It’s almost a common thing for a big company to announce a large data breach these days. It’s another matter entirely when you have a data breach that may have compromised almost half of the American population. Equifax Inc. (NYSE: EFX) has been in hot water in the wake of its massive data breach. And how the company handled it, what was disclosed and when may have been a serious tell about how this company was unprepared for a serious business interruption of this sort.
Chairman and Chief Executive Officer Richard Smith has announced his retirement. The company may consider it retirement, but Wall Street and just about any other street will recognize this as a firing and another effort for the company to clean house. When CEOs retire at a pre-retirement age in the wake of a corporate scandal, it is not a traditional retirement, not at all. This is nothing less than a modern-day version of a CEO falling on his sword.
A corporate announcement was made on Tuesday morning that Smith will retire from the company as board chair and chief executive. A search on Yahoo Finance indicates that Smith is just 57 years old. Replacements also have already been announced. The CEO portion of the change is considered an interim role.
The board of directors appointed Mark Feidler, a board member, to serve as non-executive chair. Paulino do Rego Barros Jr. has been appointed as interim chief executive officer. He has been with Equifax for seven years and most recently served as president of its Asia-Pacific operations.
Even if the CEO title is on an “interim” basis, it is highly unlikely that this critical decision was not made merely in a few minutes. The effective date was this same day, in other words “effective immediately.” Smith has agreed to serve as an unpaid adviser to the company to assist in the transition. How many unpaid advisory positions are coveted in Corporate America? Equifax also announced that its board will implement a search for a new permanent CEO and that it will consider internal and external candidates.
It may seem good that the company is seeking new direction. Unfortunately, it took quite a while for Equifax to get around to disclosing the breach and selecting the timing of releasing that information. And then there was the disclosure of a prior breach.
Equifax shares have lost more than a quarter of their value since the hack was reported. Rather than rallying on news of a CEO change, Equifax shares were lower by another 1.8% at $103.18 on Tuesday morning.
It is important to keep in mind that Equifax shares were north of $140 prior to disclosing this hack. Equifax shares have a 52-week range of $89.59 to $147.02. Its consensus analyst price target from Thomson Reuters was up at $153.25 a month ago and had risen throughout June and July. Now that consensus analyst target price is down to about $121.46 — and analysts keep lowering their targets and estimates ahead.
Smith’s exiting statement said:
Serving as CEO of Equifax has been an honor, and I’m indebted to the 10,000 Equifax employees who have dedicated their lives to making this a better company. The cybersecurity incident has affected millions of consumers, and I have been completely dedicated to making this right. At this critical juncture, I believe it is in the best interests of the company to have new leadership to move the company forward.
Many investors were burned backing Equifax. Millions of consumers could have endless credit problems ahead. There is no nice way of saying that Equifax just blew it from the start on this data breach. The company can announce a retirement all it wants, but there probably won’t be any big retirement party that Smith and the company will be sending out invites for.
Perhaps the biggest surprise here was just how long it took for Equifax to announce this “retirement.”