Dive Brief:
- The Florida agency overseeing public employee retirement funds alleged last Thursday in a class-action lawsuit that Target and its board of directors deceived shareholders about the true risk of its 2023 Pride Month campaign, causing investors to lose billions of dollars.
- Per the complaint in State Board of Administration of Florida (SBA) v. Target Corp., the Pride campaign provoked consumer backlash and boycotts that led to plummeting sales and “wiped out over $25 billion in Target’s market capitalization,” the lawsuit alleged.
- Despite knowing from experience that its DEI/environment, social and governance initiatives risked backlash, Target’s CEO and board of directors failed to disclose to shareholders the risk regarding the 2023 campaign — and falsely suggested they were overseeing any potential problems, the complaint alleged. These actions violated the Securities Exchange Act, which required Target to provide investors “with direct and honest disclosure” of risks its DEI/ESG initiatives posed, the lawsuit said.
Dive Insight:
SBA is responsible for managing and investing in the proceeds of Florida’s public employment retirement funds, according to the lawsuit.
Pursuant to this responsibility, it owns Target stock and has been damaged by the stock’s decline, the suit alleged.
“Corporations that push radical leftist ideology at the expense of financial returns jeopardize the retirement security of Florida’s first responders and teachers,” Florida Attorney General James Uthmeier stated in a media release announcing the lawsuit.
Target is facing another lawsuit, Craig v. Target Corp., that arose out of the same facts, SBA’s complaint noted. In December, a federal district court in Florida rejected Target’s motion to dismiss the suit or move the case to Minnesota, where it is headquartered.
Court documents indicated that Target’s disclosure did mention that failure to reach DEI goals may impact business outcomes.
Notably, SBA’s action is the first shareholder lawsuit by a state alleging Target’s mishandling of DEI initiatives, according to a Reuters report.
Backlash against DEI/ESG efforts has become increasingly common, as have shareholder actions challenging DEI rollbacks.
For example, in November 2024, a Lululemon shareholder sued the athletic wear company for failing to structure its diversity program to “meaningfully combat discrimination,” the lawsuit alleged. The shareholder alleged that criticism of the program led to a drop in stock prices.
Also, last summer, after tractor company John Deere announced it would no longer participate in “external social or cultural awareness parades, festival or events” and that mandatory training materials would be audited to “ensure the absence of socially motivated messages,” shareholder Amalgamated Bank raised concerns about how Deere & Co. would proceed with workplace culture and talent strategy without a DEI framework.
In January, the U.S. Security and Exchange Commission notified John Deere that it had ruled the company must consider Amalgamated Bank’s proposal to “report publicly on the effectiveness of its efforts to create a meritocratic workplace” where no one is excluded “because of immutable characteristics, such as gender, race or ethnicity.”
Shortly before Florida filed this lawsuit, Target announced it was ending some diversity efforts, citing “the importance of staying in step with the evolving external landscape,” although the retailer reiterated its commitment to “inclusion” and “belonging.”
However, that, too, caused a backlash. As Black History Month kicked off in February, so did a nationwide boycott, calling for consumers to buy directly from Black-owned brands instead of from Target.
“While some people are celebrating the big DEI retreat,” that’s short-sided “because our country has never been this diverse,” and the population keeps evolving, the senior director of a PR firm’s Latino division recently told HR Dive.
