A recent ruling by a judge in Delaware has stated that the board of McDonald’s Corp cannot be sued for allowing its former CEO Steve Easterbrook to keep tens of millions of dollars in severance pay after he was fired for having a non-physical relationship with a McDonald’s employee.
Delaware Vice Chancellor Travis Laster ruled that the directors had acted in good faith when they terminated Easterbrook without cause in 2019. Shareholders had claimed that Easterbrook’s severance package was worth $125 million, but this claim was dismissed.
However, a year after his dismissal, McDonald’s discovered that Easterbrook had sexual relationships with at least three company employees. In 2021, he agreed to pay the company $105 million to settle claims that he had misled the board about his relationships with employees. He also apologized to his former colleagues and the board.
Investors argued that the directors could have saved McDonald’s millions of dollars if they had conducted a more thorough investigation into Easterbrook’s behavior at the time of his dismissal. Nonetheless, the judge maintained that as long as the directors acted in good faith, they would be protected from legal action.
McDonald’s has stated that the board actively enforced policies and commitment to maintaining safe, respectful, and inclusive workplaces.
The judge also ruled that the directors couldn’t be sued for dismissing sexual misconduct allegations against the company, lawsuits by employees and complaints to regulators. Instead, the board updated corporate policy, implemented training, and brought in consultants to address the issue.
While the judge had previously allowed shareholders to pursue a case against David Fairhurst, the former top human resources executive, for allegedly allowing a culture of misconduct to persist at McDonald’s, that case was also dismissed.
In conclusion, the recent ruling by the Delaware judge absolves McDonald’s board from any legal responsibility for its former CEO’s misconduct and the company’s response to it. Despite these issues, McDonald’s has taken steps to address misconduct allegations and maintain a safe and respectful workplace.
