The Securities and Exchange Commission (SEC) found McDonald’s violated federal securities law when it failed to fully disclose material factors regarding the firing of former Chief Executive Stephen Easterbrook in 2019.

The SEC said the company “failed to disclose that it used discretion in treating Easterbrook’s termination as ‘without cause’ under the relevant compensation plan documents,” and that by doing so, awarded Easterbrook $44 million in compensation that otherwise would have been forfeited. The order also highlighted shortcomings in the company’s public statements regarding Easterbrook’s termination.

The SEC charged Easterbrook with misleading investors by failing to disclose to the company’s internal investigation he had sexual relationships with more than one female employee during his four-year tenure at McDonald’s, information that would have led to the company firing him with cause.

Without admitting or denying any wrongdoing, Easterbrook agreed to pay a fine of $400,000 to settle charges laid by SEC that he made false and misleading statements to investors about the circumstances that led to his termination in 2019. He also agreed to a cease-and-desist order that imposes a five-year officer and director bar.

“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,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said Monday in a press release. “By allegedly concealing the extent of his misconduct during the company’s internal investigation, Easterbrook broke that trust with—and ultimately misled—shareholders.”

In its order, the SEC said McDonald’s failed to disclose all material elements of its severance package with Easterbrook but declined to issue a fine due to the company’s cooperation with the agency’s investigation. That cooperation included “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,” the order said.

In addition, McDonald’s took “affirmative remedial steps” to claw back compensation paid to Easterbrook.

“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,” said Mark Cave, associate director of the Division of Enforcement.

Easterbrook was fired by McDonald’s in November 2019 for having a consensual, nonphysical relationship with a female McDonald’s employee that was judged by the company’s board of directors to have violated the company’s code of conduct. An internal investigation concluded the weeks-long relationship was conducted entirely via video and texts. At the time, it was the only such allegation levied against Easterbrook. As a result, the board decided to fire Easterbrook, who had been the company’s leader for four years, “without cause” for violating its rules.

The company later discovered, aided in part by a corporate whistleblower, Easterbrook had engaged in improper sexual relationships with three McDonalds employees. McDonalds subsequently filed a lawsuit, claiming it would have considered Easterbrook’s firing to be “with cause” and would not have offered him a severance package had it known about the other improper relationships with McDonald’s employees. In December 2021, the company and Easterbrook settled the lawsuit, with Easterbrook agreeing to repay $105 million in equity and cash he received from the company when he was fired.

Two SEC commissioners, Hester Peirce and Mark Uyeda, said Monday in a dissenting statement the SEC’s action creates a “slippery slope” regarding disclosure requirements for executive compensation into “unintended areas.” Whether McDonald’s fired Easterbrook with or without cause is beyond the scope of the disclosure required by Item 402(b) of Regulation S-K, they said.

“Industry practice for complying with Item 402 has developed over many years, so to spring a novel interpretation through an enforcement action is not a reasonable regulatory approach,” they said. The commission ought to address the issue through rulemaking or formal guidance, they added.

In a statement released Monday, McDonald’s said the SEC “recognized both the company’s substantial cooperation and action taken by the company to recover value for its shareholders and imposed no monetary penalty on McDonald’s.”

“The company continues to ensure our values are part of everything we do, and we are proud of our strong ‘speak-up’ culture that encourages employees to report conduct by any employee, including the CEO, that falls short of our expectations,” the statement said.