Hi Gretchen - enjoyed your column this weekend on this subject.

In making your point about how Whole Foods cleverly subverted investor rights and intentions, I think you may have missed an even bigger truth: Whole Foods went to great lengths to oppose shareholder will over what amounts to what on its face is a very small issue. We investors wonder why they would spend the time and money to do this, and want to know what we’re missing.

How is the issue small? Your column suggests that proxy access allows shareholders to nominate directors, or actually to appoint them. Proxy access does neither.

1. •Shareholders have always had the right to nominate directors. In fact, only shareholders can do that. Proxy access doesn’t change that right. Companies have indeed established other obstacles to shareholder nomination of directors, specifically advance notice and disclosure rules. Proxy access doesn’t address these other obstacles, though.
   

2. •Shareholders also do not gain the right to appoint or designate directors through proxy access. A director that a shareholder promotes through proxy access still needs to win enough votes from shareholders. Companies control many other elements of the election process, and can continue to influence (“rig”?) elections so that overall, they work out in favor of entrenched incumbents.
   

So, if it doesn’t allow shareholders to nominate directors, or assure that a shareholder nominee joins the board of directors, what exactly does proxy access accomplish? It merely requires a company to include a shareholder’s nominee(s) on the corporate proxy materials.

1. •The company would include another four or so pages of printed material in a proxy statement. It would also list the shareholder nominees on the same proxy card (ballot, really) as the company nominees.
   

2. •It would save the nominating shareholder a great deal of money and trouble. Today, without proxy access that shareholder must put together a parallel proxy solicitation process, at that shareholder’s expense.
   

3. •More importantly, it would allay significant confusion among other shareholders. Instead of keeping straight proxy materials from multiple sources, the shareholder would have a single, complete source of information about the nominees.
   

Even worse, under the proxy access structure that Scott Stringer and others have proposed, assuming a shareholder can win enough votes for their nominees, shareholders can elect at most 20% of the board of directors through proxy access nominees. Any more than that, and shareholders must solicit proxies in the conventional (expensive, arcane) manner.

So, Whole Foods devoted significant management time and considerable expense to opposing something that won't really cost the company anything, would save some shareholders a lot of money, and simplify the board of directors election for all shareholders. And, they don’t automatically have to add shareholders’ nominees to the board of directors, since those nominees still need to win more votes than the incumbent directors. Further, if a shareholder’s nominee(s) win board positions through proxy access, with at most 20% of the positions they won’t come close to controlling or really even influencing the decisions the board makes.

So, why would Whole Foods do this? or any of the numerous other corporations that oppose proxy access? It seems like a small concession.

Investors would love to have answers to two questions:

1. •What about proxy access have we missed that make it such a big issue that merits Whole Foods’ response?
   

2. •If it’s really a small issue, why does Whole Foods care so much?
   

How about considering this in a subsequent column?

Happy to discuss this further -

MRL