Views on improving the integrity of global capital markets
20 January 2015

Whole Foods Fallout? SEC Suspends ‘No Action’ Relief for Competing Proxy Access Proposals


Proxy access seems destined to become the biggest US corporate governance story of 2015. Why is that, you ask? Well, in a surprise announcement last Friday the SEC Division of Corporation Finance issued the following statement:

“In light of (SEC) Chair White’s direction to the staff to review Rule 14a-8(i)(9) and report to the Commission on its review, the Division of Corporation Finance will express no views on the application of Rule 14a-8(i)(9) during the current proxy season.”

The SEC essentially reversed a controversial December decision that allowed Whole Foods Market Inc. to exclude a resolution for proxy access from its upcoming shareholders meeting because it conflicted with Whole Foods’ own proxy access proposal. SEC Rule 14a-8(i)(9) allows a company to exclude a shareholder proposal if the shareholder proposal “directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting.”

Previously the SEC had allowed companies to exclude shareowner proposals for proxy access from the corporate proxy when companies offered their own similar proposals for proxy access — but with stricter ownership thresholds — and asked the SEC to exclude shareowner proposals that were in “conflict” with the company proposal.

For example, the most popular shareholder model for proxy access asked that shareowners who had owned 3% of a company’s shares for at least three years (3×3) could nominate a limited number of directors to appear on the corporate proxy. Many corporations answered — led by Whole Foods — with their own proposals to require shareowners to own at least 5% of company shares for five years (5×5) to nominate directors. The New York City Comptroller’s office plans to file 75 proxy access proposals at publicly traded companies this year — using the 3×3 format.

For a more in-depth analysis of what this might mean, check out the blog post of our friends at the, as they walk through what this means.

In short, the SEC’s recent decision to step away from the proxy access fray may mean that we’ll see a genuine contest of ideas on many a corporate proxy. If there are competing proposals for proxy access on a number of corporate proxies — one for 3×3 and one for 5×5 — we may actually let shareowners choose the proxy access they prefer.

That’d be something.

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About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

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