McDonald's shareholders want to oust chairman over Easterbrook exit package

Dive Brief:

CtW Investment Group, a McDonald's shareholder and investment group that works with union-backed pension funds, wants shareholders to vote out McDonald's Chairman Enrique Hernandez, Jr. and Director Richard Lenny over the exit package awarded to former CEO Steve Easterbrook, according to a CtW filing.
CtW said Easterbrook departed with stock and options that could amount to $44 million despite violating the chain's non-fraternization policy.
"The board's light handed approach demonstrates a failure to disincentivize violations of its code of conduct," CtW Investment Group's executive director Dieter Waizenegger said in the filing.

Dive Insight:

CtW Investment Group isn't the first group to openly criticize Easterbrook's exit package. Investors and New York City's comptroller called the substantial exit package distressing and asked the chain to adopt stronger a stronger "clawback" policy.

Whether CtW manages to boot Hernandez and Lenny from McDonald's board, the call to do so is evidence that the mega chain is still reckoning with the skeletons in its closet.

In the letter, CtW writes that "Easterbrook and his executive team set a poor 'tone at the top' that tacitly condoned inappropriate workplace behavior" that is reflected by "McDonald's ongoing struggle to address widespread concerns over sexual harassment in its restaurants."

McDonald's is currently facing a Florida class-action lawsuit that claims female employees at corporate-owned Florida stores endured "severe or pervasive sexual harrassment." The suit seeks at least $500 million in damages on behalf of the two plaintiffs and thousands of other women that work at about 100 corporate McDonald's locations in the state.

McDonald's told HR Dive in an emailed statement that "The plaintiff's allegations of harassment and retaliation were investigated as soon as they were brought to our attention, and we will likewise investigate the new allegations that they have raised in their complaint." The restaurant also said that Safe and Respectful Workplace Training has been rolled out at all of McDonald's corporate-owned restaurants and that franchisees are encouraged to hold these trainings as well.

The chain has suffered blows to its reputation over its sexual harassment failures for four years, when more than a dozen employees filed sexual harassment complaints with the Equal Employment Opportunity Commission in 2016. This latest suit shows that the chain has more work ahead to change its culture, especially since the charges follow companywide training designed to better protect employees.

If McDonald's shareholders do choose to vote out Hernandez and Lenny, it may be able to do so under the radar given the state of the coronavirus crisis. The chain already tapped a new U.S. chief restaurant officer earlier this month and a new global chief people officer in March, so it seems McDonald's is willing to change horses midstream.

Then again, the restaurant has its hands full trying to manage declining sales. McDonald's U.S. same-store sales dropped 13% in March, and the chain estimates that its domestic Q1 sales growth will only hit 0.1%. The chain's stock has fallen 11% so far in 2020.