The securities breach at Equifax revealed personal data such as social security and drivers license numbers, credit scores and other personal information such as home addresses and phones, and involving about 143 million Americans. Over the last years, executives at Equifax have been paid using a performance measure that excluded the costs of legal settlements. If this non-orthodox methodology continues through post-breach settlements, managers responsible for the current, massive breach will not share any of the pain they have cost the public and their own shareholders.
There will be enormous amounts paid out in settlements of class actions and an official at the Center for Corporate Government affirms that these will impact earnings and stock prices. In 2016 Equifax recorded a 6.5M charge for a settle with the Consumer Financial Protection Bureau. The case involved deceptive marketing of credit scores and 3.5M was paid in restitution to costumer and the agency received a 2.5M fine along with $300,000 in legal fees.
This fine will pale in comparison to what Equifax is expected to shell out following this massive breach. So, the issue is whether their executives should return past pay as well as take cuts going forward. Why not, when the company stated in last year’s proxy filings that their executives were paid based in part on keeping customer data secure? All three of the top executives received anywhere from $3.1M in pay up to $15M and all were given “distinguished” ratings for measures including data security.
As California’s largest employee-only law firm, we want fairness for all employees, regardless of how high in the management chain (a few of whom we represent) they are. Perhaps the best solution is to allow exclusion of settlement costs for only those events which are outside of managements’ control. Natural disasters such as we’ve seen in Houston and all of Florida come to mind.
Call us for a free consultation regarding executive severance or other employment issues. Our attorneys are among the nation’s leading qui tam authorities and have recovered hundreds of millions of dollars on behalf of the taxpayers of the United States.
Executive Compensation and the Mess Known as Equifax