Here's how things went off the rails for Ackman.

1. Winning a proxy contest is like passing a major bill in Congress. It's not enough to be right, an activist has to put forward an argument that is politically palatable to other shareholders. Ackman ultimately failed in his proxy contest because he failed to win over the support of the biggest holders such as the large mutual fund companies and pension funds.

Although these investors pay close attention to corporate governance matters, their primary concern as fiduciaries is the long-term health and success of the company. Activists sometimes shoot themselves in the foot with these shareholders when they advocate solutions that are perceived to provide only a short-term boost to the stock instead of a more sustainable move. Ackman's real estate investment trust plan for Target, designed to unlock value in the land under Target stores, and creative from a financial engineering perspective, got no support. It was successfully painted by Target as "risky" and out of step with the current environment. Ackman never should have included it as part of his plan.

2. The messenger is a big part of the message. Any activist investor in a proxy contest should be able to convince fellow investors that they are advocating solutions which will benefit the company in the long term. Far too many activists formerly looked for short-term levers to pull to create value in their shares owned, such as paying out a large dividend, taking on debt, selling off a division to a private-equity firm, or doing a big stock buyback.

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