United Natural Foods Inc

United Natural Foods (UNFI) – Proxy Score 82

UNFIUnited Natural Foods, Inc. (UNFI) , which distributes and retails natural, organic, and specialty foods, as well as non-food products primarily in the United States and Canada, is one of the stocks in my portfolio. Their annual meeting is coming up on 12/17/2014. ProxyDemocracy.org was down when I checked and voted on 12/14/2014. I hope they are able to obtain continued funding to keep the site going. If anyone would like to make a tax deductible contribution to that effort, please email Andy Eggers, cc James McRitchie (I’ll match whatever you contribute up to $2,500). I voted with management 82% of the time and assigned them a proxy score of 82.

View Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the United Natural Foods 2014 proxy in order to enhance corporate governance and long-term value.

United Natural Foods ISS Rating

From Yahoo! Finance: United Natural Foods, Inc.’s ISS Governance QuickScore as of Dec 1, 2014 is 2. The pillar scores are Audit: 2; Board: 3; Shareholder Rights: 3; Compensation: 4. Brought to you by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosures. That gives us a quick idea of where to focus… compensation.

United Natural Foods Compensation

United Natural Foods Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Steven L. Spinner, at about $4.85M.  I’m using Yahoo! Finance to determine market cap ($3.8B) and Wikipedia’s rule of thumb regarding classification.

United Natural Foods is a mid-cap company.  According to Equilar (page 6), the median CEO compensation at mid-cap corporations was $4.9 million in 2013, so United Natural Foods’ pay is below that. To its credit, United Natural Foods shares outperformed the NASDAQ over the most recent five and ten periods, while falling short over the most recent one and two year periods.


The GMIAnalyst report I reviewed gave United Natural Foods an overall grade of ‘C.’ According to the report:

  • The company has not disclosed specific, quantifiable performance target objectives for the CEO. While a majority (83.9%) of companies in the home market have not disclosed these targets, disclosure of performance metrics is essential for investors to assess the rigor of incentive programs.
  • The CEO’s total summary pay for the last reported period was more than three times the median pay for the company’s other named executive officers. Such disparity in pay raises concerns regarding the company’s succession planning process and the distribution of responsibilities among the executive management team.

I voted in favor of the pay package.

United Natural Foods Board of Directors and Board Proposals

I considered voting against the head of the Nominating and Governance Committee as a form of protest against not having an independent chair and since shareholders do not have the right to act by written consent. However, I held off in light of proposals on the proxy to eliminate supermajority requirements (proposed by management after my proposal on this subject won 81% of the vote last year) and to allow shareholders with 25% of stock to call a special meeting (proposed in order to keep a similar proposal by me with a lower 10% threshold off the proxy). These steps represent real progress. I voted in favor of both.

United Natural Foods Accounting

I voted to ratify United Natural Food’s auditor, KPMG LLP, since less than 25 percent of total audit fees paid are attributable to non-audit work.

Shareholder Proposals at United Natural Foods

As mentioned above, I voted in favor of both management proposals, which originated as proposals from my wife and me. I also voted, along with CalSTRS and Florida SBA, in favor of the Teamsters proposal to limit accelerated vesting of any equity award granted to any senior executive officer other than on apro ratabasis as of his or her termination date. This is good governance as practiced by Apple, Chevron, ExxonMobil, IBM, Intel, Microsoft, Occidental Petroleum, and others.

I like the spirit of the proposal by Paul Wilcox to 1. Determine and report the CEO to employee pay ratio as required by The Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 953(b) 2. Address the issue of internal equity as reflected in that ratio, and establish a cap on executive compensation if deemed appropriate. Although I think it is premature, given that the SEC may soon require a similar report but the rule and methodology have not yet been set and the statement about pay limitations at Whole Foods Market is flawed, I did vote in favor of the proposal. The proposal is advisory. If passed, any movement by the board to survey and report on our company’s pay ratio would be seen as a positive step. The SEC has indicated it intends to give great leeway to companies in coming up with their own methodology, so the proposal would simply put United Natural Foods slightly ahead of other companies.

CorpGov Recommendations for United Natural Foods – Votes Against Board Position in Bold

1Elect Ann Torre BatesForForFor
3Elect Gail A. GrahamForForFor
5Elect Steven L. SpinnerForForFor
7Advisory Vote on Executive CompensationForForFor
9Allow Shareholders to Call a Special MeetingForForFor
11Pay Ratios and Capping Executive CompensationForAgainstAgainst

Issues for the Future at United Natural Foods

Looking at SharkRepellent.net for provisions unfriendly to shareowners: 

  • No action can be taken without a meeting by written consent.
  • Shareholders cannot call special meetings. (Even if proposal passes this year, the threshold will be too high.

Mark your Calendar to Submit Future Proposals at Microsoft

Any proposal that a stockholder wishes to be considered for inclusion in our proxy statement for the 2015 Annual Meeting of Stockholders must be submitted to our corporate secretary, Joseph J. Traficanti, at 313 Iron Horse Way, Providence, Rhode Island 02908, no later than the close of business on July 10, 2015. We strongly encourage stockholders interested in submitting a proposal to contact legal counsel with regard to the detailed requirements of applicable securities laws. Submitting a stockholder proposal does not guarantee that we will include it in our proxy statement.


Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at 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 % if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.

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