This week, an investor brought a lawsuit against Target Corporation in connection with allegedly "false and misleading statements concerning Target's Environment, Social and Governance (ESG) and Diversity, Equity, and Inclusion (DEI) mandates that led to its disastrous 2023 children-and-family themed LGBT-Pride campaign." Specifically, this securities lawsuit, which alleges 10b-5 violations, among other things, focuses on the "unprecedented customer backlash to a campaign Target undertook as a result of its ESG and DEI initiatives . . . which embroiled Target in the culture war and caused Target to experience the biggest stock decline in the company's history, costing investors billions." In essence, this lawsuit seeks to employ the securities laws to further penalize this retailer for the consequences of a customer boycott fueled by anti-ESG activists.
Corporate ESG and DEI initiatives have increasingly been the focus of concerted pushback by conservative interests over the past few years, a trend that has accelerated recently. There have been a variety of initiatives that seek to punish corporations for adopting a stance deemed antithetical to conservative policy preferences, ranging from overt government action (e.g., Gov. DeSantis' various maneuvers against Disney) to grassroots efforts (e.g., the boycotting of particular companies). This securities lawsuit is notable for at least two reasons: (1) it demonstrates the use of yet another tactic--investor litigation--in the array of strategic options developed by anti-ESG interests; and (2) it presents the potential of further consequences to a successful consumer boycott of a company that (presumably) impacts its stock price, thus reinforcing the use of that particular tool and increasing its in terrorem value.
Nonetheless, this complaint represents simply the opening phase of the lawsuit, and it is uncertain whether the use of securities litigation as a tactic by anti-ESG interests will ultimately be successful (or even create meaningful risk for the company).
A conservative legal group led by a former adviser to Donald Trump is suing Target over shareholder losses in the wake of boycotts of its Pride Month displays. The lawsuit, filed Tuesday by former Trump White House adviser Stephen Miller's America First Legal, argues that Target misled investors when it said it was monitoring risks related to its diversity, equity and inclusion policies. The retailer's stock price has fallen almost 20 percent since mid-May, when it was met with protests, bomb scares, in-store threats from customers and a stock-market rout after an online mob seized on long-held Pride displays.