Sunday, May 11, 2014


Target's CEO, Gregg Steinhafel, recently resigned under pressure. Megan McArdle doesn't approve.  I find her arguments unconvincing.  First while Steinhafel was not directly responsible for the data breach as CEO he bears a general responsibility for everything that happens at Target.  It was his job to see that Target's data systems were staffed by competent people and that they were given sufficient resources to keep Target's systems secure.  Second the data breach is not Target's only problem.  Their expansion into Canada has not been successful to date hampered by what appear to be multiple failures to execute.  Again this is the general responsibility of the CEO even if some of his underlings were more directly responsible.  And there may be additional non-public issues.  For example the board may have lost confidence that Steinhafel was giving them accurate reports.  Naturally it is difficult for an outsider to evaluate Steinhafel's performance.  Perhaps he has just been unlucky.  But as a Target shareholder I am not going the second guess the board's apparent decision that a change at the top was needed.

Of course changing the CEO is a drastic move which shouldn't be undertaken lightly.  It suggests the board thinks Target is facing serious problems.  So it is not surprising the stock dropped on the news that Steinhafel was out.  As I noted back in January I had kind of lost faith in this stock pick.  I considered selling but didn't pull the trigger.  Perhaps I should have but at this point I think I will wait and see a bit.  Which is my natural inclination anyway. 

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