Council of Institutional Investors

CII Responds to Whole Foods Challenge on Proxy Access
Thursday, January 8, 2015
by: Amy Borrus

Section: CII Governance Alert

The 2015 U.S. proxy season is off to an explosive start, as companies and shareholders square off-again-over proxy access. CII is responding by sending letters to companies and asking the SEC staff to change its approach for analyzing situations similar to the one at Whole Foods, which was able to knock out a shareholder proxy access proposal because it was submitting its own proposal for approval at the 2015 meeting.
So far, at least 16 companies are asking shareholders to vote at 2015 annual meetings on proposed access bylaw amendments that CII and many U.S. shareholders view as unworkable (see current list below, provided by the New York City Comptroller's Office). All require nominating shareholders to meet an ownership threshold of 5 to 8 percent of the stock.
This high bar is wildly at odds with the approach to proxy access that U.S. shareholders broadly favor: requiring a nominating shareholder or group of shareholders to have owned at least 3 percent of voting shares for at least three years. (CII members have endorsed a slightly more flexible "3 percent for two years" approach.)
The corporate rush to propose bylaws permitting proxy access follows Whole Foods' success in convincing the SEC to allow it to exclude a shareholder proposal. That proposal asked the company to allow shareholder groups holding a 3 percent stake for three years to have their director nominees included on the company's proxy ballot. Whole Foods argued that the proposal directly conflicted with a proposal the company planned to submit, one that would require a sole nominating shareholder to have held a 9 percent stake for five years. Whole Foods subsequently filed a proposal asking shareholders to approve an access bylaw with a "5 percent for five years" ownership threshold. The proposal will come to a vote at the company's March 10 annual meeting.
CII has written to Whole Foods Chair John Elstrott, asking the board to revise the company's proposed binding access bylaw to be line with what shareholders regard as more reasonable. The Council plans to protest similar moves at other companies that have filed access bylaw proposals with unattainable requirements. CII will also shortly send a letter to the SEC staff asking it to change its interpretation of the subsection of Rule 14a-8 (which governs shareholder proposals), which paved the way for Whole Foods-and likely other companies-to exclude the shareholder access proposals that followed the "aggregate 3 percent for three years" approach.  

Company Proponent Min.
Min. Holding
Group Size
Max. number of
nominees (% of board)
Marathon Oil NYC Funds 5% 5 years 1 10% (Min. of 1 director)
Cabot Oil & Gas  NYC Funds 5% 3 years none 20%
Arch Coal NYC Funds 5% 5 years 1 10% (Min. of 1 director)
EBAY NYC Funds 5% 4 years Y; # not specified 15% (Min. of 1 director)
Exelon NYC Funds 5% 5 years ? 10%
Peabody Coal NYC Funds 7% 5 years 1 10% (Min. of 1 director)
Apache Energy NYC Funds 5% 3 years none specified 10% (Min. of 1 director)
Chipotle NYC Funds 8% 5 years 1 10% (Min. of 1 director)
ConocoPhillips NYC Funds 5% 3 years none specified 20%
SBA Communications NYC Funds 5% 5 years 10 15%
Noble Energy NYC Funds 5% 5 years 1 10% (Min. of 1 director)
Cloud Peak Energy NYC Funds 5% 5 years 1 10%
YUM! Brands, Inc. Marco Consulting Group 5% 4 years 1 10% (Min. of 1 director)
Domino's Pizza, Inc. Marco Consulting Group 5% 5 years 1 20% (Min. of 1 director)
First Merit KC Firefighters 5% 3 years 10 20%
Whole Foods Jim McRitchie 5%* 5 years 1 10% (Min. of 1 director)
*Whole Foods disclosed on 12/29 that it had reduced its proposed bylaw threshold from 9% to 5%.
**Limit of one means a group is ineligible; none specificied means that a group is elgible, but there are or may be group size limitations that are not yet set and/or disclosed.
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