Former McDonald’s CEO to Pay $400,000 for Allegedly Misleading Investors About His Firing

Former McDonald’s CEO Steve Easterbrook will pay $400,000 in a settlement over allegations 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 (SEC), McDonald’s fired Easterbrook for “engaging in an inappropriate personal relationship with a McDonald’s employee, in violation of company policy” – but the separation agreement stated that “his termination was without just cause, which allowed him to retain substantial compensation that would otherwise have been forfeited.”

“In reaching this conclusion, McDonald’s exercised discretion that was not disclosed to investors,” the SEC said in its Monday announcement of the charges and settlement.

Later, McDonald’s filed a lawsuit against Easterbrook that ended with the former CEO paying his $105 million severance, but the SEC charged the executive and the company for making such a settlement in the first place.

In addition to the $400,000 civil fine, Easterbrook is also prohibited from serving as a director or officer in any company that reports to the SEC. The regulator also found that McDonald’s violated the 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 or denied the allegations as part of the settlement.

The Easterbrook Saga

The imbroglio surrounding Easterbrook dates back to 2019, when the fast-food chain’s board fired him after determining that he violated company policy by demonstrating “poor judgment involving a recent consensual relationship with an employee”.

But that supposedly wasn’t all. In August 2020, McDonald’s filed a lawsuit alleging that Easterbrook lied to the board about the extent of his relationship with employees. The company said it was made aware of Easterbrook’s alleged other relationships with employees in July 2020 and opened a new investigation that allegedly found evidence of three additional sexual relationships.

McDonald’s settled the lawsuit with Easterbrook in 2021, forcing him to repay his $105 million severance package.

Easterbrook admitted at the time that he “at times failed to uphold McDonald’s values ​​and fulfill some of my responsibilities as a leader of the company.” He also apologized to management, former coworkers, and the company’s franchisees and suppliers.

In the SEC filing on Monday, Divisional Enforcement Director Gurbir S. Grewal said, “When executives corrupt internal processes to manage their personal reputations or line their own pockets, they violate their fundamental duties to shareholders, who are entitled to transparency and fair dealing by executives.”

“By allegedly concealing the extent of his misconduct during the company’s internal investigation,” continued Grewal, “Easterbrook broke trust with – and ultimately misled – shareholders.”