The former CEO of McDonald’s Corporation, Stephen J. Easterbrook, has been charged by the Securities and Exchange Commission with misrepresenting the circumstances surrounding his November 2019 termination.
The SEC said in a news release that Easterbrook made false and misleading statements to investors about the firing in violation of the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Easterbrook was terminated for exercising poor judgment and engaging in an inappropriate personal relationship with a McDonald’s employee in violation of company policy, according to the SEC’s order. But his separation agreement with the company concluded that his firing was without cause, thus allowing him to retain substantial compensation in McDonald’s stock that he otherwise would have had to forfeit.
In July 2020, McDonald’s found out through an internal investigation that Easterbrook had engaged in other undisclosed, improper relationships with additional McDonald’s employees. The SEC said that Easterbrook knew or was reckless in not knowing that his failure to disclose these added violations of company policy before his firing would influence McDonald’s disclosures to investors related to his exit 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 Grewal, the SEC director of the Division of Enforcement. “By allegedly concealing the extent of his misconduct during the company’s internal investigation, Easterbrook broke that trust with – and ultimately misled – shareholders.”
Easterbrook has not admitted or denied the SEC’s findings but did agree to the agency’s cease-and-desist order imposing a five-year ban on him serving as a corporate officer or director as well as a $400,000 civil penalty.
McDonald’s was also charged for shortcomings in its public disclosures regarding Easterbrook’s separation agreement. The company was found to have been in violation of Section 14(a) of the Exchange Act and Exchange Act Rule 14a-3. Without admitting or denying the findings, McDonald’s consented to the SEC’s cease-and-desist order. The commission decided not to impose a financial penalty on McDonald’s, citing the company’s cooperation with SEC staff during the investigation.
Those who choose to work in the financial services industry face a range of complex rules and regulations. If you are under investigation by your firm, terminated for cause or considering voluntarily leaving your firm, it is imperative that you hire counsel to advise you properly and protect your record. For more information about our financial services employment practice, please contact Lewitas Hyman at (844) 651-2641 or through our online contact form.