US Regulator Fines Former McDonald’s CEO $400,000 For Not Disclosing Relationships With Employees

In 2019, McDonald’s terminated Easterbrook for exercising poor judgment and engaging in an inappropriate personal relationship with a McDonald’s employee in violation of company policy

In July 2020, McDonald’s through an internal investigation found that Easterbrook had engaged in other undisclosed, improper relationships with additional McDonald’s employees.  ( Image Source :Getty )

US market regulator Securities and Exchange Commission (SEC) has fined former McDonald's CEO Stephen J Easterbrook $400,000 for concealing a relationship with an employee. The SEC on Monday charged Easterbrook with making false and misleading statements to investors about the circumstances leading to his termination in November 2019. 

The regulator also charged McDonald’s with shortcomings in its public disclosures related to Easterbrook’s separation agreement. The Commission did not impose a financial penalty on McDonald’s for its cooperation with SEC staff during the course of its investigation. 

In 2019, McDonald’s terminated Easterbrook for exercising poor judgment and engaging in an inappropriate personal relationship with a McDonald’s employee in violation of company policy. However, McDonald’s and Easterbrook entered into a separation agreement that concluded his termination was without cause.  

US regulator says this allowed Easterbrook to retain substantial equity compensation that otherwise would have been forfeited. 

In July 2020, McDonald’s through an internal investigation found that Easterbrook had engaged in other undisclosed, improper relationships with additional McDonald’s employees. 

The SEC said, “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.”

"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 S Grewal, Director of the Division of Enforcement, SEC.

"Public issuers like Mcdonald's, are required to disclose and explain all material elements of their CEO’s compensation, including factors regarding any separation agreements," said Mark Cave, Associate Director of the Division of Enforcement, SEC.

The SEC’s order found that Easterbrook violated the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s order also found that McDonald’s violated Section 14(a) of the Exchange Act and Exchange Act Rule 14a-3.