McDonald's sues ousted CEO, alleging employee relationships

McDonald’s says it's suing Stephen Easterbrook, the CEO it ousted last year over an inappropriate relationship with an employee, alleging Monday that he covered up relationships with three other employees and destroyed evidence.

The company now wants to reclaim hundreds of thousands of dollars in compensation paid to Easterbrook on his departure.

"McDonald's does not tolerate behaviour from employees that does not reflect our values," said McDonald's President and CEO Chris Kempczinski, who was promoted following Easterbrook's departure, in a message to employees Monday.

McDonald’s fired Easterbrook last November after he acknowledged exchanging videos and text messages in a non-physical, consensual relationship with an employee. Easterbrook told the company that there were no other similar instances. Easterbrook and his wife divorced in 2015, the same year he became McDonald's CEO.

Based on what the company knew at the time, McDonald’s board approved a separation agreement "without cause" that allowed Easterbrook to keep nearly $42 million in stock-based benefits, according to Equilar, which tracks executive compensation. Easterbrook also collected 26 weeks of pay, amounting to compensation of about $670,000.

McDonald’s says in a lawsuit that in July, it received an anonymous tip that Easterbrook had engaged in a sexual relationship with another employee. After an investigation, McDonald's confirmed that relationship as well as two other physical, sexual relationships in the year before he was fired. Easterbrook also approved a special grant of restricted stock, worth hundreds of thousands of dollars, to one of those employees, the lawsuit said.

The company said Monday that Easterbrook removed evidence of those relationships — including sexually explicit photos and videos sent from corporate email accounts — from his cellphone, preventing investigators from learning about them prior to his firing.

In a lawsuit filed in Delaware, McDonald’s said it would not have terminated Easterbrook without cause if it had known of the additional relationships.

McDonald’s is now attempting to block Easterbrook from exercising his stock options and said it will seek compensatory damages.

A message seeking comment was left with Easterbrook's attorney.

McDonald's shares were flat at $203.17 in morning trading.

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