Target's annual meeting is on Wednesday, and there's plenty to talk about

  • Article by: KAVITA KUMAR , Star Tribune
  • Updated: June 9, 2014 - 6:51 AM

The retailer’s annual shareholder meeting on Wednesday could hold some drama.

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Target Corp. shareholders certainly won’t be scrounging around for things to talk about at their annual meeting Wednesday in Dallas.

Since they last met, the retailer has been tormented by the massive data breach, supply chain problems in its new Canadian stores, and lackluster sales at its U.S. locations. Now an influential proxy adviser is urging that investors push out most of the board members who have governed Target through its recent struggles.

“Everybody is curious to see which way that [election] goes,” said Glenn Johnson, portfolio manager with St. Paul-based Mairs & Power, which owns about 3.5 million shares of Target stock. “Obviously, there have been some problems at Target. They have a lot of work to do.”

Annual meetings are often scripted, placid affairs that don’t result in big outcomes. But this shareholder gathering could prove more contentious as investors home in on the company’s various missteps and take on the controversial recommendation by Institutional Shareholder Services (ISS) to toss out seven of Target’s 10 board members.

Late last month, ISS said members of Target’s audit and corporate responsibility committees should not be re-elected, saying that those directors failed to protect the company against the massive data breach last year.

In an unusual move, Roxanne Austin, the board’s interim chairwoman, responded last week by sending a letter to major shareholders in which she defended the board’s track record. She laid out the steps the board has taken to beef up its data security and noted that many other companies have also been victims of similar breaches.

The board has also reminded shareholders that it has not been passive. For one, it ousted CEO Gregg Steinhafel. It also hired a new chief information officer and is looking for a new nonexecutive chair in Canada to help steer that enterprise in the right direction.

Some analysts are skeptical that board members will actually lose their seats, but note that votes could be closer than normal, making it uncomfortable for some directors to continue.

“I think trying to hold the board liable for that is a little extreme,” Brian Yarbrough, an analyst with Edward Jones, said in reference to the data breach.

Another proxy adviser, Glass, Lewis & Co., said there is not enough evidence that the breach resulted from board or management neglect. But it is still recommending shareholders reject two board members because of their track records on other corporate boards.

Johnson of Mairs & Power said last week that his firm was still evaluating how it will vote. On the one hand, some of Target’s overall challenges are shared by other retailers who have been struggling amid a difficult retail environment. Still, some of Target’s issues have had to do with missteps by management, he said.

“We’re hoping they’re going to get things back on track,” he said. “We still think Target is a great franchise.”

The meeting on Wednesday will be the first time many people will hear from Austin, a longtime Target board member, who stepped in to help fill the leadership void after Steinhafel was fired last month.

She and interim CEO John Mulligan have been calling the shots in recent weeks as the retailer has made a number of announcements ranging from firing the president of its Canadian division to forming a new digital advisory council to help the retailer innovate more quickly.

“I’d love to see what the nonexecutive chairman has to say,” said Matt Nemer, an analyst with Wells Fargo Securities, referring to Austin.

Jason Long, a retail consultant with Shift Marketing Group, said the shareholders meeting will obviously be closely watched, but in some ways, the retailer has already been letting some air out of the balloon leading up to it. Target has been more proactive in acknowledging its challenges and has begun taking steps to fix its operations, he said.

“It’s not going to be all roses,” he said. “They’ve realized what they need to do to turn things around.”

  • ISS vote Director Year elected Affiliation

    recommendation

    Against Roxanne Austin 2002 Interim chairwoman of Target’s

    board, president of Austin In-

    vestment Advisors, an invest-

    ment and consulting firm

    For Douglas Baker Jr. 2013 Chairman, CEO of Ecolab Inc.

    Against Calvin Darden 2003 Chairman, Darden Develop-

    ment Group

    Against Henrique De Castro 2013 Former chief operating officer,

    Yahoo Inc.

    Against James Johnson 1996 Former CEO of Fannie Mae

    Against Mary Minnick 2005 Partner, Lion Capital

    Against Anne Mulcahy 1997 Chairman, Save the Children

    Federation Inc.

    Against Derica Rice 2007 Executive vice president and

    CFO, Eli Lilly and Co.

    For Kenneth Salazar 2013 Partner, WilmerHale

    For John Stumpf 2010 Chairman, president and CEO,

    Wells Fargo & Co.

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