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Exercising new ability to spend on campaigns, Target finds itself a bull's-eye

By Jia Lynn Yang and Dan Eggen
Washington Post Staff Writer
Thursday, August 19, 2010; A01

When Target gave money in July to a pro-business group in Minnesota, the company thought it was helping its bottom line by backing candidates in its home state who support lower taxes. Instead, the retailer has found itself in a fight with liberal and gay rights groups that has escalated into calls for a nationwide boycott and protests at the company's headquarters and stores.

The problem: Target's $100,000 helped pay for TV ads supporting the gubernatorial campaign of Republican state Rep. Tom Emmer, who thinks Minnesota's corporate taxes should be lower. As it turns out, he also wants to ban same-sex marriage.

It was an embarrassing stumble for a company that has carefully cultivated an image of urbanity and hipness -- and that's earned goodwill with the gay community. The company offers benefits to domestic partners and receives sterling marks from liberal groups for its tolerance of gays. Target has even been an annual sponsor of the Twin Cities Gay Pride Festival.

The imbroglio illustrates the pitfalls facing companies after a game-changing Supreme Court decision in January allowing them to contribute unlimited money for political activities -- often with complete anonymity. But corporate donations can still come to light and, when they do, cause unexpected heartburn for public relations.

Lawrence M. Noble, a campaign-finance law expert at the law firm of Skadden Arps, said Target's troubles will be watched closely by other major corporations -- especially those with a high public profile -- who are now likely to think twice before giving corporate money to groups that may later prove controversial. "You run the real risk of backlash," he said.

It's unclear whether Target knew that the pro-business group, MN Forward, would be required under state law to disclose its contributors or that it would support Emmer as a candidate. Target declined to publicly discuss the matter in detail.

But with protests mounting in recent weeks, Target's chief executive, Gregg Steinhafel, wrote a letter of apology to employees Aug. 5, explaining that the company's political donation had been a misguided effort to foster economic growth.

"While I firmly believe that a business climate conducive to growth is critical to our future, I realize our decision affected many of you in a way I did not anticipate, and for that I am genuinely sorry," Steinhafel wrote. He continued, "The diversity of our team is an important aspect of our unique culture and our success as a company, and we did not mean to disappoint you, our team or our valued guests." He added that the retailer would more closely review any future political contributions.

The controversy began in late July, soon after MN Forward disclosed some contributors in a filing it was required to make with the state. Documents showed Target gave MN Forward $100,000 in cash and $50,000 worth of help establishing the group's brand.

The angry response was immediate. MoveOn.org e-mailed members, asking them to sign a petition promising to boycott Target unless the company pledged to stop contributing money for political activities.

Advocates object

Steinhafel's apology didn't quell the growing discontent. The day after his letter was released, MoveOn.org delivered its boycott petition to Target's headquarters and organized protests at Target stores across the country.

Meanwhile, Human Rights Campaign, which advocates for gay rights, said it opened talks with Target to see whether it would donate $150,000 to a candidate that supports gay marriage. HRC said Monday those negotiations had broken down.

Target said in a statement Monday that it wanted to hold off. "We believe that it is impossible to avoid turning any further actions into a political issue and will use the benefit of time to make thoughtful, careful decisions on how best to move forward," Target said.

The issue of gay marriage has become increasingly explosive in recent weeks with a U.S. district judge invalidating California's Proposition 8, which banned same-sex marriage. In Minnesota, the winner of the gubernatorial election in November would effectively determine whether the state legalizes such unions. Democrats, who have a big majority in the state legislature, have been willing to pass a pro-gay marriage bill, but Republican Gov. Tim Pawlenty opposes it.

In the race to replace Pawlenty, Emmer is running against former U.S. Sen. Mark Dayton, whose family founded Target before selling it. Dayton, a member of the Democratic-Farmer-Labor Party, supports same-sex marriage.

Documents also show that another Minneapolis-based retailer, Best Buy, has also supported MN Forward, donating $100,000.

"Our contribution in Minnesota was focused solely on jobs and an improved economy," said Susan Busch Nehring, a Best Buy spokeswoman. "We've learned from this, and we will thoughtfully review the process we use to make political contributions, to avoid any future confusion."

It has been Target, and not Best Buy, that has born the brunt of the protests. Ilyse Hogue, MoveOn.org's director of political advocacy, said protests have focused on Target partly because it had built its reputation as "a progressive alternative to Wal-Mart," which has crossed swords with labor unions over how the company treats its employees.

Court case changes rules

The political donations by Target and Best Buy were made possible by the Supreme Court's decision in Citizens United v. Federal Election Commission. The court found that corporations were akin to individuals when it comes to political speech. As a result, the court ruled, companies can spend as much as they want on political advertising, though they remain barred from contributing directly to political campaigns.

Companies have long been free to form political action committees, which are subject to tight restrictions on donations and spending. The court ruling, however, dramatically expanded the ability of companies to get involved in politics by allowing them to spend money from corporate coffers on elections.

The decision set off a frenzy of activity in states such as Minnesota, which like the federal government had previously banned direct corporate spending on elections. The state's lawmakers passed legislation sweeping away those restrictions and allowing the creation of committees like MN Forward, according to Gary Goldsmith, executive director of Minnesota's Campaign Finance and Public Disclosure Board.

Campaign-finance experts noted that Target's contribution came to light only because Minnesota law requires political committees, such as MN Forward, to disclose the money they receive. Many states do not have similar requirements.

Democrats in Congress have failed in recent attempts to impose new federal disclosure requirements on corporations, leaving companies such as Target free to give money to any number of nonprofit groups, trade groups and other organizations that are not required to reveal their donors.

"One has to be cautious when reading too much into the example of Target," said Tara Malloy, associate legal counsel at the Campaign Legal Center in Washington. "In many ways it was a perfect storm for a controversy."

But Allison Hayward, vice president of policy at the Center for Competitive Politics, said Target's experience offers a cautionary tale.

"This is sort of an object lesson for the next time a Sears or a Wal-Mart thinks about getting involved in some political expenditures," Hayward said. "Large corporations are not generally interested in alienating customers."

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