McDonald’s Corp.’s board cannot be sued for allowing former CEO Steve Easterbrook to keep tens of millions of dollars when the restaurant chain fired him for having an affair with an employee, a Delaware judge has ruled. decided on Wednesday.
Directors acted in good faith in 2019 when they fired Easterbrook without cause for having a non-physical relationship with an employee, Delaware Deputy Prime Minister Travis Laster said in his ruling.
Because he was not fired for good cause, Easterbrook obtained a severance pay that shareholders said was worth $125 million.
A year after Easterbrook was fired, the company discovered that he had an affair with at least three of its employees. In 2021, Easterbrook agreed to pay the company $105 million to settle claims that he misled the board about his relationship with employees. He apologized to his former colleagues and the board.
Investors argued that the directors could have saved millions of dollars if they had conducted a thorough investigation of Easterbrook at the time he was fired, but the directors refused to do so. because they don’t want to expose their own supposed careless oversight.
Laster said regardless of whether the directors could have handled the Easterbrook investigation better, they would be protected if they acted in good faith.
“The record shows that the Board actively enforces Company policies and is committed to maintaining a safe, respectful, and inclusive workplace,” the company said in a statement.
An attorney for the plaintiffs did not respond to a request for comment.
Laster also said directors cannot be sued for ignoring a wave of allegations of sexual misconduct, including employee lawsuits, complaints with regulators, and allegations that David Fairhurst, the director of top human resources executives, engaged in sexual harassment.
Instead of ignoring the problem, Laster said, directors updated company policy, implemented training, and hired consultants.
While the judge ruled in January that shareholders could pursue a lawsuit against Fairhurst for allegedly allowing a culture of misconduct to flourish at the company, that lawsuit was also dismissed on Wednesday. Private.
