Thursday, May 28, 2009

Back from the front line: Mike Levin on Target's Annual Meeting

We attended the Target Corporation's annual meeting today, with the only drama around the temporarily-uncertain outcome of Pershing Square's campaign to elect five directors, including Bill Ackman, who runs PS. In the end, as was publicized, preliminary vote counts indicate that incumbent directors won the vote. The only surprise is the actual vote: PS candidates appear to have won at most a quarter of the votes, much less than most observers expected, and fewer than PS has won in similar contests.

We arrived at a brand new, as-yet-unopened Target in Waukesha, Wisconsin for the annual meeting to find heavy security and abundant media. The meeting itself was cordial, featuring Bill Ackman's speech. Ostensibly in support of his candidates and also an arcane but important shareholder resolution that the Board of Directors consists of 13 rather than 12 positions, he directed his remarks instead to a critique of shareholder voting systems in Corporate America, the low share ownership among Target's incumbent directors, and flaws in the process for nominating directors to stand for election. He quoted John F. Kennedy's inaugural address ("we shall pay any price, bear any burden...") and paraphrased Martin Luther King's "I have a dream" speech, both of which caused him to quite sincerely choke up a bit, a testament to how seriously he takes both his investments and corporate governance in the U.S. Otherwise, the meeting was as cordial as any we have attended.

Most observers thought that PS candidates would do better than they did, especially in light of the support they received from RiskMetrics/ISS and ProxyGovernance. Some at the meeting speculated that a few large institutional owners switched their votes from PS to incumbents because these investors feared they would lose access to company management if they voted against the board-nominated candidates.

When the votes are finally tallied, it'll be interesting to see who voted and how.

Posted by Mike Levin, Hedge Fund Solutions. Mike can be contacted at