McDonald’s sues ex-CEO Steve Easterbrook over alleged sexual relationships with staff members
McDonald’s has sued former Chief Executive Steve Easterbrook, alleging that he fraudulently hid details of three sexual relationships with employees when the board fired him in November over a separate relationship with a subordinate.
In a securities filing and a document lodged with the Delaware Chancery Court, the fast-food chain said it was seeking to recover the compensation and severance payments it allowed Easterbrook to leave with. Equilar, the executive-pay consultancy, reported at the time that his severance deal was worth about $40 million.
McDonald’s would not have approved the separation agreement had it known the extent of his “inappropriate personal behavior,” the company said, but would instead have terminated him for cause.
Easterbrook could not immediately be reached for comment.
According to the lawsuit, new evidence shows that the British executive had “physical sexual relationships” with three employees in the year before his termination, that he approved an extraordinary stock grant worth hundreds of thousands of dollars for one of them “in the midst of their sexual relationship” and that he was “knowingly untruthful” with investigators.
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.
In an email to employees, Easterbrook acknowledged he had a relationship with an employee and said it was a mistake.
“The company’s complaint alleges that Mr. Easterbrook breached his fiduciary duties as an officer and director of the company and committed fraud in the inducement,” the company told investors in its filing. It is seeking compensatory damages “for all the amounts paid to Mr. Easterbrook under the separation agreement and other costs and expenses incurred by the company by virtue of his misconduct.”
The lawsuit, thought to be without precedent at a company the size of McDonald’s, followed an investigation by an external law firm after an employee came forward in July with fresh allegations about Easterbrook’s behavior.
The relationship for which Easterbrook was fired consisted only of texting and video calls, the filing says, and he assured the company at the time that he had not had other intimate relationships with employees.
“Based on the results of the investigation, the board concluded that Mr. Easterbrook lied to the company and the board and destroyed information regarding inappropriate personal behavior and in fact had been involved in sexual relationships with three additional company employees prior to his termination, all in violation of company policy,” McDonald’s said.
“McDonald’s does not tolerate behavior from any employee that does not reflect our values,” Chris Kempczinski, who replaced Easterbrook as chief executive, told franchisees and employees in a separate message seen by the Financial Times.
“We now know that his conduct deviated from our values in different and far more extensive ways than we were aware when he left the company last year,” Kempczinski said of his predecessor.
McDonald’s Corp., in its largest acquisition in 20 years, is buying a decision-logic technology company to better personalize menus in its digital push.
The fast-food company had been under pressure over allegations of workplace sexual harassment before Easterbrook’s termination, and Kempczinski emphasized the importance of staff and franchisees feeling able to blow the whistle on “any behavior that doesn’t align with our values.”
The lawsuit invoked Ray Kroc, founder of McDonald’s, who said that being “ethical, truthful and dependable” was the foundation of the company. It reiterated that the company’s code of business conduct required employees to “avoid any situation in which ... personal or financial interests might cause ... business loyalties to be divided” and to disclose any potential conflict of interests to the company.
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