The fast-food giant dismissed Mr. Easterbrook without cause in November 2019, following an investigation into his conduct. Investigators found he had a short-term, consensual relationship with an employee over text and video, but Mr. Easterbrook denied any physical sexual relationships with McDonald’s employees, according to the complaint filed Monday.
McDonald’s reopened the matter after it received an anonymous tip in July about a relationship between Mr. Easterbrook and an employee, according to the lawsuit. An investigation found that Mr. Easterbrook allegedly engaged in three other relationships with employees that were sexual in nature, including the one that triggered the inquiry. Investigators found that Mr. Easterbrook destroyed evidence about the sexual relationships and lied about his behavior during the initial investigation last fall, the complaint said.
Because McDonald’s decided to fire Mr. Easterbrook without cause, he received severance and benefits that he could have been denied had the board found him at fault. Mr. Easterbrook’s compensation, benefits and stock were potentially worth nearly $42 million, according to an analysis at the time by executive-pay firm Equilar.
Board efforts to recover compensation from CEOs for activities and statements pertaining to their termination are unusual, said Steven Hall, managing director of pay consulting firm Steven Hall & Partners. It is more common for a board to seek to clawback a bonus payment from an executive who reached a financial goal that is later found to have been misstated, he said.
McDonald’s also alleged that Mr. Easterbrook approved a stock grant to an employee with whom he was having a sexual relationship. The grant was valued at hundreds of thousands of dollars, according to the suit.
In the complaint, McDonald’s said its severance plan with Mr. Easterbrook included a provision that it can stop payment of benefits and require the former CEO to pay back severance if it determined at any time that he committed an act that would have allowed him to be fired for cause. The company said a firing for cause could be carried out in case of a serious violation of its standards and employment policies, along with dishonesty, fraud, illegality, or moral depravity. At the time, board members felt they lacked evidence to justify firing the CEO for cause, the complaint said.
“McDonald’s does not tolerate behavior from any employee that does not reflect our values,” Chris Kempczinski, who succeeded Mr. Easterbrook as CEO last November, wrote in a message to the company on Monday.
Mr. Easterbrook didn’t respond to requests for comment.