43 thoughts on “The Price Of Entry For Retailers Who Want To Play Politics

  1. There’s more to the math than simply cost of ads – lost sales. There is the benefit of a political system more to their liking – lower corporate taxes, subsidies of various sorts, tax-increment financing, etc. I’m sure Target would be more than happy with a trade off of lost sales equal to the cost of the ads.

  2. john sherman says:

    There’s a really interesting issue just over the horizon: To what extent does the right to free speech entail the right to anonymous free speech? The Supremes just told signers of petitions in Washington state that they had no expectation of anonymity, but I’m willing to bet that people like the Target execs are going to decide that the problem was not that the company gave money, but that it was found out, so the solution will be to try to take transparency requirements to the court to see if they can get them knocked out.

    A point that doesn’t get mentioned is that this isn’t a case of Betty Crocker reaching into her purse and pulling out her checkbook. The actual case is that a Target executive, or group of executives, decides to spend share holder money to support the chosen candidate. How do we know this executive isn’t simply conflating the company’s interest with his own? Maybe he’s backing Emmer because he’s a rich who wants to support someone who opposes taxing rich guys.

  3. Newt says:

    This is a media-contrived controversy that touches on the fringe elements of society.

    I get out in the world and no one – and I mean no one – has ever mentioned this “controversy.”

  4. Joe Loveland says:

    Target and Best Buy are stuck on this silly framing: “but we only are playing politics because this guy is so doggone ‘pro-business.'” They’ve been saying it for weeks, and it falls flat every time. Here’s why:

    First, that’s not the only issue that should matter to a good member of the community like Target or Best Buy. After all Hitler’s policies were very advantageous to industrialists, which made corporate leaders love him for being “pro-business.” But as we know, there were other positions that certainly merited scrutiny. Special interest blinders are very dangerous.

    Second, Target and Best Buy CEOs are entitled to their opinion about Emmer being “pro-business,” but they state it like it is a slam dunk truism that all of their customers will automatically accept. But the fact is, it’s a matter of heated debate among their customers. The low taxes/poor services race to the bottom approach taken by the Mississippi’s of the world hasn’t produced the best foundation for Information Age businesses (i.e. well trained workers, services and amenities that draw intellectual/creative talent, an efficient infrastructure, etc.). Emmer’s call to cut the state budget by a third would very much take us in that Mississippi direction, and lots of Minnesotans sincerely view that as hurting the business environment, not helping it.

    Finally, and most fundamentally, Best Buy and Target senior executives don’t seem to understand that when you support a politician for one issue you effectively support the WHOLE PACKAGE. Therefore you open up your brand to take the public heat for all that the politician(s) stand for — personal skeletons, controversial remarks and the whole array of red hot issues that badly divides your customer base…abortion, religion, race, class fairness, immigration, etc. As we’ve seen the last couple of weeks, when you push your shiny brand into the mud-slinging arena, the brand is going to get very, very muddy.

    Still Target and Best Buy continue to cling to this ridiculous line of “but forget about those other issues, we just like him because he is ‘pro-business!!’ (i.e. will cut our corporate taxes).” That just isn’s selling outside the Board Room.

  5. Mrs. Fay says:

    I saw a Target ad last night using the song “Free to be You and Me” from the children’s album of same name…which many of us listened to in the 70’s, which was supposed to be about tolerance and diversity…hmmm.

    1. Joe Loveland says:

      I’ll be shocked if a satire of this isn’t in the making as we speak.

      “And you and me are free to be corporate tax-free!”

  6. Newt says:

    This is what happens when a bunch of left-leaning PR consultants work themselves into a tizzy.

    Target is totally in the mainstream on this issue (polls support hetero-only marriage, overwhlemingly). Only here is it controversial. Which tells me Target is totally safe on this issue.

    1. Joe Loveland says:

      Yes, liberal PR consultants who also would counsel relatively liberal companies like Ben and Jerry’s, Google, Apple, and Seventh Generation to not donate to liberal politicians for the very same reasons.

  7. John Reinan says:

    I part ways with Joe and others I’ve discussed this issue with.

    I understand the classic response, well phrased by Joe, that putting your brand in the middle of a controversy is a losing proposition.

    However — now that Citizens United has opened the door to corporate cash, this is going to become a permanent and increasingly accepted part of the political landscape.

    The current dustup is getting a lot of attention simply because it’s novel. Five years from now, when corporations are routinely pumping millions of dollars into dozens of races at all levels, it will be impossible to closely follow who’s spending what.

    The public will lose interest, and only hard-core political followers will be paying attention to where the dollars are coming from and going to.

    Because when a corporation can spend a few hundred thousand dollars and potentially get political concessions worth many times that — political concessions that will be baked into policies, laws and regulations for years to come — there’s no reason to think they won’t take the PR lumps that may come with the spending. It’s short-term pain for long-term gain.

    1. Joe Loveland says:

      I substantially agree, John.

      My opinion: There are probably 5-10% of Americans who are liberal enough to avoid shopping with stores widely known to be conservatives and 5-10% who are conservative enough to avoid the rare corporation that will support a liberal. Devoted ideologues do follow such issues and do vote with their feet to some extent. So, I agree that the number willing to monitor and adjust their shopping over the long-term is relatively small, but there are a lot of companies who aren’t willing to endanger off 5% of their customer base and earnings over a contribution.

      Because of that, I think most high visibility retailers will donate to broader interest groups instead of donating directly. For instance, they’ll donate to the Chamber of Commerce instead of to a group who is only supporting one candidate at the moment. That more indirect kind of donating will substantially limit the repuational exposure and mud on brand resulting from their politicking.

  8. John Reinan says:

    Yes, that’s a good point — contributing to an umbrella org like the Chamber of Commerce would insulate them, and that’s probably what will wind up happening. Althnough that’s what MN Forward was supposed to be — they just blew it by linking themselves too closely to Emmer. It was new gorup nobody had ever heard of, and most people’s intro to it was as an Emmer supporter. Their later moves to add a few Democratic candidates were too late to counter the perception.

    Whereas if Target and Best Buy had given $150,000 to an established pro-business (and pro-GOP) group, it wouldn ‘t have raised eyeborws in the same way.

    1. Joe Loveland says:

      Target’s mistakes:

      1) TIMING. They went first, and that made news, and news and news and news and news.
      2) TRANSPARENCY. They didn’t launder their political donation through a trade association, as I predict they will in the future.
      3) EMMER-CENTRIC. They chose to donate to a group that was backing only one candidate at the time, and that candidate happened to be a very controversial candidate on a number of fronts.
      4) EXPECTATIONS. Target’s past community relations, philanthropic and HR practices set community expectations that they cared about more than just low taxes, and they didn’t live up to the expectations. They fell a long way because the pedestal we had put them on was mighty high.
      5) SCOPE MISREAD. They initially seemed to misread this as just an HR discussion with gay employees rather than a broader discussion with their customer base and national political activitists.
      6) INCONSISTENCY. The response has been slow and bipolar and that has a) ticked off both sides in the process and b) given the news story strong legs.
      7) UNDERESTIMATED COLLATERAL BRAND DAMAGE. They didn’t understand that the mud flung in campaigns can stick to brands that get spotlighted in the middle of the mud slinging. They viewed the contribution through lobbyist eyes instead of through brand management eyes, which is a problem when you are entrusted with stewardship of one of the more valuable and beloved brands in the land.

      Same with Best Buy, to a somewhat lesser extent.

      1. Newt says:

        Target’s Successes:

        1) FIDUCIARY RESPONSIBILITY: They acted in shareholders’ best interest by backing a candidate who supports pro-business legislation.

        2) CALCULATION: Target knows moveon is not a grassroots organization – it’s the political instrument of a billionaire hedge fund manager. There is no authentic or substantive opposition.

        3) STAYING THE COURSE: Target knows this is a hiccup – not a movement. Target will be there when moveon moves on.

  9. Joe Loveland says:

    Excerpts from today’s Washington Post:

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

    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.

    ….

    “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.”

    1. GB says:

      I wonder if Target actually earns points because of this video? There weren’t any shots of security guards trying to hustle the band out of the store. And the demonstration went on for at least four-plus minutes.

  10. John Reinan says:

    Very ambitious. However, if even one shopper understood the message the performers were delivering, I’d be amazed.

    1. Joe Loveland says:

      Agree, John, it does keep up the drumbeat of opposition, but other beats of the drum have been more effective. This one does start to imbed the issue into pop culture though. 404,000 video views, and counting.

  11. Newt says:

    MSBC demonstrates a rare display of enlightened self interest …

    MSNBC rejects ad from liberal MoveOn.org calling
    for Target boycott over political donation

    Associated Press

    Last update: August 19, 2010 – 11:26 AM

    ST. PAUL, Minn. – MSNBC says it has rejected a TV ad
    calling for a boycott of Target Corp. over a political
    donation in Minnesota.

    MSNBC spokeswoman Alana Russo says the commercial
    submitted by the liberal group MoveOn.org violates its
    advertising policy by directly attacking an individual
    business.

    1. PM says:

      Probably serves MoveOn’s best interests as well. The MSNBC decision becomes controversial, attracts even more attention to the issue, the ad goes viral, even more people watch it, the issue stays alive for far longer, and target continues in the crosshairs….

      Think about it–MoveOn can’t afford much of a media buy, so they attempt to do so where they know it will be rejected, getting tons of free media attention in return.

  12. john sherman says:

    I’m going to deny the basic premise that Emmer is pro-business. He’s pro rich businessman, but that’s not the same is being pro a good economy. As far as I can see, his basic line is to reduce regulation and taxes on rich people. We had eight years of that under Bush, and we saw how that worked out. Clinton raised taxes and produced more than three times as many jobs and balanced the budge.

    1. Newt says:

      Ah, slight correction: Clinton lowered taxes after signing the GOP’s Contract for America. Then the economy skyrocketed.

      And of course we all remember that tax revenues skyrocked after Reagan enacted his tax cuts.

      You all forget that liberals don’t care about tax revenues – they care about taxation as an instrument of societal equalization (generally downward for all).

      1. john sherman says:

        You mean all those Republicans who claimed that Clinton enacted the largest tax cut in American history were lying? Let’s see Reagan raised taxes, what was it three times? If liberals, or at least Democrats, don’t care about tax revenues, why was Clinton the only president in the last half century to put the budget into surplus?

  13. Joe Loveland says:

    Front-page, above-the-fold in today’s Strib:

    Target feeling investor backlash

    Three management firms that collectively hold $57.5 million of Target stock — Walden Asset Management, Calvert Asset Management and Trillium Asset Management — filed a proposal asking Target’s independent board members to undertake a “comprehensive review of Target’s political contributions and spending processes including the criteria used for such contributions,” according to a statement released Thursday night.

    Calvert and Trillium, which own $11.5 million of Best Buy stock, filed a similar resolution at the Richfield-based retailer.

    According to the Los Angeles Times, other institutional investors, including the giant New York state pension fund and union investment managers, are considering co-signing the Target resolution, the latest chapter in the ongoing controversy that has beset Target for more than three weeks.

    “Target should have carefully considered the implications that direct political contributions can have toward shareholder value,” Ola Fadahunsi, spokesman for New York Comptroller Thomas DiNapoli, the pension fund’s sole trustee, told the newspaper. “It’s troubling to think that they can fund controversial candidates without properly assessing the risks and rewards involved.”

    The New York state pension fund holds 3.8 million shares in Target, with a market value of $283 million.

    Meanwhile Portland, Ore.-based Equity Foundation, which provides grants to groups that fight prejudice against gay, lesbian, bisexual and transgender people, ditched its 170 shares in Target stock Wednesday. Executive Director Peter Cunningham acknowledged the decision was “meant to send a message more than make a huge impact.” He said he wants corporations to give more thought to the effects of wading into political waters.

    Target, a company with a total market value of more than $38 billion, declined to comment, other than to say it had received the proposals, but it has spent the past three weeks responding to criticism of its $150,000 donation.

    Tim Smith, senior vice president at Walden, said it’s unclear how often companies will donate in controversial races. “But if the Best Buy and Target contributions are any indication, imprudent donations can potentially have a major negative impact on company reputations and business if they don’t carefully and fully assess a candidate’s positions.”

  14. Newt says:

    Target has a $44 BILLION valuation.These groups collectively represent less than 1% of the company.

    Once again, a total non-story hyped by the media.

    1. Joe Loveland says:

      Reputation damage isn’t a line in the corporate books, but that doesn’t mean that reputation damage has no financial impact. An interesting observation in the NY Times column on this subject:

      “What is the value of reputation? BP’s progress with its oil leak in the Gulf of Mexico gives support to recent estimates that the disaster could eventually cost the British company less than $30 billion. Goldman Sachs, meanwhile, took a $550 million slap on the wrist to settle fraud charges with the Securities and Exchange Commission.

      But shareholders have paid a far heavier price for these episodes than the quantifiable damage suggests. That deficit has one obvious explanation: the cost of reputation harm. Goldman shares, for instance, rose only modestly after its deal with the regulator. That left its market capitalization at about $75 billion, around a fifth lower than its value on April 15, the last day before the S.E.C. filed charges.

      Almost half of that loss is attributable to the fall in global equity markets, taking the MSCI World Index as a benchmark. After backing out the paltry penalty, there is a bit under $10 billion of value destruction to explain, or some 11 percent of Goldman’s value, adjusted for falling markets.

      It’s a similar story at BP. The group is worth about $115 billion, about one-third less than its value before the gulf well blew on April 20. Adjust for the fall in global markets over the course of the spill, and back out the latest estimate of the likely costs of the cleanup and compensation, and there’s still approaching $25 billion of value destruction to account for.

      That is 14 percent of BP’s adjusted market value. It would be too crude to conclude from this analysis that reputation is worth 11 to 14 percent of market capitalization, or that BP somehow has slightly higher “reputation leverage” than Goldman does. Both companies face continuing business challenges arising from their troubles, and the British oil company’s predicament is still much more uncertain than Goldman’s.

      What is clear, though, is that reputation has huge value. Companies need to guard theirs vigilantly.”

  15. Bob Lewis says:

    Keep in mind, only retailers and suppliers of retail products are vulnerable. Businesses that sell to other businesses might find themselves criticized, but won’t be subject to consumer boycotts.

  16. John Reinan says:

    However it is structured — and as Joe suggested above, using Chamber of Commerce or a similar vehicle is likely — I find it inconceivable that substantial amounts of corporate money won’t find its way into politics.

    Right now, everyone is figuring out the best vehicle for it. Target showed how not to do it. But they’ll get the kinks worked out.

    The stakes are too high not to. The politicians are there to be influenced, and money is the best way to influence them. Corporations have a lot of money. They’ll eventually figure out how to deliver it for best effect and least blowback.

    1. Joe Loveland says:

      Right, my argument from the beginning was that Target and Best Buy mismanaged this from a brand management standpoint. My argument has never been “this means corporate donations are a thing of the past.”

  17. Ellen M says:

    From my perch:

    Newt: You are wrong about most Americans preferring hetero-only marriage. Most Americans don’t care. Get used to it..rights for persons of all sexual orientations are (rightfully) headed your way. And, really, I don’t think that it will harm you.

    Bob Lewis: Of course you’ve heard of socially responsible investing, in which we try to invest our (meager) amounts in corporations that support the majority of issues we believe in. That’s what this is.

    Today I spent $120 on towels, items I might easily have purchased at Target one month ago. Today, Herbergers and Penney’s got my money. It ain’t much, you say; however…

    During the past few years, my family has purchased everything from computers to cell phones to large screens from Best Buy..everything easily worth a few thousand dollars. No more.

    These two corporations have their right to freedom of speech, according to the Supreme Court’s stultifyingly stupid decision from last year. But I have the right not to give Target or Best Buy my money, as well. That’s my exercise of free speech.

    This isn’t a First Amendment issue. The First Amendment applies only when the government is trying to take away a person (or corporation’s) free speech rights. It does not apply to me talking back to you.

  18. John Reinan says:

    The widespread confusion about 1st Amendment rights always amazes me. Most recently, Sarah Palin tweeted that Dr. Laura lost her 1st Amendment rights because people protested her N-word remarks.

    Not true, ex-Governor. It only involves the 1st Amendment when the government is involved.

  19. Ellen M says:

    Hear hear, John. Even Dr. Laura said on Larry King Live that she was resigning her radio job “to reclaim (my) First Amendment rights.” My guess is that she got canned.

  20. Joe Loveland says:

    Quick update:

    This from the Pioneer Press:

    Boycott seems a real buzz-kill for Target

    Brandweek magazine said that a survey of 5,000 consumers revealed a striking drop in favorable feelings toward the Minneapolis-based discounter, following a controversy over its $150,000 political donation aiding an anti-gay-rights gubernatorial candidate.

    The Brandweek Brand Index Report of “consumer perception” — dubbed the buzz score — showed that Target was consistently earning favorable marks from U.S. consumers, but then the controversy hit.

    “Despite CEO Gregg Steinhafel’s Aug. 5 apology on the company’s site, Target lost one-third of its buzz score in the course of 10 days,” Brandweek reported.

    As the controversy faded, Target’s “buzz score” improved somewhat, but then slid again as the liberal group MoveOn.org mounted a nationwide boycott effort and a conservative backlash developed. MoveOn.org was angry about Target’s corporate contribution to MN Forward, which aided Republican Tom Emmer in his race for Minnesota governor.

    Last week, Target reported that sales at stores open longer than a year rose 1.8 percent in August, in line with its projections but less than what Wall Street had expected. Analysts weren’t ready to attribute the miss to a boycott.

    And this subsequent attack on Democrats from Target and Best Buy:

  21. Joe Loveland says:

    It turns out Tom Emmer doesn’t sell in The Castro. From the San Francisco Business Times:

    “It looks like Target Corp. is beginning to understand that it has some serious fence mending to do if it wants to open a store in San Francisco. Ever.

    A month after Target came under attack for its contributions to an extreme anti-gay gubernatorial candidate in Minnesota, the retailer has stepped up talks with San Francisco officials about how the situation might be resolved.

    “We are making progress but we’re not going to be resolved quickly enough,” Neches told the Business Times. “We think Target has a better understanding of how important these issues are in San Francisco and we have moved the hearing to allow more time to see if we can reach a resolution.”

    District 8 Supervisor Bevan Dufty has taken the lead in the effort to force Target to make amends. He has not commented on what he would like to see Target do, but presumably it would involve a financial contribution to San Francisco LGBT nonprofits and some sort of apology.

    It’s amazing how much damage a $150,000 political contribution can do to a corporation expecting to earn $65 billion this year.

  22. PM says:

    Kudos to General Mills for saying that they would not be making political contributions of this nature. Too bad Target and Best Buy couldn’t show the same judgement.

  23. Joe Loveland says:

    Here here. Good for them for using my Cheerios dollars for building their business rather than playing partisan politics.

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