McDonald's Former CEO Fights Severance Clawback -- Update
August 17 2020 - 2:08PM
Dow Jones News
By Heather Haddon
Former McDonald's Corp. Chief Executive Steve Easterbrook said
in a court filing that the company had information about his
relationships with other employees when it negotiated his
multimillion-dollar severance package.
In his first response to the suit McDonald's filed seeking to
recoup that severance, Mr. Easterbrook's attorney said the company
admitted it had his email account stored on company servers when it
first investigated his conduct last October. The company said last
week that McDonald's investigators unearthed email messages with
attachments that contained dozens of nude and sexually explicit
photos and videos of Mr. Easterbrook with company employees and
other women between late 2018 and early 2019.
"Based on the very same information McDonald's has today, it
negotiated a separation agreement," Mr. Easterbrook's attorney
wrote in a filing in Delaware on Friday afternoon. "But McDonald's
admits that the 'new' information it now relies upon is not new at
all."
McDonald's expects to respond to Mr. Easterbrook's filing in
court, according to a person familiar with the litigation.
"McDonald's stands by its complaint, both the factual assertions
and the court in which it was filed," a McDonald's spokesman
said.
McDonald's has taken the unusual move of seeking to claw back
Mr. Easterbrook's severance in court, exposing the company and its
board to a rare public fight over compensation awarded to a former
executive.
McDonald's fired Mr. Easterbrook without cause in November after
he acknowledged having a consensual relationship with an employee.
The fast-food giant said in the lawsuit last week that it has since
concluded that Mr. Easterbrook lied to investigators and its board
to cover up relationships with employees to secure a
multimillion-dollar severance package.
Under Mr. Easterbrook's watch, a party culture flourished among
some senior managers at the company, former employees and others
connected to the company said. Those people said the former CEO
frequently socialized at Chicago bars and sporting events with
employees, and flirted with some female employees. Rumors about Mr.
Easterbrook's alleged conduct had reached some other company
leaders in the year leading up to the first investigation, one
person said.
CEO Chris Kempczinski pledged to improve McDonald's work
environment after succeeding Mr. Easterbrook in November. He
outlined plans to renew company values late last month and brought
in a new global chief people officer, Heidi Capozzi, this year. Ms.
Capozzi has said she is working to refine the company's strategy
for supporting employees.
McDonald's made more staff changes on Monday: The company said
its senior vice president and chief people officer for the U.S.
division, Melanie Steinbach, had left. Ms. Steinbach, previously a
vice president and global chief talent officer, was promoted last
month after the previous human-resources head of the U.S. division
left the company in June.
"For a variety of reasons, and unfortunately I can't comment on
the specifics, we determined that her separation was really in the
best interest of the company," Ms. Capozzi said in a video message
to employees that was viewed by The Wall Street Journal.
Ms. Capozzi said the company had started to search for Ms.
Steinbach's successor. McDonald's and Ms. Steinbach didn't
immediately respond to requests for comment.
Daniel Herr, Mr. Easterbrook's Delaware-based employment
attorney, said in the filing that McDonald's doesn't have the legal
standing to allege the former CEO breached his severance agreement
with the company because it has admitted that it possessed material
that could have altered those negotiations.
Mr. Herr said that Mr. Easterbrook agreed not to sue the company
or make disparaging comments about it as part of the severance
agreement, barring him from responding publicly to the company's
suit seeking to recover his severance.
Mr. Easterbrook's pay and stock awards are now estimated to be
worth $57.3 million, according to the executive-pay firm Equilar.
McDonald's stock is up more than 7% since Mr. Easterbrook was fired
in November.
Mr. Easterbrook's attorney also sought to strike down claims of
fraud that McDonald's made regarding his role providing a special
stock grant to an employee. McDonald's claims Mr. Easterbrook was
having a sexual relationship with the recipient of the award at the
time it was issued. The grant was valued at hundreds of thousands
of dollars, according to the suit.
His attorney argued that McDonald's board was aware of the
special stock grant, and approved the allocation due to the
employee's performance. The employee wasn't named in the filing or
the suit.
Mr. Easterbrook also is seeking to move the case from Delaware
Court of Chancery to a court in DuPage County, Ill. Illinois is
where McDonald's is based, where the former CEO resides and where
the events in the company's complaint allegedly occurred, Mr. Herr
wrote in the filing.
McDonald's believes Delaware is the right venue for the case
based on the company's own structure and bylaws, the person
familiar with the litigation said.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
August 17, 2020 13:53 ET (17:53 GMT)
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