- Investors, along with New York City's comptroller, have called on McDonald's to adopt a stronger "clawback" policy after CEO Steve Easterbrook was fired last month for violating company policy, according to Restaurant Business.
- At issue is Easterbrook's severance package, which included the retention of nearly $42 million in stock options.
- In a letter to McDonald's chairman Enrique Hernandez, the group writes that they are "distressed" by the decision to provide him with "substantial severance pay and enable him to retain grants."
Such bloated exit payments aren’t necessarily common, but a number of things can happen when an executive exists a company, depending on company-specific or individual employment agreements. The letter goes on to state that Easterbrook's severance package comes "at apparent variance" to the company’s policies, meaning it was adjusted specifically to fit his circumstance, which included engaging in a consensual relationship with an employee. This type of relationship is in direct violation of company policy.
Intel Corp. CEO Brian Krzanich was terminated for a similar policy violation last year and walked away without a severance package, for example, according to the Los Angeles Times. Easterbrook's situation is likely different because he violated company policy versus breaking a sexual harassment law, notes the Times. Still, Nell Minow from consulting firm ValueEdge Advisors tells the Times that a middle manager would be escorted out of the building for similar violations.
It could also be considered tone deaf that Easterbrook was able to retain such a significant severance package while McDonald's employees continue to fight for higher wages. CEO compensation has increased by more than 52% since 2009, while the minimum wage has remained stagnant — a major driver behind the Fight for $15 movement. Furthering this disconnect, McDonald's was just ordered to pay $26 million to resolve claims that it skimmed wages from about 38,000 workers at corporate-run stores across California. All of this has the potential to turn off shareholders, if not some customers.
For now, Easterbrook's deal is done and the package is not likely reversible, though it has been done before, with Wells Fargo in 2016, according to Restaurant Business. This letter urges McDonald's to change its policies to avoid a similar situation in the future regarding severance pay.
Notably, the letter also urges McDonald's to change its sexual harassment policies, calling the company's response to a number of allegations "inadequate." This group is hardly alone in requesting this change and a class action suit was even filed against the company earlier this month over the issue. During the past three years, more than 50 complaints have been brought against the company.
McDonald’s has worked to change this culture with a number of new initiatives, including a new training program and hotline. Attorneys for the plaintiffs in a class action suit regarding sexual harassment claim that these efforts have fallen short, however.
With so many groups calling for change, and even demanding change through the court system, the company has an opportunity to make significant progress here. As Easterbrook's successor Chris Kempczinski tries to rebuild relationships with employees, as he told CNBC earlier this month, it's clear he has his work cut out for him.