Shares of Target Corp. (NYSE: TGT) are taking a hit of around 3% Monday morning following the resignation/firing of Chairman/President/CEO Gregg Steinhafel. The now-former CEO is being replaced temporarily by CFO John Mulligan, as a search begins for a new permanent replacement for Steinhafel.
The company’s new non-executive chairman is Roxanne Austin, who is president of Austin Investment Advisers and an independent board member at AbbVie Inc. (NYSE: ABBV), L.M. Ericsson Telefon AB, Teledyne Technologies Inc. (NYSE: TDY) and Abbott Laboratories (NYSE: ABT) in addition to her board seat at Target, where she been a board member since 2002 and has served as chair of the audit committee and a member of the finance committee. She is not a likely candidate for Steinhafel’s job.
Mulligan, the interim CEO, has held his current position for two years, and he has been employed at Target since 1996. His experience is primarily in finance and human resources at the company, and he too does not appear to be a serious candidate for the permanent job.
Steinhafel’s fall from grace was the result of the massive data breach of some 40 million customers’ information that the company did not confirm until December 19, well after the first signs of a breach had been revealed more than a year earlier. The former CIO lost her job last month.
Steinhafel can be consoled by his handsome compensation packages and a golden parachute that has yet to be announced but is sure to be even more handsome. He joined Target in 1979 and has served as president of the company since 1999, CEO since 2008 and chairman since 2009. Steinhafel is also on the board of directors of Toro Co. (NYSE: TTC).
According to the company’s most recent proxy statement, from April of 2013, Steinhafel has knocked down average total compensation of nearly $21.5 million in each of the past three years. His base salary has been $1.5 million in each of those years, and the bulk of his compensation is due to stock, option and other grants and payments. When the new proxy statement is released, we’d look for a buyout of around $50 million.
Where does that leave Target? In disarray. Among other board members, Henrique De Castro, recently departed COO at Yahoo! Inc. (NASDAQ: YHOO), is perhaps the most likely suspect, but even that is a stretch. The longer this search drags out, the worse it will be for Target. Whoever gets the job will undoubtedly demand a small fortune — and get it.
The shares were down about 3% in the first 90 minutes of trading on Monday, at $60.17 in a 52-week range of $54.66 to $73.50. Finding a replacement CEO for a $40 billion retail operation is not easy chore, and the search is not likely to come to a conclusion quickly.