Tuesday, April 14, 2015

Kroger Shareholders Withdraw Proposal on Agricultural Workers

By Amanda Maine, J.D.

Grocery retailer The Kroger Co. has informed the SEC that proponents of a shareholder proposal that would urge the company to purchase produce from growers that comply with the Fair Food Program have withdrawn the proposal.

Proposal. Kroger shareholders Glenmary Home Missioners and Mary H. DuPree (Proponents) submitted a shareholder proposal to be included in the company’s proxy for its 2015 annual meeting of shareholders that urged the board of directors to take the necessary steps to join the Fair Food Program. According to the proposal, Kroger’s current Vendor Code of Conduct is inadequate to protect the brand because it is based heavily on compliance with the law, and U.S. agricultural workers are excluded from many of the labor laws that apply to other U.S. workers. The proponents also cited Justice Department prosecutions of cases amounting to “modern-day slavery” in the U.S. agriculture industry.

According to the Proponents, the Fair Food Program is an internationally recognized program based on strict compliance with a human rights-based code of conduct that prevents forced labor of any type. Adopting the Fair Food Program’s code of conduct can help prevent violations of human rights in Kroger’s supply chain, which can lead public protests, a loss of consumer confidence, and a negative impact on shareholder value, the Proponents stated.

Withdrawal of proposal. In its letter to the SEC requesting that it be allowed to omit the proposal from its proxy, Kroger argued that the proposal sought to micromanage the company by enabling shareholders to dictate Kroger’s relationships with suppliers. As such, the proposal is excludable under Rule 14a-8(i)(7) because it infringes on the board’s and on management’s ability to control the day-to-day operations of the company, according to Kroger.

However, Calvert Investments, writing on behalf of the Proponents, sent a letter to Kroger indicating that they have agreed to withdraw the proposal. In the letter, Calvert cited “the positive steps the company is taking to improve the standards within the company,” including changes to Kroger’s Vendor Code of Conduct. The letter added that the Proponents look forward to working with Kroger to improve its supply chain audits, especially regarding social responsibility.

Kroger informed the Division of Corporate Finance of the Proponents’ withdrawal of their proposal. The Division acknowledged the withdrawal and stated it would have no further comment on the matter.