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Despite #MeToo Era McDonald’s Clawback is Huge

McDonald’s is getting a $105 million clawback from its ex-CEO Steve Easterbook’s severance package, which is notable for its size. It’s also remarkable because, despite the #MeToo Era, such efforts to reclaim payouts from unethical business CEOs are still uncommon. However, when boards of directors recognise that a CEO’s unethical behaviour, such as Easterbrook’s inappropriate sexual relationships, will have an impact on shareholders, customers, and everything else associated to a company, such outcomes are becoming less common.

According to Larcker, the prevalence of social media sharing information about claims against executives will lead to “a lot more pressure” on corporations to refuse to pay out CEOs who are fired or compelled to retire due to wrongdoing, among other considerations. Easterbrook’s settlement with McDonald’s was disclosed on Thursday, two years after the fast-food giant’s board of directors sacked him following an inquiry that discovered he had a consensual relationship with a subordinate that was against company rules.

Despite being fired, Easterbrook was compensated with a $42 million severance payment. McDonald’s sued Easterbrook in August 2020, alleging that he lied and committed fraud after a whistleblower revealed that he had a sexual contact with an employee. Easterbrook allegedly deleted material about his inappropriate behaviour, including three suspected additional sexual interactions with colleagues, before being fired, according to a subsequent investigation.

Easterbrook battled the lawsuit before agreeing to the settlement and apologising for failing “at times to respect McDonald’s principles” in a statement released Thursday. McDonald’s is “perhaps the third-largest clawback we’ve seen” by a corporation for an individual, according to Dieter Waizenegger, executive director of the pension fund adviser CTW Group. The greatest clawbacks in recent years have been against former Wells Fargo CEO John Stumpf and Carrie Tolstedt, the company’s community banking division’s head.

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