Societal noise and shareholder confidence are rarely the same thing.
Smart, serious investors not only take the long view of a company’s prospects but also recognize a well-managed, superbly positioned business when they see one.
Despite the furor over Target’s decision to pull Pride merchandise from its stores, shareholders overwhelmingly backed the company’s leadership. By large margins, investors recently re-elected Target’s 12-person board of directors, including CEO Brian Cornell, who also serves as executive chairman.
Each director received at least 94% of the vote; the average approval rate was 97.3%. Cornell even performed slightly better this year (94.7%) than 2022 (94.3%).
What’s more, 94.1% of shareholders voted to approve Cornell’s pay package, compared to 92.7% last year. The vote is advisory, but serves as a way to demonstrate investor sentiment toward top executives.
According to the company’s proxy statement, Cornell’s total compensation fell almost 11% to $17.6 million from $19.8 million in 2022. A closer look at the numbers shows Cornell’s bonus declined a hefty 42% to $693,000.
Rocky Performance So Far
So far this year, Target’s performance has been rocky. Faced with inflation-wary consumers, the company barely managed to eke out a slight overall sales gain during the first quarter. Since then, several analysts have cut ratings on Target stock because they predict consumers will continue to cut back on discretionary categories like apparel, home goods, and electronics.
But it was Target’s decision to remove Pride merchandise off its shelves that really blew up in its face. Conservative critics said investors were punishing Target for being too “woke,” with even Elon Musk musing about a possible shareholder lawsuit. Progressives and members of the LGBQT+ community accused the company of caving into right-wing extremism. Even the top law enforcement official from 15 states weighed in on the matter. Both sides talked boycotts.
Target completely botched the situation. But judging from the shareholder votes, the company’s investors have largely shrugged off the matter, including its four largest shareholders: The Vanguard Group, BlackRock Inc., State Street Corporation, and Capital World Investors. Together, the group owns over 30% of the company’s stock.
One Director Gets More No Votes
The only example of slight shareholder discontent concerned lead independent director Monica Lozano. A little over four percent of shareholders rejected her re-election to the board, almost double the figure from 2022.
Lozano, a Hispanic woman and former president and CEO of The College Futures Foundation, has a strong background in Environmental Social Governance (ESG), a framework for judging businesses. ESG often draws the ire of conservatives who equate the term as being “woke.”
But then again, Lozano still received 95.6% of the vote, more than Cornell.