WASHINGTON – The Securities and Exchange Commission issued an order charging Stephen Easterbrook, former chief executive officer of McDonald’s Corp., with making misleading statements to investors about the circumstances leading to his firing in November 2019. McDonald’s also was charged for deficiencies in its public disclosures related to Easterbrook’s separation agreement.

“Public issuers, like McDonalds’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. “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 $40 million.”

In a federal order, the SEC said McDonald’s exercised discretion that the company did not disclose to investors when it fired Easterbrook for engaging in an inappropriate relationship with a McDonald’s employee. But when McDonald’s and Easterbrook entered into a separation agreement that concluded his termination was without cause, it allowed Easterbrook to retain substantial equity compensation that otherwise would have been forfeited.

An internal investigation revealed Easterbrook had engaged in inappropriate relationships with other McDonald’s employees, the SEC said, which Easterbrook knew would influence McDonald’s disclosures to investors related to his exit from the company and his 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. “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 finds that Easterbrook violated the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Without admitting or denying its findings, Easterbrook agreed to enter the agency’s cease-and-desist order, which imposes a five-year officer and director bar and a $400,000 civil penalty.

Additionally, the SEC found that McDonald’s violated Section 14(a) of the Exchange Act and Exchange Act Rule 14a-3. Without admitting or denying its findings, McDonald’s also agreed to enter a cease-and-desist order. The SEC did not impose a financial penalty on McDonald’s considering the substantial cooperation the company provided to SEC staff during the course of its investigation. McDonald’s voluntarily provided information not otherwise required to be produced in response to SEC staff’s requests, as well as the remedial measures undertaken by McDonald’s, which included seeking and ultimately recovering the compensation Easterbrook received pursuant to the separation agreement.