Mcdonald's Sues Former CEO Over Relationships With Employees

By Madelaine D. First Posted: Aug 11, 2020 02:01 AM EDT

McDonald's is suing its former CEO, Steve Easterbrook, over alleged inappropriate relationships with another employees, while he was running the company.

On Monday, the firm accused Easterbrook of allegedly covering up his relationships with three other employees and destroyed evidence, the Associated Press reported.

Based on the complaint filed in state court in Delaware, McDonald's has launched an investigation into Easterbrook's relationship with a McDonald's employee last October.

The probe concluded that the relationship was consensual and never included a physical relationship. At that time, Easterbrook told independent outside counsel that he had never engaged in any sexual relationship with McDonald's employees.

Nevertheless, Easterbrook was terminated in November for violating company policies banning "intimate interactions." Going for a smooth transition, McDonald's did not seek "for-cause termination," and the former CEO was granted millions of dollars in severance pay and benefits.

But now, McDonald's claimed that it obtained new evidence in July uncovering sexual relationships between Easterbrook and other employees, the New York Times reported.

McDonald's File Lawsuit Against Former CEO Steve Easterbrook, Claims Employee Relationships

(Photo : Scott Olson)
McDonald's Officially Unveils Its New Headquarters In Chicago CHICAGO, IL - JUNE 04: McDonald's CEO Stephen Easterbrook unveils the company's new corporate headquarters during a grand opening ceremony on June 4, 2018 in Chicago, Illinois. The company headquarters is returning to the city, which it left in 1971, from suburban Oak Brook.

McDonald's probe showed that in the year before Easterbrook was fired, he carried on sexual relationships with three employees and approved a grant of restricted stock, worth hundreds of thousands of dollars, to one of those employees.

McDonald's alleged that Easterbrook destroyed evidence of those relationships and sexually explicit photos and videos sent from corporate email accounts inside his cell phone. The former CEO allegedly removed the evidence before he was fired to prevent investigators from discovering it. However, the evidence remained on the firm's email servers.

McDonald's did not state why the servers weren't checked during the initial investigation and relied on Easterbrook to be truthful.

"That reliance caused the company injury," the company said in the complaint.

McDonald's further noted that it would not have terminated Easterbrook without cause if it had known the additional relationships. The famous fast-food giant wanted to reclaim millions of dollars it compensated to Easterbrook.

In a message to employees on Monday, McDonald's President and CEO Chris Kempczinski said the company does not tolerate employees' behavior that does not reflect their values.

Kempczinski also told employees that he is committed to ensuring that employees are comfortable. He encouraged employees to come forward with any details about behavior that doesn't go with the company's values.

McDonald's is said to conduct a global survey and listening sessions to assess its corporate culture. The assessment will be shared to employees when completed in November, according to the message of Heidi Capozzi, McDonald's Chief People Officer, obtained by the Associated Press .

Easterbrook was fired after admitting exchanging videos and text messages in a consensual but non-physical relationship with an employee. Esterbrook told McDonald's there were no other similar instances and that the initial inspection of his cellphone confirmed that.

According to Equilar that tracks executive compensation, McDonald's approved a separation agreement "without cause" that allowed Easterbrook to keep almost $42 million in stock-based benefits. He also collected 26 weeks of pay, amounting to about $670,000.

With the filing of a lawsuit, McDonald's is attempting to block Easterbrook from practicing his stock options and demands compensatory damages. It remains unclear how much Easterbrook might have to pay.

In the lawsuit, McDonald's said Easterbrook's separation agreement showed that his 2018 and 2019 equity awards may be forfeited if the company determines he has engaged in "detrimental conduct." In those two years, Easterbrook was awarded more than $29 million in stock-based compensation.

Easterbrook had his divorce in 2015. It happened the same year when he became the CEO of McDonald's. He started his career with McDonald's when he served as a finance manager in London in 1993.

The lawsuit highlighted the years-long reckoning again over sexual harassment at Chicago-based McDonald's and its 39,000 restaurants. In the United States alone, more than 50 workers have filed separate sexual harassment charges against the firm before the U.S. Equal Employment Opportunity Commission or state courts.

Meanwhile, the group Leaders with Fight for $15, which supports higher wages and unions for fast food workers, said Monday that McDonald's should use any money it regains from Easterbrook for worker-led programs that combat sexual harassment.