Target Corporation: Ackman Versus the Board

Abstract:     
After 15 years of great performance, Target's faltering performance during an economic downturn led an activist shareholder to initiate a proxy fight. Target Corporation, the second-largest discount store retailer in the U.S., had competed successfully against industry leader Walmart for years by promoting an upscale discount shopping experience in comparison to Walmart's focus on low prices. This strategy worked well for Target in good economic times. The economic crisis of 2008-2009, however, caused shoppers to abandon Target in favor of Walmart. In the spring of 2009, one of Target's largest shareholders initiated a proxy fight to place his five director nominees on the board. Target won the proxy fight, but still faced questions about whether it had a strategy that could work in both good times and bad.

The case describes Target's business strategy and challenges to the strategy by an activist investor Bill Ackman who demands changes to Target's board to help implement the strategic shift that he proposes. The case is used to analyze long term drivers of value for Target and how the strategy has come under pressure. The case allows students to evaluate the merits of the activist investor's challenges to the company's strategy and the board's response to it. In addition, the case describes Bill Ackman's demand for changes on the board and the proxy fight to enable a discussion of the role of the board, board composition, and the proposed SEC proxy voting rules in the context of Target's proxy fight.

working papers series