A news story hit the wires yesterday that struck me as a bit odd: Whole Foods Market (Nasdaq: WFMI ) is subject to a shareholder resolution suggesting that the roles of CEO and chairman be separated, with the chairman role fulfilled by an independent director. While this issue speaks to rumblings emanating across the entire universe of publicly traded companies, I had to wonder whether Whole Foods is a wise place to start.
First of all, I don't think it's a bad idea at all for two different individuals to fulfill the roles of chairman and CEO. In these days of insane CEO pay and other governance issues that have shareholders riled up, corporate boards should fulfill the function of representing shareholder interests, not playing the role of yes-men to managements. And it makes sense that separating the chairman and CEO titles would be one step toward ensuring that there's an independent viewpoint at the top.
Ironically, Whole Foods CEO, chairman, and co-founder John Mackey has always been modestly compensated by prevailing standards for CEO pay, and he went still further recently by accepting $1 per year in salary and donating his stock options. Furthermore, even though the market has taken a pessimistic view recently, Mackey seems to have steered the company very well.
On the other hand, while Whole Foods has been known to listen to shareholder activists (its animal-compassion standards came about through shareholder agitation, for example), Mackey did cause a stir at last year's recent annual meeting by denying shareholder presentations. That incident is mentioned in this year's proposal, according to the proxy statement: "An independent Chairman could have prevented the negative press from our 2006 annual meeting. Our management was irresponsible in warning shareholder proposal proponents that they would not be allowed to formally present their proposals during our annual meeting." Whole Foods, of course, recommended that shareholders vote against the proposal, and it makes its case in the proxy statement that you can read at www.sec.gov.
The lead filer of the resolution, John Chevedden, is no stranger to this kind of activism. He has written many shareholder proposals for public companies -- General Motors (NYSE: GM ) , Ford (NYSE: F ) , AMR (NYSE: AMR ) , and Pep Boys (NYSE: PBY ) , to name just a few -- on corporate-governance issues.
I like to check out proxy statements to figure out what shareholders have on their minds. Shareholder resolutions can even hold interesting insights into companies' risks. But bear in mind that although some of Chevedden's proposals have apparently gotten high votes, shareholder resolutions rarely get anywhere. So news stories that hit the wires with headlines like "Whole Foods May Split CEO, Chair Titles" seem a bit carried away.
In general, the idea that more companies should split the chairman and CEO roles is certainly worth thought and dialogue. Corporate managements need to remember that shareholders are owners who have their eye on corporate policy and management performance, and as much as I admire Mackey's leadership, I admit that not allowing shareholder presentations at last year's meeting wasn't the friendliest move.
But is a successful and profitable retailer like Whole Foods, which over the course of its history has shown itself to be a well-run company, a strategically sound place to start agitating for such big changes at the top? Shareholders may have been irritated at not being allowed to make presentations last year, but in the grand scheme of things, I can think of more likely companies where shareholders might be ready to metaphorically pick up pitchforks and revolt. While putting the issue in the public eye is a good thing, I can't help wondering whether this particular proposal is barking up the wrong tree.
For more on Whole Foods, check out:
- Fool on Call: A Great Reason to Hold Whole Foods Market
- Mr. Market Sours on Whole Foods
- Stretching a Buck at Whole Foods