Minnesota has a lot riding on the next Target CEO

Target is looking for a new top executive to replace recently fired CEO Gregg Steinhafel, and Minnesota has a lot riding on that selection.

Whoever the retailer chooses will lead one the state's largest employers, one with deep roots and a history of commitment to the state.

In the tradition of its Dayton family founders, Target has contributed five percent of its pre-tax profits to the communities the retailer serves. By next year, the company expects to have given a total of more than $1 billion to schools alone.

• More: What Target's Steinhafel did wrong, and didn't
• Related: Target may go against history, look outside company for CEO

As the new CEO will be charged with righting a ship that has been listing, the question for Minnesota is whether the new CEO will represent a major departure for the company. The choice is very important for the region, US Bank CEO Richard Davis said.

"Target is in every fabric of our community," Davis said. "They're one of the biggest charitable givers. And I'm quite optimistic that based on the board, based on the Dayton legacy to be protected, that Target's going to find a great leader."

Target employs about 31,000 people in Minnesota. The retailer and its predecessor — the Dayton Hudson Corp. — have always had a CEO with a Minnesota connection. So far, all have emerged from within the company.

John Wood, a CEO recruiter with Heidrick & Struggles of New York, expects Minnesota connections, values and tradition will weigh heavily in the selection of Target's new CEO.

"To find somebody who'll fit with the values not just of Target but of the community is another level of complexity," he said. "You need to get the right sentiment and sensibility in that job because it faces the community pretty prominently. Especially in companies that are culture-rich and part of the community, ideally you find somebody inside."

The board that will make the decision has fewer people with strong Minnesota ties than 20 years ago. In 1994, a majority of the board members who named Minneapolis native Bob Ulrich to the top job at the time either lived in or came from Minnesota.

Today just three of 10 board members are Minnesota natives and only one lives in the state.

But Morningstar retail analyst Ken Perkins said leadership ability is more important than roots when it comes to choosing a CEO.

"It really just comes down to overcoming big issues and managing the long-term strategy to get the company back on track," Perkins said. "So, they may be willing to take a look elsewhere. But there may be internal candidates also that are equally strong in addressing these sort of issues."

The board that will make the choice is under the gun.

Shareholders signaled considerable unhappiness with most of Target's directors at the company's annual meeting last week. Four of 10 received less than 80 percent of the vote, including interim board chair Roxanne Austin. Experts say a tally below 80 percent signals serious discontent among investors. Only three received the typical support of 90 percent. Still, investors re-elected all of the board members.

• More: Target shareholders to board: We are not happy

Amid flagging shareholder confidence, the Target board has to decide whether the best choice for CEO is someone from inside or outside the company, or even from outside retail altogether.

Best Buy, for instance, turned to the hospitality world when it tapped Hubert Joly as CEO.

Wood, the CEO headhunter, anticipates Target's board will stay inside the retail sector.

"Retail is complex," he said. "It is a unique beast. It is most likely that they're going to find someone from within retail, if not from within Target."

But Wood warns that several leading retailers are hunting for CEOs, so there will be a battle for the top candidates. Some corporate governance experts say shareholder dissatisfaction with Target's board may discourage some candidates.

Among the names floated as possible fits for Target are Macy's CEO Terry J. Lundgren, J. Crew's Millard Drexler, former Target vice chairman Gerald Storch and current executive vice president Kathee Tesija.

Target officials are not saying when the company aims to have a new CEO in place. Whoever wins the job will be in a position to push major changes in Target's operations, including its relationship with Minnesota.

Edward Jones retail analyst Brian Yarbrough said Wall Street likely would prefer to see an outsider, especially one who can improve Target's e-commerce efforts.

"Someone who's got a successful track record, more than anything," he said. "I don't know that they're going out looking for someone who's been in retail for 25 or 30 years, because retail has changed so much in the last 8 or 10 years."