Even for well-run companies, it’s the era of shareholders in revolt. With corporate leaders on the hot seat over pay and bonuses, and their performance under intense scrutiny from angry taxpayers and stockholders, even companies far removed from the banking sector and Wall Street have been at least marginally swept up in a populist tide of anger over the cost of the federal bailout of the private sector and a seemingly endless series of mind-numbing missteps by banking and investment titans.
That still-mounting backlash is stinging corporate directors in all manner of industries, including (presumably) the retail sector. And it could cast proxy battles in a new light, strengthening the hand of such outsiders as Bill Ackman, who want to shake things up and challenge the status quo.
By the same token, the current negative image many Americans and shareholders have of corporate leaders and boards of directors may also weaken Target’s case for reinstalling the same slate of directors now running the company, when those board members are up for re-election May 28.
Ironically, Ackman has expressed a high regard for the way Target has been managed, calling it at one point “probably the best retailer in the world.” And like most corporate raiders and shareholder activists, his goal in waging a proxy fight for control of the retail giant is simple: to squeeze more value out of the company’s individual components and jack up the company’s overall worth – and, in the process, its stock price.
If Ackman is ultimately successful in gaining representation on Target’s board, he’ll no doubt push for such immediate changes as a drive to capitalize on the company’s real estate holdings with sale-leaseback deals, or some other leveraging arrangement. Given his lack of retail experience, Ackman’s impact on Target’s ongoing store operations or merchandising programs is far less clear.
It’s doubtful, even now, that Ackman and his firm, Pershing Square, will get their wish. Most large companies remain well insulated against these kinds of proxy battles, controlling a vast number of voting shares and allying with powerful outside stockholder groups well in advance of any shareholders’ vote on directors. Nevertheless, Ackman controls a big block of Target’s stock, and he’s tapping into a still-rising tide of investor anger and restlessness.
In the long run, that tide could upend some of corporate America’s most carefully laid plans for succession.
We’ll all stay tuned.