AUSTIN, Texas — Whole Foods Market said its founder and chief executive officer, John Mackey, would relinquish the title of chairman of the board at the natural and organic food chain after more than 30 years.
Mackey, who had been chairman and CEO since 1978, said in a post on his blog that the move was being made to avoid the “misperception” by shareholder activists about the chairman's duties at Whole Foods. Some shareholder groups have pushed for Whole Foods and other companies to separate the chairman and CEO roles to help maintain board independence from management.
John B. Elstrott, a member of the board since 1995 and lead director since 2001, will assume the chairman title at Whole Foods. The lead director position had been performing the chairman functions since 2000, the company said. Mackey will remain CEO and also will remain a director.
“Despite this shift in responsibilities which has rendered the chairman role to a mere title, the company repeatedly has received proposals from corporate activists to separate the chairman and CEO roles,” Whole Foods said in a filing with the Securities and Exchange Commission. “To avoid unnecessary distraction and protect the company's corporate governance profile, Mackey believes giving up the chairman title to be in the best interests of the company and its stakeholders.”
The lead director role will be eliminated, Whole Foods said.
In his blog post, Mackey said he made the move voluntarily and that directors and other top management had sought to discourage him from doing so.
“The members of the board and [executive] team tried to talk me out of giving up the title; however, I don't believe it is in the best interest of our company or our stakeholders to devote any more time or resources to fight this misperception over a title any longer,” he wrote. “I will remain a member of the Whole Foods Market board and will continue to passionately serve as CEO, hopefully for many more years to come.”
The move comes after one investor, CtW Investment Group, had called for Mackey's resignation as CEO in August of last year after he penned an article advocating more free-market forces in health care reform.
CtW, a Washington-based investment group affiliated with labor coalition Change to Win, has also called for Mackey to resign as chairman beginning in 2007, following the revelation that he had posted messages using a pseudonym on Yahoo! stock message boards.
“Ending his dual roles is certainly a step in the right direction,” said Bill Dempsey, director of the capital stewardship program at the United Food and Commercial Workers International Union and a co-founder of CtW, although he said the investment group still believes the performance of the company in the last five years — and Mackey's “disruptive” behavior — warrant his resignation as CEO as well.
“Our view is that it is time for him to move into an emeritus role,” Dempsey said.
He also said it was “troubling” that the company made the announcement on Christmas Eve.
Whole Foods shareholders have overwhelmingly voted against splitting the chairman and CEO roles in each of the past three years.
Mackey's stepping down as chairman could be perceived as an act of progressive corporate governance policy, much like his decision to reduce his salary to $1 a year in 2007.
At many of the largest publicly traded supermarket companies in the U.S. — including Kroger Co., Safeway and Supervalu — the CEO is also the chairman.
“Whole Foods has had a leadership role in many areas, and maybe they will be leading in this too,” said Andrew Wolf, a Richmond, Va.-based analyst at BB&T Capital Markets.
Wolf pointed out that another large company in the natural and organic space, United Natural Foods Inc., has already split the chairman and CEO roles, although in that case the founder, Michael Funk, remains chairman, while Steven Spinner, an outsider, was brought in as CEO.