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McDonald's sues former CEO over alleged employee relationships

Fast food giant McDonald’s sues ousted CEO Stephen Easterbrook after allegedly covering up relationships with three other employees and destroying evidence.

Video Transcript

ADAM SHAPIRO: You've heard about takeout, how about take back? McDonald's filing suit against its former CEO, Steve Easterbrook. This is more than take back, it's a clawback. Isn't it, Julia La Roche?

JULIA LA ROCHE: Hey, Adam. Yeah, that's right. So if you remember back in November of 2019, the board voted unanimously to oust now former CEO Steve Easterbrook, and at the time, you know, they said it was poor judgment. And essentially, it came to light that he had a relationship that was a prohibited relationship with an employee, though they found through an investigation that it was nonphysical in nature.

But now, McDonald's is out with a complaint against Steve Easterbrook. They filed an 8-K with the SEC this morning alleging that-- look, they are saying that he lied. They're saying essentially that they found that as of this summer in July 2020, they received some information about another affair, and they found that he had three sexual relationships in nature.

So basically, at the time they had fired him, but they didn't fire him for cause. And because they didn't fire him for cause, he was able to keep some pretty substantial amounts of stock. I think there was a severance pay out here, but now because of the alleged lies, that's something that's now being questioned, and they're going after him specifically for that.

I just want to share a few details from the complaint here, because they're saying that they found evidence of nude photos involving the employees that he had deleted from his company phone and email, these photos, yet they were still unbeknownst to Steve Easterbrook, allegedly still on the company's server. So they share some details around what these relationships looked like. They took place between late 2018 and early 2019. They say the photographs are undisputable evidence that Easterbrook repeatedly violated the company's prohibition of any kind of intimate relationship between employees in a direct or indirect reporting relationship.

So really getting a ton of attention here, and the "AP" reported that he was estimated to have I think it was about 42 million worth of stock based benefits when he left the company, and his compensation, that 26 weeks of pay compensation, equated to about $670,000. So a lot of money here at stake, and of course the board is saying or the company is saying had they known and had Mr. Easterbrook allegedly not lied to them, they would have terminated him for cause.

BRIAN CHEUNG: And I think an important note to also add here is that, you know, obviously Steve Easterbrook is stepping down to make way for Chris Kempczinski, who's currently the CEO, and there's going to be a cleanup job that he's going to have to continue to work through. We saw the beginnings of that only a few days after that original announcement that he was stepping down when they had the Chief People Officer, the chief HR person at McDonald's, that being David Fairhurst leaving the company shortly after that change at the top of the company there.

So we have to keep in mind that when it comes to office culture issues like this, it's not always tracked to one person. You do wonder if there were other people within the organization that maybe allowed this behavior to happen. So it does seem like the CEO in addition to running this huge multinational conglomerate also has to work through the cultural issues at the top of this company as well.