WAUKESHA, Wis. — Despite an impassioned appeal to Target Corp. shareholders, activist investor William Ackman lost his proxy fight Thursday for five seats on the retailer’s board.

This story first appeared in the May 29, 2009 issue of WWD. Subscribe Today.

Ackman had waged a two-month campaign in which he criticized the board’s stewardship publicly and in Securities and Exchange Commission documents.

A preliminary tally showed the Target-backed slate prevailed with more than 70 percent of votes favoring the reelection of the retailer’s four directors and a proposal to cut the board by one, to 12 members.

Ackman and the other candidates nominated by his Pershing Square Capital Management, which controls about 7.8 percent of Target’s outstanding shares, received from high single digits to more than 20 percent of the vote.

However, Ackman predicted nominating committees at other corporations would be influenced by the Target proxy battle and would be more diligent.

“It’s a great day for shareholders,” Ackman said after the annual shareholders meeting, which was held here at a soon-to-open Target store in this community west of Milwaukee. “It sends a message to companies.”

In an emotional speech to about 300 shareholders before the balloting, Ackman had invoked the Rev. Martin Luther King Jr.’s famed “I Have a Dream” speech.

“I have a dream,” Ackman said. “It’s a dream deeply rooted in the American dream, one day in every corporate election there will be a shareholder candidate and a corporate candidate for each seat.”

Later, he said, “I just got choked up. I’m a softy.”

The investor and hedge fund manager had pledged to keep his shares in Target for five years if he won a seat on the board. But after the meeting, Ackman, without committing himself to a strategy, said he might sell some or all of his holdings.

Ackman said the proxy fight cost Pershing about $10 million. Gregg Steinhafel, Target’s chairman, president and chief executive officer, estimated the retailer spent more than $11 million in defending the incumbent board members and arguing that Ackman’s efforts weren’t aimed at generating long-term value for stockholders.

“I look forward to focusing on retail and building the best retail franchise at Target,” Steinhafel said.

Ackman invested $2 billion in the company through a Pershing Square fund, starting in 2007. But the fund is said to have lost about 80 percent of its value as the stock declined from a 2007 high of about $70 to close Thursday at $39.14.

He has lobbied Target to sell off its credit card portfolio and to spin off its real estate as a way to raise cash and boost shareholder value. Target sold off 47 percent of the credit card unit to J.P. Morgan Chase & Co. in 2008 for $3.6 billion.

The company reported sales of almost $65 billion in the fiscal year ended in January, and set a goal of reaching $100 billion in the next decade, he said.

Target is stepping up its focus on food, including fresh produce, in an effort to get shoppers into the stores more often, Steinhafel said. Apparel makes up about 20 percent of Target’s sales, home accounts for about 20 percent and hardline goods another 23 percent.

Steinhafel said Target isn’t planning another big-name designer to replace Isaac Mizrahi, who parted with the retailer last year. Instead, Target is using a number of emerging designers in different merchandise areas.