Scott Shepard: As Target Plays Politics, Its Shareholders Take Aim

Well, it’s finally happened. A company has strayed so far into politics, at the demonstrable and shattering detriment to its bottom line, that shareholders have begun a process that – unless Target mends its ways – will end in court.

Scott Shepard

Scott Shepard

As it happens, the shareholder making this initial demand is the National Center for Public Policy Research, where I direct our shareholder-activism efforts. But I very much doubt that we will remain the only shareholder demandants in this case, or the only plaintiffs, should this proceed to suit. Nor do I think that Target is the only company that will face such demands; the clearer it becomes that putting politics before demonstrable corporate value hurts the latter, the more interest will arise in pursuing these efforts.

As you probably well know by now, Target has watched Anheuser Busch crush its own American sales, and in a nice variation on an old cliché responded, “hold your own terrible beer. Brand destruction? Corporate value destruction? You ain’t seen nothing yet!”

Then Target – which has seen its stores get sacked by urban hooligans in cities that have followed its own left-wing policy positions – further looted its own value. It combined maximum trans “affirmation” with child grooming and – because this is 2023, and everything keeps getting stupider – Satanism, and dumped the whole mess into the front of its stores nationwide.

Now, in punctilious fairness, it appears that the “Satan respects pronouns” shirt was sold not by Target, but by a Target partner who sold other things with Target. But this partner also sells gear that glorifies violence against so-called transphobes, such as designs showing the phrases “We Bash Back” with a heart-shaped mace in the trans-flag colors, “Transphobe Collector” with a skull, and “Homophobe Headrest” with skulls beside a pastel guillotine. The partner’s products also include anti-Christian imagery. The company also highlighted a panoply of trans clothing designed for children, and backed it up with significant financial support – from shareholder assets – for organizations that pressure schools to keep parents in the dark about their children’s intimate development.

Need anyone at all ask whether Target partners with groups that sell products calling for violence against people who disagree with right-of-Sunny-Hostin priorities, or with groups who make up significant (or, as is the case with transgenderism, vanishingly small but intensely attention-hungry) constituencies on the right?

Well, in fact, that’s in part what the demand to Target seeks to discover. The goal is to establish how Target went about setting itself and its share value on fire this way. Its CEO, Brian Cornell, claimed that making these partnerships, amping up these campaigns, making these donations and highlighting these products was “‘the right thing for society, and it’s the [sic] great thing for our brand.”

The first half of Cornell’s statement sets the predicate for a breach-of-fiduciary-duty suit against him and his fellow executives and directors. Corporate executives are simply not permitted at law to make decisions about how to run “their” corporations according to their personal, subjective determinations about what’s “the right thing for society.” Their duty is to maintain and increase corporate value using objective, complete and unbiased analysis. That can’t be done about partisan political issues, because there is no objective, neutral conclusion.

“Turning over the promotional areas of our stores to clothing aimed at kids pushing a highly divisive social line in ways that vast swathes of our customers find dangerous is good for society.” That’s simply not susceptible to neutral analysis. Any attempt to respond to that proposition at all requires the introduction of personal policy premises and preferences, which corporate executives may not include in their decision-making process. The fact that the CEO nevertheless took that consideration into account offers a hefty admission on his part about this fidelity to fiduciary duty.

Then there’s the second part of his formulation. As it turns out, “Turning over the promotional areas of our stores to clothing aimed at kids pushing a highly divisive social line in ways that vast swathes of our customers find dangerous is good for our brand” and for corporate value is susceptible to objective, complete and neutral a priori analysis. If Cornell and his fellow directors and executives did not bother with that objective, complete and neutral analysis – because of their eagerness to use shareholder money to push their vision of social morality – then they have assuredly violated fiduciary duty in ways that could make them personally liable for the losses being suffered by Target.

If they pretended to undertake the analysis but used biased, incomplete and goal-seeking sources, then they are similarly liable.

It’s possible, of course, that the Target execs really did try that analysis to the best of their ability, but didn’t see what was coming. In the wake of the Bud Light fiasco and a wide array of related developments, they certainly should have. But if they can make a credible showing that their breach of fiduciary duty was the result of profound incompetence rather than willful behavior, they might avoid personal liability. But if that’s true, then the last competent people left at Target would certainly have a duty to wholly reorganize the top of the company with new leaders who have been picked specifically, in part, for their ability to understand fiduciary duty and to think beyond the woke echo chamber – because failure to clean house that way would then make any similar future screwups intentional.

Target has fallen 43.9% since June 2021, while Walmart and Costco have gone up 6.9% and 35.4%, respectively, in that same time period. In the last 29 days, since Target began Targeting its own customers, Target has fallen 17.4% while the general retail sector has remained steady with a slight 0.3% increase. The usual crowd will claim that it’s just too hard to tell what caused the recent loss. This tells you nothing about how hard it is to assign the blame for the recent loss, but quite a bit about the usual crowd.

Scott Shepard is a fellow at the National Center for Public Policy Research and Director of its Free Enterprise Project. This first appeared at RealClearMarkets.

The National Center for Public Policy Research is a communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today’s public policy problems. We believe that the principles of a free market, individual liberty and personal responsibility provide the greatest hope for meeting the challenges facing America in the 21st century.