07 October 2016 by Henry Ker
The latest governance stories in the news
Prime Minister Theresa May issued a stark warning to business ‘tax-dodgers’ in her Conservative Party Conference speech this week.
She said: ‘However rich or powerful – you have a duty to pay your tax’ as ‘an economy that works for everyone is one where everyone plays by the same rules.’
May also alluded to recent scandals: ‘If you’re a boss who earns a fortune but doesn’t look after your staff; an international company that treats tax laws as an optional extra; a director who takes out massive dividends while knowing that the company pension is about to go bust; I’m putting you on warning. This can’t go on anymore.’
She criticised the seeming cosiness of non-executives with the very business leaders they must challenge, stating: ‘Too often the people who are supposed to hold big business accountable are drawn from the same, narrow social and professional circles as the executive team … the scrutiny they provide is not good enough.’
She reiterated her earlier intention to ‘publish our plans to have not just consumers represented on company boards, but workers as well.’
TalkTalk has been fined a record £400,000 over the cyber attack it suffered last year. The fine from the Information Commissioner’s Office (ICO) is short of the maximum £500,000 it can issue, but is still a landmark figure.
The ICO stated that the attack ‘could have been prevented if TalkTalk had taken basic steps to protect customers’ information’.
Talk Talk launched a full investigation, which established that the total number of customers whose personal details were accessed was 156,959, although it said ‘There is no evidence to suggest any customers have been impacted financially as a direct result of the attack’.
This fine demonstrates the ICO’s increasing hard-line approach to data breaches – the previous highest fine issued by the ICO was £350,000, against Prodial.
Talk Talk’s fine is particularly high compared to other recent penalties, such as Money Shop Ltd’s fine of £180,000 for the loss of an undisclosed number of customer details (including financial information) and Staysure.co.uk’s fine of £175,000 for the loss of up to 100,000 live credit card details and medical records – in which 5,000 customers had their cards used by fraudsters as a result.
Talk Talk commented ‘TalkTalk has cooperated fully with the ICO at all times and, whilst this is clearly a disappointing decision, we continue to be respectful of the important role the ICO plays in upholding the privacy of consumers … [the] attack was notable for our decision to be open and honest with our customers from the outset. This gave them the best chance of protecting themselves and we remain firm that this was the right approach for them and for our business.’
The new EU GDPR, due to come into force in 2018, will grant the ICO much stronger powers to impose fines — up to 4% of a company’s global turnover.
Legal & General Investment Management (LGIM) has called for changes to the ways executive pay is set. In its recent publication, ‘Mind the gap!’, it proposed several changes to the way companies come up with remuneration figures and called for better connection to the pay of employees.
LGIM wants companies to stop the annual use of benchmarks; publish the pay ratio between the CEO and the median employee; reduce their focus on the annual bonus; reduce, over time, the disparity between executive and employee pension contributions; identify employee representatives to meet with the remuneration committee annually; and apply a 50% discount if adopting restricted shares.
It stopped short of endorsing Theresa May’s recommendation of putting employee representatives on boards. It also called on investors to vote against directors when concerns persist and stop abstaining on pay resolutions.
LGIM was particularly critical of the practice of using benchmarking to set executive pay, saying ‘These peer group pay benchmarking exercises are a crude assessment of the pay practices in comparable companies. In many cases, the companies are selected arbitrarily by size or hand-picked to produce a higher median.’