Some investors connected with union pension funds don’t think McDonald’s settlement with former CEO Steve Easterbrook went far enough to get back compensation paid to him during his tenure, according to new court documents.
Pension funds tied to Teamsters unions, which have sued the company and its board over Easterbrook’s 2019 dismissal, have amended their complaint to reflect the settlement. Easterbrook in December agreed to return $105 million in cash and equity awards after the company accused him of misleading the board regarding his conduct with employees as CEO.
Easterbrook was fired in November 2019 after acknowledging a consensual affair with an employee. But he was allowed to keep his severance, estimated to be worth $37 million, even though he was fired “for cause” because of the relationships. The company was roundly criticized over the decision.
McDonald’s sued Easterbrook the following August, however, seeking to claw back the severance after saying there were more affairs with employees than he let on. That lawsuit led to last year’s settlement.
In their complaint, attorneys for the Teamsters argued that the company’s release “does not explain” how the $105 million was calculated or what Easterbrook gave up. “This litigation did not make McDonald’s whole,” the shareholders said. “It does not appear the company ever attempted to ‘clawback’ the compensation Easterbrook accepted during the years of misconduct.”
Ron Olson, attorney for McDonald’s and directors named in the lawsuit, said the board would move to dismiss the case. “The board took swift and appropriate action with respect to Easterbrook and (former Chief People Officer David) Fairhurst,” Olson said in a statement. He noted that the company filed an “unprecedented lawsuit” to hold Easterbrook accountable.
Olson said that the $105 million represents the amount its former CEO would have forfeited “had he been truthful at the time of his termination and, as a result, been terminated for cause.”
Shareholders from various labor and union-backed funds have gone after McDonald’s and its directors over the settlement in light of news about Easterbrook’s additional affairs, as well as reports of the conduct of Fairhurst, who was dismissed the day after Easterbrook.
They argue the company should have known about the conduct, particularly given that evidence of Easterbrook’s affairs were on the company’s servers, which were not checked during the board’s investigation. They argue that the company did not do a legitimate investigation and ultimately damaged McDonald’s reputation with its initial agreement.
“The Easterbrook settlement has not repaired the damage the board’s bad faith decision to terminate Easterbrook without cause caused the company,” the complaint says.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.