MCD McDonalds Corp

By Heather Haddon and Suzanne Vranica 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 26, 2020).

McDonald's Corp. said its continuing investigation into former CEO Steve Easterbrook's conduct is examining whether he covered up improprieties by other employees alongside allegations of potential misconduct within the human-resources department.

McDonald's filed suit against the former CEO following a tip that board chairman Rick Hernandez received last month about an alleged sexual relationship between Mr. Easterbrook and an employee. That tip also raised concerns about the HR department and possible improprieties by other employees, McDonald's executives said. The company declined to provide details on allegations that it said involved the HR department.

Some former managers told The Wall Street Journal they felt HR leaders under Mr. Easterbrook ignored complaints about the conduct of co-workers and executives. Some of those people said they feared retaliation for reporting the conduct of co-workers and executives to HR.

"The board will follow the facts wherever they may lead," McDonald's said.

Mr. Easterbrook and his lawyer didn't respond to requests for comment.

The fast-food giant's handling of workplace problems is in the spotlight, as McDonald's has taken Mr. Easterbrook to court, alleging he lied about three sexual relationships with employees and demanding he relinquish tens of millions of dollars in severance. McDonald's fired him without cause in November after he acknowledged a consensual relationship with an employee that violated company standards.

Mr. Easterbrook said in a legal filing this month that the company had information about his relationships with other employees when it negotiated his severance. McDonald's said it stands by its complaint. At the time of his firing in November, Mr. Easterbrook said his consensual relationship with an employee was a mistake. "Given the values of the company, I agree with the board that it is time for me to move on," he wrote at the time in an email to McDonald's employees.

Before his dismissal, Mr. Easterbrook was lauded for helping to turn around the company. After taking over in 2015, he overhauled menus and pushed franchisees to update restaurants. Sales and profits grew, and McDonald's stock nearly doubled during his tenure. The changes included cost cuts through hundreds of buyouts that led to the departure of some long-tenured compliance and HR executives, former executives said.

David Fairhurst, whom Mr. Easterbrook appointed global chief people officer months after becoming CEO, streamlined many HR functions, including a change to performance reviews that allowed for less employee feedback about concerns, former managers said.

Mr. Fairhurst socialized with employees outside the office, and his conduct during a department holiday party in 2018 drew a complaint from an employee who said some staffers drank heavily and that the HR chief and one of his subordinates made inappropriate physical contact, people familiar with the incident said.

McDonald's legal counsel conducted an investigation that year, those people said. An executive told employees who attended the gathering that such excessive drinking was inappropriate and should be reported if it happened again, the people familiar with the incident said.

Some former managers and employees described feeling left out of advancement opportunities in departments, including HR, because they weren't part of an after-hours social circle among HR leaders.

Some employees concerned about favoritism in the HR department alerted the company's legal department, according to a former manager and a letter that a former employee sent to the department last month, a copy of which was viewed by The Wall Street Journal.

In response to questions about Mr. Fairhurst's conduct and leadership of the HR department, McDonald's now says that it fired him with cause after Mr. Easterbrook's dismissal because of conduct inconsistent with company policies and values. McDonald's said at the time that Mr. Fairhurst had left the company.

McDonald's said the CEO's dismissal and HR chief's departure weren't connected. Mr. Fairhurst, who has started a workforce-consulting firm in Chicago, didn't respond to requests for comment. "I have decided the time has come for me to move on to my next career challenge," Mr. Fairhurst wrote in a LinkedIn post last fall.

New CEO Chris Kempczinski, who replaced Mr. Easterbrook in November, pledged at the time to improve McDonald's work environment. Mr. Chris Kempczinski said last month that he would renew the company's values and condemned his predecessor's alleged conduct.

McDonald's hired a new global chief people officer, Heidi Capozzi, in April from Boeing. She is reviewing HR processes and policies put in place under Messrs. Fairhurst and Easterbrook, company executives said, and plans to add new HR positions and procedures such as evaluations for senior executives with subordinates' feedback. Company executives said she is reviewing the ways concerns are raised and investigated.

The company said it has hired consultants who plan to start interviewing McDonald's employees next month about their experiences at the company.

"Our board and CEO are committed to leading with integrity," McDonald's said in a statement. "We will continue to make changes, where necessary, to support all parts of our organization."

Three executives and several other employees have left the HR department since Mr. Easterbrook's firing, former managers said. One of the recent HR departures, Melanie Steinbach, had been promoted to senior vice president and chief people officer for McDonald's U.S. last month. McDonald's said last week that Ms. Steinbach had left the company. Ms. Steinbach couldn't be reached for comment.

"I know this team has gone through a ton of change," Ms. Capozzi said in an online meeting last week with some employees, a recording of which was viewed by the Journal. "I certainly wish that wasn't the case, particularly with all the other challenges we are dealing with."

She encouraged employees to raise concerns about questionable behavior.

Jim Oberman contributed to this article.

Write to Heather Haddon at heather.haddon@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

Corrections & Amplifications McDonald's new CEO is Chris Kempczinski. An earlier version of this article incorrectly said Kempczcinski in one instance. (Corrected on May 25.)

(END) Dow Jones Newswires

August 26, 2020 02:47 ET (06:47 GMT)

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