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

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.

"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.

"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."

At Wednesday's meeting, shareholders will also get to weigh in on Target's executive compensation plan in the nonbinding say-on-pay vote. Last year, it only received a 52 percent approval on that measure as shareholders expressed concerns about Steinhafel's high level of pay relative to his peers, especially given Target's stock performance in recent years.

So in the last year, Target has reached out to about 40 percent of its shareholders to discuss the issue and has reworked its compensation plan to lower overall pay and tie it more closely to performance. The board has noted that Steinhafel's direct pay (not including gains on previously-issued equity awards) dropped 41 percent last year to $9.5 million.

Both ISS and Glass Lewis see eye-to-eye in supporting a shareholder proposal to split the role of CEO and board chairperson, a proposal that received 37 percent of votes last year. Target's board says it likes the flexibility to decide how to divvy up leadership roles depending on the circumstance and notes that it currently has an independent interim board chairwoman in Austin.

But the proxy advisers say that given Target's recent performance issues, it would be wise to permanently separate the roles to ensure there is not conflict of interest and to ensure that the chairperson is following shareholders' interests.