The Whole Foods No Action Letter and Shareholder Access

Under the title "Board Accountability Project," the New York City Comptroller has submitted shareholder access proposals to 75 corporations.  The proposals ask the board to give access rights to shareholders holding 3% of the voting shares for at least three years.   For a discussion of the Project, go here.  


A number of companies have sought to exclude the proposals and asked the SEC for a no action letter to that affect.  Some have sought exclusion under subsection (i)(9) of Rule 14a-8.  The provision permits the exclusion of a proposal that "directly conflicts with one of the company's own proposals". In a recent no action letter issued to Whole Foods, the staff granted the requested no action letter where the company indicated its intent to submit to shareholders its own access bylaw.


The only differences in the shareholder proposal and the company's bylaw were in the numerical thresholds.  Instead of the 3%/3 year thresholds in the shareholder proposals, the Whole Foods bylaw would give access rights to shareholder holding 9% of the shares for at least 5 years.  As the no action letter stated: 

  • There appears to be some basis for your view that Whole Foods Market may exclude the proposal under rule 14a-8(i)(9). You represent that matters to be voted on at the upcoming stockholders' meeting include a proposal sponsored by Whole Foods Market to amend Whole Foods Market's bylaws to allow any shareholder owning 9% or more of Whole Foods Market's common stock for five years to nominate candidates for election to the board and require Whole Foods Market to list such nominees with the board's nominees in Whole Foods Market's proxy statement. You indicate that the proposal and the proposal sponsored by Whole Foods Market directly conflict. You also indicate that inclusion of both proposals would present alternative and conflicting decisions for the stockholders and would create the potential for inconsistent and ambiguous results.  

Given the position of the staff, it is perhaps no surprise that a number of companies have already asked for similar no action relief, citing the Whole Foods letter.  For examples, go here and here.  The position of the staff in Whole Foods has, however, been appealed to the full Commission.  A discussion of the appeal and a copy can be found here.

J Robert Brown Jr.