It’s Not Our Fault

There is a trend occurring that I find troubling to say the least. It is the inability of people in power – essentially those in control of a given situation – to take ownership of a failure. Gone are the days of Harry Truman who popularized the concept of accepting personal responsibility rather than assessing blame with his famous desktop sign stating, The Buck Stops Here. We accept the fact that in politics the notion of assigning fault to a predecessor is commonplace, although not necessarily right. It is what it is. To that end, I feel this is but one reason the majority of citizens have a significant disdain for politicians.

Recently I’ve noticed an increasing number of people in business who appear to subscribe to this political theory.  Forget about asking forgiveness of their customers and outlining remedial actions to remedy the problem. In my book, corporate officers who make the choice to deflect blame rather than accepting responsibility should be replaced as this easily could be a sign of more significant problems simmering beneath the surface.

The first resident of my Wall Of Shame is Reggie Fils-Aimé, president of Nintendo of America. In an interview discussing delays on the Switch, said, “We don’t want to have a consumer disappointed by not being able to get one for the holiday season. But managing that complex supply chain is a challenge.” and “… what I don’t know is what the demand is going to be. And there is a potential that demand is going to outstrip supply.”

Regarding the SNES Classic, he blamed problems “outside our control” at retailers. Looks like they could use a new forecasting methodology, less complex supply chain and greater control over the retail channel? Perhaps even communicate with buyers.  Maybe the answer is much simpler – as in reshuffling maybe the C-Suite?
The second entrant is Rick Smith of Equifax which fessed up to a massive data breach on September 7th. The hack was discovered July 29th (and began in May) and about August 2nd and 3rd, three executives (reportedly in a planned 10b5-1 sale) sold about a combined $1.8m. While the optics don’t look good on this event, it only gets better.

They then blamed a flaw in the open-source software created by the Apache Foundation (STRUTS) without disclosing whether the patches released by Apache since March were properly applied. In a response September 14th, Apache said they weren’t. Also September 14th, CNBC reports that ‘admin’ was used as the database password in Argentina.

The wisdom of using open-source versus proprietary software should be questioned as well as the sheer stupidity exhibited by their administrators.  Then in an attempt to limit liability, their “free” credit monitoring had a provision limiting the legal actions affected consumers could use.  This was subsequently updated with a statement saying, “enrolling in the free credit file monitoring and identity theft protection products that we are offering as part of this cybersecurity incident does not prohibit consumers from taking legal action.” At week’s end, two exeutives “retired” effective immediately.  But not the CEO.

The Fool highlights some other examples but none are nearly as brazen as these two.  I do not own Nintendo (NTDOY) but have them on my watch list.  Perhaps their actions are little more than a misguided marketing ploy to stimulate sales.

I do own a small slice of Equifax (EFX) which is now under water.  As this space is controlled by the tri-opoly of Equifax, Trans Union (TRU) and Experian (EXPGY) there is not significant competition.  In fact, most US mortgages are scored using a merged report of these three bureaus.  So my game plan is to ignore TRU (no dividend), wait to add to my EFX position (so as not to catch a falling knife) and look closely at initiating a position in Experian.  There are rumors that EFX may now be a takeover target as well.

Update 26 Sep 2017 – Rick Smith CEO of EFX has retired effective immediately

So any thoughts on the data breach or other blame games?

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2 thoughts on “It’s Not Our Fault

  1. I read today that Equifax might lose 50% of value from today closing. It has gone
    down from $150 to $95. Some lawmakers are making the case for them to not charge for credit monitoring at all. In that case, they’d probably lose all of their value.
    Nonetheless, look at VW after the Diesel engine scandal, they’ve rebounded quite well. It might take a while to get back to the glory. But Walmart is more secured today than Targer because they got hacked earlier during the days, that forced them to invest more. I remember the nunbnnncemagnetic credit card wasn’t popular, but all Walmart card readers was already equipped. Same l goes for Equifax.

    But one worse thing, was the executives knew for months, even bak back in March and earlier, they have sold and sold and sold. And not disclosed to the general public.

    I don’t follow Nintendo, but I still think they might still be ahead of the curve in gaming innovation. Microsoft might have an advantage of VR! But the adaptbily might be too slow. By the time it come out, Nintendo has already gone to the next best things. 🙂

    Liked by 1 person

  2. At least the DOJ has opened a criminal investigation on the stock sales. But you’re right in that consumers have short memories. The TGT breach was EXPGY and it is a distant memory. It’s most unfortunate EFX chose to defer rather than embrace responsibility.

    On NTDOY, I agree with your assessment. The reason they (along with two other Japanese companies) were still on my watch list was due to the Yen/dollar exchange but Nintendo didn’t help their case by abdicating responsibility with their supply chain issues.

    Thanks for the comment!

    Liked by 1 person

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