Steve
Easterbrook and seeking to recoup tens of millions it paid him in
severance and benefits, alleging that he lied to the board about
sexual relationships with employees before his ouster last
The fast-food giant dismissed Mr. Easterbrook without cause in
November 2019, following an investigation into his conduct.
Investigators found he had a short-term, consensual relationship
with an employee over text and video, but Mr. Easterbrook denied
any physical sexual relationships with McDonald's employees,
according to the complaint filed Monday.
McDonald's reopened the matter after it received an anonymous
tip in July about a relationship between Mr. Easterbrook and an
employee, according to the suit. An investigation found that Mr.
Easterbrook allegedly engaged in three other relationships with
employees that were sexual in nature, including the one that
triggered the inquiry. Investigators found that Mr. Easterbrook
destroyed evidence about the sexual relationships and lied about
his behavior during the initial investigation last fall, the
Because McDonald's decided to fire Mr. Easterbrook without
cause, he received severance and benefits that he could have been
denied had the board found him at fault. Mr. Easterbrook's
compensation, benefits and stock were potentially worth nearly $42
million, according to an analysis at the time by executive-pay firm
The company also alleged that Mr. Easterbrook approved a stock
grant to an employee with whom he was having a sexual relationship.
The grant was valued at hundreds of thousands of dollars, according
to the suit.
"McDonald's does not tolerate behavior from any employee that
does not reflect our values," Chris Kempczinski, who succeeded Mr.
Easterbrook as CEO last November, wrote in a message to the company
At the time of his firing, Mr. Easterbrook said the consensual
affair was a mistake, and that he agreed with the board's decision
to fire him. Mr. Easterbrook also said at the time that he hadn't
engaged in other relationships with employees, according to
Mr. Easterbrook, appointed CEO in 2015, helped McDonald's
streamline operations and modernize. He also took part in a culture
of partying and fraternizing among some senior managers and
rank-and-file employees, The Wall Street Journal previously
reported citing some former employees and people currently
connected to the company.
McDonald's said in the suit that its investigation found dozens
of nude and sexually explicit photographs and videos of women,
including employees, sent from Mr. Easterbrook's corporate email
account to a personal one. Mr. Easterbrook had deleted the photos
from his company-issued phone, and they weren't discovered during
the company investigation that triggered his firing, according to
McDonald's said in the complaint, to be filed Monday in the
Court of Chancery of the State of Delaware, that Mr. Easterbrook
breached his fiduciary duties as a company officer and committed
fraud. The company said it is seeking to recover the amount it paid
Mr. Easterbrook in compensation and severance benefits. It is also
seeking to prevent Mr. Easterbrook from exercising stock
Some shareholder groups had criticized the board's decision to
fire Mr. Easterbrook without cause despite conduct that violated
longstanding company policies forbidding relationships with direct
and indirect reports. Proxy-advisory firm Glass Lewis advised
shareholders earlier this year to vote against the company's
executive pay package given the severance package afforded to Mr.
That payout included $700,000 in cash severance to Mr.
Easterbrook. Total compensation, including equity awards, amounted
to $17.4 million in 2019. The company's stockholders in May
approved total compensation and equity awards for Mr. Easterbrook.
The suit doesn't specify an exact sum McDonald's seeks to recover.
The company wrote in the suit that it is seeking the annulment of
the severance agreement, damages and the return of Mr.
Easterbrook's stock and cash awards.
McDonald's said in the complaint that to have fired Mr.
Easterbrook for cause last year, it would have had to prove that
his behavior had constituted "dishonesty, fraud, illegality or
moral turpitude." At the time, board members felt they lacked
evidence to justify firing the CEO for cause, the complaint
Mr. Kempczinski, who served under Mr. Easterbrook as the head of
McDonald's U.S. business, pledged to overhaul the company's culture
after assuming the job in November. Mr. Kempczinski pledged to
renew company values during a virtual company summit late last
month. McDonald's in March hired Heidi Capozzi, previously the
senior vice president of human resources for Boeing Co., as its new
global chief people officer.
Write to Heather Haddon at firstname.lastname@example.org
(END) Dow Jones Newswires
August 10, 2020 09:23 ET (13:23 GMT)
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