McDonald’s Former CEO Fights Severance Clawback

Steve Easterbrook, seen in 2018, was fired as McDonald’s chief executive last November after he acknowledged having a consensual relationship with an employee.

Photo: Scott Olson/Getty Images

Former McDonald’s MCD 0.81% Corp. Chief Executive Steve Easterbrook said in a court filing that the company had information about his relationships with other employees when it negotiated his multimillion-dollar severance package.

In his first response to the suit McDonald’s filed seeking to recoup that severance, Mr. Easterbrook’s attorney said the company admitted it had his email account stored on company servers when it first investigated his conduct last October. The company said last week that McDonald’s investigators unearthed email messages with attachments that contained dozens of nude and sexually explicit photos and videos of Mr. Easterbrook with company employees and other women between late 2018 and early 2019.

“Based on the very same information McDonald’s has today, it negotiated a separation agreement,” Mr. Easterbrook’s attorney wrote in a filing in Delaware on Friday afternoon. “But McDonald’s admits that the ‘new’ information it now relies upon is not new at all.”

McDonald’s expects to respond to Mr. Easterbrook’s filing in court, according to a person familiar with the litigation.

“McDonald’s stands by its complaint, both the factual assertions and the court in which it was filed,” a McDonald’s spokesman said.

McDonald’s has taken the unusual move of seeking to claw back Mr. Easterbrook’s severance in court, exposing the company and its board to a rare public fight over compensation awarded to a former executive.

McDonald’s fired Mr. Easterbrook without cause in November after he acknowledged having a consensual relationship with an employee. The fast-food giant said in the lawsuit last week that it has since concluded that Mr. Easterbrook lied to investigators and its board to cover up relationships with employees to secure a multimillion-dollar severance package.

Under Mr. Easterbrook’s watch, a party culture flourished among some senior managers at the company, former employees and others connected to the company said. Those people said the former CEO frequently socialized at Chicago bars and sporting events with employees, and flirted with some female employees. Rumors about Mr. Easterbrook’s alleged conduct had reached some other company leaders in the year leading up to the first investigation, one person said.

CEO Chris Kempczinski pledged to improve McDonald’s work environment after succeeding Mr. Easterbrook in November. He outlined plans to renew company values late last month and brought in a new global chief people officer, Heidi Capozzi, this year. Ms. Capozzi has said she is working to refine the company’s strategy for supporting employees.

McDonald’s made more staff changes on Monday: The company said its senior vice president and chief people officer for the U.S. division, Melanie Steinbach, had left. Ms. Steinbach, previously a vice president and global chief talent officer, was promoted last month after the previous human-resources head of the U.S. division left the company in June.

“For a variety of reasons, and unfortunately I can’t comment on the specifics, we determined that her separation was really in the best interest of the company,” Ms. Capozzi said in a video message to employees that was viewed by The Wall Street Journal.

Ms. Capozzi said the company had started to search for Ms. Steinbach’s successor. McDonald’s and Ms. Steinbach didn’t immediately respond to requests for comment.

Daniel Herr, Mr. Easterbrook’s Delaware-based employment attorney, said in the filing that McDonald’s doesn’t have the legal standing to allege the former CEO breached his severance agreement with the company because it has admitted that it possessed material that could have altered those negotiations.

Mr. Herr said that Mr. Easterbrook agreed not to sue the company or make disparaging comments about it as part of the severance agreement, barring him from responding publicly to the company’s suit seeking to recover his severance.

Mr. Easterbrook’s pay and stock awards are now estimated to be worth $57.3 million, according to the executive-pay firm Equilar. McDonald’s stock is up more than 7% since Mr. Easterbrook was fired in November.

Mr. Easterbrook’s attorney also sought to strike down claims of fraud that McDonald’s made regarding his role providing a special stock grant to an employee. McDonald’s claims Mr. Easterbrook was having a sexual relationship with the recipient of the award at the time it was issued. The grant was valued at hundreds of thousands of dollars, according to the suit.

His attorney argued that McDonald’s board was aware of the special stock grant, and approved the allocation due to the employee’s performance. The employee wasn’t named in the filing or the suit.

Mr. Easterbrook also is seeking to move the case from Delaware Court of Chancery to a court in DuPage County, Ill. Illinois is where McDonald’s is based, where the former CEO resides and where the events in the company’s complaint allegedly occurred, Mr. Herr wrote in the filing.

McDonald’s believes Delaware is the right venue for the case based on the company’s own structure and bylaws, the person familiar with the litigation said.

Write to Heather Haddon at [email protected]

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