McDonald's sues ousted CEO, alleging employee relationships

Andrew Cummings
August 13, 2020

University of Notre Dame business professor Timothy Hubbard said the lawsuit reflects McDonald's need to look out for shareholders, not just police employees' conduct. The company headquarters is returning to the city, which it left in 1971, from suburban Oak Brook.

The recent lawsuit filed in state court in DE accuses Easterbrook of having sexual relationships with three McDonald's employees, and he also awarded hundreds of thousands of dollars' worth shares to one of the employees in the form of special retention grant.

The company's case against Easterbrook includes dozens of naked or explicit photographs and videos of different women - including some McDonald's employees - that Easterbrook allegedly sent as attachments to his personal email account from his work account in late 2018 or early 2019.

An internal investigation found evidence of that relationship, and of two others, McDonald's said.

It remains unclear why the then boss's email account had not been searched for further evidence before an agreement was reached on a multi-million dollar severance payment. The company said it believed Easterbrook would have told the entire truth.

"That reliance caused the company injury", the company said in the complaint. The company explained that this would not have been retained by Easterbrook "had he been terminated for cause".

McDonald's dismissed Easterbrook last fall over a consensual relationship with a female employee and hired executive Chris Kempczinski as his successor.

In his message to employees, Kempczinski said he is committed to making sure that employees are "encouraged and comfortable coming forward with information about any behavior that doesn't align with our values". Eight months later, the fast-food giant is suing its former chief executive to recoup the money, claiming he had sexual relationships with multiple employees and tried to cover them up. Esterbrook told McDonald's there were no other similar instances and that the initial inspection of his cellphone confirmed that. That allowed Easterbrook to keep almost $42 million in stock-based benefits, according to Equilar, which keeps track of executive compensation.

McDonald's is using the latest accusations to attempt to claw back $670,000 the former exec received as part of his "without cause" separation agreement - the equivalent of 26 weeks salary - as well as compensatory damages.

McDonald's said it had also taken steps to prevent Easterbrook from selling stock it had granted to him or exercising his remaining share options.

It's unclear how much Mr Easterbrook might have to pay.

McDonald's says the investigation also uncovered that Easterbrook had made a decision to approve an extraordinary stock grant, worth hundreds of thousands of dollars, for an employee during the time of their sexual relationship.

Proxy-advisory firm Glass Lewis advised shareholders this year to vote against the company's executive pay package given the severance afforded to Mr. Easterbrook. He became global CEO in 2015. He started his career with McDonald's when he served as a finance manager in London in 1993. In the U.S. alone, more than 50 workers have filed separate sexual harassment charges against McDonald's with the U.S. Equal Employment Opportunity Commission or in state courts.

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