McDonald’s took the highly unusual move last year of suing its former CEO Steve Easterbrook to claw back his compensation, alleging that he had multiple sexual relationships with employees during his tenure and lied to cover them up.
To industry observers, the allegations were shocking. But so was McDonald’s decision to sue. No one expected an old-school institution like McDonald’s to air its dirty laundry in order to distance itself from its former CEO.
Today the saga, which had brought unwanted attention and scrutiny to the company and its board, ended for the Golden Arches. McDonald’s announced that it had settled what board chairman Rick Hernandez called in an internal memo viewed by Fortune its “unprecedented lawsuit,” with Easterbrook returning equity awards and cash, with a current value of more than $105 million. The amount is what Easterbrook “would have forfeited had he been truthful at the time of his termination and, as a result, been terminated for cause,” the company said in a press release.
“That’s quite a settlement,” says Charles Elson, a professor specializing in corporate governance at the University of Delaware’s business school. “It suggests McDonald’s had a pretty strong case. If they settled with him and got back half, that would have been a different story.”
Easterbrook’s lawyer said he and Easterbrook declined to comment further. McDonald’s also declined to comment beyond its release.
McDonald’s fired Easterbrook in November 2019 for sexting with an employee but decided not to fire him for cause, meaning he departed McDonald’s with more than $40 million in severance and compensation.
Less than a year later, McDonald’s chairman Hernandez received a whistleblower letter, which instigated a further investigation that found “dozens of nude, partially nude, or sexually explicit photographs of various women,” the subsequent lawsuit claimed. The company alleged that it was evidence Easterbrook had sexual relationships with multiple female employees and that Easterbrook had deleted the photos from his phone with “the intention of concealing their existence from the company.”
The company said in the complaint that it would never have agreed to the terms of the initial settlement if it had known about the alleged sexual relationships and Easterbrook’s attempts to cover them up.
Hernandez in today’s internal memo said, “Today’s resolution avoids a protracted court process and moves us beyond a chapter that belongs in our past.” Hernandez and his fellow directors had come under pressure for their 2019 decision to fire Easterbrook without cause, with a shareholder group calling for a refresh of the board.
Also as part of the settlement, Easterbrook issued an apology, saying that he had failed to uphold McDonald’s values and fulfill certain responsibilities as CEO.
Easterbrook had been tapped by the board in January 2015 to turn around the struggling burger giant and had shaken up the insular culture. He had made big moves like implementing all-day breakfast and relocating the company’s headquarters from suburban Chicago to the city. During his four-and-a-half-year tenure, Easterbrook grew McDonald’s market cap by over $50 billion—more than any restaurant CEO has ever added during a similar time span, according industry consultant Aaron Allen.
Easterbrook was replaced by CEO Chris Kempczinski, who has said changing the culture is a top priority.
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