McDonald’s Sue Former CEO for Fraud

Eight months ago, McDonald’s fired its former CEO Steve Easterbrook over sexual allegations with a subordinate. Easterbrook offered an apology and exited the company with tens of millions as compensation.

Recently in July, an anonymous allegation was made against the former CEO for having sexual relations with another subordinate while he was running McDonald’s as the CEO. The allegation reignited the flames of legal issues between the company and its former CEO, causing a public ruckus.

A fresh side to the matter was revealed on Monday, causing McDonald’s to file a lawsuit against Easterbrook with allegations of lying, fraud, and concealing evidence. The lawsuit was filed in Delaware’s state court, carrying allegations against Easterbrook for having sexual relationships with three of the company’s employees in 2019, and also awarded shares to one of the employees he had a sexual relationship with.

McDonald’s stated that it wants to recover the compensations that the company allowed Easterbrook to keep, including stock options. The total compensation added up to more than $40 million according to Equilar, a compensation consulting firm.

This lawsuit in particular deviates from the usual way most American corporations handle such allegations. In a more traditional way, such matters are handled without much drama, the accused simply admits his faults and walks away with compensations. McDonald’s, however, is one of the few companies that are known for publicly and aggressively going after a former executive.

In these times, many companies strive to maintain a good reputation before shareholders and customers, as a bad reputation could be very bad for business.

“McDonald’s does not tolerate behavior from any employee that does not reflect our values,” said the company’s new CEO Chris Kempczinski. “As we recommit to our values, now, more than ever is the time to lean into what we stand for and act as a positive force for change.”

McDonald’s lawsuit against Easterbrook also raises questions about the efficacy of the previous investigations before dismissing him with a $40 million compensation package.

“One would think that it would be internal investigation 101 to look at all electronic records right away,” said Brandon L. Garrett, a corporate criminal law professor at Duke University School of Law. “The concern, if an investigation doesn’t look at emails, is that it was a halfhearted investigation.”

During his tenure as the chief executive officer at McDonald’s, Easterbrook took the fast-food chain to high levels of its business. As of the time he became CEO in 2015, after working at the company for over 2 decades, McDonald’s was in a financial slump. Easterbrook restructured the business by introducing technological innovations like touch-screen ordering and other improvements to boost customer experience. In addition, the company’s shares doubled during his time in office.