Ex-McDonald’s CEO’s Legal Saga Highlights Office Romance Risks

Former McDonald’s chief Stephen Easterbrook’s alleged dalliances with employees are proving to be expensive.

First, Easterbrook agreed to give back $105 million to the Golden Arches over claims that he hid sexual relationships with colleagues from the company. Then, earlier this month, he agreed to pay $400,000 and accept a five-year officer and directorship ban to settle Securities Exchange Commission claims that he misled shareholders about the situation.

McDonald’s isn’t the only company that explicitly bans executives from having romantic relationships with subordinates. Even trysts that appear to be consensual initially may look very different when the connection sours, particularly if there’s an imbalance in the power dynamic.

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At Airbnb, we required executive team members to forego romantic relationships with co-workers entirely. The policy established a clear, shared commitment and understanding, which can help avoid problems down the road.

General counsel at companies without such policies on the books may want to reconsider, given the changing landscape of sexual harassment law and the increasing risks for officials who engage in romantic encounters with employees.

Shifting Landscape

It’s a good idea to put an “Integrity 5 Minutes” on the executive team calendar every month. Use the time for general counsel to talk to the rest of the leaders about evolving issues in the area of compliance and ethics. The goal is preventative—if there’s an environment where leaders are talking and thinking about integrity on a regular basis, the chances are a lot better that the company will be prepared to do the right thing when tough issues arise.

Here’s a great topic to kick off the new year—the dramatic new landscape for dealing with sexual harassment claims in the workplace.

Most executives are familiar with the old way of handling sexual harassment claims against company leaders: The aggrieved employee’s case is shunted off to arbitration, where the dispute plays out in a private forum. The matter is then quietly settled, with the leader denying any wrongdoing and the employee forced to sign a non-disclosure agreement in exchange for some form of cash compensation. The leader then goes back to business as usual. In the event that the executive is let go, it’s quietly and with a pre-negotiated severance package, allowing the person to resurface at another company that’s unaware of the situation.

This cycle is too often repeated. A pair of new federal laws are aimed at stopping it.

The frustration and anger that followed the Harvey Weinstein scandal in 2017 fueled the #MeToo movement. Five years later, thanks to the courage and persistence of victims like Gretchen Carlson, Congress took action to remove the shield of forced arbitration in sexual assault and harassment cases.

President Joe Biden in March signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act. The law gives individuals asserting assault or harassment claims under state or federal law the option to take the claims to court, even if they previously signed a mandatory arbitration agreement.

President Joe Biden and Gretchen Carlson at a signing ceremony on March 3, 2022.

Photographer: Samuel Corum/Bloomberg

Last month, Biden signed the Speak Out Act. This law ensures that employees cannot be prevented from disclosing that they experienced or witnessed sexual assault or harassment, even if they previously signed a nondisclosure agreement.

Both laws passed with broad bipartisan support, reflecting the changing climate in favor of transparency and workers’ rights. Combined with the SEC’s action against Easterbrook, the feds are sending a strong signal to companies that sexual harassment cases need to be handled with more transparency.

Think About Your Brand

It’s time to rethink how you negotiate employment agreements with new leaders.

Often, new executives will try to push for severance packages up front. These deals can have embarrassing results if the executive is later accused of wrongdoing and exits with millions of dollars.

Insist on protections that will void severance payments where there is demonstrated misconduct or conduct detrimental to the brand. That includes violations of company policies, like a ban on sexual relationships with subordinates.

Agree up front on a mechanism for resolving disputes over whether there was misconduct sufficient to void the severance.

It’s also worth considering whether your company should extend the new restrictions on forced arbitration and non-disclosure agreements beyond sexual assault and harassment, such as to include discrimination claims. If you’re looking to add an NDA to a particular settlement agreement, ask yourself whether restricting someone’s ability to talk about the facts of the incident really reflects well on your brand, and whether you’d actually be willing to go to court to enforce the restriction.

The better position might be to make clear that you believe in transparency and the rights of current and former employees right to express their views on a particular incident. Even if you disagree with them.

Rob Chesnut is the former general counsel and chief ethics officer at Airbnb. He spent more than a decade as a Justice Department prosecutor and later oversaw US legal operations at eBay. The author of “Intentional Integrity: How Smart Companies Can Lead an Ethical Revolution,” Rob consults on legal and ethical issues.