PROPOSAL 3 - SHAREHOLDER PROPOSAL
Mr. James McRitchie and Ms. Myra Young, having an office at 2461 Second Avenue, Sacramento, CA 95818, owner of at least $2,000 in market value of Whole Foods Market, Inc. shares, have proposed the adoption of the following resolution and have furnished the following statement in support of their proposal:
HIRE PROXY ADVISORY FIRM CHOSEN BY SHAREHOLDER VOTE
WHEREAS many shareowners lack the time and expertise to make the best voting decisions, yet prefer not to always follow management's recommendations because of management's possible conflicts of interest;
WHEREAS proxy advisory firms have established reputations for giving sound independent advice to many institutional investors on how to vote their shares;
WHEREAS shareowners have a common interest in obtaining sound independent advice, but often insufficient private interest to justify paying for it individually (the "free-rider" problem);
THEREFORE BE IT RESOLVED that Whole Foods Market shareowners request the Board of Directors to hire a proxy advisory firm for one year, to be chosen by shareowner vote. Shareowners request the Board to take all necessary steps to enact this resolution in time to hold the vote at next year's shareowner meeting, with the following features:
To insulate the selection of the proxy advisory firm from influence by Company management, any proxy advisory firm could put itself on the ballot by paying an entry fee (for example, $1000) and declaring the price for its advisory service for the coming year. The price could be no more than $5000. (The entry fee would be refunded to each candidate receiving over 5% of votes cast.) The winning candidate would be paid its declared price by the Company, and expected to make voting recommendations freely available to all Company shareowners for the subsequent year. Fulfillment of that expectation would not be policed by Company management, but rather by loss of reputation and future business if performance is disappointing.
The decision of whether to hire proxy advisory firms in later years would be left open, and could be decided by future shareowner votes.
This proposal will enhance management accountability to shareowners by making professionally researched advice available to all. It will effectively enfranchise individual investors for the first time, ensuring that a majority of shares can be voted independently of management's recommendations. The company- pay system will encourage greater competition among proxy advisory firms to serve shareowner interests, and the increased impact of their advice can be expected to improve the return on Whole Foods Market stock.
Proxy advisory firms such as Proxy Monitor (http://www.proxymonitor.com), Institutional Shareholder Services (http://iss.cda.com), and Investor Responsibility Research Center (http://www.irrc.org) are frequently cited in the financial press. For example in "Venator Holders Are Urged To Support Dissident Slate" (Wall Street Journal 07/06/1999), "Investor Activists Await New Legal Test On Binding Votes" (Dow Jones Newswire 09/24/1999), and "ISS's Influence Grows In Proxy, Option Matters" (Wall Street Journal 11/10/1997).
Articles discussing the company-pay system for proxy advice are on the Corporate Monitoring website (http://www.corpmon.com/publications.htm). These include "Collective Action for Dispersed Shareowners" (Corporate Governance International, September 1999) and "The Internet Will Drive Corporate Monitoring". Further developments in corporate governance that may follow from this company-pay system are presented in "The Corporate Monitoring Firm" (Corporate Governance: An International Review, January 1999) and "Corporate Monitoring: New Shareholder Power Tool" (Financial Analysts Journal, September/October 1998).