Target — The Chic Woke Capitalism We Don’t Need If We Want to Dismantle Structural Racism
A story of how shareholder primacy brought increased surveillance, policing, gentrification, and racial inequities across communities in the US and how companies skirt accountability and rewrite the rules to benefit their focus on growth-above-all-else.
By. Dr. Wilneida Negrón
On Wednesday, June 10, 2010, at 1:30 p.m MST inside The Inverness Hotel and Conference Center in Englewood, Colorado, Target Corporation held its Annual Meeting of Shareholders. During the Q&A portion of the meeting, shareholders pressed executives on whether Target coupons could be extended beyond a week, plans for further green programming, supporting local scholarships, and barriers to the opening of a second Target location in Hollywood. Target executives presented their multi-pronged strategy for driving growth in the next decade — refreshing the existing store base, expanding current store formats in suburban areas, testing smaller store formats in dense urban markets, and exploring opportunities for international expansion. With Walmart and Amazon as persistent competitors, the focus was on expansion and growth; and with Walmart continuing to expand into suburban markets, Target realized they must conquer dense urban markets to increase profitability and growth.
A barrier to Target’s urban strategy was the lack of “high-quality” locations. Therefore, Target had to spend more on land, buildings, and equipment due to the increased need for security and other location demands. Yet, these were costs and losses Target executives and shareholders were willing to undertake as long as it could be offset by higher sales and growing profitability. In the June 2010 meeting, Target’s CEO at the time Gregg Steinhafel assured shareholders that they always made sure that every urban location would deliver value to shareholders despite having high investment and operating costs. Target Corporation did deliver for its shareholders that year. They opened up their first Manhattan store in East Harlem on July 22, 2010. And in what was probably conceived as a Targetesque chic play with numbers, on 10/10/10 they announced the opening of 10 more stores in suburban and urban markets in the US.
The sole focus on maximizing shareholder value is called shareholder primacy — the belief that corporations exist principally to serve shareholders. Shareholder primacy has been a common trait of American-style capitalism since popularized by economist Milton Friedman in the 1970s. Yet our current reckoning with historical racial inequality and the Covid19 pandemic has imposed a new stress test across not only societies but also corporations. Therefore, following the call by the Business Roundtable (an association of U.S. CEOs) in August 2019, that corporations redefine their role to promote an economy that benefits all (and not just shareholders), there is a growing focus on examining the ways that corporations, such as Target, make decisions based on the premise of maximizing shareholder profits and at the expense of who, what, where, and when.
So, how has Target maximized profits and returns to its shareholders?
Target has delivered value to its shareholders, exhibiting its devotion to shareholder primacy at the expense of its values, in part through its rapid expansion in urban, dense markets often plagued with economic and racial inequality. Additionally, the ways they obtained “quality locations” reveals a much more sinister side of the brand that contrasts directly with its public claims of valuing racial equity. Instead what we find are business practices and decisions that would have broader social, political, and economic implications beyond the boardrooms and annual shareholder meetings. In the past 10 years, Target has financed the growth of expansive CCTV surveillance systems in cities across the US, and in some cases to the financial benefit of notoriously secretive surveillance companies such as Palantir. They have pioneered relationships between corporations, the Department of Homeland Security, and state and local governments to share surveillance and intelligence information through their own private fusion centers and forensics/intelligence centers. They have rewritten law enforcement public policy through their so-called Safe City Collaborative which advances policing and prosecutorial practices that aggressively crackdown and punish low-level “livability crimes” (eg. public drinking, trespassing, aggressive solicitation, and various crimes of disorderly conduct) — even as urban crime has been on a slow and steady downtrend in the past 30 years. They engaged in controversial spot zoning practices in urban areas that silence community input and contribute to the displacement of low-income and mostly black communities. So, while residents of a new city could celebrate the coming of a new Target store, what communities also got in return was increasing surveillance, aggressive policing practices, the gentrification and displacement of low-income people, and new invisible and undemocratic intelligence information-sharing between Target, state and local governments, and the Department of Homeland Security.
At the same time, Target Corporation engages in stock buybacks that boost shareholder value at the expense of workers. In 2019, they announced a $5 billion dollar stock buyback that brought value to shareholders alone, at the expense of the economy and workers. For example, the article “Why Stock Buybacks are Dangerous for the Economy” in the Harvard Business Review found that because stock buybacks disrupt the growth dynamic that links the productivity and pay of the labor force, they can contribute to increased income inequity, employment instability, and anemic productivity. In recent years, Target Corporation has also been called out for its treatment of workers. In the last 10 years, they have been sued by the US Equal Employment Opportunity Commission for disability discrimination, had to pay $3.75 million to resolve a class-action lawsuit over its discriminatory background check policy, and was fined a total of $21.2 million for back wage amounts and/or civil penalties as assessed by the Department of Labor’s Wage and Hour Division. This is higher than the retail industry average of $16.1 million. Is this corporate behavior we should use as the standard of corporate socially responsible practices?
But this is how shareholder primacy works in America. Aside from a few strategic corporate social responsibility engagements, corporations largely undermine the voices and concerns of communities, workers, customers, and the environment. As they grow in profits and economic power, they start to rewrite and bend policy and laws to serve business and shareholder interests. Therefore, although they tend to go under the radar, Target is another corporate juggernaut shaping the democracy and economy to maximize value for their shareholders: Uber has been rewriting labor laws since its founding in 2009; despite public concern and greater scrutiny by elected officials, Facebook continues to push the boundaries of this country’s First Amendment; and Amazon continues to push the limits of this nation’s federal antitrust laws. If the US is a nation of laws, corporate America and shareholder primacy have definitely found a way around them.
And these are the ways that inequality will continue to persist if we don’t reflect and change our ways. As Ford Foundation President Darren Walker said in his recent New York Times op-ed: “Inequality in America was not born of the market’s invisible hand. It was not some unavoidable destiny. It was created by the hands and sustained effort of people who engineered benefits for themselves, to the detriment of everyone else. American inequality was decades in the making, one expensive lobbyist and policy change at a time.”
In the wake of the #BlackLivesMatter movement, as Target’s CEO Brian Cornell vowed to do better by investing $10 million and ongoing resources for rebuilding efforts and advancing social justice. Yet, if Target Corporation and other recently “woke” brands want to center racial equity, they will not do so until leadership and shareholders alter their long-held emphasis on profits and seek to deliver real substantive value to a broader range of stakeholders — customers, employees, suppliers, communities, as well as shareholders. Only then can we imagine an economic system that does not continue to exploit and deepen pre-existing structural racial inequalities to the profit and benefit of a few.