Former McDonald’s CEO Stephen Easterbrook has been charged by federal regulators with making false and misleading statements to investors about the circumstances of his firing by the burger giant in November 2019.
Easterbrook was ousted for engaging in an inappropriate personal relationship with a McDonald’s employee in violation of company policy, the Securities and Exchange Commission said in its order Monday. But the separation agreement with McDonald's concluded that his termination was without cause, which allowed him to keep substantial compensation in McDonald's stock that he otherwise would have forfeited, the agency said.
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The SEC said Easterbrook's separation agreement was valued at more than $40 million.
Easterbrook told the Chicago company at the time that there were no other similar instances. But in July 2020, McDonald’s found through an internal investigation that Easterbrook had engaged in other undisclosed, improper relationships with additional McDonald’s employees.
The company wound up suing Easterbrook in August of that year, claiming he covered up relationships with employees and destroyed evidence.
The SEC said that Easterbrook knew or was reckless in not knowing that his failure to disclose additional violations of company policy before his firing would influence McDonald’s disclosures to investors related to his exit and compensation.
“When corporate officers corrupt internal processes to manage their personal reputations or line their own pockets, they breach their fundamental duties to shareholders, who are entitled to transparency and fair dealing from executives,” said Gurbir Grewal, the SEC director of the Division of Enforcement. “By allegedly concealing the extent of his misconduct during the company’s internal investigation, Easterbrook broke that trust with – and ultimately misled – shareholders.”
Easterbrook, who has not admitted or denied the SEC's findings, has agreed to the agency’s cease-and-desist order, which imposes a five-year ban on him serving as a corporate officer or director ban and a $400,000 civil penalty.
The SEC also charged McDonald's with failing to disclose that it exercised its own discretion in terminating Easterbrook without cause. But the agency didn't issue a financial penalty against McDonald's, citing the company's cooperation during its investigation and its successful efforts to recover Easterbrook's compensation. In late 2021, Easterbrook agreed to return $105 million in cash and stock awards to the company.
“The SEC’s order reinforces what we have previously said: McDonald’s held Steve Easterbrook accountable for his misconduct," the company said in a statement. “We are proud of our strong ‘speak up’ culture that encourages employees to report conduct by any employee, including the CEO, that falls short of our expectations.”