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News digest 29/07/16: TalkTalk boss calls for all data breaches to be reported

29 July 2016 by Henry Ker

TalkTalk calls for all data breaches to be reported - read more

The latest governance stories in the news

TalkTalk boss calls for all data breaches to be reported

All firms should be made to report data breaches according to TalkTalk Chief Executive Dido Harding. Her comments follow last year’s cyber attack on the company in which customers’ data had been stolen.

Currently companies do not have to immediately report details of cyber attacks, leading to concerns that many customers are unknowingly at risk, although the rules are expected to change under the incoming EU GDPR. Under this new regulation, data breaches have to be notified to the supervisory authorities within 72 hours and to those affected ‘without undue delay’, unless there is no risk for the data subject.

TalkTalk’s data breach led to criticism of Harding, who initially warned all 4 million of their customers that they may be affected. This led to panic among investors and customers, sending TalkTalk’s share price down by almost a third. In the end only 156,000 customers were affected and none of the stolen data allowed access bank accounts.

Read more on the potential implications of the GDPR in our feature ‘GDPR: The next steps’.


New report recommends how to curb excessive pay

A new report on executive pay, produced by a committee led by the Investment Association, sets out 10 recommendations to help restore public confidence in executive pay. The recommendations call for more flexibility in the structure of executive bonuses – finding a system that works for them and their shareholders, rather than just using the favoured ‘one-size-fits-all’ Long-Term Incentive Plan (LTIP) pay structure.

Although the report stops short of endorsing the annual binding shareholder vote on remuneration proposed by the new Prime Minister, Theresa May, it does suggests an option could be to have binding votes on companies that have failed to receive support from 75% of shareholders on their previous year’s remuneration report.

The report said: ‘Growing complexity has contributed to poor alignment between executives, shareholders and the company, sometimes leading to levels of remuneration which are difficult to justify’.

Committee Chair Nigel Wilson, Chief Executive of Legal & General, added: ‘I believe the 10 recommendations outlined in today’s report on Executive remuneration will help to simplify, provide greater transparency, and deliver better shareholder, company and executive alignment on pay.
‘We need to restore public confidence in executive pay. Our report shows shareholders, Boards and executives agree the current approach is not working, and want constructive collaboration to get it right.’

Read ICSA: The Governance Institute CEO, Simon Osborne’s recent column on executive remuneration, ‘An explosion in pay packets’, and IBE Associate Director, Peter Montagnon’s article ‘The cost of lavish rewards’, for more on the debate.


Small lenders and brokerages avoid bonus cap

The City and its financial institutions have had success in shielding small lenders and brokerages from bonus rules.

The rules, from EU banking reform adopted in 2013 in response to the 2008 financial crisis, ended waivers used by countries to exempt smaller financial firms from some pay rules − meaning bonus payments had to be deferred for several years and part paid in shares.

The rules would have affected some further 200 banks, as well as 1,000 brokerages and other finance companies. Companies felt they would mean high administrative costs and hinder their ability to attract the best talent. However, in a formal report, the European Commission has now endorsed the notion that exemptions for smaller firms should be preserved.


Revised UK Audit Firm Governance Code

The FRC has released a revised version of the UK Audit Firm Governance Code. It has been updated align the code better with the UK Corporate Governance Code, as well as advice designed to enhance transparency and improve engagement between firms, investors and independent non-executives.

Stephen Haddrill, FRC CEO, said: ‘We have clarified the purpose of the Code in the promotion of audit quality; helping secure the reputation of firms more broadly, including their non-audit businesses; and reducing the risk of firm failure. New provisions also promote greater transparency of reporting to all stakeholders including on the firms’ viability. We look for strong governance in all the firms that are covered by the Code in support of their public interest responsibilities for delivering quality audits.’

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