US securities regulators have charged McDonald’s and its former chief executive Steve Easterbrook over their handling of the British executive’s termination over his inappropriate personal relationships with staff.
The Securities and Exchange Commission said on Monday that Easterbrook had violated anti-fraud provisions of securities laws by making “false and misleading statements” to investors about the circumstances leading to his exit in November 2019.
He must pay a $400,000 civil penalty and has consented to a five-year officer and director ban, the SEC said.
The commission also reprimanded McDonald’s for initially treating Easterbrook’s termination as “without cause”, which allowed him to leave with a separation package worth more than $40mn. But it did not impose any financial penalty on the company, citing its “substantial co-operation” with the investigation.
The SEC alleged that McDonald’s knew Easterbrook had an inappropriate relationship with a subordinate, but still approved the agreement that allowed Easterbrook to “retain substantial equity” that would have otherwise been “forfeited”.
McDonald’s discovered in July 2020 that Easterbrook had failed to disclose other improper relationships with employees. In late 2021, it clawed back $105mn in awards from its former chief, which included cash payments and equity grants preceding his severance package.
In a statement on Monday, the US burger chain said 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 behaviour.”
Easterbrook could not be immediately contacted for comment.
Chris Kempczinski, Easterbrook’s successor, has sought to refocus the company on a set of values. Staff at McDonald’s, which has also faced harassment allegations from restaurant workers, are now encouraged to report misconduct by any employee, including top executives.
The SEC said Easterbrook knew or was “reckless” in not knowing that failing to disclose these additional violations of company policy would influence McDonald’s disclosures to investors and the pay package related to his exit.
“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, director of the SEC’s enforcement division.
The McDonald’s board has faced criticism from some shareholders for its handling of Easterbrook’s termination. It continues to defend against a derivative lawsuit over the issue, whose allegations it has said are without merit.