The nonprofit advocacy group America First Legal (AFL) filed a lawsuit against mega-retailer Target for harming shareholders with its adoption of woke progressive corporate policies that have led to a decline in market valuation.
AFL argues that the company’s push for diversity, equity, and inclusion (DEI) as well as environmental, social, and governance (ESG) mandates have harmed shareholders.
The lawsuit follows the company’s disastrous Pride Month marketing this year which triggered a massive consumer backlash. The company’s 2022 and 2023 annual proxy statements “misrepresented that Target adopted ESG and DEI mandates to advance shareholder value,” said the lawsuit filed on Aug. 8.
While the corporation claimed it adopted these policies for the benefit of the shareholder, in actuality, these mandates were implemented to further the “collateral interest” of Target and its officers, said AFL.
The proxy statements also mislead investors “by stating that Target’s proposed executive compensation plans were aligned with shareholder value when, in reality, they included substantial incentive payments to executives for meeting ambiguous and subjective ‘DEI progress’ mandates.”
Relying on these proxy statements, shareholders reelected the executive board. They also turned down proposals made via shareholder vote to reform the board’s risk oversight functions. The statements ended up making shareholders approve “executive compensation plans that incentivized Target’s officers to implement DEI programs.”
In May 2023, Target came under criticism from certain controversial products sold in its stores. This included LGBT-themed kids’ clothing, swimsuits with a “light binding effect” on breasts and a “tuck-friendly” option for male genitalia.
In addition, the company also sold designs from the “Satanist-inspired” brand Abprallen.
“After immense customer backlash to Target’s LGBT-Pride campaign resulted in customer boycotts of Target, Target lost $10 billion in market valuation over May 18–28, 2023, due to parents’ backlash over the company’s LGBT-themed clothing line for children, its ‘longest losing streak in 23 years,’” the lawsuit said.
“The stock value remains depressed.”
The plaintiff, Brian Craig, had brought 216.450 shares of Target on April 11, 2022, which were valued at $49,999.95. Prior to the consumer backlash on May 17, 2023, the stock was valued at $34,839. As of June 14, the stock value fell to $28,896, said the lawsuit.
“When Plaintiff purchased the stock and throughout the period of his ownership, the Defendants disseminated the false and misleading 2022 Proxy and 2023 Proxy, which made false and misleading statements of material facts.”
“As a result of the Defendants’ preparation, review, and dissemination of the 2022 Proxy and 2023 Proxy, Plaintiff has suffered substantial harm.”
The lawsuit names Target as well as some of its executives as defendants in the case. It seeks compensation for damages the plaintiff has suffered and a declaration that Target’s 2023 director election was void. The plaintiff has demanded a trial by jury.
“Federal law requires publicly-traded corporations to provide certain information to shareholders in their proxy statements that allow those shareholders to make informed decisions,” said Gene Hamilton, president of the AFL.
“As alleged in our complaint, Target failed to execute its duty to its shareholders by making statements that led them to believe that political and social risks were being assessed—when in reality, the only thing Target’s board and management cared about was how effectively they fulfilled the desires of various metrics advanced by leftwing ‘stakeholders.’”
Target’s LGBTQ Support
The lawsuit points out that Target’s ESG and DEI push is something that the company has been implementing for several years—with such “misconduct” beginning when defendant Brian C. Cornell took over as CEO and chairman of Target’s board in 2014.In 2015, Target published a “Pride Manifesto.” A year later in 2016, the company became the focus of a national debate over transgender rights after it published “an antagonistic response to North Carolina’s transgender bathroom law.”
In 2020, Target committed to a race-based hiring plan by promising to “increase representation of black team members across the company by 20 percent” over a three-year period.
The company launched an initiative called “Target Forward,” which committed the firm to ensuring that 100 percent of its suppliers have “policies and programs to advance gender equity.” Target also has adopted “supplier diversity” goals, including ensuring that certain collections be made by “LGBTQIA+ creators and brands.”
Prior to 2023, Target had faced backlash over its ESG and DEI policies. In 2016, Target opposed North Carolina’s law restricting bathroom access to transgender people.
The company allowed transgender workers and customers to use restrooms corresponding to their gender identities. Following the company’s outspoken stance on the matter, “several boycotts of Target were organized,” the lawsuit states.
Republican Warning
Target’s attempt to promote LGBTQ items among children had triggered a warning from Republican Attorneys General.In a July 5 letter to the company, seven GOP attorneys general pointed out that Target could be violating child-protection laws through such actions.
“State child-protection laws penalize the ‘sale or distribution … of obscene matter.’ A matter is considered ‘obscene’ if ‘the dominant theme of the matter … appeals to the prurient interest in sex,’ including ‘material harmful to minors,’” the letter stated.
“Indiana, as well as other states, have passed laws to protect children from harmful content meant to sexualize them and prohibit gender transitions of children.”
Following the consumer backlash, Target removed some of the items.
Between May 1 and Aug. 8, Target’s share price fell from $157.12 to $130.98, a decline of 16 percent. During this period, market capitalization fell by over $12 billion.
The actions by Target and other firms like Bud Light to push a cultural agenda have not gone well with the general American populace.
A June 2023 survey by The Trafalgar Group asked respondents whether “businesses should continue to promote political themes during pride month, or should businesses seek to be neutral on cultural issues.”
Close to 62 percent of respondents wanted companies to “be neutral on the issue.”
