3. This is a legitimate campaign -- not a distraction. As the Barron's article stated over the weekend, there is no shortage of management apologists who come out of the woodwork when there is a dissident proxy fight. Most of the time these commentators who support the status quo usually complain that the company isn't the worst of the bunch and therefore an activist campaign is a waste of time and a distraction.

That approach has allowed mediocre boards to persist in this country for decades. As the points I've mentioned verify, this campaign certainly has merit. What's more, Ackman has paid his way to put it on. He has real "skin in the game" -- unlike most, if not all, of these kinds of critics. The fact is that if more mediocre boards had been "distracted" by legitimate activist campaigns over the past two years it's likely we'd have a much stronger capital markets system today than the one which absolved itself of any risk management responsibility.

4. Ackman's made a great case. I tip my hat to Ackman, including his spirited attack of the Barron's article, for being a very precise and skilled communicator. I think he's made about as strong a case as an activist can make at this time against Target.

What Hasn't Worked

1. Target's poor performance relative to Wal-Mart hasn't been compelling enough. It's hard to win an activist campaign arguing what Target should have done in the last few years. Shareholders are human. They take short-cuts, they summarize, they look for sound-bite logic for understanding a campaign, and then they base their voting decisions on this incomplete information. Some shareholders rely heavily on what the major proxy advisory firms say when deciding how to vote. Although Ackman's made some salient points on how Target has lagged Wal-Mart, he will not gain as much shareholder support as he could have if the gap had been much more compelling.

2. The REIT component of Pershing's plan doesn't match today's environment. A large part of Ackman's plan includes increasing shareholder value through creating a new Real Estate Investment Trust. It matters not that Target uses Richard Sokolov, the president of Simon Property Group ( SPG) (who competes against General Growth Properties, of which Ackman is a large owner), to discredit Pershing's plan. The optics of the plan don't match the current environment we're operating in even if the substance of the plan is on the mark. It will be difficult to convince many investors to take a leap of faith on a sudden creation of $40 billion in value from moving a few shells around. At the moment, skepticism reigns.

3. Jim Donald's communication skills haven't matched Ackman's. As RiskMetrics' recommendation confirms, there appears to be the most support for Donald as a second pick for the Target board after Ackman.

During a recent joint CNBC appearance, Donald, who also helped build Wal-Mart's grocery business before leaving for Starbucks, failed to match Ackman's oratory skills. When someone questioned Donald about what changes as a director he'd like to see Target make, he deferred, saying that he needed some time to study things in more depth. It was modest and diplomatic but not in keeping with a bloody-nosed proxy fight.

What's more, it played to what Target has tried to press -- that there's nothing that significant to fix at the company. It would be ideal if all shareholders took the time to review all candidates' utterances prior to forming their selections, but unfortunately sound bites matter, and that one hurt.

When all is said and done Thursday, I expect that Ackman will win two seats on the Target board, along the lines as RiskMetrics suggests. In the long run, it should greatly help Target's other shareholders and prove the naysayers wrong. Ackman hasn't run a perfect campaign, but it's been very effective, and he will consider it a success with this kind of outcome. It also will give him the chance to further press his views at the board level. It's likely that Thursday's showdown will be a preview of many more activist contests to come next year, once the new SEC proxy access rule goes into effect. Sleepy boards should get ready for more distractions.
At the time of publication, Jackson had no positions in the companies mentioned.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

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