McDonald’s sues former CEO over alleged relationships with staff - business live

Graeme Wearden

from on 2020-08-10 16:25 (#56QQK)

Rolling coverage of the latest economic and financial news, as fast food chain tries to recover severance pay from ex-CEO

Latest: McDonald's sues Steve Easterbrook
Claims CEO had sexual relations with three employees
Investigation found videos and photos

Earlier:

5.25pm BST

Time for a recap

5.23pm BST

Here's my colleague Ed Helmore on the allegations against McDonald's former CEO:

Steve Easterbrook, the British former chief executive of McDonald's, is being sued by the company in an attempt to recover tens of millions in compensation and severance payments after new allegations of sexual misconduct emerged against him.

Easterbrook, who was fired from the company last November over a relationship with an employee, allegedly hid details of three other physical sexual relationships" with employees in the year before he left the company, according to a lawsuit filed in Delaware.

4.49pm BST

Back in the City of London, the FTSE 100 has closed 18 points higher at 6050.

Travel stocks, banks and retailers had a good day, with IAG jumping 8.6%, Rolls-Royce up 5%, JD Sports rising 3.8% and NatWest gaining 3.1%.

4.29pm BST

Shares in McDonald's have dipped slightly, down 0.25% to $204.11, as traders digest the lawsuit against Easterbrook.

That makes the fast food company the second-biggest faller out of the 30 major companies on the Dow Jones industrial average (Microsoft is the worst performer, down 2.3%, as tech stocks have a bad day).

4.03pm BST

The Financial Times reminds us that Steve Easterbrook made headlines more than a decade ago, when he criticised the cliche that working at the fast food chain was low-paid and unrewarding.

A cricket-playing Watford Grammar schoolboy credited with turning around McDonald's business in Europe before getting the top job in 2015, Mr Easterbrook was known as a strident defender of the company.

In 2006, while running its UK operations, he asked the Oxford English Dictionary to change its definition of the phrase McJob from an unstimulating, low-paid job".

3.49pm BST

Here's a video clip of CNBC outlining McDonald's lawsuit, just after the news broke:

McDonald's is suing its former CEO Steve Easterbrook for allegedly lying during the company's internal investigation into his behavior. The company has found evidence that Easterbrook had sexual relationships with three McDonald's employees. https://t.co/vayGhB75T7 pic.twitter.com/Gl6Ei1aN8I

3.46pm BST

McDonald's is hoping to recover tens of millions of dollars' from its former CEO, says Bloomberg:

McDonald's Corp. sued ousted leader Steve Easterbrook, seeking to recover tens of millions of dollars in severance pay after discovering evidence he had sexual relationships with multiple employees, tried to cover it up and arranged for one worker to get a lucrative stock award.

His termination last fall over an improper relationship shouldn't have included severance pay because he concealed evidence and lied about his wrongdoing," the company said in a filing.

3.31pm BST

Back on the economic beat, the number of US job opening has unexpectedly jumped.

There were 5.89m available positions in June, the Labor Department reports, up from 5.37m in May. That suggests America's economy strengthened as its lockdown eased - as last Friday's encouraging jobs report also showed.

3.17pm BST

Here's the crux of McDonald's case:

Had the Board known on November 1, 2019 what it learned in July 2020 regarding Easterbrook's conduct as CEO, it would not have approved the Separation Agreement and would have instead terminated Easterbrook for cause.

And had Easterbrook not deleted evidence from his phone and lied to the Board and its investigators in October 2019, the Board would have known the full record of his conduct when it considered the terms of his separation.

3.11pm BST

McDonalds also alleges that Steve Easterbrook approved a valuable package of stock to one of the employees, during their relationship:

The lawsuit states:

The date and time stamps of the photographs of Employee-2 also conclusively show that Easterbrook approved a special discretionary grant of restricted stock units-worth hundreds of thousands of dollars-to Employee-2 shortly after their first sexual encounter and within days of their second.

2.59pm BST

McDonald's lawsuit explains that it received allegations about Steve Easterbrook's conduct in July (eight months after he had been dismissed over a consensual relationship with an employee)

An investigation found evidence of sexual relationships with three other employees, including videos and photographs, the company alleges:

In July 2020, the Company received an anonymous report alleging that a McDonald's employee (Employee-2") engaged in a sexual relationship with Easterbrook while he was CEO.

An internal investigation into this allegation discovered photographic evidence that, while he was CEO, Easterbrook had engaged in a physical sexual relationship not only with Employee-2, but also with two other Company employees in the year before his termination. That evidence consisted of dozens of nude, partially nude, or sexually explicit photographs and videos of various women, including photographs of these Company employees, that Easterbrook had sent as attachments to messages from his Company e-mail account to his personal e-mail account.

2.42pm BST

Fast food giant McDonalds is suing former CEO Steve Easterbrook for allegedly conducting physical sexual relationships" with three employees, and misleading their board about them.

Recently identified evidence shows that Easterbrook had physical sexual relationships with three McDonald's employees in the year before his termination; that he approved an extraordinary stock grant, worth hundreds of thousands of dollars, for one of those employees in the midst of their sexual relationship; and that he was knowingly untruthful with McDonald's investigators in 2019.

These actions constitute breaches of Easterbrook's duties to McDonald's. Had Easterbrook been candid with McDonald's investigators and not concealed evidence, McDonald's would have known that it had legal cause to terminate him in 2019 and would not have agreed that his termination was without cause." Accordingly, McDonald's brings this action to redress the injuries it has suffered by virtue of Easterbrook's fiduciary breaches and deceit.

We recently became aware through an employee report of new information regarding the conduct of our former CEO, Steve Easterbrook. We now know that his conduct deviated from our values in different and far more extensive ways than we were aware when he left the company last year. While the Board made the right decision to swiftly remove him from the Company last November, this new information makes it clear that he lied and destroyed evidence regarding inappropriate personal behavior and should not have retained the contractual compensation he did upon his exit. As such, the Company, at the direction of the Board of Directors, has filed litigation to recover the compensation he retained upon his departure from McDonald's and align his exit payout with a for cause" termination.

McDonald's does not tolerate behavior from any employee that does not reflect our values. These actions reflect a continued demonstration of this commitment.

2.22pm BST

The US central bank has just announced how much more capital America's largest banks should hold to absorb future losses.

Reuters has the details:

The U.S. Federal Reserve announced Monday how much each large bank that underwent its 2020 stress tests will have to hold in additional capital.

The results mark the first time the Fed has given out custom capital requirements for each bank under its new stress capital buffer," and takes effect on October 1.

@federalreserve announces individual large bank capital requirements, which will be effective on October 1: https://t.co/3VZHjc6Rqg

2.08pm BST

Shares in Italian football club Juventus have slumped today after the Old Lady crashed out of the Champions League.

1.46pm BST

Here's our news story on the early success of the Eat Out to Help Out scheme:

1.29pm BST

Just in: Cruise operator Royal Caribbean has posted a steeper loss than expected, after being forced to stop sailings due to the pandemic.

(Earnings) Royal Caribbean Cruises( $RCL ) Actual.EPS=-6.13 vs Est.EPS=-4.82, Actual.Rev=175.6M vs Est.Rev=47.45M pic.twitter.com/ms8BFnlYoI

Starting on March 13, 2020 and due to the COVID-19 pandemic, the Company suspended its global cruise operation. This resulted in the cancellation of all of the Company's second quarter sailings.

We continue to take substantial actions to bolster our financial position.

We have accessed the capital market in an opportunistic manner and continue to aggressively manage our spend. We are prepared to navigate a volatile period while making decisions that position the Company well for the recovery."

12.37pm BST

Mohamed El-Erian, chief economic adviser to Allianz, has warned that the world's biggest economies risk repeating the mistakes of the global financial crisis.

The key to the recovery, he says, includes reopening economies in a healthy, responsible manner while also tackling longer-term household insecurity and productivity problems.

El-Erian, the former Pimco chief executive, told Financial News that while global economies remain at risk of stumbling into a depression, avoiding policy errors of the 2008 economic meltdown should be a top priority.

It [global depression] remains a risk but one that can be reduced through appropriate government policies and healthy behaviour modifications by individuals," said El-Erian, who is also a former deputy director of the International Monetary Fund.

The Bank of England last week revised down its forecast of contraction to 9.5% this year - the biggest annual decline in 100 years - from its initial May estimate of a 14% decline.

The bank also predicted the country's GDP recovering in the third quarter.

El-Erian: Global economy at risk of repeating mistakes of the 2008 financial crisis https://t.co/uuxnFXwc7p

12.07pm BST

After a quiet but choppy morning's trade, European stock markets are all showing steady gains.

The jump in Chinese factory prices, and Saudi Aramco's optimism for oil demand, helped to lift stocks - building on Friday's gains after the strong US jobs report.

The US jobs release reaffirmed its credentials as one of the most influential bits of economic data as Friday's better than expected picture helped set the tone for the start of this week.

The FTSE 100 was more than 1% higher and within touching distance of the 6,100 mark as investors brushed off mounting tensions between the US and China and fears of a second wave in the coronavirus pandemic.

11.32am BST

Modular housing company Etopia Group says it has become the world's first carbon neutral housebuilder, and has become a member of the United Nations climate neutral now initiative.

The firm, which is currently building 47 new homes in Corby, Northamptonshire, has calculated and published its current carbon footprint, including international air travel, and its plans to reduce it.

11.16am BST

Ireland's deputy prime minister has struck a cautious note, warning that the Irish economic recovery from its COVID-19 lockdown will take longer than hoped.

Leo Varadkar (who was PM at the start of the pandemic), told the Newstalk radio station that a strong recovery in 2021 isn't guaranteed.

I think to be frank the economic impact is going to be a lot worse than you or I may have thought back in March or April or when the government was formed (in June).

Back in March or April I would have said this is going to be a three-month phenomenon, a single quarter severe hit to the economy and that we would be in a very strong recovery by next year. That now looks less certain."

11.08am BST

Here's Diane Wehrle, Insights Director at Springboard, on the increase in visitors to the high street last week:

The jury is still out regarding the benefit of the Eat Out to Help Out" scheme which launched last week, although there were rises in footfall on each day between Monday and Wednesday from the week before. It is clear that it was the post 6pm period that yielded the greatest rise in footfall, and also that smaller towns benefited more than large city centres.

As the scheme continues throughout August and more Brits enjoy staycations across the UK, time will tell if the government scheme provides the boost that retail destinations across the country require for business survival."

10.58am BST

The UK government's half-price meal offer has lured plenty of people back to the high streets last week, especially during the evenings.

Would just like to inform you all that my friends have started saying we're going out for a Rishi" in place of going out for a half price dinner on a Monday - Wednesday."

10.23am BST

Grim news of the morning: a third of UK employers expect to cut jobs this autumn, even though the economy should be recovering from the coronavirus lockdown.

My colleague Jasper Jolly explains:

About 33% of more than 2,000 companies, charities and public sector bodies in the poll said they expected to make redundancies in the third quarter of 2020, according to figures from the Chartered Institute of Personnel and Development (CIPD) and Adecco Group, a staffing company.

The poll suggests the UK is likely to experience a wave of job losses across the economy as the government starts to withdraw the coronavirus job retention scheme.

10.06am BST

Back in the UK, insurance group Royal London has paid out 8.5m in life insurance claims to the families of more than 1,200 customers whose deaths were attributed to Covid-19.

It is also setting aside 10m for future claims, having posted a loss of 181m for the last six months - due to falling asset values and weaker sales during the lockdown.

9.54am BST

As feared, news of China's retaliatory sanctions has knocked shares in Europe.

The Stoxx 600 index is now flat for the day, with falling tech stocks cancelling out the rally in banks, travel companies and oil majors.

9.34am BST

Newsflash: China is imposing sanctions on a group of senior US politicians, in a move that could puncture today's market optimism.

China's foreign ministry says it will target 11 Americans, including Republican senators Ted Cruz and Marco Rubio.

BREAKING: China will sanction 11 Americans, including Senators Marco Rubio and Ted Cruz, in retaliation for restrictions imposed by Trump on Hong Kong officials https://t.co/uWgzREA9tB pic.twitter.com/U2em9Kdzem

9.24am BST

UK fashion chain Superdry has shored up its finances with a new 70m lending facility from its banks to see it through the Covid-19 crisis.

The actions we have taken to date have greatly strengthened our cash position, which together with our new [lending] facility, give us the flexibility to execute our current plans and to secure our recovery.

Together, we are making our way through this unprecedented period, and I'm confident we can reset the brand and deliver on our transformation plans."

9.11am BST

Oil producers, car makers, travel companies and financial stocks are all leading the rally in European markets this morning.

Those sectors are all sensitive to economic health, so are benefiting from optimism that the pick-up in Chinese producer prices and consumer inflation in July is signalling a recovery.

China is so much in advance in this process of lockdowns and exiting lockdown, that any good signs for the Chinese economy is essential (for the world economy)."

8.59am BST

The oil price has opened higher today.

8.55am BST

France's economy continued to recover from the Covid-19 lockdown last month, its central reported this morning.

The Bank of France estimates that economic activity was 7% below its usual levels in July, up from a 9% gap in June.

The rebound continued in July, at a more moderate rhythm, in line with the trajectory anticipated last month."

#France #GDP #Banquedefrance

FRENCH GDP CONTRACTED 13.8% IN Q2 2020, IN LINE WITH FORECAST FOR -14%, SAYS BANK OF FRANCE

FRENCH ECONOMY IN JULY RAN 7% BELOW LEVEL EXPECTED HAD THERE BEEN NO CORONAVIRUS CRISIS, BANK OF FRANCE SAYS

The report confirms what the Bank of France has described as a recovery in the shape of a bird wing, with a sudden jump after the lifting of lockdown measures in May, followed by a steady return toward normal.

France's economic recovery loses pace after initial surgehttps://t.co/uLJMfDEIqf via @WHorobin pic.twitter.com/jMA7mlOqPf

8.44am BST

Asia-Pacific stock markets have already posted gains this morning.

The pick-up in Chinese factory gate inflation, and Donald Trump's move to unilaterally extend jobless benefits, both lifted shares in the region.

The main development over the weekend was the decision by President Trump to sign four executive orders to provide more fiscal support for the US economy after the Republicans and Democrats failed to reach a bipartisan agreement. The executive orders include extending enhanced unemployment benefits at $400 per week which is a reduction from recent support at $600 per week....

The fresh stimulus provided by President Trump through executive orders is better than none at all and provides a stop gap solution. Pressure remains though on both the Democrats and Republicans to reach a more substantial and durable compromise solution.

8.23am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

China inflation data in July: CPI: 0.6%M, 2.7%Y, core: 0.5%Y, and PPI: -2.4%Y (June: -3.0%Y), #pork prices rose 85.7% on a yearly basis, chart @economics https://t.co/BuDChsgBij pic.twitter.com/I76AH4g2SD

The data adds to mounting evidence that the economic recovery in China is not only solid, but also gaining momentum, boosting optimism that the world's second largest economy will offer serious support to the global economic recovery.

FTSE Rallies On Global Economic Recovery Optimismhttps://t.co/JlDig2YeBA pic.twitter.com/Gs7NySo6O5

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