Shareholder Puts Bullseye On Target's Board Before the economic downturn, discount retailer Target was beloved by both consumers and Wall Street. One of its largest shareholders invested billions in the company two years ago, and has since lost about half that investment. That disappointed shareholder is looking to shake up Target's board of directors in what has become an expensive corporate fight.
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Shareholder Puts Bullseye On Target's Board

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Shareholder Puts Bullseye On Target's Board

Shareholder Puts Bullseye On Target's Board

Shareholder Puts Bullseye On Target's Board

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Before the economic downturn, discount retailer Target was beloved by both consumers and Wall Street. One of its largest shareholders invested billions in the company two years ago, and has since lost about half that investment. That disappointed shareholder is looking to shake up Target's board of directors in what has become an expensive corporate fight.

STEVE INSKEEP, host:

One of the country's biggest retailers holds its annual shareholder meeting tomorrow. Target was beloved by consumers and Wall Street investors though that was before the downturn. Its share price has gone down sharply and one investor is especially disappointed. He's one of Target's biggest shareholders and he's lost so much of his investment, initially worth billions, that he is now campaigning to shake up Target's board in what's become an expensive and high-profile fight. NPR's Yuki Noguchi has the story.

YUKI NOGUCHI: Consumers loved Target so much that author, Laura Rowley, decided to write a book about why.

Ms. LAURA ROWLEY (Author, On Target: How the World's Hottest Retailer Hit A Bull's-Eye): Target was the Wal-Mart that's too cool to hate, you know.

NOGUCHI: The company ran music video ads featuring everyday items dressed up in designer names, like clothes by fashion designer Isaac Mizrahi and toasters from architect Michael Gray but priced cheap.

(Soundbite of Target music video ad)

Unidentified Woman: Be happy together, design together, safe together at Target.

Ms. ROWLEY: There was a rally in a town in California to bring in a Target store.

(Soundbite of laughter)

Ms. ROWLEY: You know, and most of these rallies are to keep out big-buck stores.

NOGUCHI: Their formula was marketing stylishness on a budget. And that worked very, very well as long as the housing boom held up. William Ackman bought into that Target mystique to the tune of about $3 billion.

Mr. WILLIAM ACKMAN (CEO, Pershing Square Capital Management LP): My wife shops there. My mother in law shops there. My kids love it.

NOGUCHI: Ackman says Target still has the potential to be a dominant retailer. But despite recent layoffs, Target's earnings are down and Ackman is itching for the 50-year-old store to change. Specifically, he says the company needs fresh blood and new ideas. Whereas Target wants to reelect its existing board, Ackman is on a campaign to elect up to five new directors, including himself to the company's board.

And now, this fight has become a test of wills with shareholders casting their votes this Thursday to decide who wins. Ackman says his main beef with the board is that it too quickly dismissed one of his proposals to sell off Target's massive real estate holdings and refused to consider adding him to the board.

Mr. ACKMAN: It's bit of a, you know, we do things our own way approach, and I think that can be good to a certain extent. But when a board becomes insular, when a company becomes unwilling to listen to ideas from the outside, you know, that's when even great retailers get into trouble.

NOGUCHI: Target declined to comment for this story, but defended its board's performance in an open letter touting its long history of profitability and share price growth. Last week, outside companies that advised shareholders weighed in. One firm, Riskmetrics, said Ackman and one other dissident should be added to the board. Another firm, Glass Lewis, disagreed.

Warren Chen is managing director of Glass Lewis. He said over the longer term, Target's stock price has far outperformed its biggest rival, Wal-Mart. The existing board of directors has relevant experience in the food and retail industries and is, in their opinion, as qualified or more qualified than the people Ackman wanted to elect.

Mr. WARREN CHEN (Managing Director, Glass Lewis & Co.): All these being said didn't convince us that really the company is in need of any sort of shake-up.

NOGUCHI: Chen adds that when stocks plunge, you see more of these sorts of spats. Already he's seen 20 percent more proxy fights compared to last year. Target's shareholder meeting will take place this Thursday at a Target store in Waukesha, Wisconsin.

Yuki Noguchi, NPR News.

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