US securities regulators have accused McDonald’s and its former chief executive Steve Easterbrook of firing the British businessman over his inappropriate personal dealings with staff.
The Securities and Exchange Commission said Monday Easterbrook had violated the anti-fraud provisions of securities laws by making “false and misleading statements” to investors about the circumstances leading to his exit in November 2019.
He must pay a $400,000 civil penalty and has consented to a five-year officer and director ban, the SEC said.
The commission also reprimanded McDonald’s for initially treating Easterbrook’s dismissal as “without cause”, which allowed him to walk away with a severance package worth over $40 million. But he did not impose any financial penalties on the company, citing its “substantial cooperation” with the investigation.
The charges cap one of corporate America’s most extraordinary public feuds. After firing the divorced executive for what he initially said was a consensual relationship, the company alleged in 2020 that he engaged in three more “physical sexual encounters.”
He had approved a stock award worth hundreds of thousands of dollars to one of the women involved, he added.
Attorneys for Easterbrook initially called the company’s lawsuit “without merit.” He did, however, settle the claims in December 2021, admitting he had “at times failed to uphold McDonald’s values” as the chain recovered $105 million in the form of cash payments and equity grants.
The SEC alleged Monday that McDonald’s knew Easterbrook was having an improper relationship with a subordinate, but still approved the original deal that allowed it to “retain substantial capital” that would otherwise have been “lost.”
Easterbrook, he said, knew or was “reckless” not to know that not disclosing the additional violations of company policy would influence McDonald’s disclosures to investors and the pay package tied to his exit.
In a statement on Monday, the American burger chain said the SEC order “reinforces what we have previously said: McDonald’s held Steve Easterbrook responsible for his misconduct.” We fired him, then sued him after learning he lied about his behavior.
An Easterbrook lawyer did not immediately respond to a request for comment.
Chris Kempczinski, Easterbrook’s successor, sought to refocus the company on a set of values. McDonald’s staff, who have also faced allegations of harassment from restaurant workers, are now encouraged to report misconduct by any employee, including senior managers.
“When corporate executives corrupt internal processes to manage their personal reputations or line their own pockets, they violate their basic duties to shareholders, who are entitled to transparency and fair treatment from executives,” he said. said Gurbir Grewal, director of the SEC’s enforcement division.
McDonald’s board has come under fire from shareholders for its handling of Easterbrook’s layoff, with Neuberger Berman and New York pension funds among those publicly opposite the re-election of its Chairman of the Compensation Committee in 2021.
He continues to defend himself against a lawsuit brought by three pension funds linked to the Teamsters union, the allegations of which he says are without merit.
Two of five SEC commissioners did not support the ruling against McDonald’s, write in a statement on Monday that it “casts” the company “as a violator of securities law through a new interpretation of the commission’s extensive disclosure requirements for executive compensation.”
Republican Commissioners Hester Peirce and Mark Uyeda said the charges could create a “slippery slope” that could “extend”. . . disclosure requirements in unintended areas – a form of expansion of regulation by law enforcement.
The dissent strikes at the heart of a debate over agency enforcement under Gary Gensler, the SEC chairman appointed by President Joe Biden, with critics seeking more regulatory clarity and supporters saying the rules are clear enough and that the application is necessary.
Additional reporting by Stefania Palma in Washington
0 Comments