Consumers, but Not Executives, May Pay for Equifax Failings
Over the last three years, when Equifax determined its top executives’ incentive compensation, it has used a performance measure
that excluded the costs of legal settlements made by the company.
If it follows this practice after dealing with the costs of settling legal claims arising from the security
breach, Equifax’s top managers will essentially escape financial accountability for the blunder.
In regulatory filings, Equifax said its exclusion of legal charges from certain financial results “provides meaningful supplemental information regarding our financial results”
and is consistent with the way management reviews and assesses the company’s historical performance.
Roughly one-fifth of the companies in the Standard & Poor’s 500-stock index excluded legal settlements
and fees in their non-GAAP earnings measures in 2016, according to Jack Ciesielski, publisher of The Analyst’s Accounting Observer and a close follower of companies’ financial reporting.
These folks take home all of the upside and want none of the down.”
I asked Equifax whether its board would stop excluding legal settlement costs from executive compensation calculations so
that management would be required to absorb some of the pain.