Target board battle heats up

New York City The ongoing proxy contest for Target’s board continues to pick up steam. In the latest salvo, the Nominees for Shareholder Choice, a group backed by William Ackman's Pershing Square Capital, said Friday two members of Target's board -- Solomon Trujillo and Anne Mulcahy -- should resign because their employment status has changed. Trujillo is running for reelection to Target's board.

Ackman, who leads hedge fund Pershing Square Capital, which owns 7.8% of Target's outstanding shares, has been fighting to change Target's board -- a move he believes will provide fresh perspectives and make the discounter more profitable.

Citing Target's governance guidelines that call for directors to resign from the board "whose affiliation or position of principal employment changes substantially after election to the board," the Ackman-backed group says Trujillo, who was pushed out as CEO of Australia's Telstra, and Mulcahy, who resigned as CEO of Xerox on Thursday, "are required to promptly submit their resignations."

In response, Target issued a statement in which it advised its shareholders “not to be fooled by Pershing Square’s inaccurate and misleading reading of Target’s governance guidelines.”

The chain went on to state: “We are surprised that Mr. Ackman and Professor Gilson apparently did not read Target’s entire corporate governance guidelines. Had they done so, they would have found that the guideline that applies here to Mr. Trujillo and Ms. Mulcahy is guideline 22, which reads: ‘A non-management director who retires from principal employment may serve up to an additional three years from the date of such retirement, but only to a maximum of 20 years of service on the Board and not beyond the director’s 68th birthday.’”

Target also said: We are disappointed that now that we are in the final lap of the proxy contest, Pershing Square is making attacks on Target’s governance practices that are unsupported by the facts and, indeed, by the proxy advisory reports which it cites.”

Target holds its annual meeting next week in which shareholders will elect directors.