In the bull’s-eye, Part 2: Despite Target apology, San Francisco stores stand on shaky political ground

Second of two articles

First came a six-figure contribution to an independent-expenditure political fund known as MN Forward. That fund then paid for a TV commercial backing a gubernatorial candidate whose legislative votes consistently opposed gay rights matters in the Minnesota House of Representatives.

That all was embarrassing and damaging enough for Target Corp.

But the timing of it all really couldn’t have been worse for Target, and its potential impact on the company’s business plans for the lucrative San Francisco market remains politically uncertain.

Within the same 24-hour period in late July, when news first broke in Minnesota that Target was backing a group that was funding Republican-endorsed Tom Emmer, the retailer was proudly announcing plans to open two new, core-city stores in, of all places, San Francisco, the epicenter of gay and lesbian rights.

The national reaction over the past two weeks, fueled by the power of the Internet and customers’ feelings toward the Target brand, has been breathtaking, triggering an apology Thursday from Target CEO and Chairman Gregg Steinhafel, and pledges to re-evaluate how political contributions are made and to promote a dialogue around diversity and inclusion.

But those are words, and Target, with about $65 billion in annual sales, is about business. Now, because of a small-potatoes $150,000 campaign contribution, the giant retailer’s proposals to expand into San Francisco are at risk.

Now, the fate of the stores “is to be determined,” San Francisco Board of Supervisors member and mayoral candidate Bevan Dufty told MinnPost in an interview. “There was a lot of sentiment for people who wanted the stores to open, and this [Emmer connection] clouds that. It’s not only the cash. It’s the ham-handed way the company tried to explain it away: ‘We supported this person based on their position on economic issues.’ Well, that’s just not satisfactory.”

Clearly, Steinhafel’s apology isn’t the end of the controversy. Not by far. It seems to be the first small step in attempting to right an internal corporate decision-making process, not only at Target, but at other large companies.

All corporations now have wider latitude to give to political campaigns, following the U.S. Supreme Court’s “Citizens United” decision earlier this year.

But Steinhafel’s predicament has liberal groups and campaign finance observers wondering if companies will not only be more cautious in their political giving, but more savvy and stealthy in attempting to hide the paths of their contributions. Minnesota’s disclosure laws, tightened up after the U.S. Supreme Court ruling in January, are among the most transparent in the nation.

Still, there may be ways for donors to dodge the watchful eye of journalists and activists.

The Target board
No one knows if or when Target’s entire board of directors was involved in approving Steinhafel’s decision to contribute to MN Forward or, for that matter, the role of boards of any of the other respected Minnesota companies that have given a total of more than $1 million so far to MN Forward.

A Target spokeswoman declined to comment on the board’s role, referring MinnPost to a couple of statements issued about the Emmer controversy, neither of which addressed the board’s role.

Legally speaking, in most cases a CEO need not bring in his board on such decisions, according to corporate governance expert Ian Maitland of the University of Minnesota’s Carlson School of Management.

“I think there is no law that would require it,” Maitland said. “That sort of power is often delegated to the CEO or a group of managers … Typically, these things may be delegated fairly far down … That doesn’t mean it’s good management practice.”

Three colleagues of Maitland’s at the Carlson School conducted a study, “Corporate Political Contributions: Investment or Agency?” (PDF) that challenges the wisdom of corporate contributions and the real rate of return on political giving. It also suggests corporate contributions may be a reflection of corporate leaders’ personal politics.

As they wrote, “[W]hile companies do not have political preferences, their managers do.”

Gregg Steinhafel and his wife, Denise, have given thousands of dollars over the past few election cycles exclusively to Republican candidates and to conservative-leaning political action funds. Since 2002, Gregg Steinhafel has given $37,700 to the Republican Party, according to data at Open Secrets. The Steinhafels each contributed $2,000 to Emmer’s campaign, records show, and have contributed more than $7,000 since 2007 to Rep. Michele Bachmann’s campaigns.

Of course, this is something they are free to do as private citizens, and no one begrudges them that.

But, according to the Carlson School study, 86 percent of the publicly traded firms in the United States make no political contributions. Steinhafel and his board now know why.

If other members of the Target board were involved, they have been lying low. If they weren’t involved, they are now, thanks to activists like Aaron Baldwin in San Francisco.

Target stores
Which takes us back to the really bad timing.

On July 21, just one day after the MN Forward contribution and Emmer ad story began stirring, Target executives announced their plans, amid some hoopla, to open two in-city stores there.

Before long, gay activists, such as Baldwin, and their supporters nationwide latched onto the contradiction of a company like Target — long affiliated with community efforts and long proud of its relationship with the gay and lesbian community — backing Emmer.

Baldwin also discovered that Target contributed $3,250 two years ago to support an anti-gay marriage initiative in California; the company contributed a lesser $750 to oppose the ballot measure known as Proposition 8.

In San Francisco, thousands of potential Target customers are gay or lesbian or transgender.

It just so happens that two of Target’s board members are John Stumpf, a native Minnesotan and CEO and board chairman of Wells Fargo, and Wells Fargo Chairman Emeritus Richard Kovacevich. Wells Fargo & Co. is San Francisco-based but maintains a large presence in the Twin Cities.

Baldwin began to connect the dots. He has met with officials of the San Francisco Human Rights Commission and he has plans to reach out to Stumpf and Kovacevich, too. After all, many of Wells Fargo’s customers and employees in San Francisco are members of the GLBT community, too. Baldwin wants such powerful Target board members to encourage Steinhafel to, perhaps, contribute to the other side.

As he pointed out, DFL candidate Mark Dayton is the great-grandson of the founder of Dayton’s department stores, out of which Target was born.

“How about that for family values?” Baldwin asked. Steinhafel “blew up his company’s reputation with a community that is quickly approaching almost $2 trillion in purchasing power,” he added. “If I were a Target Board member, I would investigate for any possible inappropriate and unauthorized use of corporate funds … and see if there are grounds for termination [of Steinhafel].”

As Baldwin has begun to reach out to the Wells Fargo-Target connection, Dufty and David Campos, another member of the San Francisco Board of Supervisors, were contacted by Target regional representatives in the Bay Area. Dufty and Campos are the two gay members of the board. An emergency meeting was held Wednesday night.

In the meeting, the supervisors “expressed very strongly” their dismay with the Target backing of Emmer. Dufty said he told the Target representatives, “You can’t, on the one hand, espouse principles that speak to respecting diversity and respecting people in this community and then fund candidates who with every walking breath and moment work to make us second-class citizens.”

Perhaps it’s a coincidence, but within hours of that meeting in California with two key politicians who may have a role down the line in approving aspects of those new Target stores, Steinhafel issued his apology to Target employees in Minnesota.

Lessons?
Marc Elias, the Democratic Party lawyer who represented Al Franken in the 2008 Senate recount and who is among the nation’s campaign finance experts, said, “Companies need to be aware that when they give money to independent expenditure groups, in most instances, they’re not going to control the message those groups give out.”

Obviously, when Target gave its donation to MN Forward and allowed the fund’s leaders to craft a TV ad for Emmer, Target lost control.

To wit, as reported in MinnPost earlier, Randi Reitan’s YouTube video has received more than 200,000 hits. And there are all the Facebook pages: “Boycott Target Until They Cease Funding Anti-Gay Politics,” and “Protest Target’s Support of Extremist Tom Emmer” and “National Day of Protest Against Target.” There are numerous Twitter accounts devoted to the cause — and recent chatter on the web among blogging mothers about a back-to-school boycott of Target.

That’s why Common Cause, the good government group that works for fair elections, has called on Target and all other companies to pledge not to make contributions from general funds to political campaigns.

“Target shareholders should demand that political expenditures not be made without the explicit approval of shareholders,” said Mike Dean, executive director of Common Cause Minnesota. “This approval process will ensure that political donations are made in the best interest of the corporation and not individual managers.”

Last week, New York-based Goldman Sachs took such a pledge.

It would seem as if the Target controversy would bring a chilling effect to corporate contributions, and to MN Forward, in particular. But Executive Director Brian McClung said contributions to MN Forward have kept rolling in since the start of the Target kerfuffle. Federated Insurance, Pentair, Holiday, Cold Spring Granite and Red Wing Shoes have contributed a total of more than $300,000 to MN Forward in the past 10 days.

Said McClung: “They understand our mission. They support what MN Forward is doing, and they’re not going to be intimidated by these activists … No one is going to agree with any candidate 100 percent of the time, but you can support that candidate when you look at his record on issues that matter to the business community.”

Still, with all the scrutiny, there’s concern on the left that corporations will attempt to “launder” their contributions through smaller, less-examined organizations, such as trade associations or the non-political funding wing of the Chamber of Commerce.

Instead of, say, giving $100,000 to MN Forward, Company XYZ could give $10,000 to 10 smaller political committees, which could then move the money to MN Forward. Or give the money to the Chamber’s education fund, and the Chamber — with disclosure — could move that into its political action fund and then to MN Forward.

Such movement of money would be more difficult to trace. And such swapping would, in fact, be hard to do under the Minnesota legislation passed last May, but Rep. Ryan Winkler, DFL-Golden Valley, who sponsored the House version, said: “I think [the laundering] could be done, but you’d have to be really determined to do it.”

The Minnesota disclosure law was supported in a bipartisan fashion. The Minnesota Chamber and Business Partnership, parents of MN Forward, backed the disclosure bill, which was passed unanimously by both the House and Senate and quickly signed by Gov. Tim Pawlenty.

But for Minnesota’s strong disclosure rules, no one might know of who’s giving to whom or what. As Elias told MinnPost: “What’s interesting about Minnesota is that we actually know that Target and other companies gave to [MN Forward.]” In many states, such transparency is still not required.

Lawsuit challenges rules
Not surprisingly, some conservative groups are seeking to overturn the Minnesota campaign finance rule as it applies to independent expenditure funds and the related disclosure rules. In a federal law suit filed in Minneapolis, Minnesota Concerned Citizens for Life, an anti-abortion group; the Taxpayers League, an anti-tax group; and a private travel agency are suing the state, contending the Minnesota law is unconstitutional because it requires corporations to contribute their independent expenditure money to independent expenditure committees — such as MN Forward or WIN Minnesota — that must disclose regularly who is giving and how much.

The MCCL and the others want to be able to make independent expenditures directly to campaigns without moving them through such “IE” committees and the disclosure process.

“Political funds have burdensome and onerous registration, reporting, and recordkeeping requirements,” the lawsuit says.

Indiana lawyer Joseph LaRue, working for the plaintiffs, told MinnPost in an email, his clients’ “goal is not to avoid reporting, but to get to do what the Constitution says they should be allowed to do,” and that is, in their view, have corporations and other organizations spend money directly on candidates campaigns. If the federal court allows that, then a new state law with different disclosure rules would have to be developed, LaRue wrote. But, the fact is the Minnesota Legislature is now out of session, and if the current law were struck down, disclosure wouldn’t be possible before Nov. 2 and Election Day.

LaRue is an associate in the law firm Bopp, Coleson and Bostrom, which is led by James Bopp, a longtime national advocate for aggressively fighting campaign finance rules. Bopp’s firm has instigated lawsuits across the nation, including “Citizens United.”

A hearing in the case is set for Aug. 20 in federal court in Minneapolis, another front in the local and national campaign finance war. That courthouse is about eight blocks away from Target headquarters, where today a demonstration was set by Moveon.org. to hand over petitions with 260,000 signatures of claimed Target shoppers gathered via an Internet campaign.

Whether this influx of money from corporations and unions, from motivated CEOs or rich Democrats to liberal groups is “good for democracy” seems a bit academic right now. It’s the law of the land, and corporations will run with it. As Ken Martin of the left-leaning Alliance for a Better Minnesota put it, “We’re not going to unilaterally disarm.”

Most likely about $15 million to $20 million of independent expenditures will pour into the Minnesota gubernatorial and legislative races between now and November. Meanwhile, the approval process for two new Target stores in San Francisco has just begun.