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Facebook's market cap is $566B (common stock) and Equifax's is $16.6B. The ratio of market cap differences is about 34:1. If Facebook's fine is adjusted to Eq

Facebook's market cap is $566B (common stock) and Equifax's is $16.6B. The ratio of market cap differences is about 34:1. If Facebook's fine is adjusted to Equifax's it would be a $22.1B fine instead of $5B. So, from a market cap perspective Equifax's fine is ~4x Facebook's.

paulddraper 7y ago
I'm confused why that would have anything to do with it. If you cause $100 in damages, you pay $100 (plus any punitive awards). Doesn't matter what your shares happen to be trading at that day.
- shortandsweet 7y ago
  Because you want to teach them a lesson, not put them out of business.
  - ericd 7y ago
    Why not?
  - MereInterest 7y ago
    Again, why? The lesson is for the industry as a whole to learn, not for an individual company.
    - freeflight 7y ago
      That's like saying society has a whole lot to learn but not individual humans.
  - dogsgobork 7y ago
    Putting them out of business would teach them a lesson, one perhaps other companies might actually learn as well.
    - DaniloDias 7y ago
      An eye for an eye makes the whole world blind.
      - bbrian 7y ago
        I'm not sure that applies in the free market. It seems less scofflaw companies aren't offered the chance to serve the same markets because criminal companies are let off too lightly.
  - chii 7y ago
    corporations are not people. They don't "learn lessons". They respond to incentives. If this breach didn't cost them dearly, but they still reaped any reward from having had the breach (e.g., saved money on security, and opt to pay the fine instead when they are breached), they will do it again in the future. A fine is meant to deter as well as punish. If the fine is too small, it won't deter. And certainly if less than the profits earned, it can't punish, nor deter.
    - skybrian 7y ago
      Corporations don't learn lessons, but people do. You want managers arguing for budget to prioritize security, or lawyers arguing for legal stuff, to be able to use this as a compelling example. Losing $650 million is perhaps not quite as compelling a story as losing billions, or a smoking hole where a company used to be (as in Enron and Arthur Andersen). But it's a pretty big chunk of change. I have no experience making such arguments, but it seems plausible that it will be remembered for a while at Equifax and their competitors, at least? I'm doubtful that people respond to such incentives rationally. It probably has more to do with how well the storyteller tells the story. And whether the thing they're selling actually works well for improving security seems pretty hit-and-miss, too.
  - kevin_thibedeau 7y ago
    Installing government regulators on the board would teach their C-levels a lesson.
  - paulddraper 7y ago
    I won't lose sleep about either one of those. Primarily, I want my justice system to administer justice.
- jakelazaroff 7y ago
  That's one way of looking at it. The other way is that companies should feel about equal pain relative to their sizes. Otherwise, big companies are able to gain an unfair advantage by just ignoring laws for which they can afford the fines.
  - Sabinus 7y ago
    What does their ability to pay fines have to do with their share price? A % of profits or revenue would be more fair.
    - jakelazaroff 7y ago
      Sure, I don't really have any opinion on the best way to measure the size of a company. I'm just espousing the principle of scaling the fine to their ability to pay.
    - lostlogin 7y ago
      Percentage of profits would be a terrible way to fine. Imagining how that could be messed with isn’t hard. Mysteriously there would be no profit and the follow few years worth of expenses would be pre-paid, spent or otherwise brought forward.
      - inlined 7y ago
        And that’s why you charge a percent of revenue, not profit.
    - ineedasername 7y ago
      %of profits it fraught with ways to hide profits. Even gross revenue can be gamed, albeit with less efficacy. More practical is something like X dollars per infraction, with the ability for regulating bodies to exert some professional judgement that lets them determine if the culprit's infractions were severe enough to let the per-infraction cost put them out of business all together.
  - otakucode 7y ago
- Deimorz 7y ago
  Because fines like this are often more about sending a message to the entire industry than simply about reimbursing damage. It's saying, "make sure you take security seriously, or you're risking us taking X% of your revenue/value". If you don't do it this way, you end up in a situation similar to speeding tickets: well-off people don't care at all (and are even probably more annoyed about having their drive interrupted than the actual fine), but it can mean a poor person has to skip meals to recover. If the goal is discouraging a certain type of behavior overall, it has to hurt violators comparably, no matter their wealth.
  - pmiller2 7y ago
    > It's saying, "make sure you take security seriously, or you're risking us taking X% of your revenue/value". I would believe that if these companies didn't just keep doing what they were doing anyway. Losing a percentage of revenue or profit for one year does nothing to deter them! We need to reinstate the corporate death penalty. Equifax deserves to die for its negligence, IMO.
    - Deimorz 7y ago
      I agree with you; the fines are much too small. But the point is that they're too small for both Equifax and Facebook. Facebook's stock even went up because it was only a $5B fine! The only way things will change is if the fines hurt more, but it needs to hurt the huge companies just as much as the small ones, otherwise it ends up just being another factor that helps keep the already-dominant companies at the top.
      - maccard 7y ago
        Do you really believe that Facebook's stock went up because they "only" got a $5B fine? Facebook's stock went up because they had a pending fine, and the value of the fine was announced, reducing uncertainty. Put another way, would you buy a car that has an unknown repair bill for the same price as a car you know how much it's going to cost to fix?
  - MisterBastahrd 7y ago
- ineedasername 7y ago
  Well, that's the thing. FB didn't necessarily case $5B in damages, they broke the consent agreement. Actual damages might be, relative to the fine, minimal. It's hard to say how much monetary damage Equifax actually caused, but I thin it's not unreasonable for a primary tenet of setting fine levels the hurt, but aren't so punitive the the company must shutdown unless the activity was so egregious that a return to legitimate business may not even be possible or practical. Sort of like, in banking, the difference between leveling lots of fines on WellsFargo for their shenanigans but lettings Lehman Brothers just fail and go bankrupt. (I know, opinions differ on how these things should have gone down, and on whether Equifax should have been forced to wind down and parcel of its services to other entities. I'm just trying to explain why actual damages isn't always the sole consideration.)
- onetimemanytime 7y ago
  or you file for bankruptcy...

paulddraper 7y ago

I'm confused why that would have anything to do with it. If you cause $100 in damages, you pay $100 (plus any punitive awards). Doesn't matter what your shares happen to be trading at that day.

shortandsweet 7y ago
Because you want to teach them a lesson, not put them out of business.
- ericd 7y ago
  Why not?
- MereInterest 7y ago
  Again, why? The lesson is for the industry as a whole to learn, not for an individual company.
  - freeflight 7y ago
    That's like saying society has a whole lot to learn but not individual humans.
- dogsgobork 7y ago
  Putting them out of business would teach them a lesson, one perhaps other companies might actually learn as well.
  - DaniloDias 7y ago
    An eye for an eye makes the whole world blind.
    - bbrian 7y ago
      I'm not sure that applies in the free market. It seems less scofflaw companies aren't offered the chance to serve the same markets because criminal companies are let off too lightly.
- chii 7y ago
  corporations are not people. They don't "learn lessons". They respond to incentives. If this breach didn't cost them dearly, but they still reaped any reward from having had the breach (e.g., saved money on security, and opt to pay the fine instead when they are breached), they will do it again in the future. A fine is meant to deter as well as punish. If the fine is too small, it won't deter. And certainly if less than the profits earned, it can't punish, nor deter.
  - skybrian 7y ago
    Corporations don't learn lessons, but people do. You want managers arguing for budget to prioritize security, or lawyers arguing for legal stuff, to be able to use this as a compelling example. Losing $650 million is perhaps not quite as compelling a story as losing billions, or a smoking hole where a company used to be (as in Enron and Arthur Andersen). But it's a pretty big chunk of change. I have no experience making such arguments, but it seems plausible that it will be remembered for a while at Equifax and their competitors, at least? I'm doubtful that people respond to such incentives rationally. It probably has more to do with how well the storyteller tells the story. And whether the thing they're selling actually works well for improving security seems pretty hit-and-miss, too.
- kevin_thibedeau 7y ago
  Installing government regulators on the board would teach their C-levels a lesson.
- paulddraper 7y ago
  I won't lose sleep about either one of those. Primarily, I want my justice system to administer justice.
jakelazaroff 7y ago
That's one way of looking at it. The other way is that companies should feel about equal pain relative to their sizes. Otherwise, big companies are able to gain an unfair advantage by just ignoring laws for which they can afford the fines.
- Sabinus 7y ago
  What does their ability to pay fines have to do with their share price? A % of profits or revenue would be more fair.
  - jakelazaroff 7y ago
    Sure, I don't really have any opinion on the best way to measure the size of a company. I'm just espousing the principle of scaling the fine to their ability to pay.
  - lostlogin 7y ago
    Percentage of profits would be a terrible way to fine. Imagining how that could be messed with isn’t hard. Mysteriously there would be no profit and the follow few years worth of expenses would be pre-paid, spent or otherwise brought forward.
    - inlined 7y ago
      And that’s why you charge a percent of revenue, not profit.
  - ineedasername 7y ago
    %of profits it fraught with ways to hide profits. Even gross revenue can be gamed, albeit with less efficacy. More practical is something like X dollars per infraction, with the ability for regulating bodies to exert some professional judgement that lets them determine if the culprit's infractions were severe enough to let the per-infraction cost put them out of business all together.
- otakucode 7y ago
Deimorz 7y ago
Because fines like this are often more about sending a message to the entire industry than simply about reimbursing damage. It's saying, "make sure you take security seriously, or you're risking us taking X% of your revenue/value". If you don't do it this way, you end up in a situation similar to speeding tickets: well-off people don't care at all (and are even probably more annoyed about having their drive interrupted than the actual fine), but it can mean a poor person has to skip meals to recover. If the goal is discouraging a certain type of behavior overall, it has to hurt violators comparably, no matter their wealth.
- pmiller2 7y ago
  > It's saying, "make sure you take security seriously, or you're risking us taking X% of your revenue/value". I would believe that if these companies didn't just keep doing what they were doing anyway. Losing a percentage of revenue or profit for one year does nothing to deter them! We need to reinstate the corporate death penalty. Equifax deserves to die for its negligence, IMO.
  - Deimorz 7y ago
    I agree with you; the fines are much too small. But the point is that they're too small for both Equifax and Facebook. Facebook's stock even went up because it was only a $5B fine! The only way things will change is if the fines hurt more, but it needs to hurt the huge companies just as much as the small ones, otherwise it ends up just being another factor that helps keep the already-dominant companies at the top.
    - maccard 7y ago
      Do you really believe that Facebook's stock went up because they "only" got a $5B fine? Facebook's stock went up because they had a pending fine, and the value of the fine was announced, reducing uncertainty. Put another way, would you buy a car that has an unknown repair bill for the same price as a car you know how much it's going to cost to fix?
- MisterBastahrd 7y ago
ineedasername 7y ago
Well, that's the thing. FB didn't necessarily case $5B in damages, they broke the consent agreement. Actual damages might be, relative to the fine, minimal. It's hard to say how much monetary damage Equifax actually caused, but I thin it's not unreasonable for a primary tenet of setting fine levels the hurt, but aren't so punitive the the company must shutdown unless the activity was so egregious that a return to legitimate business may not even be possible or practical. Sort of like, in banking, the difference between leveling lots of fines on WellsFargo for their shenanigans but lettings Lehman Brothers just fail and go bankrupt. (I know, opinions differ on how these things should have gone down, and on whether Equifax should have been forced to wind down and parcel of its services to other entities. I'm just trying to explain why actual damages isn't always the sole consideration.)
onetimemanytime 7y ago
or you file for bankruptcy...