08-11-2021
Dissatisfied with how McDonald’s and its law firm handled sexual harassment allegations against top employees, a McDonald’s shareholder filed a derivative suit. Phyllis Gianotti is suing the company board and its outside legal advisor, Morgan Lewis & Bockius, for breach of their fiduciary duty. In her complaint, Gianotti refers to media reports, human resources complaints, and company records to show that former executive David Fairhurst sexually harassed female employees, and former CEO Stephen Easterbrook had inappropriate sexual relationships with subordinate employees.
Gianotti complained about Easterbrook’s receipt of a lavish severance package upon his termination for violation of company policy. She asserted McDonald’s only sought to revoke the payment after investors complained, requiring a “protracted legal battle that it could have avoided from the outset had it conducted a minimally adequate investigation.” Gianotti also claimed that Morgan, Lewis & Bockius conducted a “grossly inadequate” investigation of the sexual harassment allegations against Easterbrook, failing to review all of his emails and rushing through the initial investigation in eight days or less. The board of directors purportedly breached its duty to police sexual harassment issues, inappropriate relationships, and racial discrimination by filtering any reporting through the CEO and failing to appropriately discipline top employees after learning about initial reports of misconduct.
McDonald’s legal counsel asserted there is no basis for Gianotti’s lawsuit. He stated, “The Board has acted in accordance with McDonald’s values and will continue to do so, supporting the Company’s efforts to ensure fair opportunity for employees, franchisees, and suppliers.”