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In the bull’s-eye: How Target — and Minnesota — landed at ground zero of an expensive U.S. debate

Gregg Steinhafel, who heads one of Minnesota’s most familiar and beloved companies, has become the national poster boy for the dangers of participating in our 21st-century form of democracy in which six-figure speech may be trumping free speech.

In the bull's-eye: How Target -- and Minnesota -- landed at ground zero of an expensive U.S. debate
REUTERS/Robert Galbraith
“Getting into politics means picking fights,” said professor Ian Maitland. “And picking fights is generally what companies don’t want to do.”

First of two articles

The warnings were everywhere. They were loud and clear. But tin ears don’t hear, and blinders can block out the clouds of political fallout. That happens to businessmen sometimes. It seems to have happened to Target Corp.’s chairman, president and CEO, Gregg Steinhafel.

The first alert came from the very U.S. Supreme Court justice who wrote the opinion that changed the political money game. Other red flags were raised by prescient experts in Washington, D.C., and even, one source said, within Target itself.

The thoughtful crystal-ball gazers anticipated scrutiny and reaction, although nothing like this, nothing like protest rallies, Facebook campaigns and petitions.

Somehow, Steinhafel wasn’t listening, wasn’t looking or got carried away with his own political views, a shortcoming known to afflict many corporate chiefs, according to one academic study.

Yes, Steinhafel followed the letter of the law. He was totally within bounds of new corporate political giving rules in the country and in Minnesota when he contributed $150,000 of his company’s funds to a group committed to issues important to the state’s biggest companies.

But Steinhafel broke an unwritten rule.

“Getting into politics means picking fights,” said professor Ian Maitland, a corporate governance expert at the University of Minnesota’s Carlson School of Management. “And picking fights is generally what companies don’t want to do.”

Now Steinhafel, who heads one of Minnesota’s most familiar and beloved companies, has become the national poster boy for the dangers of participating in our 21st-century form of democracy in which six-figure speech may be trumping free speech.

Kennedy’s warning
Supreme Court Justice Anthony Kennedy warned Steinhafel. Not personally, of course, but almost as a high-school principal might in a take-home letter to parents. Kennedy alerted Steinhafel and other CEOs last January in the opinion — “Citizens United v. FCC” — that decided that corporations, as if they were human beings, have free speech rights, too, and that corporations could contribute shareholders’ money to so-called “independent expenditures” during political campaigns.

Gregg Steinhafel
Gregg Steinhafel

In Minnesota, companies can’t give directly to candidates, but to other organizations which pay for messages that support candidates or trash opposing candidates. Because of the Supreme Court’s ruling, for the first time, companies with shareholders, employees and customers could use their general funds to independently back candidates … just so long as there is no coordination between the corporations and the candidates’ campaigns.

That ruling opened the door for Steinhafel’s Target Corp. and others to walk through. But as that right was granted, so, too, were consequences, intended or not. Borrowing some previous legal language from his colleague Justice Anton Scalia, Kennedy urged caution.

“With the advent of the Internet, prompt disclosure of [political] expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters,” Kennedy wrote.

“Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are [quoting Scalia] ” ‘in the pocket’ of so-called moneyed interests” . . . The First Amendment protects political speech and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

It was as if Justice Kennedy were saying: “Mr. Steinhafel, be careful.”

Soon after the Supreme Court ruling, conversations internally at Target, according to one source — and in executive-directed literature nationwide — advised corporate leaders and general counsels to tread lightly into this new game of corporate-backed political contributions.

In the publication, Executive Counsel, widely read by corporate lawyers, two Washington-based experts cautioned corporations: “There will likely be dozens of political reporters (and even more Internet bloggers) monitoring the political activity of corporations … The absence of good internal procedures for reviewing, approving and disclosing [contributions to independent expenditure groups] will expose companies to unwanted legal exposure and harm to their reputations.”

The amber lights of political risk and brand-damaging were flashing. But, no matter, in Minnesota, forces were gathering, and the idea of raising money — lots of it — was circulating, and not just on the corporate side. (See righthand column for fundraising details.)

On the left wing of campaign fundraising, unions and the usual suspects of progressive-cause bankrolling were mobilizing, too. Liberals recognized that with corporations given virtual carte blanche to begin independently funding political messages in Minnesota, there was no time to waste. Companies, with millions of dollars, would soon jump into the independent expenditure pool, aiding candidates or promoting issues that were sympathetic to corporate interests: no new taxes, government spending cuts, education “reform.” With the Minnesota governor’s race at stake, with the Republicans controlling that office for more than two decades, this was a seminal political moment.

By June 16, a limited liability corporation called MN Forward was born, an outgrowth of the Minnesota Business Partnership and the Minnesota Chamber of Commerce, two of the state’s leading business associations, generally aligned with the Republican Party.

Soon, Brian McClung, Gov. Tim Pawlenty’s former spokesman and deputy chief of staff, was named to run MN Forward’s day-to-day operations. Charlie Weaver, a former Republican legislator and Pawlenty chief of staff, heads the Business Partnership.

On the progressive side, the Alliance for a Better Minnesota, born three years earlier, began to crank up its fundraising on the strength of contributions from the 2010 Fund political action committee and the WIN Minnesota committee, two liberal funds.

WIN and 2010 are led by Ken Martin, a veteran Democratic political operative who has run campaigns in Minnesota for John Kerry and Mike Hatch and who directed the successful Clean Water, Land and Legacy state constitutional amendment effort in 2008. That effort got the biggest single vote in Minnesota history of any issue or candidate.

The war was on. In its first skirmish — the first commercial aired by MN Forward in mid-July — Steinhafel and the treasured Target reputation were caught in the cross fire of rapid response, web mania and, seemingly, the ancillary issue of gay rights — all because of the lightning-rod nature of Republican gubernatorial candidate Tom Emmer.

Tom Emmer
MinnPost/Terry Gydesen
Tom Emmer

MN Forward wanted its message to be about job creation, but Emmer’s views on abortion and gay rights were pushed by opponents.

“It’s no surprise that organizations that differ with the candidates we are supporting would speak out against companies that are supporting our efforts,” said MN Forward’s McClung. “We were expecting some of that, but what is unique here is that MN Forward is focused on issues related strictly to jobs and the economy, and those who are criticizing us are trying to ignite a debate about social issues.”

Actually, Emmer’s opponents, especially the Alliance for a Better Minnesota, are committed to defining him, in any way they can, as a right-wing extremist.

With Minnesota’s August primary just five days away and the general election in less than three months, this blitzkrieg of independent expenditures has just begun. Meanwhile, a federal lawsuit is under way, and fund-raising continues aggressively on both sides, with predictions that at least $15 million of independent expenditures will be poured into the 2010 governor’s race.

The aftershocks of Target’s $150,000 contribution to MN Forward are being felt as far away as California, where the announced plans for two new downtown San Francisco stores are now meeting some opposition from gay and community activists.

What changed?
For years, organizations like the Minnesota Chamber and Business Partnership raised money from individuals. Affiliated political action committees — or PACs — then funneled money to aid political campaigns. What’s new since the Supreme Court ruling is that corporations — public and private, for-profit and not-for-profit — can now write checks to so-called “independent expenditure” committees, such as MN Forward, and those dollars can be used to produce commercials and direct mail that support “political activities” — that is, campaigns.

Brian McClung
Brian McClung

Here’s how MN Forward works, according to McClung.

Weaver and Chamber President David Olson approach business leaders and make a simple pitch: MN Forward supports candidates for governor and the state Legislature “that understand the importance of creating private sector jobs . . . The mission is to be a voice for job providers and to ensure those issues are at the top of the agenda,” said McClung.

Thus, Emmer is their guy, because he has voted with Chamber issues more than 90 percent of the time, as opposed to DFL candidates Margaret Anderson Kelliher, Matt Entenza and Mark Dayton, who are down in the 20- and 30-percent range.

On legislative races, which MN Forward will also take part in, McClung said: “We do not make any commitment as to which candidates we will support” when seeking funds from corporate leaders. “Those are decisions left to the leadership of MN Forward,” meaning Weaver and Olson.

McClung said soon — perhaps as early as today — MN Forward will be endorsing six legislative candidates, including three DFLers. Thus, corporate dough, including Target’s will be backing Dems, too.

“Why don’t you ask the Alliance for Better Minnesota if they’re going to support any Republicans?” McClung suggested.

The answer is no.

Left of center
The Alliance for a Better Minnesota is unabashed in bashing Emmer — it has already put together three aggressive anti-Emmer ads — and in its support of the election of a DFL governor. The Alliance is a spender of state-focused money from the two other fund-raising organizations that funnel cash to it.

Alliance Executive Director Denise Cardinal said they haven’t decided if the Alliance will endorse any legislative candidates. The focus of commercials and messaging is on the governor’s contest.

“It’s to get a true progressive in the governor’s office — that’s what we’ve all agreed,” Cardinal said of her financial backers.

Said Ken Martin of WIN Minnesota and the 2010 Fund: “I care deeply about electing a Democratic governor in the state.”

As much as corporations are backing MN Forward, a group of well-known wealthy Minnesota liberals are funding the Alliance: Alida Rockefeller Messinger — who happens to be Mark Dayton’s ex-wife; John Cowles, former owner of the Star Tribune, and his spouse, Sage; and longtime Democratic lawyer and funder Vance Opperman.

Then there is a host of labor unions. Already the Alliance has backed tough commercials defining Emmer as someone who voted to lessen drunk-driving penalties after being charged with two DWIs himself.

Among the Alliance’s biggest funders are large labor unions, including Education Minnesota, the teachers union, which has already given $250,000, and AFSCME, a public employees union with 43,000 members in the state, which has given $100,000.
In this debate about corporate money, some conservative critics wonder about the role of unions. What, they wonder, is the difference between Target contributing $150,000 to a pro-business group while teachers, nurses and state employees unions also give six-figure checks to a different independent-expenditure group.

Unions protest such comparisons. While data show that unions — in all campaign contributions nationwide — give more across the board to Democrats than business groups do to Republicans, Eliot Seide of Minnesota’s AFSCME District Council 5, said his union has on occasion backed Republican lawmakers and county commissioners.

A union is a group of individuals, and in many cases, members may opt out of contributing to their union’s political activity. For instance, at Education Minnesota, a non-participating member receives a $10 rebate annually, a spokesman said. At AFSCME, a calculated percentage of a member’s dues is refunded if he or she decides not to contribute to the union’s political giving.

AFSCME’s Seide said that dues-paying members meet and decide on endorsements, that members can remove officers in union elections every two years if they are unhappy with union contributions, and that he can be fired at will if his members are unhappy with the political endorsements he recommends.

“I doubt that the Target CEO asked his employees what they thought about” the contribution to MN Forward before the company sent its money, Seide said. (Steinhafel did not.)

In the end, when the gubernatorial campaign is over, it will be fascinating to add up all the cash and see who wins — the local corporations or the unions and the liberals. Right now, McClung is pleased to point out, the liberals have raised more than $2.1 million to the conservatives’ $1.1 million.

Rep. Ryan Winkler
Rep. Ryan Winkler

But Rep. Ryan Winkler, DFL-Golden Valley, who helped shepherd a strict disclosure law through the Legislature at the end of last session, predicted MN Forward will far out-raise the Alliance.

“Unions can’t go toe to toe with the corporations,” he said, predicting MN Forward would pour up to $10 million into the governor’s contest and legislative races.

On the left, there seems to be a unified notion that the Citizens United decision is bad for democracy, that the more money pouring in via huge amounts from corporations, the more the little person with his or her $50 contribution will get drowned out.

As Mike Dean, executive director of Common Cause said, “When I give $50 to a candidate, I’m not expecting something in return. What is Target hoping to get in return for its $150,000?”

McClung said all MN Forward’s funders want is a governor and legislators who support Chamber and Business Partnership policies, and Emmer is their guy. There are no promises being made.

The Supreme Court asserted in the Citizens United case that “independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption. That speakers may have influence over or access to elected officials does not mean that those officials are corrupt. And the appearance of influence or access will not cause the electorate to lose faith in this democracy.”

Maybe so, but some voters — active, noisy, progressive, web-savvy voters — continue to examine the case of Gregg Steinhafel and the role of the Target board of directors, and wonder what they knew and when they knew it.

What’s clear is that in Minnesota corporate political contributions will come at a cost, and Target’s Minnesota problem is a national problem that will soon find its epicenter in the biggest state of all, California.

Friday: Steinhafel, Target’s California dilemma, and a federal case on tap.