And they call Burger King home of the Whopper.
When McDonald’s recently announced that it would attempt to claw back millions from deposed CEO Steve Easterbrook for allegedly lying about the scope of his misconduct at the company, it was a huge embarrassment for the fast food giant—and, more specifically, for its board.
In the hopes of helping other boards avoid a similar fate, Corporate Board Member reached out to Major General (Retired) Bob Gruber, who spent his career as a high-ranking lawyer overseeing the Air National Guard’s Judge Advocate General corps while also working in private practice in New York. Gruber conducted hundreds of investigations in the military and shares quick tips on how—and how not to—conduct a corporate investigation, and why you likely want an outsider to do it.
What Needs Investigation?
It’s tough to tell what, exactly, went wrong at McDonalds. Although the company did bring in outside lawyers to interview the CEO about his alleged sexual relationship with an underling, the company admitted that it had not, for instance, searched Easterbrook’s work email thoroughly, where it might have discovered evidence of additional misconduct.
Not everything, of course, rises to this level of investigation, he says. But situations that cannot be resolved to everyone’s satisfaction without knowing the underlying facts—especially if they involve the CEO or another high-ranking member of the company, or a potential he-said, she-said situation involving sexual harassment or misconduct—deserve an independent investigation in his opinion.
His rule of thumb: Get an outside investigator for “anything that could potentially, if not handled correctly, lead to a realistic probability of some kind of a litigation against the company for failure to take appropriate action,” he says. “And sometimes that appropriate action is just an investigation.”
Who Should Investigate?
If the charge is potentially serious, or involves the CEO in any way, get an outside attorney—preferably one with trial experience—to investigate. “It should be someone who has absolutely no connection with the organization,” he says. “And you ought to give them total authority to look into every nook and cranny.”
The reason? Because you don’t want to potentially suffer the embarrassing fate of McDonalds, of course, but you don’t want to have any possibility that a plaintiff could say that the investigation was handled in a way that could be seen as a cover up. In addition, it’s his advice that you want to find out everything you can about the truth of the matter as soon as is possible, with an eye for material that could be potentially damaging in court.
How to Start
If a serious allegation surfaces in a company, but does not involve the CEO, then the general counsel should be informed, along with the CEO, and they can bring in an outside investigator to dig in. The investigator—who should have a track record of having successfully done this work before, and experience in gathering evidence for trial—should be given permission to talk to whomever they want and look at whatever they want. After all, this same process will be followed by a potential plaintiff’s attorney—better to learn the facts now rather than be surprised later.
If the target is the CEO, then whomever receives the complaint should go to the general counsel, who would then take it to the board. The recipient of the complaint and the GC should set a meeting with the board or lead director to explain what has been alleged. The board may not want to go further, based on the allegations, but, says Gruber, it’s usually in the company’s best interests to sort out the facts. “If you don’t, the person who’s complaining ultimately could go somewhere else to get satisfaction for their complaint,” he says.
The investigator, ideally, should be given license to follow the information wherever it leads, asking open-ended questions, examining emails and other documents. Total independence is key, says Gruber—you don’t want someone looking into the matter to be gunshy about digging around. “The lawyer, who’s independent, examines…who did what and when, and can it be supported by the record of the documents and interviews that have been built along the way?” he says, adding: “What you need to avoid all kinds of criticism is that you’ve examined everybody, and here’s what you’ve come up with.”
Once they’ve finished the investigation, the hired lawyer should create a report, usually with a 20-50 page summary and hundreds or thousands of pages of supporting documents, and take it to the board, along with—sometimes—potential recommendations. What happens next is up to the board. And while someone may disagree with the decisions the board makes based on the investigation, directors are usually covered by the business judgement rule at that point.
“The impartiality and the independence of a competent investigator is your greatest shield to protect you from either future litigation or claims that you didn’t do the right thing,” he says. “The best thing you can do—and the most that you can do—is to have an independent person who’s qualified to investigate and get to the bottom of it, examine the evidence. Once you have done that, you are, in my opinion, protected because there is nothing more that you could have done.”