Whole Foods Management to Remain Whole

Shareholders of Whole Foods Market Inc. (Austin, Texas) rejected a proposal to split the duties of ceo John Mackey, who also functions as chairman of the specialty food retailer’s board.

A shareholder advisory firm, Proxy Governance Inc. (Vienna, Va.), had endorsed a resolution by the board of pensions of the United Methodist Church to split the two roles. The company said a preliminary count showed that 27 percent of shares were voted for the proposal, and 73 percent against.

The proposal wouldn't have necessarily stripped Mackey of either job. It called for the duties to be separated “whenever possible,” but not if that meant breaking contracts.

Proxy Governance had recommended Mackey's re-election as chairman, saying the board was doing its job, but pointed out that the company’s shares fell 13 percent last year and that any continued slide in performance “may demonstrate a need for strategic or governance changes.” The shares dropped 47 percent in 2006 and 2007, and were down another 16 percent this year through Friday, March 7, 2008.

The advisory firm said Mackey appeared to be an overly dominant chief executive and that the company should bring in an independent chairman to oversee management. It said Mackey's strategy of growing through acquisitions might not be working anymore.

But directors said Mackey was “uniquely qualified” to lead the company as both chairman and ceo, and had made it stand out from other grocers.

Mackey has been chairman and ceo since Whole Foods’ inception in 1980. Last year, he came under fire for using a phony name to post comments on financial web sites that touted Whole Foods and downgraded rival Wild Oats Markets Inc. (Boulder, Colo.), a company Whole Foods would eventually buy. Proxy Governance said Mackey committed “headline-grabbing acts (that) have been embarrassing to the company,” including the release of internal memos in which Mackey said buying Wild Oats would head off price wars and prevent another grocer from elbowing into the market.