CHICAGO – When McDonald’s Corp. fired Stephen Easterbrook, then chief executive officer, he received a severance package valued at nearly $42 million, according to executive compensation experts at Equilar. Now, the company is suing Easterbrook for the return of the money and a lot more after an investigation found he’d had sexual relationships with at least three company employees.
In a complaint filed with the Delaware Court of Chancery, McDonald’s alleged that Easterbrook lied about and destroyed information related to his conduct which violated company policy.
“Had the Board been aware of this information, it would not have approved the terms of the Separation Agreement dated as of November 1, 2019, by and between Mr. Easterbrook and the company,” McDonald’s said in the court document. “Accordingly, the company has brought an action against Mr. Easterbrook in the Court of Chancery of the State of Delaware to recover compensation and severance benefits that would not have been retained by Mr. Easterbrook had he been terminated for cause. In addition, the company has taken immediate action to prevent Mr. Easterbrook from exercising any stock options or selling any stock issuable in respect of outstanding equity awards.”
McDonald’s further alleges that Easterbrook breached his fiduciary duties as an officer and director of the company. Not only did Easterbrook have physical sexual relationships with three McDonald’s employees in the year before he was fired, according to the complaint, he approved a stock grant, worth hundreds of thousands of dollars, for one of those employees in the midst of the relationship; and he was knowingly untruthful with McDonald’s investigators in 2019.
The company learned of the alleged behavior in July through an anonymous report alleging that a McDonald’s employee engaged in a sexual relationship with Easterbrook while he was CEO.
A subsequent investigation discovered photographic evidence that Easterbrook had sent as attachments to messages from his company e-mail account to his personal e-mail account. Date and time stamps on the photographs show that the photographs were all taken in late 2018 or early 2019.
“Neither these photographs, nor the e-mails to which they were attached, were present on Easterbrook’s company-issued phone when it was searched by independent outside counsel in late October 2019 because Easterbrook, with the intention of concealing their existence from the company, had deleted them from his phone,” the complaint states. “Unbeknownst to Easterbrook, however, the deletion of the e-mails from the mail application on his company-issued phone did not also trigger the deletion of those e-mails from his company e-mail account stored on the company’s servers.”
The company is seeking, among other things, compensatory damages for the money paid to Easterbrook under the separation agreement; attorneys’, accountants’, and experts’ fees; and other costs and expenses incurred by the company by virtue of his misconduct.