Target's Biggest Problem May Be Target's Board

NEW YORK (TheStreet) -- Target's (TGT) board hasn't solved its problems by forcing out Chairman and CEO Gregg Steinhafel.

That's because of the board's general passivity and its dependence on a few key hires to drive change.

The Wall Street Journal estimated Steinhafel's lovely parting gifts were worth $37.8 million, while USA Today guessed he will eventually get $55 million or more, based on past policies. The announcement of his departure came in a terse press release.

If that sounds like a lot of money Steinhafel's predecessor, Robert Ulrich, had accumulated deferred pay and pension benefits worth more than $140 million when he left in 2007.

Those numbers must be going over well in Target's employee ranks, where many people earn minimum wage. The National Employment Law Project identified Target as the fourth largest low-wage employer in the U.S., with a total workforce of 365,000.

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The company also paid big last week for its new chief information officer, Bob DeRodes. His career includes top positions at both major credit processors such as First Data, stints advising federal agencies on security and a seat on the board at NCR (NCR).

DeRodes' predecessor, Beth Jacob, had resigned in March as Target struggled to deal with fallout from the December breach in which data on 40 million accounts was stolen.

Target's board includes some big names, such as Wells Fargo (WFT) CEO John Stumpf, but with Steinhafel's resignation there are no retailers and no insiders.

Most spend their days doing good deeds, such as Anney Mulcahy, the former Xerox (XRX) CEO who now chairs Save the Children, and developer Calvin Darden, former chairman of the Atlanta Beltline. They include former Yahoo! (YHOO) COO Henrique De Castro and former Colorado Senator Ken Salazar.

Chief Financial Officer John Mulligan has been placed in temporary charge as CEO, and former Move Networks CEO Roxanne Austin is temporary board chair, but until someone is hired, Target has a void where retail leadership should be.

All this means that the board needs to rush through the hiring of a new CEO while the ship drifts, and this is a ship that can't afford to drift.

In addition to the payments and security problems, which DeRodes is expected to handle, Target faces what the Canadian media call a fiasco in the company's geographic expansion, estimated to have cost it $1 billion so far.

Target is also trying to put fresh food in its stores at the same time that competition in that area is increasing, with rival Walmart (WMT) adding organics and even Amazon (AMZN) going into fresh food delivery.

What Target needs now is a turnaround artist, a charismatic leader who can bring fresh ideas and new people with him or her. These kinds of people don't grow on trees.

Can Target's board identify one?

That someone then has to craft a new strategy for Target stores, a unique direction that isn't a clone of Walmart and can deal with competition from the grocers, dollar stores and online retailers who are grabbing off big hunks of its market.

Is there such a strategy?

The last troubled retailer to try on a charismatic leader and a new strategy was J.C. Penney (JCP) when it hired Ron Johnson from Apple (AAPL).

The resulting changes destroyed Johnson's career and nearly wrecked Penney.

Yet a board composed entirely of retailing outsiders is now expected to do better.

At the time of publication the author owned shares of AAPL and AMZN.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

>>Read More: Target Ousts Its Scapegoat CEO, but That's No Sign to Buy >>Read More: Analysts' Actions: Target, Valero and More

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