Target's Management: Watching Their Own Backs, Not Maximizing Shareholder Value

It is clear Bill Ackman has plans for Target (TGT). It is also clear in public he has been very complimentary of Target's management, though he has avoided a direct confrontation with them for over year, until now. It is also clear that management has no intention of even listening to their largest shareholder who has made investors billions doing what he is proposing Target do, unlock value.

What does it all mean? Management at Target does not have a clue that the landscape is changing out there, and being outright dismissive of shareholders while sales crater and the stock languishes, is well, not a very good idea.

Ackman has an interest in 8% of Target's shares. If you are a shareholder, you should want to know, if management says his ideas are bad for shareholders, how many shares do they own? The answer? .31%. Not 31, not 3.1 but POINT .31% or less than 1%. Now that includes the Board - all management. All of them.

So, what are they more concerned about really? Their jobs maybe? Ackman has an interest in 25 times more stock than they do. If you are a shareholder, wouldn't that mean to you that he probably has a rather large vested interest in the health of the stock? Maybe management is truly more concern with their nice salaries & perks than the share price?

This is not to say that they do not care about it, just that their pay and benefits trump stock price.

Here is the most recent pay figures:

Click to enlarge
It is nice to see them taking the free shares from the company. But one has to ask, "how many shares are they actually using their own money to buy?. The answer? None. In the past year only Chairman Seinhafel made a single purchase and that was the exercise of an option that he did not turn around and sell. Meanwhile, Ackman, his investors and anyone else who bought shares did so with their hard earned money.

Changes on the Board would probably mean changes in management as Target sought to be managed by those with more experience in those area such as food, real estate etc. I think it is pretty clear that management's actions are about "protecting our jobs", not "maximizing shareholder value".

If you are a shareholder, who are you going to want to hear from? Are you wondering why the blanket dismissal? Are you wondering, "well, what is management going to do other than sit and wait for the economy to turn?"

The letter:

To Our Shareholders:

You are cordially invited to attend Target Corporation's 2009 Annual Meeting of Shareholders. The Annual Meeting will be held at 1:00 p.m., Central Daylight Time, on Thursday, May 28, 2009 at the Target Store located at 1250 West Sunset Drive, Waukesha, Wisconsin. Details regarding admission to the Annual Meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.

At this year's Annual Meeting, you will be asked to determine that the number of directors constituting our Board of Directors shall be 12, to elect the Class III directors to our Board of Directors for three-year terms, to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm, to approve the performance measures available under the Target Corporation Long-Term Incentive Plan, and to act on the shareholder proposal in the Proxy Statement, if presented at the Annual Meeting.

We hope you will be able to attend the Annual Meeting, but if you cannot do so, it is important that your shares be represented. We urge you to read the proxy statement carefully, and to use the WHITE proxy card to vote for the Board of Director's nominees by telephone or Internet, or by signing, dating, and returning the enclosed WHITE proxy card in the postage-paid envelope provided, whether or not you plan to attend the Annual Meeting. Instructions are provided on the WHITE proxy card.

You should know that Pershing Square Capital Management, L.P. and certain affiliated entities, a group of hedge funds led by William Ackman that own Target shares and derivative securities ("Pershing Square"), have stated their intention to propose alternative director nominees for election at the Annual Meeting in opposition to the Board's recommended nominees.

We strongly urge you to vote for the nominees proposed by the Board by using the enclosed WHITE proxy card and not to return any proxy card sent to you by Pershing Square. If you vote using a proxy card sent to you by Pershing Square, you can subsequently revoke it by using the WHITE proxy card to vote by telephone or Internet, or by signing, dating and returning the WHITE proxy card in the postage-paid envelope provided. Only your last-dated proxy will count—any proxy may be revoked at any time prior to its exercise at the Annual Meeting as described in the Proxy Statement.

Thank you for your continued support.

Disclosure: No position

Comments

[jala:]

Short-sighted, to say the least. That applies to Ackman and the author of this article. All too many "investors" like Ackman are really vultures who raid and run. Yes, he could make the stock price go up over the short term. His ideas, however, would weaken the company and its long term success. Target is a very well run company with a proven formula. That the stock price is lagging is of concern to speculators, but not to investors. Leave it alone and go buy some options on some not-so-well-run company Mr. Ackman!

Apr 01 07:21 AM

[malach hamo...:]

Ackman wants to decouple Target from its real estate; it could be a very big mistake as it would greatly limit the company's ability to maneuver as it closes older stores and opens more efficient ones. It also adds zero value at this point since there is no greater valuation placed on retail real estate than on the stores that occupy them.

If he thinks he can run the stores better, let him make his case; it all he wants to do is lever the company by burdening it with higher rent to cover fresh debt on spun-off real estate, he'd be ruining the company just as it's poised to take its place among the top survivors.

Apr 01 07:31 AM

[reddog:]

Thinking that moves like this add value is what got this country in such a mess today. Yeah, right.

Apr 01 08:11 PM

[what !?:]

Wow, the author of this article is obviously clueless to what is going on. Ackman wants as much $ to make up for his errors as possible, that's no secret or even rocket science. Target is interested in long term growth and stability. Sell all their real estate and rent it back - always the sign of a company going down, not a strong healthy company. If anyone is short sighted and interested only in a quick buck, that would be Mr. Ackman. If he is so unhappy, bail out and suck the life out of some another ??? I am surprised at the author for not getting it.

Apr 01 09:05 PM