Monday, January 12, 2015

CII Criticizes Whole Foods for Unworkable Proxy Access Threshold

[This story previously appeared in Securities Regulation Daily.]

By John Filar Atwood

Whole Foods Markets has drawn the ire of the Council of Institutional Investors (CII) by proposing a proxy access ownership threshold that is far above the norm. The company initially proposed to require a nominating shareholder to hold 9 nine percent stake, but subsequently reduced it to 5 percent. CII called both numbers “unreasonably high” and beyond what U.S. shareholders want.

Not workable. CII executive director Ann Yerger has written to Whole Foods to ask its board to revise the proposed proxy access bylaw to be consistent with prevailing U.S. shareowner views for a viable ownership threshold. She noted that the initial proposal of holding a nine percent stake for five years would not have been workable for any current Whole Foods shareholder.

Yerger said that the revised proposal—a nominating shareholder would have to have owned 5 percent of company stock for at least five years—is still “wildly at odds” with the approach to proxy access currently supported by U.S. shareholders. That approach, she noted, is requiring a nominating shareholder or group to have owned 3 percent of the voting shares for at least three years.

Three percent approach. The 3 percent method has already been adopted by a number of companies, including Chesapeake Energy Corp., Western Union Co. and Verizon Communications Inc., according to Yerger. She also noted that in 2014, proxy access proposals won majority shareholder support at annual meetings of six U.S. companies and all of them endorsed the 3 percent for three years approach. Members of CII, many of whom are Whole Foods shareholders, favor a 3 percent for two years model, she added.

Yerger urged the Whole Foods board to revise the proposed binding access bylaw, asking that the company respect what U.S. shareholders increasingly view as the norm.

1 comment:

James McRitchie said...

Not only is 5% unreasonably high, the Whole Foods threshold must be met by a single shareholder, rather than by groups.

Too bad no one is really focused on the legal issues. A few years ago the SEC began dramatically reinterpreting its own rules regarding what constitutes a conflict between a shareholder proposal and one put forth by the board. They can't legally do that. They should have announced a new rulemaking but did not.