McDonald’s Sues Former C.E.O., Accusing Him of Lying and Fraud
McDonald’s is among a tiny number of major companies to publicly — and with unconcealed anger — go after a recently departed chief executive. CBS’s firing of Leslie Moonves, in which the television company accused him of obstructing an internal investigation, is one of the few other examples. (Mr. Moonves claims he is entitled to a $120 million severance package. The dispute is now in arbitration.)
Until last fall, Mr. Easterbrook, a native of Watford, England, was regarded as something of a savior at McDonald’s. He had worked at the company for nearly two decades before taking its helm in March 2015. The fast-food chain was in a financial slump. Mr. Easterbrook streamlined its businesses, introduced technological innovations like touch-screen ordering and delighted customers by offering all-day breakfasts. The company’s shares roughly doubled during his tenure.
But in October 2019, the company was notified that Mr. Easterbrook had engaged in an inappropriate relationship with a McDonald’s employee. Mr. Easterbrook and the employee, who has not been publicly identified, told the company that the relationship was consensual and was not physical; it consisted of text messages and videos. Mr. Easterbrook assured the company’s outside investigators that he had never engaged in a sexual relationship with an employee.
The board of directors nonetheless decided to fire him. The question that the directors considered was whether he would be fired “for cause” — in other words, for an offense such as dishonesty or committing a crime. It was a crucial determination. If Mr. Easterbrook was fired for cause, he would have to relinquish previously awarded compensation, including stock options that he was not yet eligible to cash in.
McDonald’s said in its lawsuit on Monday that its board had feared that trying to fire Mr. Easterbrook for cause would be “certain to embroil the company in a lengthy dispute with him.” Instead, the board opted to ease Mr. Easterbrook out “with as little disruption as possible.”
The company allowed Mr. Easterbrook to keep his stock options and other compensation.
But McDonald’s severance plan, which the company said applied to Mr. Easterbrook, contained an important clause: If, in the future, McDonald’s determined that an employee was dishonest and actually deserved to be fired for cause, the company had the right to recoup the severance payouts.
Last month, after McDonald’s received the anonymous tip alleging that Mr. Easterbrook had had a sexual relationship with another employee, the company opened a new investigation.