On December 1, 2014, the SEC's Division of Corporation Finance issued a no-action letter granting Whole Foods Market, Inc.'s request to exclude a shareholder proposal requesting proxy access.

James McRitchie had submitted a proxy access proposal for inclusion in Whole Foods's proxy materials. The shareholder proposal was a non-binding proposal to allow nominees proposed by one or more owners of at least 3% of the company's outstanding stock held for at least three years. This tracks the percentage and holding period requirements included in the proxy access rule (Rule 14a-11 under the Exchange Act) previously adopted by the SEC and struck down by the US Court of Appeals for the D.C. Circuit in 2011. In addition, the shareholder proposal would allow the shareholder(s) to nominate up to 20% of the board of directors or two candidates.

Whole Foods requested the SEC staff grant it no-action relief if it excluded McRitchie's proposal under Exchange Act Rule 14a-8(i)(9) on the grounds that it conflicted with a similar proposal being submitted by management. Whole Foods's competing proxy access proposal would allow nominees proposed by any shareholder, but not a group of shareholders, holding 9% or more of the company's outstanding stock for at least five years. The shareholder could nominate the greater of one director or 10% of the board.

The SEC staff agreed with Whole Foods' position that the two proxy access proposals directly conflict and that including the shareholder proposal would present the potential for inconsistent and conflicting results. As a result, the staff indicated it would not take any action against Whole Foods if it excluded the shareholder proposal.

Following this no-action letter, companies that receive proxy access shareholder proposals may consider submitting their own competing proxy access proposals. However, companies should also consider the potential for criticism from shareholders and proxy advisors if they adopt this strategy. For example, McRitchie noted in his response to Whole Foods's no-action request that the company's largest shareholder currently holds 5.4% of the company's outstanding stock, and it would be unlikely that any shareholder could satisfy the conditions of the Whole Foods proposal. It remains to be seen how Whole Foods shareholders will react to the company's proposal and what impact this may have on the company.