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McDonald’s sues fired CEO to recoup $40m parting package

McDonald’s is suing its fired CEO Stephen Easterbrook to recoup tens of millions of dollars in severance and benefits after claiming he covered up sexual relationships with three employees – who are among five  and destroyed evidence so he wouldn’t be caught. 

The 53-year-old was fired from his $16 million-a-year job in November last year after he admitted to having an inappropriate relationship with a female employee who he exchanged videos and text messages with. 

He in fact had relationships five women who worked for the company.  

Only one of them has been named; PR executive Denise Paleothodoros. 

As part of his ‘without cause’ severance agreement, Easterbrook was allowed to keep about $40 million in stock-based benefits and six months pay, which amounted to roughly $670,000 in compensation, after he insisted there were no other similar instances. 

In a lawsuit filed in Delaware on Monday, McDonald’s said it reopened an investigation last month after receiving an anonymous tip that led to the discovery of sexual relationships between Easterbrook and three other employees in the year prior to his termination.

The company has argued that Easterbrook, a divorcé and father-of-three from Watford, United Kingdom, no longer deserved the payout because of his ‘silence and lies’.   

In its complaint, McDonald’s said it had found dozens of nude or sexually explicit photos of women, including the three employees, that Easterbrook sent to his personal email account from his company email account. 

McDonald’s has accused Easterbrook of deleting the emails and attached photos from his company-issued phone shortly before he was ousted in a bid to prevent investigators from learning about them prior to his firing.

The deleted emails and photos, which were sent in late 2018 and early 2019, remained on a company server unbeknownst to him, the lawsuit states. 

McDonald’s also alleges Easterbrook approved an ‘extraordinary’ stock grant, worth hundreds of thousands of dollars, for one of those employees during their sexual relationship.  

‘That evidence consisted of dozens of nude, partially nude, or sexually explicit photographs and videos of various women, including photographs of these company employees, that Easterbrook had sent as attachments to messages from his company email account to his personal email account,’ the lawsuit says.  

The lawsuit also claims Easterbrook lied to investigators by denying any physical sexual relationships with employees.   

McDonald’s said in the lawsuit that Easterbrook’s board-approved separation agreement was based on what the company knew at the time. The lawsuit says McDonald’s would not have terminated Easterbrook without cause if it had known of the additional relationships.

‘Easterbrook’s silence and lies – a clear breach of the duty of candor – were calculated to induce the company to separate him on terms much more favorable to him than those the company would have offered and agreed to had it known the full truth of his behavior,’ McDonald’s said in the filing.  

‘Had Easterbrook been candid with McDonald’s investigators and not concealed evidence, McDonald’s would have known that it had legal cause to terminate him in 2019.’ 

Easterbrook joined the company in 1993 and had been chief executive since March 2015. 

He and his wife Susie divorced in 2015  – the same year he relocated to Chicago to become McDonald’s CEO. He had previously been based in the UK where he had been the company’s head of North Europe. 

Under his leadership the company’s shares nearly doubled in value while sales at its US locations stagnated. 

He had been credited with modernizing the chain, introducing touch-screen kiosks and launching an all-day breakfast menu. 

At the time he was pushed out, McDonald’s said Easterbrook had violated company policy by engaging in a consensual relationship with an employee. McDonald’s forbids managers from having romantic relationships with direct or indirect subordinates. 

In an email to employees at the time, Easterbrook acknowledged he had a relationship with an employee and said it was a mistake.

‘Given the values of the company, I agree with the board that it is time for me to move on,’ Easterbrook said in the email at the time.

At the time of his firing, lawyers from McDonald’s had viewed messages on Easterbrook’s company phone but did not thoroughly search his email records. 

The second and more in depth investigation, which was initiated last month, uncovered emails that had been deleted.   

It is not yet clear why a thorough search was not carried out the first time.   

At the time of his dismissal, the company said Easterbrook was eligible for six months of severance pay, which would have been $675,000. He was also eligible for prorated payment for hitting 2019 performance targets. 

Under McDonald’s severance plans, the company says it has the right to claim back any payouts if it determines employees have been dishonest and there is evidence they could have been fired with cause. 

McDonald’s said this clause in the agreement also applied to Easterbrook.

The company is now attempting to block Easterbrook from exercising his stock options and is seeking compensatory damages.  

Easterbrook was replaced by Chris Kempczinski, who joined McDonald’s in October 2015 after working in a senior strategic role at Kraft Foods and previously at PepsiCo.

One day after Easterbrook’s departure, McDonald’s announced that its top human resources executive, David Fairhurst, who joined McDonald’s in 2005 and was named chief people officer at the restaurant chain in 2015, had also left. 

In an employee memo on Monday, Kempczinski said McDonald’s does not tolerate behavior inconsistent with its values and that Easterbrook’s conduct ‘deviated from our values in different and far more extensive ways’ than it had known. 

Easterbrook could not be immediately reached for comment. 

After he was fired last year, it emerged that Easterbrook had previously escaped censure for another office romance. 

It came to light that Easterbrook had dated Denise Paleothodoros, 46, when she was assigned to the McDonald’s account by her PR firm. 

The two-year affair came to light in 2015 but McDonald’s concluded the relationship did not violate its policies. 

Paleothodoros was removed from the McDonald’s account at the time to ‘avoid any conflict of interest’. 

Easterbook joined the company in 1993 as a branch manager and after working his way up to become its UK chief in 2006 and then became president of its northern European business, in charge of 1,800 restaurants. 

In 2011 he became boss of Pizza Express and then Wagamama in the UK but then went back to McDonald’s as Chief Brand Office in 2013.

He then became overall boss in 2015, running the business from its $250million headquarters in Chicago earning $16million-a-year [£12million].

He was married to British wife Susie, and the couple have three children. It is not known when they separated but they are believed to have been divorced since he moved to the US. 

Under his leadership the company’s shares nearly doubled in value while sales at its US locations stagnated. 

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