Dr. P.V. Viswanath



Economics/Finance on the Web
Student Interest


Target Holders Back Management Slate
May 29, 2009, Wall Street Journal by Ann Zimmerman


Board Incumbents Grab 70% of Votes Cast; Activist Investor Ackman Handed a Rare Defeat

WAUKESHA, Wis. -- Target Corp. shareholders on Thursday overwhelmingly backed the company's four incumbent directors after a bruising and expensive proxy battle with hedge-fund activist William Ackman, the company said.

Shareholders also backed the Minneapolis-based retailer's proposal to set its board's size at 12 members, it said. The company said a full tally of the results would be released later.

[target and ackman and board vote]Mr. Ackman, founder of hedge fund Pershing Square Capital Management LP, had nominated five candidates to the board, including himself, and backed a 13-person board. He estimated his company spent more than $10 million to mount the 2½-month proxy bid, launched after the retailer spurned his proposals to turn company property into a real-estate investment trust.

"I look forward to refocusing on the retail and credit side of our business," Target Chief Executive Gregg Steinhafel said following the meeting held at a store here.

In the preliminary count, Target said that its board nominees received more than 70% of the votes. Elected were Mary N. Dillon, McDonald's Corp. chief marketing officer; Richard M. Kovacevich, chairman of Wells Fargo & Co.; George W. Tamke, a partner with Clayton Dubilier & Rice; and Solomon D. Trujillo, former CEO of Telstra Corp.

Mr. Ackman and his nominee Jim Donald, former chief executive of Starbucks Corp., received the most votes of the dissident slate.

Mr. Ackman said following the meeting that his slate would have done better had shareholders been allowed to pick and choose from among Target and dissident candidates on a universal proxy. Shareholders could only vote for members of one slate or the other.

Mr. Ackman choked back tears during the shareholder meeting as he echoed President John F. Kennedy, saying, "I will be pay any price...oppose any foe...in what I believe is right." He later said that regardless of his loss, his proxy contest would have a positive impact on Target and other companies, saying they "will take a hard look at their corporate governance."

Mr. Ackman's Pershing Square owns a 7.8% stake in Target stock and options. The $2 billion investment lost about 80% of its value since April 2007, as Target's business suffered in the recession.

Mr. Ackman called Target a "great company that I still believe is undervalued." He said he expects his fund to maintain its Target investment, although he wouldn't rule out "selling some or all of it, depending on other opportunities."

Mr. Steinfafel said he expects the investor to continue talking with the board. "I assume he'll be engaged and put forward ideas. And we'll evaluate them as we have in the past," he said.

He was reluctant to describe the proxy fight as a distraction. "In the last couple of months, I spent a lot of time with shareholders. As a new CEO, I think that is a good thing over time."




  1. Why is it important, according to Ackman for shareholders to pick and choose between candidates across slates?
  2. Can you think of a reason why shareholders should only be allowed to vote for a single slate?
  3. Why would Ackman's attempt to put his slate in affect management actions if his slate lost?