After weeks of public protest over its financial support of an organization that backed a GOP gubernatorial candidate opposed to gay rights, Target Corp. now faces a new form of pressure: demands from institutional shareholders that it revamp its donation process to avoid the chance of additional backfires.

The shareholder action follows the disclosure last month that Target had sent corporate funds to an organization backing the Minnesota gubernatorial candidate. Such donations are allowed under a recent Supreme Court decision that lets companies and unions contribute directly to independent election campaigns.

Critics of the decision, including President Obama, feared the ruling would allow big-business dollars to disproportionately affect campaigns across the country. But the Target case suggests that customer and shareholder pressure is emerging as an unexpected factor that could rein in at least some of that corporate spending.

“Imprudent donations can potentially have a major negative impact on company reputations and business if they don’t carefully and fully assess a candidate’s positions,” said Tim Smith, a senior vice president at Walden Asset Management, one of three asset management firms that this week filed a resolution asking the retail giant to overhaul its campaign donation policies. He cautioned that funding ballot initiatives, as many corporations have done, “can similarly backfire.”

The three management firms sponsoring the resolution — Calvert Asset Management, Trillium Asset Management and Walden — together hold $57.5 million of Target stock. Other institutional investors, including the giant New York state pension fund and union investment managers, are considering co-signing the resolution, which calls on Target’s independent directors to review the criteria and risks in making donations to organizations active in political campaigns.

“Target should have carefully considered the implications that direct political contributions can have toward shareholder value,” said Ola Fadahunsi, spokesman for New York Comptroller Thomas DiNapoli, the pension fund’s sole trustee. “It’s troubling to think that they can fund controversial candidates without properly assessing the risks and rewards involved.”

The New York state pension fund currently holds 3.8 million shares in Target, with a market value of $283 million.

Target was among several Minnesota firms that gave large donations to MN Forward, a new tax-exempt committee running ads backing GOP gubernatorial candidate Tom Emmer. Another leading retailer, Best Buy Co., also gave to the committee and has received the same shareholder resolution as Target.

Target spokeswoman Jessica Carlson declined to comment on the resolution. She pointed to a statement this month from Chief Executive Gregg Steinhafel, who promised to “begin a strategic review and analysis of our decision-making process for financial contributions in the public policy arena.”

The investors’ resolution calls for a far more rigorous and specific review by independent board members and for disclosure of the company’s contributions policy.

A spokeswoman for Best Buy, Sue Busch Nehring, said the company would review the resolution. She previously said Best Buy had “learned from this” and would review its political donations process.

Target said it made a $150,000 donation to MN Forward because the group promised to back candidates promoting a better business climate. “The intent of our political contribution to MN Forward was to support economic growth and job creation,” Steinhafel said in an e-mail to employees.

The first advertisement aired by MN Forward touted Emmer, who favors lower taxes and other pro-business positions but also has a strong record of opposition to gay rights legislation. Since the controversy exploded, MN Forward, which collected well more than $1 million in corporate donations, has made contributions to a handful of Minnesota Democratic candidates.

Besides seeking a review of political contributions, the institutional shareholders also are asking the retailers to consider how contributions will affect the company’s public image, business sales and profitability, and whether a candidate espouses policies that conflict with the company’s values.

Bill de Blasio, a board member of another large pension fund, the New York City Employee Retirement System, said Thursday that he would ask other members of his board to support the resolution. The retirement board holds nearly 1 million Target shares.

Some analysts said the resolution might not affect corporate behavior, particularly since the protesting investors hold only a small fraction of the company’s 700 million shares outstanding. Yet Best Buy and Target are also particularly vulnerable to public reaction since they are retailers in a highly competitive market.

The Conference Board, an influential business association, is preparing to publish a guide advising companies and their directors to be cautious in the new era of campaign contribution.

Bruce Freed, president of the Center for Political Accountability and one of the guide’s authors, said corporate executives were tracking the Target situation closely and looking for ways to avoid similar public relations problems.

Added Shelley Alpern, director of shareholder advocacy for Trillium Management: “A good corporate political contribution policy should prevent the kind of debacle Target and Best Buy walked into.

“We expect companies to evaluate candidates based upon the range of their positions — not simply one area — and assess whether they are in alignment with their core values. But these companies’ policies are clearly lacking that,” Alpern said.

In a news release announcing the resolution, Trillium also disclosed that one client with a relatively small holding in Target had asked that its ownership of the stock be immediately liquidated. Officials from the Equity Foundation of Portland, Ore., said they were divesting because they were “troubled” by Target’s political contribution.

Target also is facing calls for a boycott from MoveOn.org and has received stinging criticism from gay rights advocates, who once lauded the company for its approach to gay and lesbian issues.

Though some corporate executives and activists think the Target case may be a cautionary tale for businesses, Tara Malloy of the Washington-based Campaign Legal Center believes it will not necessarily hinder businesses from pouring money into campaigns.

Energy companies and defense contractors that have less interaction with the public won’t be subject to the same kind of pressure as retailers.

Besides, she said, “the Target case may just be an example of a corporation doing it wrong.” Other donors may take pains to make their contributions anonymous, she said.

jennifer.martinez@latimes.com

tom.hamburger@latimes.com