Former McDonald’s boss Stephen Easterbrook’s alleged flirtations with employees are proving costly.
First, Easterbrook agreed to return $105 million to Golden Arches for claims that he concealed sexual relationships with company colleagues. Then, earlier this month, he agreed to pay $400,000 and accept a five-year ban as an officer and director to resolve the Securities Exchange Commission’s claims that he misled shareholders about the situation.
McDonald’s isn’t the only company that explicitly prohibits executives from having romantic relationships with their subordinates. Even dates that initially appear to be consensual can look very different when the connection goes sour, especially if there is an imbalance in power dynamics.
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At Airbnb, we require executive team members to completely forego romantic relationships with co-workers. The policy established a clear and shared commitment and understanding, which can help avoid problems in the future.
The general counsel of companies that do not have such policies on the books may want to reconsider, given the changing landscape of sexual harassment law and the increasing risks to officials who engage in romantic encounters with employees.
changing landscape
It’s a good idea to put “5 Minutes of Integrity” on the executive team calendar each month. Take advantage of general council time to talk with your fellow leaders about evolving issues in the area of compliance and ethics. The goal is proactive: If there is an environment where leaders talk and think about integrity on a regular basis, the chances are much higher that the company will be prepared to do the right thing when tough issues arise.
This is a great topic to kick off the new year: the dramatic new landscape for dealing with allegations of sexual harassment in the workplace.
Most executives are familiar with the old-fashioned way of handling sexual harassment claims against company leaders: the aggrieved employee’s case is referred to arbitration, where the dispute takes place in a private forum. The matter is then settled quietly, with the leader denying any wrongdoing and the employee forced to sign a confidentiality agreement in exchange for some form of cash compensation. The leader then goes back to business as usual. In the event the executive is fired, he is silent and with a pre-negotiated severance package, allowing the person to resurface at another company that is unaware of the situation.
This cycle repeats itself all too often. A couple of new federal laws aim to stop it.
The frustration and anger that followed the Harvey Weinstein scandal in 2017 fueled the #MeToo movement. Five years later, thanks to the courage and persistence of victims like Gretchen Carlson, Congress moved to remove the shield of forced arbitration in sexual assault and harassment cases.
President Joe Biden signed the Act to End Forced Arbitration of Sexual Assault and Sexual Harassment into law in March. The law gives people who make claims of assault or harassment under state or federal law the option to bring the claims to court, even if they previously signed a binding arbitration agreement.
President Joe Biden and Gretchen Carlson at a signing ceremony on March 3, 2022.
Photographer: Samuel Corum/Bloomberg
Last month, Biden signed the Speak Out Act. This law ensures that employees cannot be prevented from disclosing that they experienced or witnessed sexual assault or harassment, even if they previously signed a confidentiality agreement.
Both laws passed with broad bipartisan support, reflecting the changing climate in favor of transparency and worker rights. Combined with the SEC’s action against Easterbrook, the feds are sending a strong signal to companies that sexual harassment cases need to be handled with more transparency.
think about your brand
It’s time to rethink how you negotiate labor agreements with new leaders.
Often new executives will try to push for severance packages up front. These deals can have embarrassing results if the executive is later accused of wrongdoing and walks away with millions of dollars.
Insist on protections that will nullify severance payments when misconduct or misconduct is proven. That includes violations of company policies, such as the prohibition of sexual relations with subordinates.
Agree in advance on a mechanism to resolve disputes about whether there was enough misconduct to void the award.
It’s also worth considering whether your company should extend the new restrictions on forced arbitration and confidentiality agreements beyond sexual assault and sexual harassment, to include discrimination claims. If you’re looking to add an NDA to a particular settlement agreement, ask yourself if restricting someone’s ability to speak about the facts of the incident really reflects well on your brand, and if you’d really be willing to go to court to enforce the restriction
The best position might be to make it clear that you believe in transparency and in the rights of current and former employees to express their views on a particular incident. Even if you don’t agree with them.
Rob Chesnut is the former General Counsel and Chief Ethics Officer for Airbnb. He spent more than a decade as a Justice Department prosecutor and later oversaw US legal operations at eBay. The author of “Intentional Integrity: How Smart Companies Can Lead an Ethical Revolution,” Rob consults on legal and ethical issues.