MCD McDonalds Corp

By Heather Haddon and Suzanne Vranica 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 1, 2020).

McDonald's Corp. pushed back at former Chief Executive Steve Easterbrook's attempts to dismiss its lawsuit seeking to claw back his severance, saying that his attorney's questions about the thoroughness of its investigation into his affairs should be addressed in court.

The burger company fired Mr. Easterbrook without cause in November after he acknowledged having a consensual relationship with an employee. The company said in August that an investigation stemming from a tip found evidence that Mr. Easterbrook lied to investigators and its board to cover up additional sexual relationships with employees to secure a multimillion-dollar severance package.

"When McDonald's investigated, Steve Easterbrook lied," the company said in a statement Monday. "He violated the company's policies, disrespected its values, and abused the trust of his co-workers, the board, our franchisees, and our shareholders.

Mr. Easterbrook's attorneys didn't respond to requests for comment.

McDonald's has said its continuing investigation into Mr. Easterbrook's conduct is examining whether he covered up improprieties by other employees alongside allegations of potential misconduct within the human-resources department.

Some former managers have told The Wall Street Journal they felt HR leaders under Mr. Easterbrook ignored complaints about the conduct of co-workers and executives. Some of those people said they feared retaliation for reporting such conduct to HR.

McDonald's has said its investigators uncovered 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. Mr. Easterbrook allegedly destroyed that evidence on his electronic devices, and the company later found it on its computer servers.

Responding to the company's suit, Daniel Herr, a Delaware-based attorney for Mr. Easterbrook, said in a filing two weeks ago that McDonald's had Mr. Easterbrook's email account stored on company servers when it first investigated his conduct last October.

Mr. Herr wrote in the filing that McDonald's had filed a meritless and misleading lawsuit in the wrong court venue. Mr. Herr didn't comment directly on Mr. Easterbrook's alleged sexual relationships within the company.

"This brazen attempt at table-turning has no merit," McDonald's wrote in a filing in Delaware Court of Chancery. The company said the Delaware court was the proper venue for the case, according to its corporate bylaws.

McDonald's said in the filing that the evidence would have been "buried somewhere in the tens of thousands of his emails" in the company's servers, and that criticism of the thoroughness of its investigation doesn't hold up.

McDonald's fired its former HR chief, David Fairhurst, shortly after Mr. Easterbrook's termination for reportedly making women at the company uncomfortable on numerous occasions. Mr. Fairhurst said at the time that he left the company to pursue other career challenges.

The company has said Mr. Fairhurst's and Mr. Easterbrook's dismissals weren't connected. Mr. Fairhurst didn't respond to requests for comment.

Some former managers and employees told the Journal that they felt HR leaders under Mr. Fairhurst ignored complaints about the conduct of co-workers and executives they felt was inappropriate or unfair.

Mr. Fairhurst also contributed to a party culture that developed among some executives and managers during Mr. Easterbrook's tenure, according to former employees, some of whom said they saw him intoxicated at company events.

Some former managers and employees said they felt left out of advancement opportunities in departments, including HR, because they weren't part of an after-hours social circle among HR leaders.

Mr. Fairhurst's conduct during a department holiday party in 2018 drew a complaint from an employee who said some staffers drank heavily and that the HR chief and one of his subordinates made inappropriate physical contact, people familiar with the incident said.

McDonald's legal counsel conducted an investigation that year, those people said. An executive told employees who attended the gathering that excessive drinking was inappropriate and should be reported if it happened again, the people familiar with the incident said.

The company fired Mr. Fairhurst after receiving another complaint about his behavior around women at McDonald's, company executives said. McDonald's code of conduct prohibits harassment or intimidation. The code also disallows relationships between employees and direct or indirect reports. Mr. Easterbrook was fired for violating that aspect of the company's code, McDonald's said at the time.

McDonald's hired a new global chief people officer, Heidi Capozzi, in April from Boeing Co. She is reviewing HR processes and policies put in place under Messrs. Fairhurst and Easterbrook, company executives said, and plans to add new HR positions and procedures such as evaluations for senior executives with subordinates' feedback. Company executives said she is reviewing the ways concerns are raised and investigated.

In an online meeting with employees in August, Ms. Capozzi encouraged them to raise concerns about questionable behavior, according to notes of the meeting reviewed by the Journal.

Write to Heather Haddon at heather.haddon@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

(END) Dow Jones Newswires

September 01, 2020 02:47 ET (06:47 GMT)

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