It may only be a matter of time before the board of Equifax Inc. (NYSE: EFX) fires its long-time chair and chief executive, Rick Smith. However, the move cannot come too soon to satisfy investors, regulators and customers. All the problems that built up to the hacking of 143 million Equifax accounts happened on his watch.
Smith threw two Equifax executives under the bus. Chief Information Officer Susan Maulin and Chief Security Officer David Webb have retired. However, neither is among Equifax’s most senior management. The executives at the top of Equifax have been protected, for now.
As it announced the retirements, the company released minute details of the history of the hack. Equifax first learned about “suspicious network traffic” on July 29. On August 2, Equifax hired cybersecurity firm Mandiant. It took weeks until Equifax told its customers that much of their personal data was at great risk. As part of the company’s timeline of the debacle, management said:
The incident potentially impacts personal information relating to 143 million U.S. consumers – primarily names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers.
The hack trouble will trigger, at the very least, class action suits by customers against the company; congressional investigations, which have already begun; and probes and legal actions by state attorneys general. New York State has started an investigation.
Smith is to blame on at least two counts: the fact that the hack could happen at all, and the fact that the company took so long to disclose it. Equifax, given the sensitivity of the data its gathers and holds, should have data protection provisions that are among the best in the world. Customers should have been warned about the problem early in the investigation, even if only to flag what might or might not be coming.
Smith likely will be protected because he has been entrenched so long as CEO, since 2005. He runs an undistinguished board made up primarily of retired CEOs, second-tier executives at large companies, and small financial firm leaders and entrepreneurs. The pressure on them to “retire” Smith will grow by the day.
Another reason Smith needs to go is that the board has to do what it can to arrest the drop in the Equifax share price. The stock trades near a 52-week low of about $93, down from a 52-week high around $147. With each new revelation about the cause of the problem, the lack of preventive measures and the company’s potential liabilities, the shares have much further to skid. Morgan Stanley analysts speculated more bad news could push shares down to $50.
Taken together, all the bad news means that Smith probably will be gone soon. It cannot happen too fast if the company wants to build even a small measure of confidence in its present and its future.