McDonald’s Chairman Enrique Hernandez and Director Richard Lenny were reelected to their board positions at the burger giant on Thursday over opposition from some union-affiliated investment firms over their handling of former CEO Steve Easterbrook’s departure.
CtW Investment Group, the California Public Employees Retirement System (CalPERS) and others had led opposition to the reappointment of the two directors over Easterbrook’s severance payment—which he was allowed to keep following his firing over a consensual relationship with an employee back in 2019.
One proxy advisory firm, Glass Lewis, agreed with the shareholders in pushing for their ouster, but another one, Institutional Shareholder Services, said the company’s clawback lawsuit and public fight against Easterbrook since then are evidence the board is doing its job.
McDonald’s sued Easterbrook in August, arguing he had more affairs with employees than he initially admitted and therefore owed the company stock and other benefits he was allowed to keep following his firing. Those benefits are estimated to be worth well over $50 million.
Shareholder groups argued the company should have fired Easterbrook “for cause” back in November. They also argued he was treated differently from his former chief people officer, David Fairhurst, who was fired the day after Easterbrook was let go for cause.
Meanwhile, franchisees of the burger giant appear to be taking a keener interest in such matters. The National Owners Association, the company’s independent franchise association currently at odds with company management over a technology fee dispute and other issues, shared the Glass Lewis report with other franchisees. It did not make a recommendation on the board makeup.
It’s unusual for franchisees to even consider getting involved in board votes even though many franchisees also own shares in McDonald’s stock. “Bring in fresh blood,” one operator said in the survey response. “Their handling of the Easterbrook matter was disgraceful.”
Multiple operators said there should be either current or former franchisees on the board. “Owner-operators should be represented on the board to show respect and value for those on the front lines of this great brand," another operator said.
Nearly two-thirds of the company’s franchisees said in a survey obtained by Restaurant Business that they were either somewhat or very dissatisfied with the company’s board. The survey included responses from 200 operators, or about 10% of the company’s franchisee base. More than 70% of franchisees in the survey said they were dissatisfied with the company.
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