Whole Foods Market (Nasdaq: WFMI ) just upped its quotient of progressive corporate-governance policies. Like increasing numbers of other big-name firms, the organic grocer has amended its bylaws to adopt a majority voting standard for its director elections.
Many corporate-governance watchdogs would like to see even more companies follow Whole Foods' lead. The traditional practice of plurality voting isn't exactly fair to shareholders, since it counts only votes for a nominee. Withheld votes (which suffice as a "no") are ignored. Some joker who got just a single "yes" vote could still be elected under that standard.
In addition to majority voting, Whole Foods' board also approved a common follow-on policy that would require any director who does not receive a majority vote to resign immediately.
After the SEC dealt shareholder rights a recent setback by allowing companies to block proxy access, it's nice to see corporations like Whole Foods voluntarily adopting such a shareholder-friendly measure. According to a study obtained by ISS Proxy, 66% of S&P 500 companies made similar board election reforms in 2007, a notable increase from just 16% in 2006. The 400-plus companies to adopt majority voting standards include Dell (Nasdaq: DELL ) , Intel (Nasdaq: INTC ) , FedEx (NYSE: FDX ) , Sara Lee (NYSE: SLE ) , PG&E (NYSE: PCG ) , and Pfizer (NYSE: PFE ) . That said, majority voting only takes place in uncontested elections; for contested elections, plurality voting remains the status quo.
Whole Foods' move may not be enough for some activist shareholders. Last year, Whole Foods faced a shareholder resolution that advocated splitting the chairman and CEO roles, both currently held by founder John Mackey. Breaking up positions like this is a common focus among corporate-governance watchdogs.
I'm glad Whole Foods joined the majority-voting movement; it can only help shareholders, now that they're denied proxy access. The grocer's built its image on a whole spectrum of progressive policies. Slacking off on shareholder-friendly measures would reflect poorly on a company known for looking out for all its stakeholders' interests.