UNFI Vote: Have We Turned the Corner on Annual Elections?

J. McRitchie, UNFI Shareowner

My proposal to declassify the board at United Natural Foods, Inc. ($UNFI) passed by an overwhelming margin of 87.89%:

  • 38,086,048 for
  • 5,248,963 against

See their 8-K filing. Text (pdf) of proposal and opposition. Of course, the margin would have been even higher without insider holdings and blank votes going to management. Have we turned the corner on declassification measures to the point where companies might as well throw-in the towel and declassify when faced with such proposals? If so, much of that momentum may to due to the Harvard’s Shareholder Rights Project (SRP), which has been working with several pension systems and the Nathan Cummings Foundation, submitting 74 proposals this year on their behalf.

I did a quick search of shareowner proposals passing this year by ratios of 87.89% and higher using FactSet Research’s easy to use tools at SharkRepellent.net and came up with 30, including my own. Of those, 21 were on the topic of declassifying boards. The SRP was involved in 13 of those efforts. Other high proportion winners were 6 majority vote for director proposals (3 from CalSTRS), 2 end supermajority requirement proposals from John Chevedden, and 1 proposal to require redemption of a shareowner vote on a poison pill.

Perhaps even more telling, out of 56 proposals to declassify boards going to a vote, 52 won at least a majority of yes/no votes. I think it is clear that given the option, shareowners want the ability to vote on all directors annually. Hopefully, UNFI and other companies will get the message and will adopt this change. UNFI already has a majority vote requirement for director elections. However, they still have supermajority requirements, so those might be a fitting target next year.

As I indicated in a previous post, I am very disappointed with the lockout style annual meeting at UNFI. After an eloquent speech from Tim Smith, Vice President of Walden Asset Management a division of Boston Trust & Investment Management Company, and a question from me, Joseph Traficanti, Senior Vice President, General Counsel and Chief Compliance Officer, indicated UNFI is “open” to reasonable suggestions from shareowners and gave out his e-mail address, jtraficanti@unfi.com, seeking feedback. Please send an e-mail to mailto:jtraficanti@unfi.com with “Annual Meeting Format” in the subject line. Feel free to embellish:

Dear Mr. Traficanti,

This is in response to your call for suggestions on how to conduct next year’s annual meeting of UNFI shareowners. I recommend that UNFI move to a hybrid format, so that shareowners can attend either in-person or virtually. UNFI should also incorporate the best practices outlined in the Guidelines for Protecting and Enhancing Online Shareholder Participation in Annual Meetings.

Since Tim Smith, representing one of UNFI’s larger shareowners, participated in creating those Guidelines, I suggest you run a draft policy by him. You should also consult with the Council of Institutional Investors, Broadridge and other parties who have  researched these issues. As a concerned long-term shareowner, I would also welcome the opportunity to provide additional feedback on any such draft. Thank you for your consideration.


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