Ex-CEO of McDonald’s charged with ‘misleading investors’


Former McDonald’s CEO Stephen Easterbrook has been charged by the US Securities and Exchange Commission (SEC) with making false and misleading statements to the company’s investors about the circumstances leading to him being fired in November 2019.

According to the SEC’s order, McDonald’s fired Mr Easterbrook for exercising poor judgment and engaging in an “inappropriate personal relationship” with a McDonald’s employee.

However, the chain and Mr Easterbrook entered into a separation agreement that concluded his termination was without cause, which allowed him to retain substantial equity compensation that otherwise would have been forfeited.

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The SEC said that by making this conclusion, McDonald’s exercised discretion that was not disclosed to investors.

The company has now been charged for shortcomings in its public disclosures related to Mr Easterbrook’s separation agreement.

McDonald’s claimed it discovered through an internal investigation in 2020 that Mr Easterbrook had engaged in other improper relationships with additional employees.

The SEC order found that Mr Easterbrook “knew or was reckless in not knowing that his failure to disclose these additional violations of company policy prior to his termination would influence McDonald’s disclosures to investors related to his departure and compensation”.

The order found that he violated the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Without admitting or denying the findings, Mr Easterbrook has consented to the entry of the SEC’s cease-and-desist order, which imposes a five-year officer and director bar and a US$400,000 civil penalty upon him.

Gurbir S. Grewal, director of the SEC’s Division of Enforcement, 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, Easterbrook broke that trust with – and ultimately misled – shareholders.”

The SEC’s order found that McDonald’s violated Section 14(a) of the Exchange Act and Exchange Act Rule 14a-3, and without admitting or denying the findings, the company has agreed to the SEC’s cease-and-desist order.

The commission decided not to impose a financial penalty on the company in light of the “substantial cooperation it provided to SEC staff” during the course of the investigation, including seeking and ultimately recovering the compensation Mr Easterbrook received as a result of the separation agreement.

Mark Cave, associate director of the Division of Enforcement, added: “Today’s order finds that McDonald’s failed to disclose that the company exercised discretion in treating Easterbrook’s termination as without cause in conjunction with the execution of a separation agreement valued at more than US$40 million.”

In a statement, McDonald’s said it was proud of its “strong ‘speak up’ culture” that allows employees to report conduct by any other employee that does not meet the company’s policies.

Tags : Mcdonald's
Joshua Walton

The author Joshua Walton

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