There’s an old saying that’s not always true: You get what you pay for.
Unfortunately, Equifax’s board got exactly what it paid for when it lavished money on now-former CEO, Richard “Rick” Smith.
Smith was hired to grow Equifax big time. That’s exactly what he did while acquiring a massive trove of sensitive data on nearly a billion people.
What he and the board didn’t do was slow down enough to sufficiently protect the company’s precious assets, which also happen to be our precious assets.
Smith suddenly “retired” Tuesday after ugly missteps following the disclosure of an ugly and massive data breach.
Let’s hope that his departure is not a harbinger of worse disclosures still to come.
Growth is a fundamental measure of whether a publicly traded company is moving in an investor-pleasing direction and at what velocity. It adds pepper to shareholders’ financial libidos.
So it’s not surprising that in Smith’s pre-breach comments and corporate filings he stressed goals that sounded like “Grow, baby, grow!” And, “Profit, baby, profit!”
I saw less reliance on words such as “secure” and “protect,” which are verbs that, at least pre-breach, might bore many investors.
That might be OK for a company that makes socks, but not for one whose business core relies largely on massaging oceans of consumer secrets to reduce risk for clients.
Equifax’s recent data breach stood out not only for its size (data on 143 million people) and the sensitivity of the information exposed (Social Security numbers), but also because it apparently was so preventable. It involved a vulnerability for which a patch was widely available.
Smith and Equifax had more than a month to prepare before publicly disclosing the breach. Stunningly, they bungled that, too, looking unprepared, less than transparent and even like they were prepping to eventually profit from the risk they exposed consumers to. (As Smith correctly pointed out in a pre-disclosure speech, “Fraud is a huge opportunity for us.”)
The problems kept coming. Like in recent days, when company tweets accidentally sent some consumers to a fake online site.
Smith was supposed to be able to lead an operation way better than that.
He spent 22 years getting to the top rungs at GE. The legendary Jack Welch was one of his mentors. Smith once told The New York Times that years ago, after failing to recognize some brewing risks, Welch counseled him on “digging deeper and anticipating issues before they occur.”
Now, we’re left to wonder whether the news at Equifax can get any worse.
Maybe that’s what Equifax’s board is afraid of, too.
The company struck a new employment agreement with Smith as part of his sudden retirement. It defers “all decisions relating to the characterization of Mr. Smith’s departure and any obligations or benefits owed to Mr. Smith” until after the board completes “its independent review of the 2017 Equifax data breach and the response thereto.”
Actually, the parties did agree that Smith won’t get an “annual bonus opportunity” for 2017.
What a turnaround.
In a filing earlier this year, the company gushed about Smith’s Equifax tenure. “Under the leadership of our CEO, Rick Smith, Equifax has achieved outstanding growth and performance since September 2005, including total shareholder returns 103 percent greater than the S&P 500 Index shareholder return and market capitalization growth from $4.3 billion to $15.7 billion.”
Smith got $15 million in total compensation in 2016. That was just the cherry on top of nearly $130 million over his full tenure with Equifax, according to the Wall Street Journal. (So from what he’s earned, he’s got less than a dollar to give to each of the 143 million people whose Equifax records were exposed. Unless he was a good investor.)
Last year, Smith’s payout included a multi-million-dollar bump for reaching 210 percent of his corporate and individual objectives. So his bosses apparently thought he was a star.
Heck, just before Equifax’s data breach became public, another publication (the Atlanta Business Chronicle) labeled Smith as “Most Admired CEO,” one of more than 50 locals it poured that title on this year. In a Q-and-A tied to the award, Smith extolled the virtues of “transparency, candor, consistency, and humility.”
So far, Equifax hasn’t come across as a paragon of the first three.
The humility part remains an open question.