Whole Foods Market's (Nasdaq: WFMI ) co-founder and CEO, John Mackey, is nothing if not full of surprises. Just months after the ruckus sparked by his voicing what some considered to be controversial views on health care, he has now delivered a more positive shock for corporate governance fans. Mackey has voluntarily given up the role of chairman of the board of Whole Foods.
Why's it shocking? Well, Mackey had held the titles of CEO and chairman of the board at Whole Foods for about three decades, and shareholder activists have been agitating for a separation of the roles there for several years running (I wrote on the topic in 2007).
Shareholder activists pursue this change at many companies (and are often unsuccessful). Well-known entities like ExxonMobil (NYSE: XOM ) are frequent targets. Meanwhile, high-profile corporate debacles like Lehman Brothers, Citigroup (NYSE: C ) , Countrywide Financial, Merrill Lynch, and Bank of America (NYSE: BAC ) all had CEOs acting as chairmen when major mistakes transpired. (Granted, a CEO also presiding over the board of directors is a common practice in corporate America to begin with.)
Fixing director independence (with an independent chairman as a key component) is an important corporate governance issue. Boards of directors are supposed to represent shareholder interests, and having management's top dog also preside over the board can be a conflict of interest, not to mention a distraction from his or her core (and essential!) job of actually running the company.
The SEC filing that disclosed Mackey's decision said the reason is to "avoid unnecessary distraction and protect the Company's corporate governance profile." Mackey's decision is curious, since such shareholder demands are not new for Whole Foods. Then again, a union-related shareholder, CtW Investment Group, agitated for Mackey's resignation or removal after the health-care controversy earlier this year. Perhaps the coming proxy season was gearing up to be just a tad more "distracting" than usual.
Overall, though, I'd say this is good for the company's reputation. Whole Foods has taken other important steps, as well, like adopting majority voting. In 2006, Mackey voluntarily gave up salary and donated stock options, becoming one of the best examples of a modestly paid CEO when most CEOs' pay had gone wild. The public commitment to donate future stock options sets Mackey apart from, say, the leaders of Apple (Nasdaq: AAPL ) and Google (Nasdaq: GOOG ) , who have also voluntarily taken $1 salaries and received fat options grants. Whole Foods has other elements that promote goodwill, too.
Those of us who are fans of reasonable corporate governance principles, and hopeful that corporate America will get away from policies that endanger good business practices, applaud moves like this one. What do you think of Mackey's move, or the idea of separating the roles at companies across the board? Sound off in the comments boxes below.