McDonald's Suing Former Chief Executive – All That You Need to Know!

  • Aug 12, 2020 AEST
  • Team Kalkine
McDonald's Suing Former Chief Executive – All That You Need to Know!

Summary

  • McDonald's filed a lawsuit against former CEO over multi-million-dollar severance deal, alleging him of consensual relationship with the employees.
  • The lawsuit accuses Steve Easterbrook of allegedly lying in the investigation and destroying the evidence.
  • A multi-billion-dollar company like McDonald's suing its former head in the public domain is a rare case.

It's been eight months since McDonald's Chief Executive Steve Easterbrook was fired for allegedly sexting with a co-worker. After the revelation, ex- CEO apologised and left the company with tens of millions in compensation. On Monday, 10th August, McDonald's filed a lawsuit against Easterbrook, accusing him of lying, concealing evidence and fraud.

According to an executive compensation tracking firm Equilar, the severance deal was estimated to be more than US$41 million. The value of Easterbrook's severance agreement rose since his firing. According to current estimates, the package is now worth ~$57 million altogether including the stocks from the initial severance deal.

Soon enough, the fast-food chain moved on with a new Chief Executive as well. Chris Kempczinski was appointed as a new CEO in November 2019.

Last month, an employee accused Easterbrook of having sexual relationships with another subordinate while running the company. This accusation has now ignited a rare public dispute between the American fast-food giant and its former leader.

What are the Allegations on Easterbrook?

McDonald's attorneys wrote in the lawsuit, that the company found out about the allegations on Easterbrook in 2019 after which an internal investigation started in the company. An employee accused ex-CEO of having an inappropriate personal relationship with a female subordinate. The company immediately issued an inquiry following which company's board became aware that its CEO had a non-physical, consensual relationship with a co-worker, involving texting and video calls.

During the investigation, a thorough search was done in his company-issued iPhone 10 and iCloud account, but the investigators did not find any additional evidence. That time they did not review his electronic communications, i.e. emails which were stored in the McDonald's computer servers.

The current complaint filed in Delaware's Court of Chancery by McDonald's attorneys stated that during last year’s investigation, Easterbrook told investigators of having non-sexual but of intimate nature relationship with the employee and it was the only such relationship he ever had in the company. Followed by an apology from him, the board then came to a conclusion that he will be terminated immediately 'without a cause' so that he would receive the substantial severance benefits.

McDonald's attorneys also told the court that if Easterbrook had been candid with the investigators and not concealed the evidence, the company would have terminated him on legal cause and not agreed to terminate him 'without a cause'.

This time the investigators searched Easterbrook’s emails with the employee's name on it. Easterbrook is found to send pictures of the women and two other employees to his personal email. In the current lawsuit, the company said they had noticed dozens of sexually explicit photographs and videos of various women, including pictures of the company employees. Easterbrook sent these pictures from the company email account to his personal Hotmail email account in Britain.

The photographs are indisputable evidence that Easterbrook lied to the company in the previous investigation, as per the company. He had deleted the photos from his phone, but without him being aware, the emails were automatically stored in the computer server, which the investigators found out now.

What Happens if Easterbrook Loses?

With the fresh allegations and lawsuit, Easterbrook may lose more because of the stock-heavy severance agreement. The severance package comes with a clause that if in the future company finds out that the employee was dishonest and the company has a legal cause to fire, then the company is not payable to the accused.

McDonald's in its latest lawsuit has not specified the amount for the damages it has faced. But the fast-food giant is asking the court to award it with the compensatory damages. The company has also requested attorneys, accountants, and expert fees to be paid by the accused Easterbrook.

As an alternative, the company has asked the court to allow Easterbrook to pay back all the cash and stocks he was granted in the severance package deal.

The recent lawsuit filed in state court in Delaware 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. It is to be noted that individual senior executives are authorised to grant the grant to the top-performing employees in the company, and the board's approval is not required.

In the past few months, another employee filed a complaint against Easterbrook, after which the company reopened the investigation.

Is McDonald's vs Steve Easterbrook, a One of its kind case?

After #MeToo movement flared up worldwide, many executives had to depart from the companies as their sexual and misconduct allegations came to the picture. A few, including Mr Harvey Weinstein, a mega Hollywood movie producer, faced criminal charges as well. #MeToo movement rocked and is still swaying the most influential people in various diasporas.

A multi-billion-dollar company like McDonald's suing its former head in the public domain is a rare case. In the past in 1996, The Walt Disney Company had paid its former President Michael Ovitz a whopping US$140 million in severance package after just 14 months on the job. The Shareholders sued Disney, but the judge gave a final ruling in 2005 in which it mentioned that the company is well within its rights to provide Ovitz such a generous package. However, the judge also suggested of Disney board making a poor decision in the matter.

Also read: Here’s Why these big giants are in the news- Disney, Amazon

Bottomline

During his tenure in McDonald's, Steve Easterbrook was considered a saviour as the fast-food chain was collapsing financially. He worked in the company for nearly two decades before taking up the role of chief executive. He not just streamlined the businesses and brought back the company on its feet but also introduced technological innovations. Touch-screen ordering and all-day-breakfast were such initiatives taken by him. During his stint, McDonald's shares roughly doubled.

Now with the new allegations and lawsuit, McDonald's want to set an example of not tolerating any such behaviour with any employee that does not reflect on company values. While, tech adoption and strategic business innovations continue to be on company’s agenda.

 


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