Activist investor group calls for independent board chair at Target, not Brian Cornell

Target is facing pressure from shareholder activists who don’t want Brian Cornell to retain his board chair status when Michael Fiddelke takes over as CEO.

They also want the board to permanently reshape how the Minneapolis-based retailer governs its boardroom leadership.

The investors, who make up the Accountability Board, filed a shareholder proposal Wednesday calling for Target to amend its bylaws to require an independent board chair. That person, they said, should be someone who has not been an executive at the company in the past three years.

The move is aimed directly at the retailer’s plan for Cornell to remain executive chair after he steps down as CEO in February, a decision that drew sharp criticism from some analysts.

The group argued that maintaining Cornell as executive chair blurs the lines between management and oversight at a time when Target’s financial and reputational performance is under strain.

“These problems have all occurred under a leadership structure where the chair of the board is also an executive of the company, which is widely regarded as not the best form of board oversight,” said Matt Prescott, president of the Accountability Board.

The group declined to disclose how many shares it holds in Target. But it is not listed among the retailer’s 50 largest shareholders, which all own more than 1% of the company’s stock.

The proposal failed with only 29% of shareholders supporting the proposal at the June 2024 annual meeting. The group held $25,000 worth of Target stock at the time.

Target confirmed it received the proposal and said it will “consider it in conjunction with planning” for its 2026 annual shareholders meeting.

“We always welcome shareholder input and feedback,” Target said in a statement.

The Accountability Board also has investments in Walmart, Amazon, McDonald’s and Kroger.

Founded by former Humane Society employees Prescott and Joshua Balk in 2022, the Accountability Board has previously pushed proposals on environmental and animal welfare issues.

The group has won two proposals at Jack in the Box and Wingstop, pushing the restaurant chains to set greenhouse gas reduction targets.

Several analysts have criticized Target as its stock has fallen 44% in the past five years, lessening gains made during its pandemic boom.

More recently, investors have been concerned about the company’s handling of diversity policies, supply chain pressures from tariffs and slowing consumer demand for non-essential goods — Target’s primary moneymaker.

The company’s shares fell more than 6% after announcing Cornell’s planned transition and Fiddelke’s appointment as CEO. It then slid 31% over the following month, according to the shareholder group’s filing.

“The proposal is necessary, but it will also be uncomfortable for Target as it puts the focus back on its poor decision-making and the leadership debate,” said Neil Saunders, managing director at GlobalData Retail, in an email.

The Accountability Board said an independent chair is a “crucial step” to ensure the board represents shareholder interests “free from executive entanglements.”

Its proposal points to inconsistent sales growth, weakening foot traffic and ongoing controversies as evidence the current structure has failed to protect investors.

Target faced a similar push in 2015, only a year after Cornell took over as CEO. Nearly 40% of shareholders supported a proposal for an independent chair. Cornell was serving as both chairman of the board and CEO.

Research from Stanford’s Graduate School of Business found that the question of whether a company should separate or combine the CEO and chair roles is one of the most debated issues in corporate governance.

More than a third of consumer companies adopt an executive chair structure during CEO transitions, according to data from executive search firm Spencer Stuart.

Two-thirds of Target’s board members have held executive chair positions elsewhere, according to the group’s proposal.

Advocates of independent chairs argue that the structure strengthens oversight and reduces conflicts of interest, while those who support CEO/chairs say the structure can streamline decision-making.

At companies where the CEO also serves as chairman, it’s common for the board to appoint a lead independent director, as is the case at Target.