In re STEPHEN J.

 
UNITED STATES OF AMERICA  
  Before the  
  SECURITIES AND EXCHANGE COMMISSION  
  
SECURITIES ACT OF 1933  
Release No. 11144 / January 9, 2023 
  
SECURITIES EXCHANGE ACT OF 1934  
Release No. 96610 / January 9, 2023 
  
ADMINISTRATIVE PROCEEDING  
File No. 3-21269 
  
  
  
ORDER INSTITUTING CEASE-AND- 
DESIST PROCEEDINGS PURSUANT  
TO SECTION 8A OF THE SECURITIES  
ACT OF 1933 AND SECTION 21C OF  
THE SECURITIES EXCHANGE ACT  
OF 1934, MAKING FINDINGS, AND  
 IMPOSING A CEASE-AND-DESIST  
         ORDER  
  
I.  
The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 
Act”)  against  Stephen  J.  Easterbrook  (“Easterbrook”)  and  McDonald’s  Corporation 
(“McDonald’s”) (collectively, “Respondents”).  
II.  
In anticipation of the institution of these proceedings, Respondents have submitted Offers 
of Settlement (the “Offers”) which the Commission has determined to accept. Solely for the purpose 
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are 
admitted, and except as provided herein in Section V, Respondents consent to the entry of this Order 
Instituting Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and 
  
  
  
In the Matter of  
  
STEPHEN J.  
EASTERBROOK and  
MCDONALD’S  
CORPORATION,  
  
Respondents.  
  
  
  
  

2  
  
Section  21C  of  the  Securities Exchange  Act  of  1934,  Making  Findings,  and  Imposing  Remedial 
Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.    
III.  
On the basis of this Order and Respondents’ Offers, the Commission finds that:  
INTRODUCTION  
1. Effective November 1, 2019, McDonald’s terminated its former CEO, Stephen J. 
Easterbrook, after finding that he  had exercised poor judgment and engaged  in an  inappropriate 
personal relationship with a McDonald’s employee in violation of corporate policy. During the 
internal  investigation  that  preceded  his  termination,  Easterbrook  did  not  disclose  other  physical 
relationships   with   company   employees   and   withheld   information   relevant  to  the   internal 
investigation.  For the reasons set forth below, Easterbrook’s conduct violated Section 10(b) of the 
Exchange  Act  and  Rule  10b-5  thereunder  and  Section  17(a)  of  the  Securities  Act  and  caused 
violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-11 thereunder.  
2. In its Definitive Proxy Statement filed after Easterbrook’s separation, McDonald’s 
disclosed that it had terminated Easterbrook “without cause” and described the terms of  his 
separation  agreement,  including,  among  other  things,  his  right  to  certain  unvested  equity-based 
compensation.    In  violation  of  Section  14(a)  of  the  Exchange  Act  and  Rule  14a-3  thereunder, 
McDonald’s failed to disclose that it exercised discretion in terminating Easterbrook “without 
cause” under the relevant compensation plan documents after finding that he violated corporate 
policy,  allowing Easterbrook  to  retain  certain  equity-based  compensation  that  would  have  been 
forfeited if the company had terminated him for cause.   
RESPONDENTS  
3. Easterbrook, age 55, resides in Chicago, Illinois. He was McDonald’s CEO and a 
board member from March 2015 through October 2019.   
4. McDonald’s is  a  Delaware  corporation  with  its  principal  place  of  business  in 
Chicago, Illinois, and has a class of securities registered pursuant to Section 12(b) of the Exchange 
Act. McDonald’s common stock trades on the New York Stock  Exchange  under  the  symbol 
“MCD.” McDonald’s files periodic reports, including annual reports on Form 10-K and quarterly 
reports on Form 10-Q, with the Commission pursuant to Section 13(a) of the Exchange Act and 
related rules thereunder.    
BACKGROUND  
McDonald’s Internal Investigation Regarding Easterbrook’s Misconduct  
5. In October 2019, counsel for a former McDonald’s employee (“Employee 1”) 
contacted  counsel  for  the  company  to  allege  that  Easterbrook  had  engaged  in  an  inappropriate 
personal  relationship with Employee 1. The McDonald’s Board of Directors retained outside 
counsel to conduct an independent internal investigation.   

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6. On October 22, 2019, McDonald’s outside counsel interviewed Easterbrook. The 
interview was conducted pursuant to McDonald’s Standards of Business Conduct, which required 
Easterbrook  to  participate  in  and  cooperate  with  the  investigation.  When  asked  if  he  had  ever 
engaged in a physical or non-physical sexual relationship with any other McDonald’s employee, 
Easterbrook said that he had not. In July 2020, McDonald’s learned that Easterbrook had in fact 
engaged  in  other  relationships  with  McDonald’s  employees  in  violation  of  the  company’s 
Standards of Business Conduct.  
7. During  the  course  of  the  independent  internal  investigation,  Easterbrook  also 
withheld potentially relevant information from McDonald’s.    
8. As the company’s CEO, Easterbrook knew or was reckless in not knowing that  
misleading McDonald’s in the course of a formal corporate process convened to, among other 
things,  make  a  determination  about  his  continued  employment  and  his  compensation,  would 
influence McDonald’s disclosures to investors, including disclosures in the company’s periodic 
disclosures and its Definitive Proxy Statement.  
McDonald’s Terminates Easterbrook and Enters Separation Agreement   
9. On  November  1,  2019,  McDonald’s  terminated  Easterbrook  following  the 
McDonald’s Board of Directors’ formal determination that Easterbrook “violated Company policy 
and demonstrated poor judgment involving a recent consensual relationship with [Employee 1],” 
in violation of the company’s  Standards of Business Conduct regarding dating and fraternization.  
10. At the time, Easterbrook had multiple agreements with McDonald’s that governed 
his  compensation  and  potential  benefits  upon separation.  Two  of  those  agreements – the  Stock 
Option  Award  Agreements  and  Performance-Based  Restricted  Stock  Unit  (“PRSU”)  Award 
Agreements – included in the definition of a Termination of Employment for Cause a termination 
due to a violation of the company’s Standards of Business Conduct.    
11. The terms of those agreements provided for Easterbrook’s unvested stock options 
and PRSUs to be forfeited  if the company terminated him  for cause, including a termination  for 
cause  resulting  from  the  commission  of  acts  in  violation  of  the  Standards  of  Business  Conduct. 
The PRSU Award Agreements provided:   
  
Termination  for  Cause  or  Policy  Violation.  If  the  Grantee  has  a 
Termination  of  Employment  for  Cause,  including  on  account  of  a 
Policy  Violation  (which  means  a  termination  resulting  from  the 
commission  of  any  act  or  acts  which  violate  the  Standards  of 
Business Conduct of the Company or a Subsidiary or any successor 
thereto   (including   underlying   polices   or   policies   specifically 
referenced therein), as the same is effect [sic] and applicable to the 
Grantee at of the time of the Grantee’s violation), as determined by 
the Committee or its delegee in its sole and absolute discretion, the 
RSUs and any Dividend Equivalents will be immediately forfeited.  
  
The Stock Option Award Agreements provided:  

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Termination   Due   to   Policy   Violation.   If   the   Optionee   has   a 
Termination  of  Employment  for  Cause  due  solely  to  a  Policy 
Violation (as determined by the Committee in its sole and absolute 
discretion),  any  Options  exercisable  on  the  date  of  the  Optionee's 
Termination of Employment may be exercised not later than the 90th 
day  following the Optionee's Termination of Employment (but not 
beyond  the  Expiration  Date).  Any  unvested  Options  shall   be 
forfeited   as   of   the   date of  the  Optionee’s  Termination  of 
Employment.  
  
12. On  October  29,  2019,  the  Board  of  Directors  presented  Easterbrook  with  a  draft 
Separation  Agreement  and  General  Release.  As  a  condition  of  settlement,  Easterbrook  was 
required  to  disseminate  a  letter  to  all  McDonald’s  employees  explaining  his  departure  and 
endorsing the new CEO. He was also given an opportunity to review McDonald’s press release 
regarding his termination. Both the letter to employees, which was covered in multiple mainstream 
media outlets, and the press release, which was attached as an exhibit to a Form 8-K filed by the 
company, described Easterbrook’s misconduct as limited to a single consensual relationship with 
another McDonald’s employee.   
13. In relevant part, the letter to employees stated: “As for my departure, I engaged in 
a recent consensual relationship with an employee, which violated McDonald’s policy. This was a 
mistake.”    
14. The press release stated that Easterbrook “separated from the Company following 
the Board’s determination that he  violated  company  policy  and  demonstrated  poor  judgment 
involving a recent consensual relationship with an employee.”  
15. Neither  the  letter to  employees  nor the  press  release  disclosed  information  about 
Easterbrook’s  relationships  with  other  McDonald’s  employees.    Information  about  the  other 
relationships came to light in July 2020.  
16. On November 1, 2019, McDonald’s and Easterbrook entered into a Separation 
Agreement  and  General  Release,  which  stipulated  that  Easterbrook’s  termination  would  be 
“considered a termination of employment by McDonald’s without ‘Cause.’”   
17. The Separation Agreement and General Release also stipulated that Easterbrook’s 
stock options and PRSUs would “continue to vest or become exercisable pursuant to the original 
schedule” in the Stock Option Award and PRSU Award Agreements.    
18. At  the  time  of  the  settlement,  McDonald’s  calculated  the  total  value  of  the 
compensation that Easterbrook received pursuant to the Separation Agreement to be $47,534,341, 
of which $43,999,937 was composed of outstanding stock options and PRSUs.    
19. McDonald’s  has  publicly  stated  that,  had  Easterbrook  been  candid  with  the 
company during the internal investigation, it would not have terminated him “without cause.”   
 

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McDonald’s Files a Form 8-K Announcing Easterbrook’s Termination   
20. On November 4, 2019, McDonald’s filed a Form 8-K announcing Easterbrook’s 
termination from the company. It stated that Easterbrook was “separated from his officer and director 
positions” and that “[t]he Company has entered into a separation agreement with Mr. Easterbrook, 
which provides that he will be eligible for the severance benefits contemplated by the Company’s 
benefit plans upon a termination of employment.” The Form 8-K  also  attached  the  press  release 
described in Paragraphs 12 and 14, supra, and the Separation Agreement and General Release.   
21. As a result of Easterbrook’s conduct during the company’s internal investigation and 
in his review of the company’s press release and his letter to McDonald’s employees, the company’s 
public filings and his own public statements did not disclose the existence of Easterbrook’s other 
improper relationships.    
McDonald’s 2020 Definitive Proxy Statement Solicits Shareholder Approval for 
Compensation Easterbrook Received Pursuant to the Separation Agreement    
22. On April 9, 2020, McDonald’s filed its Definitive Proxy Statement for fiscal year 
2020.  It  disclosed  that  Easterbrook  was  terminated  “without  cause”  and  recommended  that 
shareholders “approve, on  an  advisory  basis,  the  [2019]  compensation  of  the  named  executive 
officers,” including, by extension, the terms of the Separation Agreement and General Release.    
23. In the Definitive Proxy Statement, McDonald’s represented to shareholders that “[i]n 
accordance with the terms of their outstanding equity awards, (i) Mr. Easterbrook’s options that 
would have vested within the three years following his termination of employment will continue to 
vest in accordance with their regular schedule and will remain exercisable for three years . . . .”   
24. The Definitive Proxy Statement did not disclose that, absent the company’s exercise 
of  discretion  in  treating  Easterbrook’s  termination  as  without  cause,  Easterbrook  would  have 
forfeited unvested options and PRSUs as a result of his termination on account of a violation of the 
Standards of Business Conduct.      
McDonald’s Sues Easterbrook to Recover Compensation Received Pursuant to the 
Separation Agreement  
25. From November 2019 to June 2020, Easterbrook exercised at least 193,000 options 
and  sold  the  resulting  shares  for  net  cash  proceeds  of  $9,365,072.37.  Easterbrook  also  received  a 
performance payment for 63,687 PRSUs valued at $7,054,291.83 after taxes.   
  
26. In July 2020, McDonald’s received an anonymous complaint that alleged  another 
McDonald’s  employee  engaged  in  an  inappropriate  personal  relationship  with  Easterbrook. 
McDonald’s commenced a second internal investigation, which identified evidence that Easterbrook 
engaged  in  inappropriate  personal  relationships  with  McDonald’s  employees,  in  addition  to 
Employee 1.   
27. On  August  10,  2020,  McDonald’s  sued  Easterbrook  in  the  Delaware  Court  of 
Chancery  seeking  to  recover  the  compensation  Easterbrook  received  as  part  of  the  Separation 
Agreement  and  General  Release.  The  complaint  asserted  claims  for  breach  of  fiduciary  duty  and 

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fraud in the inducement related to Easterbrook’s conduct during the course of the October 2019 
internal investigation.   
28. On  December  16,  2021,  McDonald’s  publicly  announced  that  it  had  reached  a 
settlement with Easterbrook. Under the settlement agreement, McDonald’s agreed to dismiss the suit 
filed in Delaware Court of Chancery in exchange for Easterbrook’s payment to McDonald’s of his 
cash  severance,  prorated  bonus,  certain  proceeds  realized  from  the  sale  of  securities  that  resulted 
from his exercise of options and PRSUs, and certain attorney’s fees incurred by the company, as 
well as forfeiture of all outstanding equity and awards.  
VIOLATIONS  
29. As a result of the conduct described above, Easterbrook violated Section 10(b) of the 
Exchange  Act  and  Exchange  Act  Rules  10b-5(a)  and  (c),  which  prohibit,  in  connection  with  the 
purchase and sale of securities, the use of any “device, scheme, or artifice to defraud” and any “act, 
practice or course of business which operates or would operate as a fraud or deceit upon any person.”  
30. As  a  result  of  the  conduct  described  above,  Easterbrook  violated  Securities  Act 
Sections 17(a)(1) and (3), which prohibit, in the offer or sale of securities, the use of any “device, 
scheme or artifice to defraud” and “any transaction, practice or course of business which operates or 
would operate as a fraud or deceit upon the purchaser.”  
31. As a result of the conduct described above, Easterbrook violated Section 10(b) of the 
Exchange  Act  and  Exchange  Act  Rule  10b-5(b), which prohibits any person from “making any 
untrue statement of a material fact” or “omit[ting] to state a material fact necessary in order to make 
the statements made, in the light of the circumstances under which they were made, not misleading,” 
in connection with the purchase or sale of a security.   
32. As a result of the conduct described above, Easterbrook violated Section 17(a)(2) of 
the Securities Act, which prohibits any person in the offer or sale of a security from “obtain[ing] 
money or property  by  means of any untrue statement of a material  fact or any omission to state a 
material  fact necessary  in order to make the  statements  made,  in  light of the circumstances under 
which they were made, not misleading.”   
33. As a result of the conduct described above, Easterbrook caused violations of Section 
13(a) of  the  Exchange  Act  and  Exchange  Act  Rules  12b-20  and  13a-11,  which  prohibit  an  issuer 
from filing periodic or current reports that contain materially false or misleading information.   
34. As  a  result  of  its  failure  to  provide  certain  disclosures  with  respect  to  executive 
compensation required by Item 402 of Regulation S-K, McDonald’s violated Section 14(a) of the 
Exchange  Act  and  Exchange  Act  Rule  14a-3,  which  prohibit  solicitation  of  a  proxy  without 
furnishing the information specified by Schedule 14A. Item 402(b) of Regulation S-K provides the 
Compensation  Discussion  and  Analysis  “shall  explain all material  elements  of  the  registrant's 
compensation of the named executive officers.” (Emphasis added.) The instructions to Item 402(b) 
call for registrants to address “specific decisions that were made or steps that were taken that could 
affect a fair understanding of the named executive officer’s compensation.” Item 402(b)(2) provides 
specific  examples  of  potentially  material  information  to  be  disclosed  in  the  Compensation 
Discussion  and  Analysis,  including  “factors  considered  in  decisions  to  increase  or  decrease 

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compensation materially.” See Item 402(b)(2)(ix). A registrant is also required to disclose, “[w]ith 
respect to any contract, agreement, plan or arrangement, whether written or unwritten, that provides 
for payment(s) at, following, or in connection with any termination or change-in-control, the basis 
for selecting particular events as triggering payment (e.g., the rationale for providing a single trigger 
for  payment  in  the  event of  a  change-in-control).” See Item  402(b)(2)(xi).  Finally,  Item  402(j)(5) 
requires disclosure of any “material factors” regarding a “contract, agreement, plan or arrangement 
. . . that provides  for payment(s) to a named executive officer at, following, or in connection with 
any termination.”   
35. McDonald’s violation of Section 14(a) of the Exchange Act and Exchange Act Rule 
14a-3 arose from its failure to disclose that it used discretion in treating Easterbrook’s termination 
as “without cause” under the relevant compensation plan documents after determining that he 
violated  the  Standards  of  Business  Conduct  and  in  entering  into  a  Separation  Agreement  and 
General Release that provided for the continued vesting of options and PRSUs. Under the terms of 
the Separation Agreement and General Release, Easterbrook retained equity-based compensation 
valued  at  approximately  $44  million  that  otherwise  would  have  been forfeited,  absent  the 
company’s exercise of discretion.       
MCDONALD’S COOPERATION  
36. In  determining  to  accept  McDonald’s  Offer,  the  Commission  considered  the 
cooperation it provided during the Commission’s investigation, as well as remedial measures 
undertaken by McDonald’s.  
37. McDonald’s provided substantial cooperation to the Commission’s staff throughout 
its   investigation,   including   by   voluntarily   providing   relevant   documents   and   testimonial 
information  that  was  otherwise  not  required  to  be  produced  in  response to the staff’s requests; 
providing  briefings  to  the  staff  that  highlighted  critical  facts  and  key  documents;  and  promptly 
making the company’s officers, directors, and other senior managers available for interviews and 
testimony.  This  cooperation  substantially  advanced  the  quality  and  efficiency  of  the  staff’s 
investigation and conserved Commission resources.  
38. McDonald’s  also  took  affirmative  remedial  steps  to  recover  value  for  its 
shareholders  by  suing  Easterbrook  in  the  Delaware  Court  of  Chancery, seeking  and  ultimately 
recovering  the  compensation  Easterbrook  received  pursuant  to  the  Separation  Agreement  and 
General Release.  
IV.  
In  view  of  the  foregoing, the  Commission  deems  it  appropriate  and  for the  protection  of 
investors to impose the sanctions agreed to in Respondents’ Offers.  
Accordingly, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange 
Act, it is hereby ORDERED that:  
A. Easterbrook shall cease and desist from committing or causing any violations and 
any  future  violations  of  Section  17(a)  of  the  Securities  Act;  Sections  10(b)  and  13(a)  of  the 
Exchange Act; and Exchange Act Rules 10b-5, 12b-20, and 13a-11.  

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B. McDonald’s shall cease and desist from committing or causing any violations and 
any future violations of Section 14(a) of the Exchange Act and Exchange Act Rule 14a-3.   
C. Easterbrook  be,  and  hereby  is,  prohibited,  pursuant  to  Section  21C(f)  of  the 
Exchange  Act,  from  acting  as  an  officer  or  director  of  any  issuer  that  has  a  class  of  securities 
registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to 
Section 15(d) of the Exchange Act for a period of five (5) years from the entry of this Order.  
D. Easterbrook  shall  pay  disgorgement  and  prejudgment  interest  of  $52,728,069. 
However, the full amount of disgorgement and prejudgment interest shall be deemed satisfied by 
the compensation Easterbrook repaid to McDonald’s in resolution of the company’s claims in 
McDonald’s Corporation v. Stephen J. Easterbrook, C.A. No. 2020-0658-JRS (Del. Ct. Ch.).  
E. Easterbrook  shall,  within  14  days  of  the  entry  of  this  Order,  pay  a  civil  money 
penalty in the amount of $400,000 to the Securities and Exchange Commission for transfer to the 
general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3).  If timely 
payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.   
Payment must be made in one of the following ways:    
1. Easterbrook  may  transmit  payment  electronically  to  the  Commission,  which  will 
provide detailed ACH transfer/Fedwire instructions upon request;   
  
2. Easterbrook  may  make  direct  payment  from  a  bank  account  via  Pay.gov through the 
SEC website at http://www.sec.gov/about/offices/ofm.htm; or   
  
3. Easterbrook may pay by certified check, bank cashier’s check, or United States postal 
money   order,   made   payable   to  the   Securities   and   Exchange   Commission   and 
handdelivered or mailed to:   
Enterprise Services Center  
Accounts Receivable Branch  
HQ Bldg., Room 181, AMZ-341  
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169  
  
Payments by check or money order must be accompanied by a cover letter identifying the 
relevant Respondent in these proceedings, and the file number of these proceedings; a copy of the 
cover letter and check or money order must be sent to Mark Cave, Associate Director, Division of 
Enforcement, Securities and Exchange Commission, 100 F St. N.E., Washington, DC 20549.    
F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes.  To preserve 
the deterrent effect of the civil penalty, Easterbrook agrees that in any Related Investor Action, he 
shall  not argue that he  is entitled to, nor shall he benefit by, offset or reduction of any award of 
compensatory damages by the amount of any part of any Respondent’s payment of a civil penalty 
in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a Penalty 

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Offset, Easterbrook  agrees that  he  shall,  within  30  days  after  entry  of  a  final  order  granting  the 
Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 
Offset  to  the  Securities  and  Exchange  Commission.    Such  a  payment  shall  not  be  deemed  an 
additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a private 
damages action brought against any Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.  
G. McDonald’s acknowledges that the Commission is not imposing a civil penalty 
based upon its cooperation in a Commission investigation or related enforcement action. If at any 
time  following  the  entry  of  the  Order,  the  Division  of  Enforcement  (“Division”)  obtains 
information  indicating  that  McDonald’s  knowingly  provided  materially  false  or  misleading 
information or materials to the Commission, or in a related proceeding, the Division  may, at  its 
sole discretion and with prior notice to the McDonald’s, petition the Commission to reopen this 
matter and seek an order directing that McDonald’s pay a civil penalty. McDonald’s may contest 
by  way  of  defense  in  any  resulting  administrative  proceeding  whether  it  knowingly  provided 
materially false or misleading information, but may not:  (1) contest the findings in the Order; or 
(2) assert any defense to liability or remedy, including, but not limited to, any statute of limitations 
defense. V.  
It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 
523 of the Bankruptcy Code, 11 U.S.C. § 523, Easterbrook stipulates that the findings in this Order 
are true, and further stipulates that any debt for disgorgement, prejudgment interest, civil penalty 
or other amounts due by Easterbrook under this Order or any other judgment, order, consent order, 
decree  or  settlement  agreement  entered  in  connection  with  this  proceeding,  is  a  debt  for  the 
violation by Easterbrook of the federal securities laws or any regulation or order issued under such 
laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. § 523(a)(19).  
  By the Commission.  
  
  
  
Vanessa A. Countryman 
Secretary  
  
  
  

UNITED STATES OF AMERICA  

  Before the  

  SECURITIES AND EXCHANGE COMMISSION  

  

SECURITIES ACT OF 1933  

Release No. 11144 / January 9, 2023 

  

SECURITIES EXCHANGE ACT OF 1934  

Release No. 96610 / January 9, 2023 

  

ADMINISTRATIVE PROCEEDING  

File No. 3-21269 

  

  

  

ORDER INSTITUTING CEASE-AND- 

DESIST PROCEEDINGS PURSUANT  

TO SECTION 8A OF THE SECURITIES  

ACT OF 1933 AND SECTION 21C OF  

THE SECURITIES EXCHANGE ACT  

OF 1934, MAKING FINDINGS, AND  

 IMPOSING A CEASE-AND-DESIST  

         ORDER  

  

I.  

The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 

Act”) against Stephen J. Easterbrook (“Easterbrook”) and McDonald’s Corporation 

(“McDonald’s”) (collectively, “Respondents”).  

II.  

In anticipation of the institution of these proceedings, Respondents have submitted Offers 

of Settlement (the “Offers”) which the Commission has determined to accept. Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are 

admitted, and except as provided herein in Section V, Respondents consent to the entry of this Order 

Instituting Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and 

  

  

  

In the Matter of  

  

STEPHEN J.  

EASTERBROOK and  

MCDONALD’S  

CORPORATION,  
  

Respondents.  
  

  

  

  



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Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial 

Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.    

III.  

On the basis of this Order and Respondents’ Offers, the Commission finds that:  

INTRODUCTION  

1. Effective November 1, 2019, McDonald’s terminated its former CEO, Stephen J. 

Easterbrook, after finding that he had exercised poor judgment and engaged in an inappropriate 

personal relationship with a McDonald’s employee in violation of corporate policy. During the 

internal investigation that preceded his termination, Easterbrook did not disclose other physical 

relationships with company employees and withheld information relevant to the internal 

investigation.  For the reasons set forth below, Easterbrook’s conduct violated Section 10(b) of the 

Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act and caused 

violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-11 thereunder.  

2. In its Definitive Proxy Statement filed after Easterbrook’s separation, McDonald’s 

disclosed that it had terminated Easterbrook “without cause” and described the terms of his 

separation agreement, including, among other things, his right to certain unvested equity-based 

compensation.  In violation of Section 14(a) of the Exchange Act and Rule 14a-3 thereunder, 

McDonald’s failed to disclose that it exercised discretion in terminating Easterbrook “without 

cause” under the relevant compensation plan documents after finding that he violated corporate 

policy, allowing Easterbrook to retain certain equity-based compensation that would have been 

forfeited if the company had terminated him for cause.   

RESPONDENTS  

3. Easterbrook, age 55, resides in Chicago, Illinois. He was McDonald’s CEO and a 

board member from March 2015 through October 2019.   

4. McDonald’s is a Delaware corporation with its principal place of business in 

Chicago, Illinois, and has a class of securities registered pursuant to Section 12(b) of the Exchange 

Act. McDonald’s common stock trades on the New York Stock Exchange under the symbol 

“MCD.” McDonald’s files periodic reports, including annual reports on Form 10-K and quarterly 

reports on Form 10-Q, with the Commission pursuant to Section 13(a) of the Exchange Act and 

related rules thereunder.    

BACKGROUND  

McDonald’s Internal Investigation Regarding Easterbrook’s Misconduct  

5. In October 2019, counsel for a former McDonald’s employee (“Employee 1”) 

contacted counsel for the company to allege that Easterbrook had engaged in an inappropriate 

personal relationship with Employee 1. The McDonald’s Board of Directors retained outside 

counsel to conduct an independent internal investigation.   



3  

  

6. On October 22, 2019, McDonald’s outside counsel interviewed Easterbrook. The 

interview was conducted pursuant to McDonald’s Standards of Business Conduct, which required 

Easterbrook to participate in and cooperate with the investigation. When asked if he had ever 

engaged in a physical or non-physical sexual relationship with any other McDonald’s employee, 

Easterbrook said that he had not. In July 2020, McDonald’s learned that Easterbrook had in fact 

engaged in other relationships with McDonald’s employees in violation of the company’s 

Standards of Business Conduct.  

7. During the course of the independent internal investigation, Easterbrook also 

withheld potentially relevant information from McDonald’s.    

8. As the company’s CEO, Easterbrook knew or was reckless in not knowing that  

misleading McDonald’s in the course of a formal corporate process convened to, among other 

things, make a determination about his continued employment and his compensation, would 

influence McDonald’s disclosures to investors, including disclosures in the company’s periodic 

disclosures and its Definitive Proxy Statement.  

McDonald’s Terminates Easterbrook and Enters Separation Agreement   

9. On November 1, 2019, McDonald’s terminated Easterbrook following the 

McDonald’s Board of Directors’ formal determination that Easterbrook “violated Company policy 

and demonstrated poor judgment involving a recent consensual relationship with [Employee 1],” 

in violation of the company’s  Standards of Business Conduct regarding dating and fraternization.  

10. At the time, Easterbrook had multiple agreements with McDonald’s that governed 

his compensation and potential benefits upon separation. Two of those agreements – the Stock 

Option Award Agreements and Performance-Based Restricted Stock Unit (“PRSU”) Award 

Agreements – included in the definition of a Termination of Employment for Cause a termination 

due to a violation of the company’s Standards of Business Conduct.    

11. The terms of those agreements provided for Easterbrook’s unvested stock options 

and PRSUs to be forfeited if the company terminated him for cause, including a termination for 

cause resulting from the commission of acts in violation of the Standards of Business Conduct. 

The PRSU Award Agreements provided:   

  

Termination for Cause or Policy Violation. If the Grantee has a 

Termination of Employment for Cause, including on account of a 

Policy Violation (which means a termination resulting from the 

commission of any act or acts which violate the Standards of 

Business Conduct of the Company or a Subsidiary or any successor 

thereto (including underlying polices or policies specifically 

referenced therein), as the same is effect [sic] and applicable to the 

Grantee at of the time of the Grantee’s violation), as determined by 

the Committee or its delegee in its sole and absolute discretion, the 

RSUs and any Dividend Equivalents will be immediately forfeited.  

  

The Stock Option Award Agreements provided:  



4  

  

Termination Due to Policy Violation. If the Optionee has a 

Termination of Employment for Cause due solely to a Policy 

Violation (as determined by the Committee in its sole and absolute 

discretion), any Options exercisable on the date of the Optionee's 

Termination of Employment may be exercised not later than the 90th 

day following the Optionee's Termination of Employment (but not 

beyond the Expiration Date). Any unvested Options shall be 

forfeited as of the date of the Optionee’s Termination of 

Employment.  

  

12. On October 29, 2019, the Board of Directors presented Easterbrook with a draft 

Separation Agreement and General Release. As a condition of settlement, Easterbrook was 

required to disseminate a letter to all McDonald’s employees explaining his departure and 

endorsing the new CEO. He was also given an opportunity to review McDonald’s press release 

regarding his termination. Both the letter to employees, which was covered in multiple mainstream 

media outlets, and the press release, which was attached as an exhibit to a Form 8-K filed by the 

company, described Easterbrook’s misconduct as limited to a single consensual relationship with 

another McDonald’s employee.   

13. In relevant part, the letter to employees stated: “As for my departure, I engaged in 

a recent consensual relationship with an employee, which violated McDonald’s policy. This was a 

mistake.”    

14. The press release stated that Easterbrook “separated from the Company following 

the Board’s determination that he violated company policy and demonstrated poor judgment 

involving a recent consensual relationship with an employee.”  

15. Neither the letter to employees nor the press release disclosed information about 

Easterbrook’s relationships with other McDonald’s employees.  Information about the other 

relationships came to light in July 2020.  

16. On November 1, 2019, McDonald’s and Easterbrook entered into a Separation 

Agreement and General Release, which stipulated that Easterbrook’s termination would be 

“considered a termination of employment by McDonald’s without ‘Cause.’”   

17. The Separation Agreement and General Release also stipulated that Easterbrook’s 

stock options and PRSUs would “continue to vest or become exercisable pursuant to the original 

schedule” in the Stock Option Award and PRSU Award Agreements.    

18. At the time of the settlement, McDonald’s calculated the total value of the 

compensation that Easterbrook received pursuant to the Separation Agreement to be $47,534,341, 

of which $43,999,937 was composed of outstanding stock options and PRSUs.    

19. McDonald’s has publicly stated that, had Easterbrook been candid with the 

company during the internal investigation, it would not have terminated him “without cause.”   

 



5  

  

McDonald’s Files a Form 8-K Announcing Easterbrook’s Termination   

20. On November 4, 2019, McDonald’s filed a Form 8-K announcing Easterbrook’s 

termination from the company. It stated that Easterbrook was “separated from his officer and director 

positions” and that “[t]he Company has entered into a separation agreement with Mr. Easterbrook, 

which provides that he will be eligible for the severance benefits contemplated by the Company’s 

benefit plans upon a termination of employment.” The Form 8-K also attached the press release 

described in Paragraphs 12 and 14, supra, and the Separation Agreement and General Release.   

21. As a result of Easterbrook’s conduct during the company’s internal investigation and 

in his review of the company’s press release and his letter to McDonald’s employees, the company’s 

public filings and his own public statements did not disclose the existence of Easterbrook’s other 

improper relationships.    

McDonald’s 2020 Definitive Proxy Statement Solicits Shareholder Approval for 

Compensation Easterbrook Received Pursuant to the Separation Agreement    

22. On April 9, 2020, McDonald’s filed its Definitive Proxy Statement for fiscal year 

2020. It disclosed that Easterbrook was terminated “without cause” and recommended that 

shareholders “approve, on an advisory basis, the [2019] compensation of the named executive 

officers,” including, by extension, the terms of the Separation Agreement and General Release.    

23. In the Definitive Proxy Statement, McDonald’s represented to shareholders that “[i]n 

accordance with the terms of their outstanding equity awards, (i) Mr. Easterbrook’s options that 

would have vested within the three years following his termination of employment will continue to 

vest in accordance with their regular schedule and will remain exercisable for three years . . . .”   

24. The Definitive Proxy Statement did not disclose that, absent the company’s exercise 

of discretion in treating Easterbrook’s termination as without cause, Easterbrook would have 

forfeited unvested options and PRSUs as a result of his termination on account of a violation of the 

Standards of Business Conduct.      

McDonald’s Sues Easterbrook to Recover Compensation Received Pursuant to the 

Separation Agreement  

25. From November 2019 to June 2020, Easterbrook exercised at least 193,000 options 

and sold the resulting shares for net cash proceeds of $9,365,072.37. Easterbrook also received a 

performance payment for 63,687 PRSUs valued at $7,054,291.83 after taxes.   

  

26. In July 2020, McDonald’s received an anonymous complaint that alleged another 

McDonald’s employee engaged in an inappropriate personal relationship with Easterbrook. 

McDonald’s commenced a second internal investigation, which identified evidence that Easterbrook 

engaged in inappropriate personal relationships with McDonald’s employees, in addition to 

Employee 1.   

27. On August 10, 2020, McDonald’s sued Easterbrook in the Delaware Court of 

Chancery seeking to recover the compensation Easterbrook received as part of the Separation 

Agreement and General Release. The complaint asserted claims for breach of fiduciary duty and 



6  

  

fraud in the inducement related to Easterbrook’s conduct during the course of the October 2019 

internal investigation.   

28. On December 16, 2021, McDonald’s publicly announced that it had reached a 

settlement with Easterbrook. Under the settlement agreement, McDonald’s agreed to dismiss the suit 

filed in Delaware Court of Chancery in exchange for Easterbrook’s payment to McDonald’s of his 

cash severance, prorated bonus, certain proceeds realized from the sale of securities that resulted 

from his exercise of options and PRSUs, and certain attorney’s fees incurred by the company, as 

well as forfeiture of all outstanding equity and awards.  

VIOLATIONS  

29. As a result of the conduct described above, Easterbrook violated Section 10(b) of the 

Exchange Act and Exchange Act Rules 10b-5(a) and (c), which prohibit, in connection with the 

purchase and sale of securities, the use of any “device, scheme, or artifice to defraud” and any “act, 

practice or course of business which operates or would operate as a fraud or deceit upon any person.”  

30. As a result of the conduct described above, Easterbrook violated Securities Act 

Sections 17(a)(1) and (3), which prohibit, in the offer or sale of securities, the use of any “device, 

scheme or artifice to defraud” and “any transaction, practice or course of business which operates or 

would operate as a fraud or deceit upon the purchaser.”  

31. As a result of the conduct described above, Easterbrook violated Section 10(b) of the 

Exchange Act and Exchange Act Rule 10b-5(b), which prohibits any person from “making any 

untrue statement of a material fact” or “omit[ting] to state a material fact necessary in order to make 

the statements made, in the light of the circumstances under which they were made, not misleading,” 

in connection with the purchase or sale of a security.   

32. As a result of the conduct described above, Easterbrook violated Section 17(a)(2) of 

the Securities Act, which prohibits any person in the offer or sale of a security from “obtain[ing] 

money or property by means of any untrue statement of a material fact or any omission to state a 

material fact necessary in order to make the statements made, in light of the circumstances under 

which they were made, not misleading.”   

33. As a result of the conduct described above, Easterbrook caused violations of Section 

13(a) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-11, which prohibit an issuer 

from filing periodic or current reports that contain materially false or misleading information.   

34. As a result of its failure to provide certain disclosures with respect to executive 

compensation required by Item 402 of Regulation S-K, McDonald’s violated Section 14(a) of the 

Exchange Act and Exchange Act Rule 14a-3, which prohibit solicitation of a proxy without 

furnishing the information specified by Schedule 14A. Item 402(b) of Regulation S-K provides the 

Compensation Discussion and Analysis “shall explain all material elements of the registrant's 

compensation of the named executive officers.” (Emphasis added.) The instructions to Item 402(b) 

call for registrants to address “specific decisions that were made or steps that were taken that could 

affect a fair understanding of the named executive officer’s compensation.” Item 402(b)(2) provides 

specific examples of potentially material information to be disclosed in the Compensation 

Discussion and Analysis, including “factors considered in decisions to increase or decrease 



7  

  

compensation materially.” See Item 402(b)(2)(ix). A registrant is also required to disclose, “[w]ith 

respect to any contract, agreement, plan or arrangement, whether written or unwritten, that provides 

for payment(s) at, following, or in connection with any termination or change-in-control, the basis 

for selecting particular events as triggering payment (e.g., the rationale for providing a single trigger 

for payment in the event of a change-in-control).” See Item 402(b)(2)(xi). Finally, Item 402(j)(5) 

requires disclosure of any “material factors” regarding a “contract, agreement, plan or arrangement 

. . . that provides for payment(s) to a named executive officer at, following, or in connection with 

any termination.”   

35. McDonald’s violation of Section 14(a) of the Exchange Act and Exchange Act Rule 

14a-3 arose from its failure to disclose that it used discretion in treating Easterbrook’s termination 

as “without cause” under the relevant compensation plan documents after determining that he 

violated the Standards of Business Conduct and in entering into a Separation Agreement and 

General Release that provided for the continued vesting of options and PRSUs. Under the terms of 

the Separation Agreement and General Release, Easterbrook retained equity-based compensation 

valued at approximately $44 million that otherwise would have been forfeited, absent the 

company’s exercise of discretion.       

MCDONALD’S COOPERATION  

36. In determining to accept McDonald’s Offer, the Commission considered the 

cooperation it provided during the Commission’s investigation, as well as remedial measures 

undertaken by McDonald’s.  

37. McDonald’s provided substantial cooperation to the Commission’s staff throughout 

its investigation, including by voluntarily providing relevant documents and testimonial 

information that was otherwise not required to be produced in response to the staff’s requests; 

providing briefings to the staff that highlighted critical facts and key documents; and promptly 

making the company’s officers, directors, and other senior managers available for interviews and 

testimony. This cooperation substantially advanced the quality and efficiency of the staff’s 

investigation and conserved Commission resources.  

38. McDonald’s also took affirmative remedial steps to recover value for its 

shareholders by suing Easterbrook in the Delaware Court of Chancery, seeking and ultimately 

recovering the compensation Easterbrook received pursuant to the Separation Agreement and 

General Release.  

IV.  

In view of the foregoing, the Commission deems it appropriate and for the protection of 

investors to impose the sanctions agreed to in Respondents’ Offers.  

Accordingly, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange 

Act, it is hereby ORDERED that:  

A. Easterbrook shall cease and desist from committing or causing any violations and 

any future violations of Section 17(a) of the Securities Act; Sections 10(b) and 13(a) of the 

Exchange Act; and Exchange Act Rules 10b-5, 12b-20, and 13a-11.  



8  

  

B. McDonald’s shall cease and desist from committing or causing any violations and 

any future violations of Section 14(a) of the Exchange Act and Exchange Act Rule 14a-3.   

C. Easterbrook be, and hereby is, prohibited, pursuant to Section 21C(f) of the 

Exchange Act, from acting as an officer or director of any issuer that has a class of securities 

registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to 

Section 15(d) of the Exchange Act for a period of five (5) years from the entry of this Order.  

D. Easterbrook shall pay disgorgement and prejudgment interest of $52,728,069. 

However, the full amount of disgorgement and prejudgment interest shall be deemed satisfied by 

the compensation Easterbrook repaid to McDonald’s in resolution of the company’s claims in 

McDonald’s Corporation v. Stephen J. Easterbrook, C.A. No. 2020-0658-JRS (Del. Ct. Ch.).  

E. Easterbrook shall, within 14 days of the entry of this Order, pay a civil money 

penalty in the amount of $400,000 to the Securities and Exchange Commission for transfer to the 

general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3).  If timely 

payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.   

Payment must be made in one of the following ways:    

1. Easterbrook may transmit payment electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request;   

  

2. Easterbrook may make direct payment from a bank account via Pay.gov through the 

SEC website at http://www.sec.gov/about/offices/ofm.htm; or   

  

3. Easterbrook may pay by certified check, bank cashier’s check, or United States postal 

money order, made payable to the Securities and Exchange Commission and 

handdelivered or mailed to:   

Enterprise Services Center  

Accounts Receivable Branch  

HQ Bldg., Room 181, AMZ-341  

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169  

  

Payments by check or money order must be accompanied by a cover letter identifying the 

relevant Respondent in these proceedings, and the file number of these proceedings; a copy of the 

cover letter and check or money order must be sent to Mark Cave, Associate Director, Division of 

Enforcement, Securities and Exchange Commission, 100 F St. N.E., Washington, DC 20549.    

F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes.  To preserve 

the deterrent effect of the civil penalty, Easterbrook agrees that in any Related Investor Action, he 

shall not argue that he is entitled to, nor shall he benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of any Respondent’s payment of a civil penalty 

in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a Penalty 



9  

  

Offset, Easterbrook agrees that he shall, within 30 days after entry of a final order granting the 

Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against any Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.  

G. McDonald’s acknowledges that the Commission is not imposing a civil penalty 

based upon its cooperation in a Commission investigation or related enforcement action. If at any 

time following the entry of the Order, the Division of Enforcement (“Division”) obtains 

information indicating that McDonald’s knowingly provided materially false or misleading 

information or materials to the Commission, or in a related proceeding, the Division may, at its 

sole discretion and with prior notice to the McDonald’s, petition the Commission to reopen this 

matter and seek an order directing that McDonald’s pay a civil penalty. McDonald’s may contest 

by way of defense in any resulting administrative proceeding whether it knowingly provided 

materially false or misleading information, but may not:  (1) contest the findings in the Order; or 

(2) assert any defense to liability or remedy, including, but not limited to, any statute of limitations 

defense. V.  

It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 

523 of the Bankruptcy Code, 11 U.S.C. § 523, Easterbrook stipulates that the findings in this Order 

are true, and further stipulates that any debt for disgorgement, prejudgment interest, civil penalty 

or other amounts due by Easterbrook under this Order or any other judgment, order, consent order, 

decree or settlement agreement entered in connection with this proceeding, is a debt for the 

violation by Easterbrook of the federal securities laws or any regulation or order issued under such 

laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. § 523(a)(19).  

  By the Commission.  

  

  

  

Vanessa A. Countryman 

Secretary