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Target's $150,000 Mistake -- or, Why Corporations Should Avoid Politics

Just when Target (TGT) thought it had the upper hand, a California Superior Court judge in San Diego County decided that a gay rights group can continue to picket the discount retailer. And just like that, Target's controversial $150,000 political donation to MN Forward came back to haunt it. It's a mistake that's become an object lesson in why big corporations should steer clear of politics.

Last January, the Supreme Court ruled on the Citizens United decision which gave corporations and unions more flexibility to spend unlimited money on campaign advertising. So in August, Target -- the second largest retailer in the U.S. with sales of over $65 billion -- signed over a small-ish donation check to the organization that supported the failed gubernatorial campaign of GOP candidate Tom Emmer, who opposes same-sex marriage.

Flashmobs! Facebook groups!
Maybe Target thought that because it was a state race, no one would pay attention. But tiptoeing isn't something a multi-billion dollar corporation can get away with. Backlash on the blogospherewas vitriolic and swift. A YouTube (GOOG) video posted by the mother of a gay son showed her cutting up her Target credit card and returning merchandise in protest.

Facebook groups formed and ignited GLBT organizations, employees, and customers around the country. A flash mob descended on a Seattle store complete with drums, a horn section, rainbow umbrellas and an original song (to the tune of Depeche Mode's People are People). Though only a few hundred bore witness to the event in person, the YouTube video has garnered over 1.3 million hits. And over 40,000 signed a petition to get Target to stop supporting anti-gay politicians.

When sorry won't cut it
CEO Gregg Steinhafel defended the contribution in an e-mail to Target employees. His apology included the fact that MN Forward is supported by many other organizations and businesses throughout the state, including the Minnesota Chamber of Commerce (but they do it too!). He also had a bit loaded with buzz words about Target's history of bipartisan support (both sides of the aisle! job creation! Economic growth!)

Taking a page from the politicos, he added, "It is also important to note that we rarely endorse all advocated positions of the organizations or candidates we support, and we do not have a political or social agenda." Kinda like earmarks, eh Steinhafel?

Pissing off the shareholders
If Steinhafel thought he could appease everyone with a formal apology, he was dead wrong. By not offering an equal donation to a gay rights group or reneging on the $150K to MN Forward, he managed to anger Target shareholders as well. And not just any investors.

Three management firms that collectively hold $57.5 million of Target stock -- Walden Asset Management, Calvert Asset Management and Trillium Asset Management -- took Target's independent board members to task. demanding a "comprehensive review of Target's political contributions and spending processes including the criteria used for such contributions," according to the Star Tribune. Calvert and Trillium leveled the same blow at Best Buy (BBY), also contributors to MN Forward.

Awards, schmawards
Target still managed to snag a place as one of the World's Most Ethical Companies for 2011 by Ethisphere Institute. But how does a little know organization compare to the endorsement -- or lack thereof -- of an international superstar? Lady Gaga, she of the 9 million+ Twitter followers and the first artist to score more than a billion hits on YouTube, dissed an exclusive deal to release her album at the chain because she thought the company's reform (a planned $500K donation to GLBT groups and policy review committee) didn't go far enough.

Time will tell if Target is able to buff its image back to squeaky clean and all-inclusive. In the meantime, corporate executives of all stripes might want to think twice before putting their companies in the political spotlight.

Image via Target's Facebook Fan Page

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