Board governance. Ever since the Dayton family, led by former CEO Kenneth Dayton, took their company public in 1967, Target has been known for its superior board governance. Dayton's 1984 Harvard Business Review article became the national model for governance and the basis for many provisions in the Sarbanes-Oxley bill. Twenty-five years later Target's board governance principles remain essentially unchanged, and its board is consistently ranked one of the best in the U.S.
Ackman has picked an odd target in attempting to replace the Target board. It is one of the strongest, most committed boards in the country. In order to reflect the diversity of its customer base, Target's eleven independent directors comprise four women and three minorities, with CEO Gregg Steinhafel as the only inside director.
Ackman is off base in suggesting that the Target board lacks relevant expertise, with no CEO-level expertise in retail, credit cards and real estate. Target's board includes financial experts with real estate and credit card expertise like Richard Kovacevich of Wells Fargo and Jim Johnson of Fannie Mae, and marketing experts General Mills' Steve Sanger, McDonalds' Mary Dillon, and Coca-Cola's Mary Minnick.
In the last fifteen years the wisdom and unity of the board has guided the company through economic downturns, successful CEO successions, the timely and profitable spinoff of Marshall Field's and Mervyn's LLC, and expansion of Target stores into a national franchise.
Why would shareholders want to destroy the board's independence with directors loyal to Ackman, rather than to all of Target's shareholders?