KENNESAW, Ga. | Sep 26, 2017

Senate Banking Committee members had a lot of questions for Jay Clayton, the Securities and Exchange Commission chairman, on Tuesday, but several senators switched gears to ask about compensation clawbacks after news broke that Equifax CEO Richard Smith was retiring.

Equifax EFX, +1.55% disclosed on Sept.7 that criminals had exploited a flaw in its website to gain access to confidential data about 143 million consumers. An Equifax spokesperson told MarketWatch that Smith, whose retirement is effective immediately, won’t receive a “package” to retire and will not receive a 2017 bonus based on the company’s performance. Smith received bonuses of about $3 million a year in 2016 and 2015 .

Smith will also will not receive severance pay, which could have been as much as $5 million. However, Smith will still receive some $18.3 million in pension benefits he is entitled to under any circumstance, according to the spokesperson.

Read: After breach, Equifax CEO leaves with $18 million pension, and possibly more

Sen. Elizabeth Warren, the Democrat from Massachusetts, was more focused during the hearing on Clayton’s call for more IPOs, but after the hearing she issued a statement about Equifax and Smith. “I’ve called for Equifax executives to be held accountable for their role in failing to stop this data breach and hiding it from the public for forty days,” said Warren. “It’s not real accountability if the CEO resigns without giving back a nickel in pay and without publicly answering questions.”

Smith, who the board said would retire as of Tuesday, was expected to appear before the House Energy Committee and Senate Banking Committee next week.

See also: Equifax faces its biggest litigation threat from state attorneys general

Sen. Sherrod Brown, D-Ohio, and the ranking member on the banking committee, asked why, given the situation at Equifax, the SEC still had not finalized the 2010 Dodd-Frank law’s clawback policy.

Clayton said that the Dodd-Frank clawback rule was “on his list” and that he intended to “finish the mandate,” but he welcomed the senators’ input on the agency’s remaining Dodd-Frank rulemaking priorities. The SEC’s regulatory agenda announced July 20 made no mentionof another Dodd-Frank rule never finalized, Section 956, which prohibits incentive-based compensation that encourages inappropriate risks.

However, despite the senators’ outrage and call for SEC action on clawbacks, neither one of the post-crisis policies — the Dodd-Frank clawback rule or the 2002 Sarbanes-Oxley clawback rule — is applicable to the Equifax situation.

Read: SEC’s clawback proposal leaves a big loophole

That’s because the broader Dodd-Frank policy, not yet finalized by the SEC, and the Sarbanes-Oxley clawback law that focuses only on CEOs and CFOs, both require a material restatement of prior financial results to trigger enforcement. So do most company policies, such as the one at Equifax or the one at Wells Fargo WFC, +0.99%. Equifax’s policy is even more forgiving than Wells Fargo’s, exempting executives from clawbacks unless the misstatement of financial results is the result of fraud.

That's similar to the Sarbanes-Oxley policy that requires misconduct by someone. The Equifax policy, however, does leave open the possibility that if an executive engages “in certain other activities detrimental to the Company” he or she may be subject to financial consequences such cancellation of equity grants.

But just like the Sarbanes-Oxley clawback policy, where the SEC has a lot of latitude in enforcement if companies fail to do so, Equifax’s clawback policy leaves a lot of the interpretation of these terms up to the board.

“More and more companies are adopting fairly comprehensive clawback policies as contained in Dodd-Frank, but very few are actually invoking the policy to clawback compensation,” said Divesh Sharma, an accounting professor at Kennesaw State University’s Coles College of Business, whose research focuses on corporate clawback policies. “Companies are simply checking the compliance box.”

See also: Rarely enforced SEC rules may give green light to earnings manipulation

“The terms ‘materiality’ and ‘misconduct’ are quite subjective,” said Sharma “In allowing these executives to retire, the board is signaling, at this point, they do not believe any of them committed any misconduct or failed as a manager,” he said.

In the case of Wells Fargo’s CEO John Stumpf and senior executive Carrie Tolstedt, the reported eventual clawback numbers looked big but were still only a fraction of their overall compensation. In addition, the majority of the clawed-back amounts consisted of unvested stock-option awards, rather than cash already paid out.

Wells Fargo clawed back approximately $28 million paid as incentive compensation in March 2016 under a 2013 equity grant, in addition to the $41 million in unvested equity awards that Stumpf agreed to forfeit shortly before his October 2016 resignation, according to a blog post by Kevin LaCroix, author of the blog D&O Diary. The $28 million already paid will be deducted from his retirement plan payouts, according to the bank’s statements at the time.

Based on the findings of its board investigation, the bank was also able to support a change in view of Tolstedt’s retirement with honors, determining that “cause existed” for Tolstedt’s September 2016 termination. That permitted the board to request forfeiture of $47.3 million outstanding stock-option awards, in addition to $19 million of unvested equity awards the board caused to be forfeited at the time of her termination. The total value of Tolstedt’s compensation forfeitures was approximately $66.3 million, and as with Stumpf, the majority was compensation that had not yet been turned into cash.

See also: Wells Fargo CEO’s $41 million ranks only third among executive-pay clawbacks, forfeitures

Wells Fargo did more than most companies because it is a bank subject to under stricter regulatory requirements after the financial crisis. In Wells Fargo’s case, that stricter policy also allowed it justify a clawback based on reputational damage to the bank and poor risk management. LaCroix also cited an article in 2016 by Columbia Law Professor John Coffee on the CLS Blue Sky Blog, in which he commented, “Wells Fargo’s far broader clawback policy was the result of pressure from New York City’s pension funds in 2013, which had threatened to file a shareholder proxy resolution unless Wells Fargo adopted a policy broadly authorizing clawbacks beyond the context of restatements.”

-MarketWatch