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Target Corp. has been informed by its third-largest investor, Pershing Square Capital Management, that it intends to nominate five alternative candidates for the retailer’s board of directors that it describes as “highly qualified nominees with extensive experience in key areas of Target's business, including retail, credit cards and real estate.” Pershing Square says that its alternative slate is a marked contrast to the incumbent non-executive directors put up by Target, which it says do not have “comparable executive experience in the company's main lines of business.”

Pershing owns 7.8 percent of Target’s outstanding common stock, through shares and options, and has been pushing for Target to sell off non-core assets and maximize shareholder value.

Bill Ackman of Pershing Square said, "We believe that our nominees will bring insight, accountability and fresh and relevant perspectives to the Target board. If elected, we believe they will substantially improve Target's ability to navigate through the current economic environment while increasing shareholder value over the long-term." If elected, Pershing Square's nominees will hold five of the thirteen seats on Target's board.

Among the nominees being put up by Pershing Square is Jim Donald, the former CEO of Starbucks and Pathmark who also has served in senior executive positions at Safeway and Walmart.

The other nominees are Michael L. Ashner, Chairman and Chief Executive Officer of Winthrop Realty Trust; Professor Ronald J. Gilson, a professor at Stanford Law School and Columbia Law School and a leading scholar in the law of corporate acquisitions, finance and governance; Richard W. Vague, the former Chief Executive Officer of First USA, Juniper Financial and Barclays Bank Delaware; and Pershing Square’s Ackman.

"Pershing Square has had no previous business relationships with these nominees. Our nominees are well qualified, highly experienced and are committed to working as independent fiduciaries to maximize Target's value. Each nominee's accomplishments and reputation speak for itself. Their collective expertise is directly relevant to the businesses that will help Target build long term value," Ackman said.

Target has recommended that shareholders re-elect McDonald’s executive Mary Dillon; Wells Fargo chairman Richard Kovacevich; Telstra CEO Solomon Trujillo; and George Tamke, a partner at private equity firm Clayton Dubilier & Rice.

Target has announced that it plans to open roughly 75 stores this year, down from 114 new locations in 2008; it also has said that it expects its 2009 earnings to be significantly below those of 2008.

KC's View:
I have a bias here, simply because I think that virtually any company would be better off with Jim Donald involved. (Oh, if only I could get him here at MNB…)

That said, it does not seem like an enormous leap of faith to suggest that Target is not living up to its potential these days. Let’s face it – Walmart, its major competitor, is firing on pretty much all cylinders with a far more targeted approach to marketing and merchandising, but Target seems to be having trouble getting into gear or even focusing on how best to respond to changing consumer needs in a recessionary environment, while maintaining a long-term strategy that will serve the company well when times get better.

Someone once said that “a little revolution, now and then, is a healthy thing.” It seems to me that this is what Target needs.

However, someone else once said that “the most radical revolutionary will become a conservative the day after the revolution.” Which is something that Target (not to mention a bunch of other companies) needs to avoid.

Over the past few years, Walmart seems to have become expert at fomenting small revolutions from within, changing the way it does business, sometimes making mistakes, but always maintaining momentum. That’s got to be the model, and it sounds like this is what Pershing Capital is after with its alternative slate of directors.