McDonald’s clawback from CEO Easterbrook unusual despite #MeToo era
Steve Easterbrook, president and chief executive officer of McDonald’s Corp., walks the grounds after a morning session during the Allen & Co. Media and Technology conference in Sun Valley, Idaho, U.S., on Wednesday, July 12, 2017.
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Claimback of $105,000,000 McDonald’sWhere do you start? the severance paid to its ex-CEO Steve Easterbook stands out for its massive size. This is also noteworthy because such attempts to recover payouts from corporate chiefs who are misbehaving remain uncommon despite the #MeToo Era.
David Larcker (a Stanford University professor of business) said, “This kind of result is rare.” who co-authored a 2016 paper titled “Scoundrels in the C-Suite,” which examined how corporate boards should respond to CEO misconduct.
Larcker stated that “such outcomes are becoming more rare”, as boards of directors recognize that bad behaviour by a CEO, like Easterbrook’s sexual relations, can impact shareholders and customers as well as other aspects related to a company.
He stated, “These are items that will have an effect on the bottom line and that’s going be serious.”
According to Larcker, the “extraordinary” amount of information shared on social media about misconduct allegations by executives is going to increase pressure for companies not to pay out to those CEOs that are dismissed or forced to resign.
Easterbrook’s deal with McDonald’s came after two years of being fired by the board. This was following an investigation into whether he was in a complicit relationship with a senior employee that went against company policy. Easterbrook was also given a $42 million severance package.
McDonald’s filed suit against Easterbrook to recover that payment in August 2020. They claimed Easterbrook lied and perpetrated fraud after an employee whistleblower stated that he was involved with a woman.
An investigation revealed that Easterbrook had deleted information about his sexual behavior. This included three additional relationships with staff members before his firing. Easterbrook was unable to settle the lawsuit and instead agreed to pay back the money. He also apologized for “sometimes failing to uphold McDonald’s principles.”
According to Dieter Waizenegger (executive director, CTW Group), the McDonald’s Case is the “probably third-largest individual clawback” that a corporation has ever received.
Waizenegger stated that the firm is “probably the biggest around sexual harassment.” It advises the New York City Comptroller as well. had called for McDonald’s Chairman Enrique Hernandez Jr. to be replaced on the boardBecause the company failed to carry out a 2019 probe that would have revealed the extent of Easterbook’s misconduct.
Recent years have seen the largest amount of clawbacks involve former clients Wells FargoJohn Stumpf (CEO) and Carrie Tolstedt (who had previously led the community banking division of Wells Fargo). They presided over Wells Fargo’s creation of up to 2 million credit and bank accounts by employees without the consent of customers. Stumpf had $69 Million to be returned, and Tolstedt was responsible for $67 Million.
John Stumpf is CEO at Wells Fargo
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2007 was the year before that. former UnitedHealth Group CEO William McGuirIn settlement of claims from shareholders and Securities and Exchange Commission about backdating of stock option options, e agreed that $618 million would be forfeited.
Waizenegger observed that that Wells Fargo was able to claw back money from the former executives because then-New York City Comptroller John Liu,The person responsible for managing the city’s pension fund investments in 2013 pushed for an expansion of clawback policies to cover executives whose behavior caused reputational damage, as opposed to only those who led to financial statements being restated.
Scott Stringer was Liu’s replacement and successfully sued Wells Fargo for Stumpf and Tolstedt payments. Wells Fargo spent nearly $200million to resolve probes into the account scandal.
Waizenegger suggested that similar policies be adopted by other businesses to help make it more easy to collect executive pay.
He also suggested that corporations boards take action to eliminate what is effectively “no fault severance” agreements in CEO contracts. These allow for them to be paid even if fired or forced to resign due to violating an internal company code of conduct.
Waizenegger explained that it was important to “stand your ground”, as there will be a provision in place to prevent such payouts when you are appointing a new CEO.
Waizenegger claimed that #MeToo has become a scandal, as well as other ones. [for corporations]To say “We must take a more rigid look at what are willing to tolerate,” by a CEO.
He stated that a zero-reward policy for violating code of conduct should be the new norm.
Waizenegge called for the reorganization of corporate boards, to bring in new members and replace those who have been there more than 10 years.
He stated, “It seems that you have an almost glacial turnover rate on boards.”
The #MeToo movement was born in October 2017, when multiple women made allegations of sexual misconduct against Harvey Weinstein in articles published in The New York Times, and The New Yorker.
One of these men is CBS CEO Les Moonves, resigned in 2018 after being accused of sexual harassment and assault.He refuted the allegations.
CBS later withheld $120 Million in Moonves’ severance payment.
In a statement, the board stated that Mr. Moonves was terminated for cause. This included his material and willful misfeasances, violations of Company policies, breach of employment contracts, and willful refusal to cooperate with Company investigations.
Moonves also filed an arbitration case seeking the return of the money.
This year, the dispute was resolved. with an agreement that saw Moonves drop his claim to the severance.
CNN President for the month of March Jeff Zucker reportedly told employees that the cable-news network will not pay the fired prime-time anchor Chris Cuomo severance.
Cuomo was fired after disclosure of documentsThis revealed that he was more involved in counseling his brother, the former governor of New York. Andrew Cuomo was charged with sexually harassing several women.
The attorney Debra Katz has said she notified CNN shortly before it fired Chris CuomoAn allegation that Katz was involved in sexual misconduct.
Chris Cuomo’s spokesperson has refuted the claims.
CNBC has additional reporting Amelia Lucas