January 3, 2022
Clawbacks: Former CEO Returns $105 Million for “Misconduct”
While many folks were hard at work on year-end deadlines – or taking well-deserved breaks – there was a big development in the clawbacks space. McDonald’s announced via a Form 8-K and press release that its former CEO, Steve Easterbrook, had returned more than $105 million in equity awards & cash. As part of the settlement, Easterbrook also apologized to the company, the board and the broader McDonald’s community.
The company took the extraordinary step of suing Easterbrook in 2020 after an anonymous tip indicated that he may not have been truthful at the time of his 2019 termination about his relationships with employees. The tip prompted an internal investigation, and in some ways gave the board a “do-over” after it had determined that the original termination – which resulted from a consensual employee relationship against company policy – was not “for cause” but just a demonstration of “poor judgment.” As I blogged when the complainant was filed, the board said that it would not have approved a separation agreement characterizing Easterbrook’s termination as “without cause” if it had been aware of his dishonesty and additional conduct violations.
This isn’t the first time a former exec has had to pay back incentives – a recent example happened in 2020 when the SEC ordered Hertz’s former CEO to repay $2 million following a restatement. As this NYT article recaps, there have also been larger settlements, relating to options backdating & fraud. But this settlement is unique in that the misconduct is not directly tied to financial issues.
Last year at this time, Lynn blogged that shareholders were calling for resignations of the McDonald’s board chair and the compensation committee. All directors were re-elected, but in a move that may be aimed at appeasing some of the discontent around oversight of #MeToo issues, the company’s press release also reiterates previously announced mandatory training for both company-owned and franchised locations:
Recognizing its scale and resulting influence, McDonald’s will continue to promote safe and respectful workplaces. McDonald’s is implementing mandatory and industry-leading Global Brand Standards for safe, respectful and inclusive workplaces, which require all 39,000 McDonald’s restaurants to adhere to these new standards.
– Liz Dunshee