Ex-McDonald’s CEO to Repay $105 Million to Settle Lawsuit (2)

Steve Easterbrook, the former McDonald’s Corp. chief executive officer who was fired over his sexual relationships with subordinates, agreed to return $105 million in cash and equity awards to settle a lawsuit by the fast-food chain.

The amount represents the compensation Easterbrook would have forfeited had he been forthcoming about his actions and been fired for cause, the Chicago-based company said. Easterbrook, 54, also apologized for the behavior that led to his 2019 ouster.

Steve Easterbrook

Photographer: Joshua Lott/Bloomberg

“During my tenure as CEO, I failed at times to uphold McDonald’s values and fulfill certain of my responsibilities as a leader of the company,” he said in a statement distributed by the company on Thursday. “I apologize to my former co-workers, the board, and the company’s franchisees and suppliers for doing so.”

The lawsuit lets McDonald’s close a painful chapter and keep legal proceedings from dragging on, Chairman Rick Hernandez told employees and franchisees in a memo seen by Bloomberg. The board initially became aware of the situation because a worker “had the courage to speak up,” he said.

“Even as we move forward, there are lessons that cannot be forgotten, including the importance of continuing to foster a culture where the expectation is that people will speak up in response to wrongdoing,” Hernandez said.

Some shareholders have criticized Hernandez and other board members for paying Easterbrook severance, only to file suit to claw it back later after concluding they had been misled about the extent of Easterbrook’s misbehavior. But Hernandez was re-elected by investors in the annual meeting in May.

Shares of McDonald’s rose 0.2% at 3:20 p.m. in New York.

While Easterbrook left a tarnished legacy at McDonald’s, during his 4 1/2-year tenure he pushed for technological changes, mobile ordering and delivery services that ultimately helped the company weather the pandemic when stores were forced to halt indoor dining. The shares have gained about 37% since his firing, compared with a 52% gain in the S&P 500 index.

Under current CEO Chris Kempczinski, McDonald’s has made changes to improve its corporate culture, including tying executive pay to diversity and rolling out anti-harassment training at its stores. Amid his effort to restore the company’s image, Kempczinski sparked a new uproar this year when a private text message surfaced in which he appeared to cast blame on the parents of two children killed in Chicago-area shootings. He apologized.

On Thursday, McDonald’s said it purchased the 13 restaurants owned by former Major League Baseball player Herb Washington for $33.5 million in exchange for his agreement to dismiss a lawsuit alleging racial bias. Washington had claimed the company purposefully steered him to stores in distressed, predominantly Black neighborhoods, knowing they would be less-profitable than those in more affluent communities.

Read more: McDonald’s CEO Vows to Add More Minority, Female Franchisees

McDonald’s said the purchase price for Washington’s stores “is no more than what we deem a fair price for the value of the restaurants,” and the court didn’t find the company violated any laws.

“Discrimination has no place at McDonald’s,” the company said in an email. “While we were confident in the strength of our case, this resolution aligns with McDonald’s values and enables us to continue focusing on our commitments to the communities that we serve.”

(Adds settlement of racial-discrimination lawsuit beginning in 10th paragraph.)

To contact the reporter on this story:
Crayton Harrison in New York at tharrison5@bloomberg.net

To contact the editors responsible for this story:
Crayton Harrison at tharrison5@bloomberg.net

Catherine Larkin, Richard Clough

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