What is the worth of a personal conduct policy? As a business ethics motivational speaker and business ethics consultant and author of books on ethics, I emphasize several points when it comes to personal conduct policies.
The first, and perhaps most major point, is that an ethical policy either applies to everyone – or to no one. By everyone I mean from the CEO down to the hire of the newest intern. The second point is that there aren’t greater or lesser penalties for the same infraction and third, that the policy must be widely disseminated and communicated,
Steve Easterbrook
From 2015 to 2019, Steve Easterbrook was the CEO of McDonald’s following years of serving in various senior roles. If anyone knew the personal conduct policy and the penalties for violation, it was Easterbrook. However, in spite of what was written, Easterbrook entered a consensual relationship with an employee.
The organization had no choice but to terminate Easterbrook. However, the former CEO failed to fully appreciate that McDonald’s was a publicly-traded company. There are penalties for failures in disclosure. Again, if anyone in the company knew the penalties for violating the SEC rules on reporting, it was Easterbrook.
As he was “heading out the door,” he signed a separation agreement. He said to the SEC he was terminated without cause, which meant in legalize that the company more or less fired him on a whim. By saying that, he realized he could keep thousands of shares of stock. However, he blatantly lied. He was terminated because he violated the company’s strict policies on sexual harassment.
The consequences
The SEC investigated his termination agreement and in realizing his lies, he has had to pay a $400,000 penalty and he is now banned for 5-years from serving as an officer of a publicly-traded company.
It has also come out that Easterbrook did not violate the sexual harassment policy with just one consensual subordinate, but with more. Lying to the SEC, especially on the part of the CEO is a serious matter and often affects stock price.
On Monday, January 9, 2023, McDonald’s issued an apology stating:
“The SEC’s order [to pay penalties] 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.”
In recent years, the SEC has encouraged publicly-traded to “claw back” lucrative termination agreements when there have been violations of the public trust. When Easterbrook left the company, his compensation upon leaving the company was worth millions of dollars. He has been sued to recover much of his compensation.
Had he not been caught in a set of lies, his reputation would have remained intact, and he would have been able to approach other publicly-traded organizations about positions.
The parting gifts
The parting gifts given to Steve Easterbrook for violating his own ethics policies, speak volumes about corporate hypocrisy. He felt himself to be above everyone else and perhaps, for that reason alone, he fell the farthest. Whether Easterbrook will regain his status, is unknown at this time. However, his gift to himself (courtesy of the SEC), is that he will always be known as a serial sexual abuser who intentionally disregarded everyone in his organization. The cloak of deception is a hard costume to wear in any boardroom.
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