McDonald's faces lawsuit from executives alleging racial discrimination

Key Points
  • Two senior McDonald's executives are suing the company for racial discrimination.
  • Under former CEO Steve Easterbrook, the chain allegedly "became overtly hostile to African Americans in both words and deeds."
  • The lawsuit claims that as a result of that discrimination, McDonald's fired and demoted black leadership, pushed out black franchisees and lost African American customers.
Customers at a McDonald's restaurant
Scott Mlyn | CNBC

McDonald's is facing a lawsuit from executives alleging that the chain fired African American leadership, pushed black franchisees out and lost African American customers as part of a broader racial discrimination problem at the company.

Two senior executives, Vicki Guster-Hines and Domineca Neal, allege in the lawsuit filed in Illinois federal court Tuesday that they were subjected to racial discrimination, a hostile work environment and retaliation when they protested against the treatment.

The suit also names former McDonald's CEO Steve Easterbrook, current CEO Chris Kempczinski, and Charles Strong, former president of McDonald's U.S. Western zone, as co-defendants. Strong was promoted to chief field officer in December, after McDonald's received notice of the two women's claims, the lawsuit alleges.

Easterbrook became chief executive in 2015, replacing the company's first black CEO, Don Thompson. McDonald's board ousted Easterbrook in November because of a consensual relationship he had with an employee, in violation of the company's policy.

Kempczinksi, formerly the head of McDonald's U.S. division, was tapped as his successor. In his new role as CEO, he is trying to apply the company's "core values" more evenly across its entire system, according to messages obtained by CNBC.

The lawsuit alleges that under Easterbrook and Kempczinksi, the company "became overtly hostile to African Americans in both words and deeds."

McDonald's said in a statement that it disagrees with the complaint's characterizations but is currently reviewing it and will respond accordingly.

"At McDonald's, our actions are rooted in our belief that a diverse, vibrant, inclusive and respectful company makes us stronger," the company said in a statement. "In the U.S., in particular, almost half of our Corporate Officers are people of color — an increase of nearly 10% from 2013 — and all 10 of the U.S. Field Vice Presidents are people of color."

Between 2014 and 2019, McDonald's fired 30 black officers and demoted five black officers, including the two plaintiffs, according to the lawsuit. The chain began a corporate restructure in 2018, reducing the number of officer-level positions across the company.

A person familiar with the matter said the decrease in the number of African American officers was proportional to that of all officers over the last several years.

The lawsuit alleges that in April 2019, at a meeting requested by senior African American executives to discuss the lack of representation in upper management, Kempczinski said the "numbers [of African Americans] don't matter." Guster-Hines, Neal and other black, female leaders were labeled "Angry Black Women" in an attempt to silence and shame them, according to the lawsuit.

Business Insider reported in December that McDonald's black franchisees are departing the chain as the cash flow disparity between them and their white counterparts grows wider. Nearly one out of three black franchisees left McDonald's since Easterbrook became CEO, which the lawsuit alleges is disproportionate to the overall franchisee system.

"African American franchisees were disparately strong-armed, driving them out of the system in record numbers, and damaging them by the loss of equity in their businesses," the lawsuit claims.

The suit also claims that the company stopped advertising to African American customers, leading those customers to stop frequenting its restaurants. Black customers historically accounted for about one-fifth of McDonald's U.S. revenue, but that number dropped to 14% in 2019, according to the lawsuit.

In March 2019, McDonald's launched Black and Positively Golden, its largest marketing campaign aimed at black consumers in 16 years.

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