If negative press, customer losses, legal fees, and massive lawsuits weren't already enough to get corporate boards of directors to pay attention to the risk of data breaches, perhaps this will get their attention: Institutional Shareholder Services, a leading proxy advisory firm, is now urging shareholders of Target Corp. to oust seven of the company's 10 directors for "not doing enough to ensure Target's systems were fortified against security threats."
In November 2013, Target was the victim of an attack by hackers that ultimately resulted in the theft of 40 million credit card numbers, and 70 million addresses, phone numbers, and other pieces of personal information. Since then, Target has suffered numerous consequences from the breach, including being named as a defendant in more than 90 lawsuits. Bloomberg reports that through February 1, 2014, Target has already spent $61 million responding to the breach, and saw significant declines in both its holiday profits and its number of transactions.
ISS' blamed the directors serving on Target's audit and corporate-responsibility committees for the issue, saying that "it appears that failure of the committees to ensure appropriate management of these risks set the stage for the data breach, which has resulted in significant losses to the company and its shareholders."
In response, Target stated yesterday that its security measures were "among the best-in-class" in the retail world and that it had made additional significant investments in data security following the data breach.