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Target Corp. shareholders yesterday rejected the call by hedge fund founder and shareholder activist William Ackman to replace five of its incumbent directors with an independent slate of candidates that Ackman said would be better positioned to help the company compete with Walmart in a tough environment. Shareholders also supported the company’s call to keep its board to 12 members.

According to the Wall Street Journal, Ackman “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.”

After the vote, Ackman said that he believed that his efforts would end up having a positive impact on Target since it forced management to deal with tough issues; he also said that the battle would have a broader impact on other companies that now will be forced to consider their corporate governance.

Ackman called Target a "great company that I still believe is undervalued” and said he expected to maintain his investment, though he said that could change.

Target CEO Gregg Steinhafel said after the meeting that he would continue to evaluate suggestions made by Ackman. The Journal writes that Steinhafel “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’.”

KC's View:
Target might be doing better if Steinhafel spent more time in stores and less time with shareholders. But I guess that you could argue that this set of priorities was dictated in part by the challenge mounted by Ackman; since I was in favor of the dissident slate, especially because it included former Starbucks and Pathmark CEO Jim Donald, I guess I can’t be too critical in this area.

Target has been losing both market share and stock market value during the recession. If it addresses the first issue, the second will work itself in the long run.