SEC Charges Ex-McDonald’s CEO With Misleading Statements Over His Firing

Mr. Easterbrook led McDonald’s from 2015 until he was fired by the company in 2019, when McDonald’s said that Mr. Easterbrook had violated company policy on personal conduct because of a consensual relationship with an employee. McDonald’s later said that a further investigation found that Mr. Easterbrook engaged in multiple improper relationships with company employees.

A representative for Mr. Easterbrook declined to comment Monday. Mr. Easterbrook has previously apologized for failing “to uphold McDonald’s values and fulfill certain of my responsibilities as a leader of the company.”

In a statement Monday, McDonald’s 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 behavior.”

The agency didn’t impose a financial penalty on McDonald’s, citing the company’s cooperation during the investigation as well as remedial measures the company took, including clawing back compensation made to Mr. Easterbrook as part of his severance package.

Mr. Easterbrook’s separation agreement, filed to the SEC in November 2019, said his termination was without cause, which allowed him to retain substantial stock-based compensation that otherwise would have been forfeited, according to the SEC. In doing so, McDonald’s exercised discretion that wasn’t disclosed to investors, the SEC said.

Mr. Easterbrook, 55 years old, served in various senior roles at McDonald’s for more than a decade before taking over as CEO as the company was struggling to boost its sales. He has been credited with helping turn around the company’s performance by pushing franchisees to update their restaurants, overhauling menus and reducing costs, including through corporate staff cuts. The company’s stock rebounded under his tenure.

Some employees said that they grew uncomfortable with McDonald’s corporate culture under Mr. Easterbrook, as he and other company executives socialized in and outside the company. After Mr. Easterbrook’s ouster, incoming CEO

Chris Kempczinski

pledged to improve the company’s working environment and renew its values.

In July 2020, an internal investigation by McDonald’s revealed that Mr. Easterbrook had engaged in additional improper relationships with McDonald’s employees and didn’t disclose them to the company, according to the SEC.

The fast-food giant later that year sued Mr. Easterbrook, accusing him of lying to investigators to cover up relationships with employees and protect his multimillion-dollar severance package. Mr. Easterbrook’s attorney said at the time that the former CEO abided by all the demands made in the original severance agreement, including refraining from working for a rival for two years.

In December 2021, Mr. Easterbrook agreed to return compensation to McDonald’s that was valued at more than $105 million at the time to settle the lawsuit.

The SEC said Mr. Easterbrook knew, or should have known, that his failure to disclose those additional relationships before his ouster would have influenced McDonald’s disclosures to investors about his departure and compensation.

“By allegedly concealing the extent of his misconduct during the company’s internal investigation, Easterbrook broke that trust with—and ultimately misled—shareholders,” said

Gurbir Grewal,

director of the SEC’s Division of Enforcement.

The SEC has been intensifying efforts to recoup pay from senior executives whose companies allegedly break financial-reporting rules, suing or settling with several executives over the past year. The agency approved in October 2022 a new rule that requires exchange-listed companies to have policies for taking back top executives’ incentive pay if significant errors in financial statements are found, even in cases where no misconduct occurred.

The SEC has in recent years handed down more five-year bars against individuals to serve as officers or directors of a public company through negotiated settlements, said

Stephen J. Crimmins,

a partner at Davis Wright Tremaine LLP. Mr. Easterbrook could continue to privately invest in companies while barred from serving as an executive or board member, he said.

“It is very much something that people will try to negotiate,” Mr. Crimmins said about officer and director barment.

The five-member commission voted 3-2 to authorize the settlement with McDonald’s. Two Republican commissioners,

Hester Peirce

and Mark Uyeda, voted against the McDonald’s case, arguing that SEC rules don’t require public companies to disclose the specific reasons for an executive’s firing or separation from the firm.

“To spring a novel interpretation through an enforcement action is not a reasonable regulatory approach,” Ms. Peirce and Mr. Uyeda wrote.

—Dave Michaels contributed to this article.

Write to Will Feuer at [email protected] and Heather Haddon at [email protected]

Mr. Easterbrook led McDonald’s from 2015 until he was fired by the company in 2019, when McDonald’s said that Mr. Easterbrook had violated company policy on personal conduct because of a consensual relationship with an employee. McDonald’s later said that a further investigation found that Mr. Easterbrook engaged in multiple improper relationships with company employees.

A representative for Mr. Easterbrook declined to comment Monday. Mr. Easterbrook has previously apologized for failing “to uphold McDonald’s values and fulfill certain of my responsibilities as a leader of the company.”

In a statement Monday, McDonald’s 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 behavior.”

The agency didn’t impose a financial penalty on McDonald’s, citing the company’s cooperation during the investigation as well as remedial measures the company took, including clawing back compensation made to Mr. Easterbrook as part of his severance package.

Mr. Easterbrook’s separation agreement, filed to the SEC in November 2019, said his termination was without cause, which allowed him to retain substantial stock-based compensation that otherwise would have been forfeited, according to the SEC. In doing so, McDonald’s exercised discretion that wasn’t disclosed to investors, the SEC said.

Mr. Easterbrook, 55 years old, served in various senior roles at McDonald’s for more than a decade before taking over as CEO as the company was struggling to boost its sales. He has been credited with helping turn around the company’s performance by pushing franchisees to update their restaurants, overhauling menus and reducing costs, including through corporate staff cuts. The company’s stock rebounded under his tenure.

Some employees said that they grew uncomfortable with McDonald’s corporate culture under Mr. Easterbrook, as he and other company executives socialized in and outside the company. After Mr. Easterbrook’s ouster, incoming CEO

Chris Kempczinski

pledged to improve the company’s working environment and renew its values.

In July 2020, an internal investigation by McDonald’s revealed that Mr. Easterbrook had engaged in additional improper relationships with McDonald’s employees and didn’t disclose them to the company, according to the SEC.

The fast-food giant later that year sued Mr. Easterbrook, accusing him of lying to investigators to cover up relationships with employees and protect his multimillion-dollar severance package. Mr. Easterbrook’s attorney said at the time that the former CEO abided by all the demands made in the original severance agreement, including refraining from working for a rival for two years.

In December 2021, Mr. Easterbrook agreed to return compensation to McDonald’s that was valued at more than $105 million at the time to settle the lawsuit.

The SEC said Mr. Easterbrook knew, or should have known, that his failure to disclose those additional relationships before his ouster would have influenced McDonald’s disclosures to investors about his departure and compensation.

“By allegedly concealing the extent of his misconduct during the company’s internal investigation, Easterbrook broke that trust with—and ultimately misled—shareholders,” said

Gurbir Grewal,

director of the SEC’s Division of Enforcement.

The SEC has been intensifying efforts to recoup pay from senior executives whose companies allegedly break financial-reporting rules, suing or settling with several executives over the past year. The agency approved in October 2022 a new rule that requires exchange-listed companies to have policies for taking back top executives’ incentive pay if significant errors in financial statements are found, even in cases where no misconduct occurred.

The SEC has in recent years handed down more five-year bars against individuals to serve as officers or directors of a public company through negotiated settlements, said

Stephen J. Crimmins,

a partner at Davis Wright Tremaine LLP. Mr. Easterbrook could continue to privately invest in companies while barred from serving as an executive or board member, he said.

“It is very much something that people will try to negotiate,” Mr. Crimmins said about officer and director barment.

The five-member commission voted 3-2 to authorize the settlement with McDonald’s. Two Republican commissioners,

Hester Peirce

and Mark Uyeda, voted against the McDonald’s case, arguing that SEC rules don’t require public companies to disclose the specific reasons for an executive’s firing or separation from the firm.

“To spring a novel interpretation through an enforcement action is not a reasonable regulatory approach,” Ms. Peirce and Mr. Uyeda wrote.

—Dave Michaels contributed to this article.

Write to Will Feuer at [email protected] and Heather Haddon at [email protected]