Equifax Inc. investors are pushing its board to adopt a stronger clawback policy and stop using adjusted financial results to calculate executive bonuses, months after a data breach exposed personal information on almost half of the U.S. population.
New York City Comptroller Scott Stringer, who oversees $187 billion in pension fund assets, asked that Equifax amend its clawback policy to cover misconduct that causes significant financial and reputational harm, according to a proposal obtained by Bloomberg on Tuesday.
The AFL-CIO and advocacy group As You Sow also asked the board to stop using adjusted financials, which exclude one-time expenses such as legal settlements, when setting executive bonuses, representatives for the groups said. Investors will weigh in on both proposals at Equifax's 2018 shareholder meeting, which has yet to be scheduled.
Ines Gutzmer, a spokeswoman for Atlanta-based Equifax, declined to comment.
Shares of Equifax tumbled as much as 37% in a week after announcing on Sept. 7 that a hack of the credit-reporting firm exposed the personal data of 145.5 million consumers in the U.S. Lawmakers later asked whether the board had plans to recoup payments to senior executives. The company also faces lawsuits and investigations into stock sales made by three senior executives days after it discovered the breach. The sellers had no knowledge of the attack at the time of the trades, the board said this month.
Equifax's existing clawback policy authorizes directors to recoup incentive compensation from senior managers in case of a financial restatement caused by employee misconduct. Certain equity awards also can be canceled or clawed back if the recipient engaged in activities deemed harmful to Equifax.
Mr. Stringer's proposal would extend the board's ability to recoup money also in cases where employee misconduct causes significant financial or reputational harm, resembling the policy in place at Wells Fargo & Co., where 10 bank executives were stripped of more than $172 million in awards after a scandal involving the creation of fake customer accounts.
"Significant damage can be caused by misconduct that does not necessitate a financial restatement," according to Mr. Stringer's proposal, dated Nov. 8.
Former Equifax CEO Richard Smith left in September with $18.4 million in retirement benefits and may get millions more, including lifetime health coverage, depending on how the board classifies his departure. He took home more than $165 million during his 12 years at the company, data compiled by Bloomberg show.
In past years, Equifax's top bosses received annual incentives partly tied to adjusted earnings per share, which excludes costs such as legal settlements, fines and restitution. The proposal from As You Sow and the AFL-CIO, the biggest U.S. federation of unions with more than 12 million workers, seeks to ensure that the financials used to calculate executive bonuses include such expenses.
Equifax's adjusted third-quarter earnings excluded $87.5 million of expenses related to the breach, including an internal investigation, the company's response to lawsuits and its offering of free credit monitoring to U.S. customers. About 10% of Mr. Smith's target compensation was linked to adjusted earnings, according to a regulatory filing.