Target board has no class

Shareholders of Target last week overwhelming supported the elimination of the company’s earlier board classification structure so that the company’s directors must now stand for election every year. It’s not surprising that such a shareholder-friendly measure would pass, but it is interesting to look at the details of votes on other proposals. For example, board member Anne Mulcahy was re-elected, but the former Xerox CEO and chairwoman drew a large number of negative votes, with 14.7% of the shares cast against her. Likewise, board member Stephen Sanger, former chairman and CEO of General Mills saw 10.5% of shares voted against him. In comparison, only 3% of shares voted were against Target chairman, president and CEO Gregg Steinhafel.

Of course, some shareholders tend to vote negatively on everything, as even the relatively non-controversial act of ratifying the appointment of Ernst & Young as the company’s accounting firm drew a 14.9% negative vote. However, that wasn’t the case with a proposal related to executive compensation, which drew more “for” than “against votes.

The sixth item on the proxy statement called upon the company to adopt a policy that “provides shareholders the opportunity at each annual shareholder meeting to vote on an advisory resolution, proposed by management, to ratify the compensation of the named executive officers (NEOs) set forth in the proxy statement’s Summary Compensation Table (the "SCT") and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.”

The board was against the change and many shareholders voted against the proposal. However, more voted for it than against it (49.4% for, 45.6% against) than against it, but the margin was large enough as Target’s rules require 75% vote in favor of a proposal before a change is made.