Equifax CEO Richard Smith stepped down amid a hacking scandal that exposed the personal information of more than 143 million Americans. He will not receive his 2017 bonus or a severance payment, the company said, but he is set to receive a pension recently valued at $18.4 million. (Joey Ivansco/Atlanta Journal-Constitution via AP)

Critics of Equifax may be hoping that Richard Smith, who stepped down Tuesday amid a massive data breach, won't see any more of the money he's been granted as CEO of the credit reporting agency. As Ohio Sen. Sherrod Brown (D) said in a statement, "there’s no easy out for the working families that Equifax exposed to cyber criminals, so there shouldn’t be a big payday for the company’s CEO."

But while the company said Tuesday Smith would not receive his 2017 bonus and a spokeswoman said he would not receive a severance payment, he will still receive a pension worth millions. According to the company's most recent proxy statement, that benefit was valued at $18.4 million, though could be reduced somewhat because Smith, who is 57, is stepping down before age 60. 

Still, anything near that high will be eye-popping to many Americans -- and could infuriate those who question why the chief executive of a company that faces multiple federal investigations over its handling of a hack that affected as many as 143 million people could walk away with a cushy retirement.

Executive compensation experts say it would be very unusual for a CEO to lose out on the pension he's earned, even if bonuses or stock grants are cancelled or were to end up being "clawed back," or recouped after being disbursed. 

"I can’t think of a case where it has been taken away," said John Roe, head of ISS Analytics, part of the influential proxy advisory firm Institutional Shareholder Services. "You can’t say never, but I would say it's very uncommon to see a situation where a pension was clawed back. It would have to be an extremely unusual situation."

Roe says that's because CEO pensions, like retirement accounts for rank-and-file employees, are thought of as a benefit to reward years of service, rather than individual performance, as bonuses and stock grants are often designed. But the similarities end there: Many CEOs receive special "supplemental executive retirement plans" that offer benefits well in excess of what the average employee receives. The company typically either makes a contribution to the plan that's invested or provides a defined benefit that's set up as an annuity or a lump-sum payment.

Such supplemental plans have drawn controversy, with investors asking why executives need to see retirement payments worth a million dollars or more each year when they're already bringing home millions each year in their regular compensation.

"The irony is that the people who probably have the most secure retirement are the people who need it least," said Rosanna Landis Weaver, an executive compensation expert for the nonprofit As You Sow.

After reports surfaced in 2013 about McKesson CEO John Hammergren's record-setting $159 million pension, the CEO agreed to have it cut by $45 million after a campaign by activist investors.

When John Stumpf, the former CEO of Wells Fargo, surrendered $69 million in the aftermath of the bank's fraudulent accounts scandal, it came from the forfeiture of $41 million in unvested equity awards and the "clawback" of $28 million in proceeds from a 2013 equity grant. Stumpf's pension, valued at $19.9 million, was not cancelled or clawed back, though retirement plan payouts may have been used to recoup the value of the grant.

In Smith's case, he had worked at Equifax for 12 years, and had participated in both the company's regular pension plan and the SERP for executives, both of which are now closed to new participants, according to the proxy. Nearly all of the $18.4 million value comes from the supplemental plan, which has a more generous formula and is not subject to the same limits. He also started out ahead: According to the proxy, Equifax credited him five years of service when he joined the company in 2005 to compensate him for retirement benefits given up when he left General Electric.

Compensation consultant Brian Foley says that Equifax's supplemental plan does not have what he calls a "bad boy" clause that would prompt forfeiture or modification in the case of bad behavior, though he says he has seen it before.

Indeed, an Equifax spokeswoman said in an email that under the terms of the company's plan, Smith is "entitled to that pension under any circumstance" and company filings show that even if Smith were to be fired "for cause," he would still receive the pension and supplemental retirement plan. (Equifax said Tuesday that Smith was retiring, but that "all decisions relating to the characterization of Mr. Smith’s departure" would come after the review into the hack is completed.)

Company documents do say that Equifax can clawback "excess incentive compensation (including bonuses, annual incentive awards and performance-based equity awards predicated on achievement of financial results)" if there is a "material restatement" of financial results. But the provision does not mention the retirement plan.

It's possible that Smith could end up with even more. If the characterization of his departure does not change from "retirement," Smith would continue vesting in certain outstanding stock awards, which were worth $20.8 million as of Tuesday's closing stock price, according to an estimate from Equilar, the executive pay and governance research firm. If he's ultimately fired for cause, those would be forfeited. A company spokeswoman said the disposition of certain long-term equity awards was dependent on the outcome of an independent review about the breach.

Still, some compensation consultants said it's at least possible the public outcry could get so loud that the board might feel pressured to reconsider or negotiate with Smith. On top of the pension, Foley calculates that Smith has realized more than $95 million in salary, bonus and equity compensation over the past three years.

Once the review is over, and the board decides how it will characterize Smith's departure, "if it turns out to be for cause it may create practical pressure to revisit the pension," Foley said. "They’ve already said we’ve got poured concrete all the way around this pension. But this has the potential to get so ugly they may have to un-pour the concrete." 

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