And protecting it is critical for executives who are at the top of their games. Which is why Target’s CEO Gregg Steinhafel stepped down. Here’s the story from Elizabeth A. Harris of the New York Times:
The chief executive of Target, Gregg Steinhafel, resigned from the company on Monday, signaling the depths of the damage done by last year’s extensive breach of customer information.
While the online attack has been the most prominent of the retailer’s problems, other issues — including sluggish customer traffic, a competitive online market and a badly disappointing expansion into Canada — have compounded the turmoil.
After extensive discussions between the board and Mr. Steinhafel, and as the company’s latest quarter drew to a close, Target’s board said on Monday that it had determined the company needed new leadership.
Target is scheduled to release earnings for its first financial quarter later this month, its second profit report since the breach, and in notes to investors on Monday morning, retail analysts said Mr. Steinhafel’s resignation did not bode well.
“Presumably the board was not pleased with Steinhafel’s performance, and we think that it is fair to assume that current business trends are not particularly good,” Faye Landes, an analyst at Cowen, wrote in a note to investors. “The board also may have come to the conclusion that the problems leading to the credit breach were the results of underinvestment, which is a C.E.O. decision, and the aftereffect of the breach may ultimately be quite costly, which we believe to be the case.”
The Wall Street Journal story by Paul Ziobro, Monica Langley and Joann S. Lublin pointed out the generous package that Target paid in compensation:
Mr. Steinhafel, after spending 35 years at the discount retailer, will collect an exit package estimated to be worth $37.8 million, based on Target’s Monday closing share price, including cash severance and accelerated vesting of stock, calculates Mark Reilly, a compensation consultant at Verisight Inc., who has never advised Target.
Target declined to comment on the severance package.
The biggest worry for some Target directors and executives was the pending conclusion of a comprehensive report on the data breach. The report is quietly being distributed this week by Verizon Enterprise Solutions, a unit of Verizon Communications Inc., the investigator hired by the retailer, to Target’s banking partners and credit-card issuers and it will document in detail the company’s failings in cybersecurity, according to two people familiar with the situation. While it wouldn’t single out the CEO, it would put a negative mark on a tenure already marred by the stumbles in Canada and online that manifested in poor 2013 financial results.
Bloomberg Businessweek outlined the issues Target continues to face in a story by Michael Riley and Dune Lawrence:
The breach shook customer confidence in the company following an announcement that hackers had stolen 40 million debit and credit card numbers from the retailer’s data banks as well as the personal data of as many as 70 million Target customers. In March, Bloomberg Businessweek reported that the company had failed to act even though its security systems had detected the hackers before any of the data were removed.
The company has yet to announce the results of a months-long internal investigation into the breach, which may provide an account of how the hackers were able to penetrate the retailer’s supposedly secure point-of-sales systems as well as other critical parts of the company’s computer network. Outside auditors are also examining possible security failures at the company, a process that could significantly increase the cost of the breach by shifting liability from bank card issuers to the retailer.
Last month the company hired a new chief information officer, replacing another Target veteran who had risen through the company ranks with an outsider with long experience in securing credit, online, and mobile payments systems.
Mulligan, the interim CEO who represented the company in testifying about the data breach before Congress, is as much of a Target insider as Steinhafel. He joined Target in 1996 as a financial analyst, becoming director of Target.com Finance and then capital investments. In 2010 he took the lead in accounting and financial operations. His MBA is from the University of Minnesota.
Brian Yarbrough, an analyst for Edward Jones & Co. in St. Louis, called the data breach “the final straw,” adding to concerns about lackluster U.S. sales and a Canadian expansion that’s lost three times the money Target initially expected.
“The business has been struggling, the Canadian operation, and then you throw on top of that this massive data breach and the board probably sat down and said, it’s time for some change here,” said Yarbrough.
It looks as if Target has a lot of ground to make up. Many customers during the breach woke up to new credit card numbers and headaches, which damages the retailer’s reputation. While a new CEO might close the gap, many customers will likely still have questions about security.
