Target has filed a letter with the United States Security and Exchange Commission that it received from a group of activist investors asking for leadership changes, including the ouster of executive chairman Brian Cornell based on results, operational miscues and amending social initiatives.
The letter addressed to Target stockholders from Mercy Investment Services, SOC Investment Group and Trillium Asset Management asked them to vote their shares against Cornell (pictured above) and independent director Christing Leahy at the company’s annual meeting on June 10. The letter also criticized the promotion of Michael Fiddelke to CEO.
In the letter, the activist investors stated:
In our view, Target has endured years of strategic and operational missteps that have led to significant underperformance compromising long-term shareholder value. The recent CEO succession does not signal that the board is focused on the genuine reset we believe is critical to turn the company around. Instead, the board’s decision, under Ms. Leahy’s leadership, to promote longtime executive Micheal Fiddelke to chief executive officer while also retaining former CEO Brian Cornell as executive chair and special advisor suggests continuity without correction. Not only does retaining Mr. Cornell comes at considerable financial cost to the company, but his role undermines the turnaround effort by jeopardizing the independence and effectiveness of both management and the board. Accordingly, we urge you to vote against the reelection of directors Cornell and Leahy on June 10th.
The letter additionally charged that Cornell’s compensation as executive chairman and the division of authority his presence in that position created were not consistent with positive change at the company.
The letter goes on to say that Target has underperformed the past five years and, although the authors acknowledged the company has faced multiple macroeconomic headwinds during that period, they insisted the company’s performance woes run deeper than what market factors might suggest. The general underperformance occurred during Cornell’s leadership as CEO and Leahy’s tenure on the board, the letter asserted, a time period when traffic, sales and share price have not lived up to expectations.
The letter also noted:
In our assessment, Target’s lagging financial performance stems principally from a series of operational and strategic missteps that have materially impaired the company’s brand. Multiple reports indicate persistent challenges with disorganization, high out-of-stocks and poor employee morale, leading to a diminished in-store experience. Furthermore, Target appears to have eroded its longstanding reputation for distinctive, fashion-forward merchandise assortments. Compounding these issues, Target has repeatedly entangled itself in social controversy over the past several years, including its decision to pull back its Pride collection, the rollback of its DEI initiatives and, most recently, its limited public response to Immigration and Customs Enforcement activities at certain store locations. These developments have elicited substantial consumer backlash, manifesting in protests, boycotts and reputational harm. Consequently, Target may have alienated key customer demographics, including Black, Latino, LGBTQ+ and progressive consumer segments.
The decisions on social policy hurt the company’s reputation, the letter maintained, citing various polls on the topic, including those from Harris Axios and Fortune magazine
As they asked shareholders to vote against Cornell and Leahy, the activist investors added that they are not asking for authority to vote other shareholders’ proxies and that no proxy cards would be accepted.
