Whole Foods Market

Whole Foods Market Appeal in the Press

Whole Foods MarketNice to see the Gretchen Morgenson of the New York Times writing about my appeal of the SEC’s no-action letter allowing Whole Foods Market to exclude my proxy access proposal. (Whole Foods’ High Hurdle for Investors, 1/3/2015)  As Morgenson, writes:

Other companies seem to have been closely watching the S.E.C.’s ruling. Since the Dec. 1 decision, 10 other companies have asked the S.E.C. for permission to exclude nomination proposals from 3 percent shareholders. They include Arch Coal, Cabot Oil & Gas and Marathon Oil, and they make the same argument about conflicting proposals. 

Morgenson doesn’t highlight that my proposal allows groups to meet a threshold, whereas management’s limits nominators to one shareowner. No one will meet Whole Foods’ threshold once Baillie Gifford sells off a few more shares, as they have been doing for years. Nor does she mention either of the reasons I presented in my appeal (McRitchieAppealNo-action12-23-2014 pdf).:

  1. The originally intended definition of “directly conflicts” has been perverted by more recent staff interpretations of the rule. It was limited to very narrow circumstances where adoption of competing proposals could be harmful to shareowners.
  2. The was rule never intended to allow companies to substitute their own proposals when generated in reaction to those submitted by shareowners.

As a former regulator concerned with governance, the main issue for me (during the appeal process) centers around the SEC rewriting a rule without going through the public notice process. That’s what they did decades ago to take away proxy access. AFSCME sued and won, pointing out they reinterpreted rule without public notice (AFSCME v AIG). We then got proxy access back for a few months until the SEC wrote a rule banning it. Then we got them to write new rules allowing it. Now staff is essentially eliminating our rights by again misinterpreting Rule 14a-8(i)(9).

The process used in the no-action process is important. Understandably, Morgenson focuses on the power struggle between shareowners and company management but she does so at a very surface level. If the Commission ever hears my appeal, it will be discussing these more nuanced issues, not the merits of proxy access.

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4 Responses to Whole Foods Market Appeal in the Press

  1. Dan Boxer January 6, 2015 at 8:55 am #

    Jim,
    You are giving WF an incredibly good and well deserved run for their money. As a former NYSE company GC I know that this kind of attention will spark institutional holders to question the sincerity of WF’s commitment to Governace.
    There is also some perverse irony at play here for those of us who read Mackey’s “Conscious Capitalism” where he dwells at length on investors as stakeholders and the ultimate authority of shareholders.
    Board entrenchment doesn’t seem to square with much of his conscious capitalism theme.
    Keep up the great work,
    Dan

  2. James McRitchie January 6, 2015 at 9:14 am #

    Thanks very much for the comments Dan. Mackey’s Capitalism may be conscious but maybe his isn’t conscious of his inconsistencies. I guess most of us aren’t. He once told me that resolutions turn shareowner meetings into a circus.

    Where is the board in all this? They are supposed to represent shareholders. I liked your commentary on Russell “Rusty” Brace. http://www.pressherald.com/2014/10/19/maine-voices-lack-of-oversight-will-cost-midcoast-charity/ Again, where was the board? Maybe I’ll get out to Maine next September.

    • Dan Boxer January 6, 2015 at 2:11 pm #

      Let’s redo the lobster on the rocks when you come.
      The editors wouldn’t let us use the word “crook” in our column on Brace. Too bad because that is what he is!

  3. James McRitchie January 6, 2015 at 2:42 pm #

    Sounds wonderful. No such editorial restrictions here. Might be late August and looking forward to it.

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