Disgraced former McDonald’s CEO Steve Easterbrook will pay $400,000 to settle charges that he allegedly misled investors about the circumstances of his 2019 firing following a relationship with an employee.
According to the Securities and Exchange Commission, McDonald’s fired Easterbrook for “engaging in an inappropriate personal relationship with a McDonald’s employee in violation of company policy” -— yet the separation agreement claimed “his termination was without cause, which allowed him to retain substantial equity compensation that otherwise would have been forfeited.”
“In making this conclusion, McDonald’s exercised discretion that was not disclosed to investors,” the SEC said in its Monday announcement of the charges and the settlement.
McDonald’s later filed a lawsuit against Easterbrook that ended with the ex-CEO paying back his $105 million severance payment, but the SEC charged both the executive and the company for making such a deal in the first place.
In addition to the $400,000 civil penalty, Easterbrook is also banned from serving as a director or officer at any company that reports to the SEC. The regulator also found McDonald’s violated law, but the SEC is not fining the company “in light of the substantial cooperation it provided to SEC staff during the course of its investigation.”
Neither Easterbrook nor McDonald’s
(MCD) admitted to or denied the charges as part of the settlement.
The imbroglio that engulfed Easterbrook dates back to 2019, when the fast-food chain’s board fired him after determining he violated company policy by demonstrating “poor judgment involving a recent consensual relationship with an employee.”
But that allegedly wasn’t all. In August 2020, McDonald’s filed a lawsuit claiming Easterbrook lied to the board about the extent of his relationships with employees. The company said that it was tipped off to Easterbrook’s alleged other relationships with employees in July 2020, and it opened a new investigation that allegedly found proof of three additional sexual relationships.
McDonald’s settled the lawsuit with Easterbrook in 2021, forcing him to repay his severance package of $105 million.
Easterbrook admitted at the time that he “failed at times to uphold McDonald’s values and fulfill certain of my responsibilities as a leader of the company.” He also apologized to the board, former coworkers and the company’s franchisees and suppliers.
In the SEC’s statement Monday, Director of the Division of Enforcement Gurbir S. Grewal said: “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.”
“By allegedly concealing the extent of his misconduct during the company’s internal investigation,” Grewal continued, “Easterbrook broke that trust with — and ultimately misled — shareholders.”
— CNN’s Jordan Valinsky contributed reporting.