Equifax CEO's Parting Gift: An $18 Million Bonus

With Equifax shares having plunged by a third since the company announced a historic corporate cyber-breach, which released the personal records of over 143 million Americans to still unknown hackers, losing some $5 billion in market cap, today the company's CEO was the latest rat to leave the sinking ship, a move which failed to prompt a jump in the stock and was widely panned by the analyst community as indicative of further troubles ahead.

And while the surprising "retirement" of CEO Richard Smith was briadly perceived as controversial, public anger is only set to grow when the general public realizes that the disgraced former Chairman and Chief Executive may be due a parting bonus of no less than $7.6 million, and potentially far more, payable early next year, as part of the company's long-term incentive plan that was supposed to align executives with shareholders.

While Equifax previously said Smith would not receive any annual bonus specifically for 2017, Bloomberg's Steven Gandel calculates that he is in line to receive a 73,392-share bonus early next year as part of the long-term incentive plan the company put in place back in 2008.

That's on top of the $52 million he will walk away with in stock and other retirement benefits that he accrued as part of his nearly 12-year run as CEO. That doesn't even include the nearly $13 million he received in salary and cash bonuses for the past three years alone. He also may be entitled to lifetime health insurance and $60,000 worth of financial planning and tax advice.

What is even more surprising, is that Equifax's very limited clawback policy "which the company has called rigorous," applies only to financial restatements. That means Smith will have to return almost none of this tens of millions of dollars of pay, even if the company eventually finds that the hack has was his fault.

It gets better: Smith is in line to receive as much as another $11 million stock bonus at the end of next year, or a grand total over $18 million.

While the populist outrage will be acute, it will also likely be brief and last until the next, even more egregious, instance of unpunished, if very well compensated, corporate negligence. As Gandel summarizes the CEO's quiet departure, "Smith's exit pay, and particularly the looming bonus payments, follows an unfortunately well-worn pattern: Something egregious happens at a company. Someone has to take the inevitable hit, normally the CEO, who then walks into the sunset with millions of dollars."

It doesn't have to be that way...

Last year, Wells Fargo, under extreme pressure, eventually decided to claw back as much as $136 million from its former CEO John Stumpf and former executive Carrie Tolstedt, who ran the division at the center of that bank's fake accounts scandal. The bank was originally planning to pay both executives in full. But that is one of the handful of cases in which companies have instituted a clawback.

... but it most likely will be due to several key footnotes in Smith's departure, chief being that it is a "retirement" which means that all else equal, Smith's multimillion-dollar long-term stock bonus payments are safe. And while the company said that is could reclassify his exit as a "termination with cause"  - if the board finds that Smith was at fault - that rarely happens according to Gandel, who notes that with Smith already out, it seems unlikely the board would go back and revisit his exit. As we noted this morning, the two other executives who also left the company - both of whom were in charge of security (and one was a music major) were also allowed to retire.

Furthermore, and this goes to CEO incentives to keep issuing debt and buying back company stock boosting the share price in the process, oblivious if this means the company will be saddled with unrepayable debt and potentially resulting in insolvency, the Equifax long-term compensation plan is based entirely on the company's stock performance for the past three years compared with the S&P 500.

What's more, the plan included a calculation that was supposed to protect the executives against any sudden drops in the company's stock at the end of the three-year period. That is in part why Smith is still eligible for such a big payout, despite Equifax's recent stock plunge. Before the hack, the company's shares were up nearly 75 percent in the previous two and a half years.

Finally, there is Equifax's clawback plan, or rather lack thereof. Gandel writes that Equifax will only seek to claw back past pay from executives in instances in which the company is forced to make a material restatement of its past results. If, however, they do something that destroys the company's reputation, subjects it to investigations and likely impacts the company's prospects for years to come - like in this case - their past pay, the many millions of it, is in the clear.

In short, congratulations to Richard...

... who played the game of crony capitalism to perfection, and gets his parting present. 143 million other Americans may not be so lucky.


vato poco BuddyEffed Tue, 09/26/2017 - 16:10 Permalink

this bullshit; hollywood assholes giving us the finger every chance they get; billionaire football owners kneeling in 'solidarity' with a bunch of assholes they'd never let get anywhere near their daughters ....TPTB are just daring us to crank up Civil War 2.0. soon, assholes. soon. we'll be in touch

In reply to by BuddyEffed

Bunga Bunga j0nx Tue, 09/26/2017 - 21:12 Permalink

Freeze doesn't help much. With your Social Security number, crooks can file false income tax returns in your name, take bogus deductions, and steal the resulting refund. Data from the Equifax breach can be used to steal your benefits from private health insurance, Medicare, or Medicaid when the identity thief uses your coverage to pay for his own medical treatment and prescriptions. Using your driver’s license number, identity thieves can create bogus driver’s licenses and hang their moving violations on you.

In reply to by j0nx

Bam_Man Tue, 09/26/2017 - 15:55 Permalink

Another psychopath, who's clearly a member of "The Big Club"..."It's a Big Club, and you ain't in it. You and I are not in The Big Club."

HRH Feant2 Jugdish787 Tue, 09/26/2017 - 19:45 Permalink

Why would anyone with money go the Y? In my experience they are either in an old building (which always smells) or in the burbs and full of kids and old people. There have to be some decent athletic clubs in Atlanta, way better than the fucking local Y. Ewwwww. I have a decent suburban Y in my neighborhood and there is no way in hell I go there. Too many kids and too many old people. Yuck.

In reply to by Jugdish787

Silverlok HRH Feant2 Tue, 09/26/2017 - 21:37 Permalink

"...Why would anyone with money go the Y?..."Rich people go to the 'bad' part of their (or any) neighborhood for only 1 reason; to satiate their vice(s).Given that it's the 'Y' do you really not know why "pedo-bird neck freak eyes" might like to go there? I doubt it's ( primarily ) coke or weed at that venue,...perhaps it's just the cheap "exercise" he enjoys habitually.but perhaps I am wrong and his Y is the best one ever and has no strange connection to missing persons, sex traffic, and pedophilla, and he is just really  super responsible with his money and private information and super duper irresponsible with almost every working Americans.Of course, TRW the god-parent of all the modern "credit reporting" agencies, was obvioisly not started with see -aye- ehhh black funds so I guess we can all feel secure that it's 'children' are not spawns ( clones of multiple redundency ) of the same type and the people that work in high places for them are not of a 'high-minded' likeness to the original mission statement...right?

In reply to by HRH Feant2

Endgame Napoleon Sliced into ribbons Tue, 09/26/2017 - 16:40 Permalink

Interesting how they said a CEO is never blamed. Unless it is some outside-of-the-club scapegoat, no one takes responsibility for anything in this society, not even when they are paid $18 million in a departure bonus after a massive failure.

I have not worked for this company, but I have worked in amazingly unprofessional financial services offices, including credit processing, a haven for frequently absentee, back-watching momma cliques, most of whom take the latest kid-themed, dress-up day at work much more seriously than the work. A few people are excellent, not that it gets them enough pay to avoid being effectively homeless, especially in one case that I saw.

For the vast majority of positions, as in insurance back offices, they hire the mommas with spousal income or welfare / taxfare to supplement the low $10 per hour pay. That is what they pay most people for handling all of that sensitive information and, in a few cases, for advising their high-end clients on refinancing matters. Most of these people have no training beyond the job.

In reply to by Sliced into ribbons

tropicthunder Tue, 09/26/2017 - 16:03 Permalink

And people wonder why BITCOIN is becoming so highly valued. Owning BITCOIN is a BIG FUCK YOU to the establishment. The same establishment that lets muther fuckers like these live lavishly while sucker punching average joe in the gut over and over again...

Endgame Napoleon tropicthunder Tue, 09/26/2017 - 16:45 Permalink

Don't you have to spend Bitcoin only on the internet? If so, that is a major limitation. Some people have a place to receive deliveries. Some do not. Many people are at work all day. Others live with people who inquire on every purchase they make. I used to buy things online when I had my own shop, because every day, I was there during business hours. I would not do that now.

In reply to by tropicthunder

Robert Trip Tue, 09/26/2017 - 16:03 Permalink

Well done Steve.A very well executed "let's take the suckers for a ride."Kudos and 2 thumbs up Steve,Take care and share a few laughs at "The Club."Robert.