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After cancelling its diversity commitments, Target now finds itself being attacked by both supporters and opponents of DEI, with shareholders filing a lawsuit saying it misled investors.
Civil rights activists had already gathered outside its headquarters to call for a national boycott of the retailing giant over its decision to phase out its diversity, equity and inclusion initiatives, and now it is facing a class-action lawsuit from shareholders who allege the retailer misled investors about the financial risks associated with its DEI initiatives, as well as other social programs.
Nekima Levy Armstrong, a veteran civil rights lawyer in Minneapolis and founder of the Racial Justice Network, was at the demonstration and said: “We thought that they would hold the line. We thought that they would continue to stand for the values that we all hold dear, but instead they acted cowardly, and they made the decision to bow down to the Trump administration. We will not step back, and we will not turn around.”
Meanwhile, the lawsuit, filed Friday in federal court in Fort Myers, Florida, claims Target failed to disclose the potential for consumer backlash, which shareholders say contributed to a significant decline in the company's stock value.
The City of Riviera Beach Police Pension Fund in Florida is leading the lawsuit, accusing Target and its CEO, Brian Cornell, of defrauding investors by inflating stock prices while allegedly mismanaging funds to advance political and social agendas. The complaint seeks damages on behalf of shareholders who purchased Target stock between August 26, 2022, and November 19, 2024.
Concealed backlash
The lawsuit claims that Target did not adequately inform investors about the risks tied to its environmental, social, and governance (ESG) efforts and DEI programs. The legal filing cites the company's 2023 Pride Month campaign, which faced consumer boycotts and in-store confrontations over LGBTQ-themed merchandise. Target ultimately removed some products from shelves after employee safety concerns arose.
Shareholders argue that the company’s failure to disclose the potential for such a backlash misled them about the stability of their investments. They highlight Target's November 20, 2024, stock price drop of 22%, which erased approximately $15.7billion in market value after the company reported weaker-than-expected profits and holiday sales forecasts.
The lawsuit claims the underperformance contrasts sharply with competitor Walmart's results, which were not similarly affected.
Scaling back DEI
The lawsuit was filed shortly after Target announced earlier this month that it would be ending several DEI programs, including initiatives supporting Black-owned businesses that were implemented following the 2020 murder of George Floyd by a Minneapolis police officer.
Target's decision aligns with moves by other major corporations like Walmart and Amazon, which have also scaled back such initiatives amid growing political scrutiny.
Many conservative figures, including Donald Trump, have criticized corporate DEI efforts, framing them as politically motivated, as part of an ideologically-motivated effort to eradicate efforts around greater equity.
