In what is becoming and increasingly familiar site in the Senate Banking Committee, a now former CEO faced an intense grilling by Senators on both sides of the aisle concerning a major corporate scandal. This week's testimony was from former Equifax CEO Richard Smith who faced scathing criticisms over the company's data breach as well as certain stock trades made by executives and his own compensation levels. The testimony comes as reports surfaced stating that Equifax's board is considering how best to exercise a clawback of some of the pay of top executives over the data breach. As we indicated last week, the Wall Street Journal has reported that the board is considering not paying affected executives this year as well as cancelling equity awards which has yet to vest. The board will also consider whether any other compensation should be subject to the clawback. Equifax's board is no doubt reviewing the lessons of last year's Wells Fargo Scandal where the company's board awkwardly and slowly addressed the clawback provision leading to significant criticism.
The clawback was top of mind at these week's Senate Banking Committee hearing on the Equifax data breach where former CEO Richard Smith was peppered with questions about certain trades made by key executives days before news of the scandal broke. While almost all the exchanges were notable for one reason or another, the exchange between Mr. Smith and Senator Tim Scott (R-SC), a Republican, was perhaps most notable. Like others, Senator Scott inquired as to the knowledge of the data breach by certain senior executives who made "well-timed" trades which netted them a significant gain over the general market. Mr. Smith responded that the trades were given the okay and processed through the proper channels and that no one had made trades based on any non-public information. Senator Scott responded that he sincerely doubted the claim, but noted that the Equifax executives which did make the trades must have just been "super lucky." Another notable exchange came between Mr. Smith and Senator Schatz (D-HI) who inquired about Mr. Smith's huge retirement sum and equity takeaway he received upon his retirement. Mr. Smith defended his pay, noting he had spent years at the company and had worked hard. When pressed on his pay, and its fairness, Mr. Smith responded "I don't set my own compensation, the board does, and they are elected every year."