McDonald’s Pursuing Former CEO Steve Easterbrook for His Severance Pay

The board of McDonald’s kinda, sorta did an investigation into the conduct of their then CEO, Steve Easterbrook, in November 2019. The board concluded that they did not have enough evidence to show that Easterbrook’s behavior (sending sexually explicit text messages, photographs, and engaging in FaceTime calls with an employee) involved “dishonesty, fraud, illegality or moral turpitude.” Those were the four grounds for termination in the Easterbrook contract. Instead, not finding a breach of terms, they sent Mr. Easterbrook away with a severance package of $700,000 in cash, and $17.4 million in stock grants. Various reports put the value of the package at $40 million.

Now come the results of a real investigation. After another employee disclosed that she had a sexual relationship with Mr. Easterbrook (something Mr. Easterbrook denied to the board in the first investigation), presumably new investigators searched the company e-mails under the employee’s name and found e-mails that Easterbrook sent from the company e-mail to his Hotmail account. And, well, as it turns out, the photographs as well as the e-mails to which they were attached were indeed hot. Easterbrook had deleted the e-mails from his phone. However, company e-mails are backed up; it just turns out that the original crackerjack investigators, treading lightly, only investigated the e-mail misconduct but did not take the time to go through the rest of the treasure trove of Easterbrook e-mails on the company server.

The board made it all this public. Good thing. A company trying to change a culture with new leadership cannot move on unless it acknowledges the reality of what was going on with its former CEO. How demoralizing it must have been to employees who knew the truth to witness the November result. The guy who did something wrong walked away with $40 million and probably lied to get that. The irony of the past few months of moralizing statements, pledges of zero tolerance, andforces of change from new leaders must have brought some chuckles.

Now the board looks silly. McDonald’s is back to square one in changing its culture, and the lawsuit will drag this all out for months. Is it any wonder we question the wisdom, depth,and backbone of corporate boards? And one last thing for CEOs everywhere: How many times must we go through this scenario before you surrender and find something else to do? One more thing: your e-mail is discoverable, sooner or later (depending on the quality of the investigation).

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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