SEC to Review Corporate-Ballot Rules After Whole Foods Fight

The Securities and Exchange Commission said it would review rules that allow companies to block shareholder proposals by offering their own watered-down alternative.

The SEC’s move on Friday follows a fight over a Whole Foods Market Inc. shareholder proposal that would have allowed investors to nominate directors if they own three percent of the firm’s shares for three years. Whole Foods opposed the initiative and countered with its own version.

Under the SEC’s rules that are slated for review, companies may omit shareholder proposals from corporate ballots if management offers a similar plan.

“We are extremely pleased the SEC has reconsidered,” said Amy Borrus, deputy director of the Council of Institutional Investors, which represents public-sector pension funds and other large investors. “Shareholders should have the right to seek different terms for a reform that management itself is proposing.”

More than 20 other companies, including Citigroup Inc. and ConocoPhillips, have sought the SEC’s approval to block proposals making it easier for shareholders to nominate directors, according to the council.

A Whole Foods shareholder proposed allowing director nominations by investors holding a 3 percent stake for three years.

Whole Foods responded by proposing a higher threshold of 9 percent for five years. No single investor currently owns more than 6 percent of Whole Foods’ stock.

The SEC said Friday it would withdraw a December opinion allowing Whole Foods to omit a vote on the proposal by shareholder James McRitchie. In doing so, the SEC said it is no longer taking a position on whether Whole Foods can exclude the proposal, according to a letter signed by David Fredrickson, chief counsel of its corporation finance division.

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