Ackman is an activist shareholder who has used his stock ownership in Target to pressure Target's top management. First, Ackman proposed a real estate sale-leaseback primarily because he believed that “the stock market gave Target no credit for their large and valuable real estate portfolio. “Target owned 85%-95% of its stores and facilities, therefore, selling these assets and then leasing the space would create a large amount of value, presenting an opportunity for a buyback. However, this proposal is was ultimately rejected by Target along with Ackman's proposal seeking two seats on the board. Over time, as Ackman's proposals were rejected one after another, opposition developed regarding Target's corporate governance and more specifically its own. directors - then launched a proxy fight against Target, as well as increasing his pressure on management by nominating a slate of five directors to run in opposition to the re-election of Target's directors. He was concerned that Target's board of directors lacked experienced directors at the CEO level in the credit card industry or real estate – two of Target's primary business-creating segments – believing that this lack of board experience had negatively contributed to Target's recent performance. He also highlighted the current board's lack of shareholder representation, arguing that Pershing Square (which owns 7.8%) compared to the incumbent board (which owns less than 0.1% of the company) has a greater economic motivation in creating long-term shareholders. value. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get Original Essay Furthermore, as an individual shareholder, Ackman owned more stock than any company executive and no doubt wanted to see Target succeed in both the short and near term. long term. Target communicated with other shareholders encouraging them to reject Ackman's slate of candidates and publicly questioned his motives: they did not believe that Ackman's interests were aligned with those of other shareholders because a substantial percentage of Perishing Square's interests in Target was in the form of derivative securities that were set to expire in the next year or so, which would likely cause them to emphasize the short-term performance of Target stock and ignore long-term success and risk management to do so . Target ultimately prevailed and shareholders gave over 70% of their votes to 1 Target's slate of candidates - however neither Ackman nor Target emerged unscathed from this proxy fight as it was costly for both (around $10 million) and Target has been through a great period of uncertainty and board discussions have unfortunately surrounded this proxy fight rather than corporate strategy. Given the situations described in the case study we cannot say that Ackman completely controlled Target Corporation. As we know, shareholder ownership does not imply control of a company: even owning the large percentage of shares he owned, Ackman could not simply give orders to the directors and still had to go through a lot of bureaucracy to get his proposals accepted by the company as c 'there was still the need to deal with the other shareholders and the board of directors. At most we can say that Target could find itself having to face Ackman in certain situations in which theend could have control, even if by proxy of the other shareholders. Ackman was not a "normal" shareholder of Target Corporation: by owning common stock and being a hedge fund manager he was in a position where conflicts of interest could arise. Hedge fund activism, where hedge funds (even when a minority shareholder) can exert considerable influence over companies' decisions, has grown in recent years, especially in the United States. It has been seen as a positive impact for corporate governance as it helps mitigate the agency problem. However, it is seen by many as a form of extortion, where hedge funds pressure companies to change certain aspects just to get returns on their investments. The fact that Ackman was also a hedge fund manager may be the real motivation for Ackman's activism towards the Target Corporation. It is clear that his responsibilities to the hedge fund's clients may have influenced some decisions he sought to impose on the company, for example by making decisions that would compromise long-term performance only to present short-term benefits because his clients they had options at Target. shares that would be worthless in the very short term if the company failed to raise its stock price to $35 per share. This short-termism was what many expected from hedge fund activism, and while it wasn't Ackman's real motivation, it proved as damaging as if it were. This puts his two actions in a new perspective: it is possible that his interests when he was an active shareholder came more from a professional side (i.e. satisfying his clients to obtain bonuses or even just reputation) than from the desire to represent the interests of all shareholders - which was actually one of the points Target made for shareholders not to side with Ackman in this feud. The study helps assess the merits of activist investors' challenges to the company's strategy and the board's response to it. The general practice of directors being appointed by existing directors created a feeling among shareholders that their interests were not well represented and that, in fact, Target's board did not have meaningful shareholder representation. Based on this case, we can draw some lessons about the controversy that could arise from the willingness of shareholders to propose new candidates for the board of directors: the clearest point we can make is that the constant conflict between shareholders and the company over these types of decisions can result in huge losses for both sides regardless of the outcome of the conflicts (in the proxy fight, both sides spent considerable sums, about 10 million dollars). Along with the instability created by splitting shareholders between two parties - for both Ackman and Target - this fight also caused management to lose focus on company strategy, something they couldn't afford given the company's poor performance during the recession. The power struggle was unusual because Target had been praised for its “superior governance” and superior long-term stock price appreciation. Still, some consulting firms, Ackman acknowledged, could have brought a fresh perspective to Target's board and pushed the retailer to explore new business opportunities, and while the candidates on each side had impressive qualifications, Target could have benefited from some of “new blood”. Furthermore, using a single card system 3 would reflect the best corporate governance: without.