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There are several stories about the corporate intrigue at Target Corp., where a debate over the makeup of the board of directors has grown more strident as the calendar moves inexorably toward a May 28 vote by shareholders.

The Wall Street Journal reports on how discontent with Target’s poor performance – both in the stores and on Wall Street – seems to have played into the efforts by “hedge fund mogul” Bill Ackman, who owns almost 10 percent of the company’s stock and options and has recruited a slate of board candidates that he feels “will bring new ideas to the discount retailer and relevant expertise to a board he describes as slow to make critical decisions,” according to the Journal story. “One weapon Mr. Ackman is deploying in the proxy battle is Wal-Mart, which has managed to post relatively robust growth despite the recession. In past downturns, Target's sales gains have trailed Wal-Mart by a percentage point or two, but since autumn that spread has widened to up to six percentage points. Some retail analysts have pointed out that Target's business began to slow before the recession, evidence that, among other things, some competitors that copied its low-priced designer strategy might be stealing its thunder.”

Target Chief Executive Gregg Steinhafel has been fighting back, saying that the company is making needed changes and that Ackman really is only looking for short-term profits, not a long-term and sustainable business strategy.

Target, the Journal writes, has slammed Ackman “in a flurry of news releases and letters to shareholders, and defended its board, which includes former executives of General Mills Inc., Quaker Oats Co. and the current chair of Wells Fargo & Co., as having all the right experience to guide the company.”

Ackman’s proposed slate of directors, other than himself, includes include Jim Donald, former chief executive of Starbucks Corp.; Richard Vargas, who has run major credit-card firms; Michael Ashner, chairman of Winthrop Realty Trust, and Ronald Gilson, an expert in corporate governance who teaches at the law schools of Stanford University and Columbia University.

The Fortune magazine article on the contretemps notes that “though chosen by Ackman, the would-be directors are hardly your classic slate of yes-men. Interviews with each of them reveal not a unified bloc typical of proxy fights, but a collection of individuals, each with different reasons for wanting to serve. None but Ashner knew Ackman before last month, none is an investor in his funds, and each swears that he hasn't been asked for any kind of quid pro quo.”

Furthermore, Fortune writes that “the stakes are high, and not only because Target is one of the largest companies ever to be involved in a proxy fight. Regardless of who wins the vote at the annual meeting on May 28, Ackman's move against a widely respected company with no record of poor governance represents a new front in the world of shareholder activism, and one that any company should pay attention to. Although directors of companies with worse records -- Citigroup, anyone? -- have been reelected, the fight at Target suggests that the days of the ‘trust me’ boardroom are waning, and that costly struggles for control may become commonplace.”

KC's View:
I have a bit of a bias on this story because of a friendship with Jim Donald…but I simply cannot imagine a board of directors for a retail company that would not be better off with him on it. (I have not interviewed him about the Target story, by the way…I’m careful about not crossing the line.)

I have no idea how this will turn out, but if you are to compare Target to Walmart, you have to conclude that the latter has done a far better job of judging the marketplace and creating a level of format diversification/experimentation that seems to make it far better positioned to grow market share. Target stores are okay…but okay doesn’t cut it; “nimble” isn’t a word that comes to mind when you think about Target.

I have the sense from my reading that Target got complacent…and it needs some shaking up.