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Whole Foods faces a whole new ballgame, with shareholders and customers

October 1, 2015, 5:23 PM UTC
Inside A Whole Foods Market Inc. Store As Earnings Figures Are Released
Bags of groceries sit at a Whole Foods Market Inc. store in Oakland, California, U.S., on Wednesday, May 6, 2015. Whole Foods Market Inc. released earnings figures following the close of U.S. financial markets today. Photographer: David Paul Morris/Bloomberg via Getty Images
Photograph by David Paul Morris — Bloomberg via Getty Images

Whole Foods is one company that may need to start thinking differently about both shareholder and animal rights.

This year, shareholder rights were front and center at many large companies. And proxy access proposals, in particular, dominated the shareholder voting season. Giving shareholders proxy access allows them, under certain conditions, to put board candidates on the company’s ballot. Without this access or a forceful move by investors to unseat current directors, the only board members put on the ballot are those the board recommends. The “drive for Proxy Access, largely as a result of a very high profile campaign by NY City Comptroller Scott Stringer has led to … significant support from the investor community,” Nick Dawson, managing director of Proxy Insight Limited, wrote me in an email.

Given the high percentage of institutional and individual investors that tend to just vote with management, the strength of the support was surprising. But Stringer’s efforts on behalf of the New York City Pension Funds, called the Boardroom Accountability Project, were unprecedented. Building on those efforts, other shareholders also put forward proxy access proposals. On top of that, some companies put forth their own proposals. Other companies just went ahead and adopted the new ballot measures.

But Whole Foods got into hot water this proxy season with investors and the SEC because of their approach to the proxy access issue. Instead of just putting the shareholder proposal on the ballot, the company tried to end run it by suggesting their own, less robust proposal—and then asked the SEC to allow them to drop the shareholder’s version. In the end, Whole Foods bypassed a shareholder vote entirely by simply adopting a form of proxy access which had more stringent conditions than the shareholder proposer, Jim McRitchie had wanted.


In response, Whole Foods investor McRitchie has sent a proposal to the grocery chain for shareholders to vote on next year. It is designed to revise Whole Foods’ proxy access bylaw to “meet best practices according to investors.” The proposal would give investors the right to nominate two directors or a quarter of the board, whichever is greater, and place “no limitations on the number of shareholders that can aggregate their shares to achieve the 3% Required Ownership Percentage” to put forward nominations. The proposal also calls for no limits on how often candidates can be proposed and no limits on any compensation arrangements the candidates may have with shareholders.

The Whole Foods proposal is just one example of a new series that will start to come on company ballots next year to improve on the proxy access requirements now on the books. In August, the Council of Institutional Investors issued a paper on the common fixes needed to some of the current proxy access measures adopted by companies. “We will see more of these in a second wave … even though the first wave has just begun,” McRitchie wrote me in an email.

But for Whole Foods shareholders, there’s more than ballot access to be concerned about. The company’s share price has fallen by 46% over the past seven months. And the company faces increasing competition, all while it’s trying to revamp its operations.

Employees and customers likely have their own concerns. Earlier this week, Whole Foods announced that it would be laying off workers. And last week, PETA (People for Ethical Treatment of Animals) sued the company for alleged violations in its five step animal welfare ranking system. “The entire audit process for Whole Foods’ animal welfare standards is a sham,” the lawsuit reads.

With shares tanking, competition rising, employee ranks dwindling, and customers (potentially) defecting, the new proxy access “update” at Whole Foods may have a shot.

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (, an independent board education and advisory firm she founded in 1999. She has been a regular contributor to Fortune since April 2010 and is the author of two books on corporate governance and valuation, Economic Value Management: Applications and Techniques and Value-led Organizations.