Whole Foods Markets: How I Voted – Proxy Score 69

Whole Foods Markets ($WFM) is one of the stocks in my portfolio. Their annual meeting is coming up on 3/15/2013. ProxyDemocracy.org had collected the votes of five funds when I checked on 3/3/2012, more were added later.  I voted with management 69% of the time.  View Proxy Statement. (Note to IR departments everywhere, including WFM, can’t we make all proxies indexed with hyperlinks? It would be so much easier to find the topics we’re looking for.)

Warning: Be sure to vote each item on the proxy. Any items left blank will be voted in favor of management’s recommendations. (See Don’t Let Companies Change Shareholders’ Blank Votes.)

I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions where something obviously warrants different treatment. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay, Oxford Review of Economic Policy, Vol. 21, Issue 2, pp. 283-303, 2005), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms want to admit to having average executives. They survey executive compensation at corporations and then set compensation packages that are above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third-world. 

WFM’s SummaryCompensation Table (p. 23) shows that Ken Meyers, Executive Vice President of Operations, was the highest paid named executive officer (NEO) at about $1.8M in 2012. I’m using Yahoo! Finance to determine market cap and Wikipedia’s rule of thumb regarding classification. WFM is a large-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9 & 10), using data from Equilar, the median CEO compensation at large-cap corporations was $10.8 million in 2010.

WFM’s pay is substantially below median. WFM continues a unique compensation policy in which no executive may earn base salary more than 19 times the average employee wage. I like that, so voted in favor of the compensation plan. I think it leads to more of a shared comraderie within the firm. However, I joined with the other shareowners reporting on ProxyDemocracy.org in voting against amending the stock plan… too much dilution.

I voted against Ralph Sorenson because of the failure of the nominating and governance committee (which he chairs) to implement majority-supported shareowner proposals, in addition to his combination of age (79) and years on the board (19). WFM has five board members serving for over 10 years. In my opinion, that limits the likelihood of independence. I also voted against Hass Hassan who has been on the board for eight years and still doesn’t own stock in our company.  Directors should believe in the company or should step down.

I voted to ratify the auditor.

With regard to shareowner proposals, it looks like because of poor formatting, ProxyDemocracy.org picked up the wrong labels for the proposals. When I voted on the ProxyVote.com platform, I pasted the titles they used for these proposals into the table below.

I voted in favor of proposal number 5 by the As You Sow Foundation. WFM is already out in front on recycling. It would take only a minimal effort to write a report on Extended Producer Responsibility (EPR). I’m sure there are at least some measures that can easily be taken. One step at a time.

Of course, I voted in favor of my own proposal requesting an independent Chair.  That’s simply good governance. Independence is a “must” when leading an evaluation of strategy or management performance. A chair who is also the CEO can’t do that effectively. How I voted (CorpGov) below:

1.1John ElstrottForWithholdForWithholdForFor
1.2Gabrielle GreeneForForForWithholdForFor
1.3Shahid ‘Hass’ HassanWithholdForForWithholdForFor
1.4Stephanie KugelmanForForForWithholdForFor
1.5John MackeyForWithholdForWithholdForFor
1.6Walter RobbForWithholdForWithholdForFor
1.7Jonathan SeifferForForForWithholdForFor
1.8Morris ‘Mo’ SiegelForForForWithholdForFor
1.9Jonathan SokoloffForForForWithholdForFor
1.10Ralph SorensonWithholdWithholdForWithholdForFor
1.11William ‘Kip’ Tindell, IIIForForForWithholdForFor
2Ratify AuditorsForAgainstForForForAgainst
3Advisory Vote to Ratify Named Executive Officers’ CompensationForForAgainstAgainstAgainstFor
4Amend Omnibus Stock PlanAgainstAgainstAgainstAgainstAgainstAgainst
5Request for Report on Producer Responsibility for Post-Consumer PackagingForForForForForFor
6Independent Board Chair not previously an executive of the companyForForForForForFor


Mark your calendar: Requirements for Shareholder Proposals to Be Considered for Inclusion in the Company’s Proxy Materials.

Any proposal that a shareholder of the Company wishes to have considered in connection with the 2014 Annual Meeting of Shareholders must be submitted to the Company’s Corporate Secretary at its principal executive offices no later than September 27, 2013, and in accordance with related provisions of the Company’s current Bylaws.

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