Target Feels Backlash From Its Shareholders

It is remarkable how dumb some corporate leaders can be. Target and the current controversy that it finds itself embroiled in is a case in point. The $150,000 contribution to what turns out to have been an anti-gay organization obviously should have been better investigated BEFORE the contribution was made. But someone from the outset should have realized that the same forces that are always describe themselves as "pro-business" are the same ones who typically wrap themselves in the flag of homophobia to pander to Neanderthal Christianists voters. Even someone casually familiar with politics and the GOP platform in general should have been able to connect the dots and figured out that this might backfire and bite Target in the ass. Did they think Teh Gays wouldn't find out? In any event, now Target, which has carefully worked to provide same sex partner benefits, non-discrimination policies for LGBT employees, etc., has found all of that effort shot to Hell. Worse yet, it now faces calls for boycotts and is receiving all kinds of negative news coverage. And deservedly so in my view. Now adding to the mix is the backlash from shareholders who are none too happy at the controversy which could have been so easily avoided by simply remaining neutral. Having once been in-house counsel for a Fortune 50 corporation, I never cease to be amazed how ego maniacal senior management forgets that it is the shareholders - not management - that own the corporation. The Los Angeles Times looks at the self-inflicted damage being experienced by Target. Here are some highlights:
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After weeks of public protest over its financial support of an organization that backed a GOP gubernatorial candidate opposed to gay rights, Target Corp. now faces a new form of pressure: demands from institutional shareholders that it revamp its donation process to avoid the chance of additional backfires.
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Imprudent donations can potentially have a major negative impact on company reputations and business if they don't carefully and fully assess a candidate's positions," said Tim Smith, a senior vice president at Walden Asset Management, one of three asset management firms that this week filed a resolution asking the retail giant to overhaul its campaign donation policies. He cautioned that funding ballot initiatives, as many corporations have done, "can similarly backfire."
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The three management firms sponsoring the resolution — Calvert Asset Management, Trillium Asset Management and Walden — together hold $57.5 million of Target stock. Other institutional investors, including the giant New York state pension fund and union investment managers, are considering co-signing the resolution, which calls on Target's independent directors to review the criteria and risks in making donations to organizations active in political campaigns.
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"Target should have carefully considered the implications that direct political contributions can have toward shareholder value," said Ola Fadahunsi, spokesman for New York Comptroller Thomas DiNapoli, the pension fund's sole trustee. "It's troubling to think that they can fund controversial candidates without properly assessing the risks and rewards involved." The New York state pension fund currently holds 3.8 million shares in Target, with a market value of $283 million.
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Target said it made a $150,000 donation to MN Forward because the group promised to back candidates promoting a better business climate. "The intent of our political contribution to MN Forward was to support economic growth and job creation," Steinhafel said in an e-mail to employees.
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The first advertisement aired by MN Forward touted Emmer, who favors lower taxes and other pro-business positions but also has a strong record of opposition to gay rights legislation.
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Besides seeking a review of political contributions, the institutional shareholders also are asking the retailers to consider how contributions will affect the company's public image, business sales and profitability, and whether a candidate espouses policies that conflict with the company's values.
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Bill de Blasio, a board member of another large pension fund, the New York City Employee Retirement System, said Thursday that he would ask other members of his board to support the resolution. The retirement board holds nearly 1 million Target shares.
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"A good corporate political contribution policy should prevent the kind of debacle Target and Best Buy walked into. . . . "We expect companies to evaluate candidates based upon the range of their positions — not simply one area — and assess whether they are in alignment with their core values. But these companies' policies are clearly lacking that," Alpern said.
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In a news release announcing the resolution, Trillium also disclosed that one client with a relatively small holding in Target had asked that its ownership of the stock be immediately liquidated. Officials from the Equity Foundation of Portland, Ore., said they were divesting because they were "troubled" by Target's political contribution.
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Target also is facing calls for a boycott from MoveOn.org and has received stinging criticism from gay rights advocates, who once lauded the company for its approach to gay and lesbian issues.