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Pension funds line up in favor of proxy-access bylaw change at Whole Foods

Whole Foods

Large pension funds have lined up against Whole Foods Market Inc. in support of a shareholder proposal that would amend the company’s proxy-access bylaw, a change the company opposes.

The proposal would enable an unlimited number of eligible shareholders to aggregate their shares to reach the 3% ownership requirement to nominate up to 25% of the board or two directors, whichever is greater.

The C$282.6 billion ($205.2 billion) Canada Pension Plan Investment Board, Toronto; $179.4 billion California State Teachers’ Retirement System, West Sacramento; $172.5 billion Florida State Board of Administration, Tallahassee; C$154.5 billion Ontario Teachers’ Pension Plan, Toronto; and $125 billion Texas Teacher Retirement System, Austin, all plan to vote their Whole Food shares in favor of the proposal, according to their proxy-voting disclosures.

The Whole Foods existing access bylaw enables a group of up to 20 shareholders that hold in aggregate 3% of the stock continuously for three years to nominate up to 20% of the board, rounding down to the nearest whole number of board seats.

“Even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the 3% criteria at most of the companies examined by the Council of Institutional Investors,” the proposal states.

Institutional Shareholder Services and Glass Lewis, both proxy-voting advisory firms, separately recommend their institutional investor clients support the proposal.

“Overall, the proxy-access provisions in this proposal would enhance the company’s existing right for shareholders while leaving the board with the flexibility to maintain safeguards on the nomination process,” an ISS report states.

Glass Lewis in a report states, “The company’s current bylaw amendments could have a potentially dampening effect on the ability for qualified shareholders to use proxy access.”

The board currently is made up of 11 directors.

“Having at least two nominees helps ensure that, if elected, directors can serve on multiple committees and bring an independent perspective to board decisions,” the proposal states.

The company opposes the proposal, noting in its proxy statement, “The proposal’s allowance to nominate up to 25% of the board each year may result in excessive disruption to the board and reduce the board’s effectiveness,” the company states in its proxy statement.

“In the absence of a reasonable limitation on the number of shareholders in a group, the company could be required to make burdensome and time-consuming inquiries into the nature and duration of the share ownership of a large number of individuals participating in a nomination in order to verify their required share ownership, which could impede the exercise of proxy-access rights by other shareholders,” the company added.

The Whole Foods annual meeting is March 9.