The hack at US credit-scoring group Equifax could prove even more expensive than the cyber attack on Yahoo, says Alice Gråhns.
“For all their diligent shredding, American consumers may as well walk around with their financial information tattooed on their foreheads,” says Lex in the FT. Last week, credit-scoring company Equifax disclosed that 143 million people’s details, including their social security numbers, had been illegally accessed between mid-May and July 2017. The firm’s shares slid by almost 20% on the news.
The hack is one of the biggest breaches on record, noted Simon Duke in The Times. It could ultimately prove more financially damaging than the attack on a billion Yahoo user accounts last year. Equifax, which holds data on 44 million Britons and works for companies including BT and British Gas, has suffered the loss of more sensitive personal details than in Yahoo’s case, so the scope for fraud and theft is now greater. In addition to “potentially crippling litigation” the firm is fighting to save its reputation.
This episode is especially embarrassing because it is “a direct hit” to what, over time, has become Equifax’s core business, says Richard Beales on Breakingviews. “When Americans are hacked, they turn to three big consumer-credit agencies for help with identity theft.” Who can they turn to now? The firm’s dozy response to the episode hasn’t exactly helped matters either. Why did consumers have to wait six weeks for Equifax to go public? In this case, there is also the “unseemly spectacle of insiders, including the finance chief, selling stock days after the hack was discovered”.
The company says the individuals had no idea of the breach at the time. Now that Equifax has failed at its one job, many would question whether it should be allowed to keep doing it, says Farhad Manjoo in The New York Times. But it seems unlikely that any regulatory body would shut down the firm over this breach. As one of the nation’s three major credit-reporting agencies, Equifax is probably deemed “too central to the American financial system”. The company’s demise would reduce competition in the industry and make each of the two survivors a bigger target.
Nonetheless, says Beales, the industry needs to get its act together. “Laggard” boards must keep a closer eye on cybersecurity, while it might also be time to overhaul the rules for companies who hold confidential information. After Enron, accounting standards were beefed up radically. The mess at Equifax “provides a similar opportunity for important change”.
AkzoNobel: unfortunate and careless
“AkzoNobel seems less and less likely to retain its independence,” says Stephen Wilmot in The Wall Street Journal. Last week, before a general meeting to confirm the appointment of new CEO Thierry Vanlancker, the European paint group said its finance chief, Maelys Castella, was taking a leave of absence for health reasons and issued a profit warning. Former boss Ton Büchner, who defended the company against three takeover approaches from US peer PPG Industries and noisy activism from top shareholder Elliott Management, stood down for health reasons less
than two months ago. “To paraphrase Oscar Wilde, to lose one top executive may be regarded as a misfortune; to lose both looks like carelessness.”
Vanlancker claims that currency headwinds and other one-off problems will prevent Akzo achieving its promised 7% increase in operating profit in 2017. Yet he confirmed the ambitious 2020 profitability goals issued by Büchner in April, when Akzo was under siege from PPG Industries. “The unrealistic 2020 goals deserve to be binned quickly,” says Olaf Storbeck on Breakingviews. Unfortunately, this would dent Akzo’s share price further, emboldening Elliott to continue agitating. There’s an “unpleasant smell” at Akzo, and we’re not talking paint fumes.
City talk
• Let’s hope Simon Fox, CEO of Trinity Mirror, knows what he’s doing with his plans to buy the Express, the Star and OK! magazine from Richard Desmond for around £125m, says Alistair Osborne in The Times. The combined group would have a daily circulation of about 1.4 million – roughly the same as the Mail, and the extra scale “brings more clout for ad and print deals”. Yet Trinity Mirror would also be doubling down on print media at a time when the sector is struggling and advertisers are wandering off to Facebook or Google. Fox “must be careful not to fox things up”.
• The protests over Berkeley Group’s pay practices were small but expected, says Nils Pratley in The Guardian. Sixteen per cent of shareholders voted against a report on its top executives’ combined £92m windfall. Long ago, Berkeley convinced fund managers that chairman Tony Pidgley and CEO Rob Perrins deserve their yearly bonanza “because the company is in the process of paying £2.2bn in dividends over a decade”. True, the housebuilder “runs an impressively slick operation” – but the bosses’ rewards have been “supercharged by lottery-like features”. Now the door is open for execs “in other feast-or-famine sectors to try their luck and demand jackpot incentives at the right moment in the cycle”.
• The pace of smartphone improvements has slowed considerably since Apple came up with the iPhone in 2007, but “the march hasn’t stopped”, as Robert Cyran points out on Breakingviews. The incremental improvements on the new iPhone X include more processing speed and face recognition. These features are hardly new, but the group has always excelled at bringing all the elements together seamlessly. Only a firm with Apple’s scale and wide range of skills can produce a phone likely to “fly off the shelves” even if it costs around $1,000.