Target’s Bizarre Bathroom Policy

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By USDR

TAt today’s annual meeting of Target shareholders held in Costa Mesa, California, the National Center for Public Policy Research presented a shareholder resolution designed to question the wisdom of the retailer’s seemingly unnecessary foray into national legal and policy debates and asked company executives whether they had any regrets over the public controversy regarding its open bathroom policy. Shockingly, Target CEO Brian Cornell had no coherent response to questions over whether he considers Americans who disagree with Target’s bathroom policy to be bigots.

“Target has been making headlines for all the wrong reasons lately,” said National Center Free Enterprise Project Director Justin Danhof, Esq. “When Target responded to the controversy over North Carolina’s so-called bathroom law by announcing that all Target restrooms are open to all comers, it needlessly entered a major national debate and offended millions of Americans, customers and investors. Target and its leaders are well within their Constitutional free speech rights to engage in legal and public policy debates. However, when a decision to enter the political realm offends vast swaths of investors and consumers, stakeholders have a right to question the corporation’s decision-making process.”

Danhof asked Target CEO Brian Cornell, in part:

In a May appearance on CNBC, CEO Brian Cornell compared the company’s decision to mix the biological sexes in states of undress to the company’s decision in the 1960s to use African-American models, saying the decision to use black models “wasn’t well received.” The implication appears to be that people who believe sex is determined physically, or who simply don’t want to be undressed near people who have a different physiology, are bigots, and morally equivalent to racists.

Investors have noted that Target, which as many unisex restrooms and a commitment to building more, could easily have avoided this entire controversy. Instead, as one financial analyst put it, Target “went in guns blazing” and “took a hard-line stance, promoting a very small social movement over the conservative sensibilities of millions of Americans.”

I have a quick two-part question: Is it the company’s position that Americans who prefer to undress only near people of the same physical gender are bigots, the moral equivalent of racists? And second, since Target could have avoided most of this controversy, do you have any regrets about taking, as the financial analyst put it, “a hard-line stance” that, regardless of your intention, has made many Americans feel unwelcome at Target?

Danhof’s entire question, as prepared for delivery, is available here.

“Target’s shareholder meeting was appalling from beginning to end,” said Danhof. “Liberal corporate leaders such as Cornell throw around the words ‘diversity’ and ‘inclusion’ so much they are starting to lose their meaning. In addition to my question, two other shareholders also expressed concern over the company’s offensive bathroom policy. Cornell just kept repeating the same vacuous lines about diversity and inclusion. He doesn’t seem to get that he has offended the sensibilities of millions of Americans.”

“When Cornell ducked my question, I followed up and urged the company’s leadership team to think hard about the fact that they are branding millions of Americans, potential customers and investors as bigots. Not a one of them had a response. If you are offended by Target’s decision to allow grown men to be in states of undress in front of young girls, and at the potential for predators to abuse Target’s bathroom policy, the company is basically saying that they don’t want your business,” said Danhof. “That’s the message that I took away from today’s meeting.”

“Company executives also made the bold claim that its absurd stance on bathrooms hasn’t impacted the company’s financial performance in any way – that’s a whopper! Target’s stock price was $83.98 the day of the announcement. On Monday, it was $68.81, an 18% drop in seven weeks. For Target to deny any correlation between its announcement and its tanking stock is ignorance of the highest form,” added Danhof. “Offending millions of investors and consumers, then denying the financial implications, borders on fiduciary negligence.”

At today’s meeting, Danhof also presented the National Center’s shareholder resolution that also touched on the company’s involvement in legal and policy issues. The genesis of the National Center’s proposal was Target’s involvement in the debates over gay marriage. Target and other corporations played a big role in denouncing traditional marriage laws when the Supreme Court ruled on the Constitutionality of such laws last summer. Since much of this corporate activism went under the radar, the National Center decided to submit a resolution questioning the wisdom of even getting involved in such a contentious Constitutional issue.

Speaking on behalf of the National Center’s proposal today, Danhof stated, in part:

I’m sure few investors here realize that Target – and many other corporations – were heavily involved in the Supreme Court’s decision regarding gay marriage. In a brief before the Court, these companies bashed American states that supported traditional marriage (which by the way included California where voters overwhelmingly supported traditional marriage) by claiming that traditional marriage laws “hamper employer efforts to recruit and retain the most talented workforce possible in those states.” If there was a mass exodus of employees from traditional marriage states to those that recognized gay marriage before the Supreme Court ruled on the issue, the world at large must have missed it. It’s worth noting that Target operates in countries where homosexual acts are criminalized. So it’s fair to ask: what’s the company’s position on its employees in those countries? But our proposal is not about re-litigating one Supreme Court decision.

Rather, as corporations get more and more involved in political, policy and legal debates, investors should be given a lens into that decision-making process. Issues such as gay marriage and whom to allow in North Carolina’s public restrooms hardly seem like issues that are germane to Target’s core business. Yet the company chose to make very public stands on these issues. Many consumers and investors didn’t react well to the company’s activist positions.

The full text of Danhof’s statement in support of the National Center’s proposal at the Target meeting, as prepared for delivery, can be found here.

The National Center’s complete shareholder resolution, and Target’s response to it, can be found on pages 66 and 67 of the company’s proxy statement, which is available for download here.

“While our proposal predated Target’s silly stance on restrooms, it was designed to address just such situations. Target claimedthat it opened its bathrooms to everyone so that its employees and customers would be ‘protected from discrimination and treated fairly.’ But there is no evidence that anyone was treated unfairly before,” said Danhof. “Target admitted that it has single occupancy family restrooms in most of its locations that are already open to everyone. Target invented a solution in search of a problem.”

The National Center’s Free Enterprise Project is the nation’s preeminent free-market activist group focusing on shareholder activism and the confluence of big government and big business. In 2014-15, National Center representatives participated in 69 shareholder meetings advancing free-market ideals in the areas of health care, energy, taxes, subsidies, regulations, religious freedom, food policies, media bias, gun rights, workers’ rights and many other important public policy issues. Today’s Target meeting marks its 16th shareholder meeting of 2016.