A missing fact in this morning’s Target-investor-backlash story

So it seems the ante has been upped in the controversy over Target Corp.’s donation to MnForward, the big-business group trying to elect Tom Emmer.

As we all know, gay-rights supporters are outraged that the friendly hometown corporation gave shareholder dough to elect a guy who opposes equal rights. Today’s news is that three institutional shareholders holding $57.5 million in Target stock want the company to conduct a “comprehensive review of Target’s political contributions and spending processes, including the criteria used for such contributions.”

So the big-money folks find some agreement with the grassroots — a very legitimate story.

But there is a bit of context missing from the Star Tribune and Associated Press stories: Trillium Asset Management, Calvert Investments, and Walden Asset Management are all “socially responsible investors” — they incorporate human rights, diversity, environmental and other moral stands into their investment decisions.

Walden’s mission statement declares it is “managing our clients’ assets to achieve their specific financial and social objectives.”

In other words, the funds are ideological by design, with a different ideology than the sharks who typify the investment community — or in this case, Target’s management. (Though Target execs also say they’ll do a political-giving review, you can read the lacerating tone of the shareholder resolution here.)

That doesn’t make the Strib or AP stories wrong — the Target blowback did pick up steam yesterday. However, the news also doesn’t mean that run-of-the-mill capitalists see the discounter’s donations as a value-destroying proposition, if you define value as shareholder return.

The Strib story noted that a New York state pension fund and union funds may co-sign the Target resolution; hopefully readers can figure out the political dimensions there.

“Socially responsible” funds market themselves as different because they are. Readers should know the distinction when considering the depth of the “investor backlash.”

Update: MPR’s Tom Scheck compiles a list of corporations that will and won’t give to MnForward.

Update II: Looks like the L.A. Times story, noted by colleague Eric Black, doesn’t mention the SRI factor, either.

Comments (31)

  1. Submitted by Paul Udstrand on 08/20/2010 - 08:01 am.

    I’m sure the nature of these investors was no secret prior the political contribution. One would think that well paid executives would be aware of their investor profile and take it into account. Did Target look at these investors and say: “Meh, screw em, let em sell if they don’t like it” or did the just assume no one would notice the contribution? Or did they assume that giving money to a candidate who is actively seeking to codify inequality in MN law wouldn’t bother social justice investors?

  2. Anonymous Submitted by Anonymous on 08/20/2010 - 08:19 am.

    Guess what? SRI investing provides superior returns than unethical investing. These guys not only have a conscience, they provide better results than other investors.

    http://www.responsible-investor.com/images/uploads/resources/research/21205478981Evaluating_the_performance_of_SRI_funds.pdf

  3. Submitted by Hiram Foster on 08/20/2010 - 08:57 am.

    I don’t think it’s wrong to say that the investors referred to in this morning’s news reports run socially conscious funds, or otherwise subject to political influence. But the fact to add in addition to that is that socially conscious funds own shares just like any other fund, and like any other fund, they are there to provide good returns for their investors.

    Target has always presented itself as a socially conscious company, one that would attract the kind of investors who are now weighing in this morning. It is clear now, that their actions are alienating those investors who the company depended on to provide the kind od demand for it’s shares that drives the price up. Another reason why Target’s decision to get involved in partisan politics seems so strange.

  4. Submitted by John Olson on 08/20/2010 - 09:07 am.

    I would think that this represents a “shot across the bow” to Target management from some of their institutional investors.

    It also serves notice to other publicly-held businesses that entering the political arena with corporate financial contributions can be a dicey proposition.

  5. Submitted by James Hamilton on 08/20/2010 - 09:45 am.

    The one thing that is becoming increasingly clear is that Target gave no thought to the consequences of its contribution.

  6. Submitted by Joseph Skar on 08/20/2010 - 09:47 am.

    This story is so overblown. 0.15% of the investors are disgruntled, nobody cares. Props to David though for not calling it 50 million shares. The average daily share volume is 8 times the holdings of these investors so dumping every share they own would hardly effect market cap. Bolshevists please move along.

  7. Submitted by chris hatch on 08/20/2010 - 09:56 am.

    I’m curious what percentage the $57.5 mil is of the total amount of stock (yes I am probably being too lazy to google it). Maybe these groups weren’t large enough to be on their radar.

    I am in agreement with others that getting involved directly with politics so quickly does seem to be rather surprising given how careful Target is with its brand in every other venue. It tends to make you question Steinhafel’s leadership.

    Ultimately I would love to see a law that requires corp. boards of directors to approve any political contributions from general funds due to the potential effects on shareholders, but I am not holding my breath for a law like that to ever pass.

  8. Submitted by Josh Williams on 08/20/2010 - 10:08 am.

    Regardless of whether or not the backlash spreads beyond SRIs to other large shareholders, it is clear that they in and of themselves a significant market force.

    However, it doesn’t matter if in the end companies such as Target are able to display one face publicly and make UNDISCLOSED contributions that pursue an opposing agenda. What actions Congress and the courts take on disclosure requirements is a huge issue, and one that deserves our attention.

  9. Submitted by Hiram Foster on 08/20/2010 - 10:08 am.

    Target managers just aren’t that politically sophisticated, and they relied on people who they thought were politically sophisticated. What they missed is the folks were relying on were not in fact the sharp political operators they presented themselves to be, nor did those folks know anything at all about business generally or Target’s business in particular.

    That Target CEO must be kicking himself for ever letting the MN Forward guys get past the secretary.

  10. Submitted by Brian Simon on 08/20/2010 - 10:40 am.

    “That Target CEO must be kicking himself for ever letting the MN Forward guys get past the secretary.”

    I doubt it. This was not a decision made on a whim. A couple-three months ago, Target hired Sen John Thune’s chief of staff as their political director (or similar; I don’t recollect his exact title). That implies to me that Target is very deliberately planning a political strategy, and likely has (or had) plans far beyond their paltry contribution to MN Forward.

  11. Submitted by Hiram Foster on 08/20/2010 - 11:03 am.

    I don’t know if I would characterize Target’s decision to contribute to the Emmer campaign as entirely based on a whim, but it’s hard for me to believe that a lot of careful thought went into it. It was just as obvious at the time as it is in retrospect that Target was the best possible target, if you will, for those seeking to pick a fight over the issue of direct corporate contributions to political campaigns.

    Corporations should be aware that just serving time in a senator’s office, particularly a South Dakota senator’s office, doesn’t make anyone any smarter. That’s a lesson Target is paying a pretty high price to learn.

  12. Submitted by Hiram Foster on 08/20/2010 - 11:14 am.

    Just as a sidenote, Target’s problems offer an example of the high price shareholders are sometimes required to pay for manager ego. Here you have a bunch of Target executives who made a good living for themselves, selling tooth paste. But that wasn’t enough for them. They wanted to be players on the larger stage. After all, wasn’t the fact that they were earning those big bucks evidence that they were pretty smart? Shouldn’t the public receive the benefit of their high intelligence? So they go out and hire who used to work for a senator they knew nothing about, who immediately took it into his head to throw some money at some old buddies of his who had just left the governor’s office and were looking to cash in on their years of service. And suddenly you have a political firestorm, that pretty much anybody who followed the news who wasn’t blinded by their ego, could have seen a mile away.

    The wonderful thing about hubris is that, unlike the clothes at Target, it never goes out of fashion. The sad thing is that it’s Target shareholder who have to pay the bill for it.

  13. Submitted by chris hatch on 08/20/2010 - 11:26 am.

    @Brian

    actually Matt Zable hasn’t even started as VP of government affairs yet. the press release about him indicates he doesn’t start until next week.

    I have a feeling the MN Forward donation had more to do with a long running close relationship with the MN Chamber of Commerce than anything else.

    and as an aside, many of the people upset with Target should consider the Chamber started MN Forward and so tacitly all their members are supporting Emmer as well.

  14. Submitted by William Souder on 08/20/2010 - 11:31 am.

    I think it’s a stretch to define socially responsible investing as an “ideology,” but okay. Just the same, ALL institutional investors are going to be unhappy if a political donation creates a customer backlash or blows up into a boycott. This is encouraging, as it suggests corporations may be cautious in exercising their newsly expanded opportunities to fund campaigns…and that those who are not may be punished.

  15. Submitted by Stephen Dent on 08/20/2010 - 12:20 pm.

    Thanks for the list of Minnesota corporation that have or have not given money to MN Forward. Now I’ll know where and where not to spend my money. Thank goodness for COSTCO.

  16. Submitted by Hiram Foster on 08/20/2010 - 12:30 pm.

    Target to one degree or another, has always believed that doing good is good business, although they might not have put it in precisely those terms. The naive idealist in me would like to think that as well, and sometimes does. But the lesson they have learned, at the expense of their shareholders is that doing bad is generally not good business. And don’t trust your corporate fortunes to a guy whose last job was answering phones in a South Dakota senator’s office.

  17. Submitted by B Maginnis on 08/20/2010 - 12:40 pm.

    It would seem many of the above are “anti-business”.

    I wonder what busineses put bread on their tables….

    Oh, and here’s something for you, Brau, regarding “Fox”s contribution to the Governors PAC.

    http://www.dailyfinance.com/story/company-news/why-news-corp-s-1-million-gift-to-republicans-is-no-big-deal/19600475/

    I can smell the fear regarding November, the “U- Turn election”.

    All of the sputtering Target boycotters in the world can’t stop the (neccessary) U-turn!

  18. Submitted by Brian Simon on 08/20/2010 - 12:56 pm.

    “Matt Zable hasn’t even started as VP of government affairs yet. the press release about him indicates he doesn’t start until next week.”

    Thanks for digging up the details.

  19. Submitted by Brian Simon on 08/20/2010 - 01:05 pm.

    “I can smell the fear regarding November, the “U- Turn election”.”

    BD, prepare yourself for the possibility that the excitable media types may be over-selling the great wave projected for 2010. If you start looking at the actual seats that are likely to change hands, the Repubs might regain control of the house – which would require winning 39 new seats and losing none. Four seats are considered likely to flip Repub to Dem, meaning Repubs need to flip 43 to net the 39. That would put them at a slight advantage; hardly a u-turn. Meanwhile in the Senate, GOP odds of winning the majority are longer – largely due to the nomination of extreme candidates like Sharron Angle (NV), Rand Paul (KY) and Marco Rubio (FL), who’s chased popular incumbent Governor Charlie Crist from the party – making FL a likely Independent seat, where Crist is projeted to side with the majority in order to achieve relevance, meaning, like Lieberman, he’d caucus with the Dems. Saving the best for last, Rep Emmer is mired in the mid 30s in the MN Gov race, while Dayton is polling at 45-46%. With Horner likely to win around 10% of the vote, it will only take 45%+1 to win, meaning Dayton’s already there.

    So tell me again about this ‘U turn’.

  20. Submitted by chris hatch on 08/20/2010 - 01:16 pm.

    I would argue that Target still believes in doing good. It is not like they have stopped giving back to communties. Let us not forget they donated $150K to a business focused PAC while they give $3mil a week to the arts and children.

    and yes I know that many would argue about the business focus of MN Forward angle, but I think that is disingenuous. It would be like arguing that a vote/donation to Obama is in support of inequality since he does not support gay marriage.

    It would be hard to argue that they shouldn’t support business-friendly legislation or regulation as they are a corporation and not a non-profit advancing a social agenda

    They just made a huge misstep as relates to their brand. They apparently thought no one would care or they could slip under the radar, interestingly against the advice of their own risk assessment team according to some early reports.

    I would be curious how many other companies have given to political campaigns in states that don’t have as strict of disclosure laws as MN does. I wonder if they are now worried about that information leaking?

  21. Submitted by Hiram Foster on 08/20/2010 - 02:16 pm.

    “I wonder what busineses put bread on their tables…”

    The weird thing is that they contributed to a candidate, Tom Emmer, who favors a regressive tax structure. Whatever it’s other merits, a regressive tax structure shifts money from people who would use it at stores like Target to those who don’t.

    Target managers forgot the nature of the business they are in. They put their own subjective view of the world ahead of what was good for their customers and their business.

  22. Submitted by Stan Daniels on 08/20/2010 - 04:31 pm.

    Target hasn’t forgotten the nature of their business. They gave to an organization that supports 4 republicans and 3 democrats. MN Forward is a pro-business, pro-jobs organization. You may choose to disagree with there purpose, but it makes perfect business sense for a company to support candidates that help their business mission.

    The entire tie to gay rights and MN Forward remains a huge stretch and frankly a dangerous one. Corporations give hundreds of millions of dollars to charities each year. Should they now make sure they only contribute to charities that match your own personal agenda? Should Target survey each customer to make sure they aren’t offended by every political fundraiser they attend?

    Feel free to boycott Target over a single issue. America has much bigger problems that a donation to a pro-jobs group. Remember who has been the loudest complained. Moveon.org which has their own agenda. Somehow they are allowed to speak, but Target isn’t. That is scary to me — Target employs thousands of people. Moveon is the toy of one very wealthy person. In my America they both deserve an equal voice.

  23. Submitted by Gregory Lang on 08/20/2010 - 05:16 pm.

    For a bit of perspective, yesterday after reading about MSNBC rejecting the moveon.org anti-Target ad I check http://moveon.org They claim to have “five million members”. They had a fundraiser for money to buy ad time. It had $75,000 raised. Divided by the “five million members” that works out to a penny and a half per “member”.

    As for the quarter million or so “signatures” I have heard no one ask if these are “online” from an “action alert” email moveon.org sent out to all of these “five million members”.

    I recall the let used to claim that online polls or online petitions were “freeped”. (FreeRepublic.com) Some probably were, but isn’t moveon.org doing the same thing?

  24. Submitted by Gregory Lang on 08/20/2010 - 05:29 pm.

    Google “tgt” and you will get Mkt Cap: 38.41B

    Volume: 5,527,261
    Avg Vol: 5,680,000

    figure $52 per share, $50 if you want to do mental math.

  25. Submitted by Bernice Vetsch on 08/20/2010 - 06:18 pm.

    “MoveOn is allowed to speak but Target isn’t?”

    Actually, Target did “speak” with its donation.
    What happened after that is an uprising on the part of customers and investors who were outraged at that particular piece of “speech.” They, too, have a right to “speak” and are perhaps providing an example to others who may follow in their footsteps.

    Republican senators stopped the House’s DISCLOSE Act from coming to a vote in the Senate, but the Senate plans to try again in (most likely) September. Corporate and union donors would have to identify themselves every time they make a donation, which would mean that they would open themselves to the same kind of criticism Target has received.

    It’s a Power to the People moment.

  26. Submitted by Hiram Foster on 08/20/2010 - 08:25 pm.

    MN Forward is a Republican organization that uses the nominal support it gives to Democrats as political cover.

    Corporations do have to take into account the consequences of their actions. What’s happening to Target is evidence of that.

  27. Submitted by Hiram Foster on 08/20/2010 - 08:30 pm.

    The notion that Tom Emmer who wants to throw 30,000 state employees, all of whom shop at Target, out of work, would somehow be good for Target’s business is absurd.

  28. Submitted by Dennis Tester on 08/21/2010 - 08:50 am.

    ” … elect a guy who opposes equal rights.”

    Wow. That’s a stretch. If opposing gay marriage is “opposing equal rights” then Barack Obama is opposed to equal rights too.

  29. Submitted by Hiram Foster on 08/22/2010 - 07:53 am.

    I don’t think Target’s managers should be using the shareholder dollars entrusted to them to fund the Obama campaign either. All other arguments aside, it just doesn’t make sense for retail companies to identify with particular parties or candidates.

  30. Submitted by Hiram Foster on 08/23/2010 - 08:13 am.

    News stories can’t contain all the facts there are, and generally don’t contain all the facts the reporter may know. The fact that the funds that were the subject of the story engaged in socially responsible investing could have been included in the original story, I suppose, but that would also have opened up a whole new line of investigation. Target, after all, presents itself as a socially responsible company, one that contribute a portion of it’s profits to charity. Isn’t one effect of that policy to make it’s stock attractive to socially responsible investors whose demand for the stock tends to drive the stock price up? An issue has been made in recent days, that these particular investors hold a relatively small share of the company in relation to the overall market cap of the company. But it may also be the case that there are other socially responsible investors with the same concern who just aren’t expressing them publicly. If they are thinking of selling Target stock or just not interested in buying more, it’s hardly in their interest to announce that publicly as long as they hold shares, since that kind of news would tend to drive down the price of the shares they currently hold. Not even socially responsible investors can be expected to bad mouth a market position they have until after they have sold it.

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