The U.S. Securities and Exchange Commission on Monday charged both McDonald’s and former CEO Steve Easterbrook with disclosure violations related to Easterbrook’s 2019 firing for having affairs with employees, continuing a legal saga that has dogged the burger giant for more than three years.
The agency charged Easterbrook with making false and misleading statements to investors about the circumstances of his firing in November 2019. It also charged McDonald’s with violations of public disclosure rules regarding Easterbrook’s separation agreement.
Easterbrook agreed to pay a $400,000 civil penalty as part of the charges, without admitting or denying their findings. The penalty also prevents him from being an officer or director of a U.S. public company for five years.
The SEC opted not to impose any financial penalties on the Chicago-based burger giant, citing its cooperation in the investigation. The agency said that McDonald’s provided information “not otherwise required to be produced in response to the staff’s requests.”
McDonald’s fired Easterbrook in 2019 after the discovery of a consensual relationship with an employee but allowed him to leave with tens of millions of dollars’ worth of severance payments. McDonald’s later sued Easterbrook to claw back that severance after apparently discovering additional affairs. The former CEO would ultimately agree to repay $105 million.
The SEC said that Easterbrook “knew or was reckless in not knowing” that failure to disclose additional violations of company policy before his termination would influence McDonald’s disclosures to investors related to his departure.
“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,” Gurbir Grewal, director of the SEC’s division of enforcement, said in a statement. “By allegedly concealing the extent of his misconduct during the company’s internal investigation, Easterbrook broke that trust with—and ultimately misled—shareholders.”
The SEC said that McDonald’s “exercised discretion that was not disclosed to investors” by initially firing Easterbrook “without cause” and allowing him to keep his severance. The lack of disclosure over that discretion was a violation of SEC rules regarding public company disclosures.
Public companies like McDonald’s “are required to disclose and explain all material elements of a CEO’s compensation, including factors regarding any separation agreements,” Mark Cave, associate director of the SEC’s division of enforcement, said in a statement.
In a statement, McDonald’s noted the SEC’s comments on its cooperation and the action the company took to recover the severance payment. “The SEC’s order reinforces what we have previously said: McDonald’s held Steve Easterbrook accountable for his misconduct. We fired him and then sued him upon learning that he lied about his behavior,” the company said in a statement.
Easterbrook was fired by surprise in early November 2019 and was replaced by current CEO Chris Kempczinski.
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