Category: Articles

As stated here before, I have no “skin in this game”. The sole reason for my interest in this is the message it hopefully sends to other corporate boards should Ackman be successful.

Hopefully there is little objection to the “corporate boards are unresponsive to shareholders” meme. That being said, a successful Ackman may spur changes at other boards if for no other reason the avoid a similar situation.

My main issue is with Target’s changing of their governance rules in order to entrench the board. Also, their refusal to publicly debate or discuss the ideas of their largest shareholder, while at the same time using press releases to snipe at the ideas he floats is more than a bit distasteful..

Read other ValuePlays post on this here, here, and here.

Here is today’s CNBC appearance.

Part 1:

Part 2:

Pershing Square Press Release May 26

Disclosure (“none” means no position):None

Interesting development just days before the Target (TGT) proxy vote…

According to Target’s Own Governance Guidelines,
Two Directors Should Step Down Promptly

NEW YORK, May 22 – The Nominees for Shareholder Choice commented today on recent developments concerning corporate governance issues at Target Corporation (NYSE: TGT).

Under Target’s Governance Guidelines – which are based on principles articulated by Target’s former CEO and founding family member Kenneth Dayton – two current members of its board, Solomon Trujillo and Anne Mulcahy, are required to tender their resignations promptly, making room for directors with relevant experience and fresh perspectives. In light of the on-going proxy contest, the Nominees for Shareholder Choice expressed concern that the company has not made any public disclosure regarding each of these incumbent directors’ resignations under the company’s Governance Guidelines.

Two Incumbent Directors Should Resign Promptly
According to Target’s Governance Guidelines

Incumbent director Solomon Trujillo (who is currently running for re-election to the Target board) has recently been asked to resign as CEO of Telstra, the Australian telecommunication company that he headed. In addition, yesterday, Xerox Corporation announced that incumbent director Anne Mulcahy has stepped down as CEO of Xerox. Under Target’s Governance Guidelines, as a result of changes in their principal employment, Mr. Trujillo and Ms. Mulcahy are required to promptly submit their resignations. Target’s Governance Guidelines provide as follows:

“Changes in Director’s Principal Employment – Any director (including management directors) whose affiliation or position of principal employment changes substantially after election to the Board will be expected to offer to tender his or her resignation as a director promptly to the Board. The Nominating Committee shall make a recommendation to the Board on whether to accept or reject the offer, taking into consideration the effect of such change in employment on the director’s qualification as an independent director and on the interests of the Corporation.”

Given the clear mandate of Target’s Governance Guidelines, Target should disclose whether either or both of these directors have submitted a resignation, and whether the board intends to delay taking action on their resignations to thwart the effective exercise of the shareholder voting franchise at the upcoming annual meeting.

Ronald J. Gilson, a renowned corporate governance scholar and a Nominee for Shareholder Choice stated, “The board and nominating committee know that board policies require members to offer their resignations when their principal employment changes substantially. It is poor corporate governance to deprive shareholders of the opportunity to choose successor directors to Mr. Trujillo and Ms. Mulcahy.”

Trujillo Era at Telstra

Mr. Trujillo’s departure from Telstra has been widely reported in the Australian press. A recent article in The Australian IT entitled, “Quiet Last Supper for Sol,” observed that under Mr. Trujillo’s leadership, Telstra’s share price declined materially, its relationship with the Australian government became severely strained, and a $12-billion IT transformation program originally lauded by Mr. Trujillo was over-budget and over-time with little results to show for it. The Australian IT quoted an analyst as saying, “The Sol Trujillo era at Telstra will be characterised by $15 billion of shareholder value destruction, uncertainty around the outcome of his much-heralded transformation program and customer satisfaction at an all-time low.”

The Nominees for Shareholder Choice believe that the circumstances surrounding Mr. Trujillo’s departure from Telstra suggest that, after a 15-year long tenure on the Target board, it is time for him to give up his seat to make room for a director with fresh perspectives and more relevant experience.

Despite Mr. Trujillo’s departure from Telstra, not only has Mr. Trujillo apparently failed to tender his resignation, but instead the company’s nominating committee and board have nominated him for yet another three-year term at the upcoming annual meeting. Mr. Trujillo’s nomination comes after multiple extensions of Target’s director term limits – which have increased from 12 to 15, and more recently to 20 years – in an apparent accommodation to Mr. Trujillo who is the only incumbent director who would have been immediately impacted by the prior 15-year term limit.

The Nominees for Shareholder Choice believe that Mr. Trujillo’s continued board candidacy is emblematic of the erosion of the governance principles first articulated and implemented by Target’s founding family member and chairman Kenneth Dayton decades ago.

The Nominees for Shareholder Choice are of the view that under these circumstances, if he has not done so already, Mr. Trujillo should promptly submit his resignation, and the Target’s nominating committee and board should accept his resignation and withdraw his nomination. The resulting vacancy should be filled by a vote of all shareholders at the upcoming meeting. According to the express terms of Target’s Governance Guidelines, Ms. Mulcahy must also promptly submit her resignation.

Now the whole resigning thing isn’t really the issue as the nominating committee could have recommended the Board not accept it. The problem is, and this is actually more disturbing is that so close to such a contested proxy vote that the Board and the Nominating Committee chose to ignore Target’s own rules.

One has to assume they rather not draw attention to potential issue with current members so close to the vote and give shareholders a possible reason to not re-elect them. I have a real hard time believing it was any type of over-site on their part also. It really does not pass the smell test…not even close..

Pershing’s Ackman has been on record questioning Target corporate governance…..they just gave his gas to add to his fire…

Read Former Board Member Bill George’s rebuttle to Ackman written yesterday. It now reads as more that a bit ironic given today’s events..

Disclosure (“none” means no position):None