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Yes, there are good reasons for Mackey to step down from the chair. Here's what I posted at http://www.corpgov.net/news/news.html

Oh, That's Who Was Such a Jerk

Rachael Beck, national business columnist for The Associated Press, called yesterday to alert me to the fact that I had tangled with John Mackey on the Yahoo board last year after attempting to get Whole Foods Market to allow shareowners to present their resolutions during the annual meeting. Read interchange here. (I think there were more...but this gives a flavor.)

Of course, at the time, I had no idea that "rahodeb" was Mackey. Like many on the boards, he just seemed a little impolite. For example, he took a "love or leave it" stance, advising me to "sell your stock--and invest your money into a company that you feel is more 'responsive' to your personal issues." (3/13/06) He also told me several times that if I thought barring shareowners from presenting their proposals was illegal, I should sue.

On 3/14/06, he said, "The fact that Corporate Library has downgraded Whole Foods is not important to me and most other investors. Who cares?" I pointed out that about 89% of Whole Foods stock is held by institutions. "Ratings by The Corporate Library, Institutional Shareholder Services, Glass Lewis, and others can have a profound effect on the market (and their change in ratings could account for some of the recent slippage at WFMI). You can find, for example, the ISS rating (probably out of date) for WFMI at Yahoo under company profile, then under the "corporate governance quotient." A low score can push the price of the stock down. It can also change the outcome of corporate elections. An endorsement by ISS of a resolution will often mean a 20% increase in affirmative votes. Individual investors are under no legal obligation to vote intelligently. However, institutional investors are required to treat their vote as any other asset, exercising their various duties, such as the duty of care.

I've never had much luck raising concerns about shareowner rights on these boards. Those who post seem much more interested in playing on rumors and short term swings. At least Mackey demonstrated some interest in the subject.

Beck asked where I thought Whole Foods should go from here. As indicated in the article below, I like the fact that the board is finally investigating and that Mackey apologized. I also like their recent corporate governance reforms that I recommended to them last year. (The Board adopted a formal governance policy, which includes executive sessions, stock ownership guidelines, lead director, and set guidelines to avoid the over extension of directors who serve on other boards, among other provisions.) I still think Mackey is a genius at knitting acquired firms into the Whole Foods culture and, despite calls for his resignation, think he should remain the CEO. However, it is obvious the board needs to take a stronger oversight role.

Why did the board allow Mackey to keep shareowner resolutions off the agenda at last year's annual meeting when no other company (to my knowledge) has ever denied such shareowner rights? Why did it take the board until February 16, 2007 to finally adopt a set of corporate governance principles? Why did independent directors not meet regularly in executive session without the CEO present? When Mackey's internet postings were revealed, why did it take the board so long to act?

It appears that Mackey, as co-founder, CEO, and board chair, holds too much sway for the board to exercise real independent oversight. Whole Foods Markets needs to split the roles of CEO and board chair. The Conference Board's Commission on Public Trust and Private Enterprise recommended this change years ago and there has been slow but growing acceptance. "Each corporation should give careful consideration to separating the offices of Chairman of the Board and CEO, with those two roles being performed by separate individuals. The Chairman would be one of the independent directors."

John Chevedden proposed a resolution to split the CEO and chair position that appeared on this year's proxy. If the board doesn't take this action, Chevedden should bring the resolution back. If he does, I doubt folks like Motley Fool's Alyce Lomax will again be "wondering whether this particular proposal is barking up the wrong tree," since Whole Foods "has shown itself to be a well-run company." For a review of legal issues, see 'Rahodeb' postings improper?, SFGate.com, 7/19/07.

Yes, I still own shares in Whole Foods and I hope to get off this jag of writing about it soon. Watch for Rachel Beck's article this weekend in your local paper and online.