Support for Target's board members narrowed, vote shows

Target Corp.'s 10 board members were re-elected by slimmer margins than last year, with two board members receiving votes in the low 60 percent range, according to results released Friday.

Last year, every board member received at least 86 percent support.

The results from the company's shareholders meeting on Wednesday suggest that stockholders are beginning to grow weary as Target tries to work through a string of challenges, including last year's massive data breach, a nearly $1 billion loss in Canada and sluggish U.S. sales. The lower returns also reflect the lobbying of two prominent proxy firms who had recommended that shareholders reject some members of the board.

Most board directors are elected with more than 90 percent support from voting shareholders, so when you see directors elected in the 60 to 70 percent range, it raises eyebrows, said Hillary Sale, a professor of corporate law at Washington University in St. Louis.

"In the world of shareholder votes, those are bad votes," she said. "I think they are definitely on notice."

Two Target board members — James Johnson, former CEO of Fannie Mae, and Anne Mulcahy, former CEO of Xerox Corp. — garnered the least support from shareholders. Johnson received 63 percent support and Mulcahy 64 percent.

Meanwhile, Target's interim chairwoman, Roxanne Austin, garnered 78 percent approval, down from 95 percent the previous year. Three other directors criticized by one of the proxy firms received 79 to 81 percent support.

In a statement on Friday, Austin said the board appreciates the continued support of shareholders after a challenging year. "During this proxy season, we have had a productive dialogue with many of our investors, and we look forward to continued engagement in the weeks and months to come," she said.

Sale noted that two JPMor­gan Chase board members resigned last year after receiving just 53 percent and 59 percent support of shareholders. As for Target's board members, the company's performance in the next year could be a big factor in their fate, she said.

"If the company is doing well next year, this could all blow over," she said.

Last month, the proxy adviser Glass, Lewis & Co. had recommended "no" votes for Johnson and Mulcahy because of their record of oversight of other companies, including Fannie Mae, that have collapsed or have faced other serious issues.

Another adviser, Institutional Shareholder Services, counseled investors to oust seven board members — those on the company's audit and corporate responsibility committees, including Johnson and Mulcahy — because it argued they failed to protect the company from last year's massive data breach.

The three board members who were not singled out by the proxy firms — Douglas Baker Jr., Kenneth Salazar and John Stumpf — received high marks with more than 95 percent of votes.

But there was a bright note for Target's board. Shareholders did indicate rising confidence in the company's executive compensation, which the board retooled after last year's say-on-pay vote garnered only 52 percent approval. This year, that measure received 78 percent support

Shareholders had expressed concerns about former CEO Gregg Steinhafel's high level of pay compared with his peers, especially given Target's stock performance in recent years. So the company made changes to lower executive pay and link it more to performance.

This year, shareholders also expressed more interest in having an independent chairman. The board doesn't have a policy splitting the CEO and chairman roles and has said it prefers the flexibility to decide the best system based on the circumstances. Steinhafel was both CEO and board chairman.

A shareholders' nonbinding proposal on the matter, which was opposed by the board, received 46 percent of votes, up from 37 percent last year.

"It's a strong signal," Sale said. "They are in the midst of a CEO search now. So if they want to make the change, it's an easier change now than if they have a sitting CEO. … You don't have to say to your current CEO: 'Scoot over.' "

Kavita Kumar • 612-673-4113