PROXY STATEMENT
Table of Contents
Table of Contents
550 Bowie
Street
Austin, Texas 78703
PROXY
STATEMENT
Annual Meeting of
Shareholders of the Company to be held on February 17, 2017
Questions and Answers
Regarding This Proxy Statement
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Q:
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Why am I
being asked to review these materials?
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A:
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The
accompanying proxy is solicited on behalf of the Board of Directors of
Whole Foods Market, Inc., a Texas corporation (which we refer to as the
“Company,” “we,” “us” or “our”). We are providing these proxy materials to
you in connection with our Annual Meeting of Shareholders to be held at
the JW Marriott Austin, 110 E. 2nd Street, Austin, Texas 78701, on
February 17, 2017 at 8:00 a.m. local time. As a Company shareholder, you
are invited to attend the Annual Meeting and are entitled and encouraged
to vote on the proposals described in this Proxy Statement.
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Q:
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Why am I
being asked to review materials online?
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A:
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Under rules
adopted by the U.S. Securities and Exchange Commission, we are furnishing
proxy materials to many of our shareholders on the Internet rather than
mailing printed copies of those materials to each shareholder. If you
received a Notice by mail, you will not receive a printed copy of the
proxy materials unless you request one. Instead, the Notice will instruct
you as to how you may access and review the proxy materials on the
Internet. If you received a Notice and would like to receive a printed
copy of our proxy materials, please follow the instructions included in
the Notice. We anticipate the Notice will be mailed to shareholders on or
about January 4, 2017.
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Q:
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Who may
vote at the meeting?
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A:
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You may
vote all of the shares of our common stock that you owned at the close of
business on December 21, 2016, the record date. On the record date, the
Company had 318,490,727 shares of common stock outstanding and entitled to
vote at the meeting. You may cast one vote for each share of common stock
held by you on each of the matters presented at the meeting.
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Q:
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What
proposals will be voted on at the meeting and how does the Board of
Directors recommend I vote?
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A:
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There are
six proposals to be considered and voted on at the meeting, including four
Company proposals and two shareholder proposals. Please see the
information included in the Proxy Statement relating to these proposals.
The proposals to be voted on and related recommendations from the Board of
Directors are as follows:
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Company
Proposals
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1.
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To elect the 12
nominees named herein to the Board of Directors of Whole Foods Market,
Inc., each to serve a term expiring at the later of the Annual Meeting of
Shareholders in 2018 or upon a successor being elected and
qualified. Our Board of
Directors unanimously recommends that you vote
“FOR”
each of the nominees to the Board of
Directors.
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2.
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To conduct an
advisory vote to approve the compensation of the named executive officers.
Our Board of Directors unanimously recommends that you vote
“FOR”
approval of the compensation of the named
executive officers.
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3.
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To conduct an
advisory vote on the frequency of shareholder advisory votes on executive
compensation. Our Board of Directors unanimously recommends that you vote
to conduct a shareholder advisory vote on executive compensation every
“ONE
YEAR.”
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Table of Contents
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4.
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To ratify the appointment of Ernst &
Young LLP as independent auditor for the Company for the fiscal year
ending September 24, 2017. Our Board of Directors unanimously recommends
that you vote
“FOR”
ratification of Ernst &
Young LLP as our independent auditor.
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Shareholder
Proposals
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5.
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To ask that our Board of Directors adopt
revisions to the Company’s proxy access bylaw. Our Board of Directors
unanimously recommends that you vote
“AGAINST”
this proposal.
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6.
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To ask that our Board of Directors issue a
report regarding our food waste efforts. Our Board of Directors
unanimously recommends that you vote
“AGAINST”
this proposal.
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We will also consider
other business that properly comes before the meeting in accordance with
Texas law and our Bylaws.
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Q:
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How do I
vote?
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A:
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You may vote your shares
in advance using any of the following voting alternatives:
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VIA INTERNET at
www.ProxyVote.com.
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BY TELEPHONE by viewing
the proxy materials at www.ProxyVote.com and using a touch-tone phone and
the toll-free number provided at that time. You can also use a telephone
to request a paper copy of the proxy materials.
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BY MAIL by completing
and mailing in a paper proxy card, as outlined in the
Notice.
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Alternatively, you may
vote your shares in person at the meeting. If, like most shareholders of
the Company, you hold your shares in street name through a stockbroker,
bank or other nominee rather than directly in your own name, you are
considered the beneficial owner of those shares. To vote at the meeting,
beneficial owners will need to contact the broker, trustee or nominee that
holds their shares to obtain a “legal proxy” to bring to the
meeting.
You are encouraged to
read all of the proxy materials before voting your shares as they contain
important information necessary to make an informed decision.
If your shares are
registered directly in your name with our transfer agent, Securities
Transfer Corporation, you are considered a shareholder of record with
respect to those shares, and the Notice has been sent directly to you by
Broadridge Financial Solutions, Inc. If you are the beneficial owner of
those shares, the Notice is being forwarded to you.
Please carefully
consider the information contained in this Proxy Statement and, whether or
not you plan to attend the meeting, vote by Internet, telephone or mail so
that we can be assured of having a quorum present at the meeting and so
that your shares may be voted in accordance with your wishes. Even if you
plan on attending the meeting but later decide not to attend, your vote
will be counted if you vote by Internet, telephone or mail.
We encourage you to
register your vote via the Internet at www.ProxyVote.com. If you attend
the meeting, you may also submit your vote in person, in which case any
votes that you previously submitted (whether via the Internet, by
telephone or by mail) will be superseded by the vote that you cast at the
meeting. Whether your proxy is submitted by the Internet, by telephone or
by mail, if it is properly completed and submitted and if you do not
revoke it prior to the meeting, your shares will be voted at the meeting
in the manner set forth in this Proxy Statement or as otherwise specified
by you. To vote at the meeting, beneficial owners will need to contact the
broker, trustee or nominee that holds their shares to obtain a “legal
proxy” to bring to the meeting.
Unless you hold your
shares through the Company’s 401(k) plan, you may vote via the Internet or
by telephone until 11:59 p.m., Eastern Time, on February 16, 2017, or the
Company’s agent must receive your paper proxy card on or before February
16, 2017. If you participate in the Company’s 401(k) plan, your proxy card
includes shares that the plan has credited to your account. To allow
sufficient time for the Company’s 401(k) plan trustee to vote, the trustee
must receive your voting instructions via Internet or by telephone by
11:59 p.m., Eastern Time, on February 14, 2017, or the Company’s agent
must receive your paper proxy card on or before February 14, 2017. If the
trustee does not receive your
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Table of Contents
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instructions by that
date, the trustee will vote the shares in the same proportion of votes
that the trustee receives from other plan participants who did
vote.
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If I do provide
voting instructions and/or grant my proxy, who will vote my shares at the
meeting and how will they vote my shares?
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A:
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John Mackey and
Glenda Flanagan are officers of the Company and were named by our Board of
Directors as proxy holders. They will vote all proxies, or record an
abstention, in accordance with the directions on the proxy. If no contrary
direction is given, the shares will be voted as recommended by the Board
of Directors.
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What happens if
additional matters are presented at the Annual Meeting?
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A:
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Other than the items
of business described in this Proxy Statement, we are unaware of any other
business to be acted upon at the Annual Meeting. If you grant a proxy, the
persons named as proxy holders, John Mackey and Glenda Flanagan, will have
the discretion to vote your shares on any additional matters properly
presented for a vote at the meeting in accordance with Texas law and our
Bylaws.
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If my shares are held
in street name by my broker, will my broker vote my shares for
me?
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A:
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Your broker is
allowed to vote your shares only on certain “routine” proposals or if you
provide your broker with instructions on how to vote. Under applicable
stock exchange rules, only Proposal 4 (ratification of the appointment of
Ernst & Young LLP as independent auditors) is routine. Brokers are
prohibited from voting uninstructed shares on “non-routine” proposals,
including proposals for elections of directors and all other proposals
except Proposal 4. If you do not give your broker or nominee specific
instructions, your shares may not be voted on certain matters and will not
be considered as present and entitled to vote with respect to those
matters.
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What constitutes a
quorum? Why is a quorum required?
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A:
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Return of your proxy
is important because a quorum is required for the Company shareholders to
conduct business at the meeting. The presence at the meeting, in person or
by proxy, of the holders of shares having a majority of the voting power
represented by all issued and outstanding shares entitled to vote on the
record date will constitute a quorum, permitting us to conduct the
business of the meeting. Proxies received but marked as abstentions, if
any, will be included in the calculation of the number of shares
considered to be present at the meeting for quorum purposes. Because this
proxy includes a “routine” management proposal, shares represented by such
“broker non-votes” will be counted in determining whether there is a
quorum present. If we do not have a quorum, we will be forced to reconvene
the Annual Meeting of Shareholders at a later date.
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Q:
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What if I
abstain?
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A:
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Abstentions are
included in the determination of shares present for quorum purposes;
however, except as required by applicable law or regulations, votes
submitted as abstentions will not be counted as votes FOR or AGAINST any
matter presented for shareholder approval.
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Q:
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Can I change my vote
after I have delivered my proxy?
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A:
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Yes. You may revoke
your proxy at any time before its exercise. You may also revoke your proxy
by voting in person at the Annual Meeting. If you are a beneficial
shareholder, you must contact your brokerage firm or bank to change your
vote or obtain a legal proxy to vote your shares if you wish to cast your
vote in person at the meeting.
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Q:
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Who will count the
votes?
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A:
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We hired Carl T.
Hagberg and Associates to judge voting and be responsible for determining
whether or not a quorum is present. We hired Broadridge Financial
Solutions, Inc. to tabulate votes cast by proxy or in person at the Annual
Meeting.
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Q:
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Where can I find
voting results of the meeting?
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A:
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We will announce
preliminary general voting results at the meeting and publish final
detailed voting results on a Current Report on Form 8-K that we expect to
file within four business days after the
meeting.
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Table of Contents
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Who will bear the
cost for soliciting votes for the meeting?
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A:
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We will bear all
expenses in conjunction with the solicitation of the enclosed proxy,
including the charges of brokerage houses and other custodians, nominees
or fiduciaries for forwarding documents to security owners and the fee to
Georgeson Inc., who will help us solicit proxies. We anticipate that the
fee to Georgeson Inc. will be $8,500, plus expenses. In addition, proxies
may be solicited by mail, email, in person, or by telephone or fax by
certain of our directors, officers and other team members.
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Q:
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Whom should I call
with other questions?
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A:
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If you have
additional questions about this Proxy Statement or the meeting or would
like additional copies of this document or our 2016 Annual Report on Form
10-K, please contact: Whole Foods Market, 550 Bowie Street, Austin, TX
78703, Attention: Investor Relations Dept., Telephone: (512)
542-0204.
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Q:
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How can I communicate
with the Company’s Board of Directors?
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A:
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Shareholders may send
communications in care of the Director of Internal Audit, Whole Foods
Market, 550 Bowie Street, Austin, TX 78703, or via email to:
shareholder.communications@wholefoods.com
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Please indicate whether your message is for the Board of Directors
as a whole, a particular group or committee of directors, or an individual
director. The Board of Directors has implemented procedures for processing
shareholder communications and a description of these procedures can be
found on our website at
http://investor.wholefoodsmarket.com/investors/corporate-governance/governance-documents/default.aspx.
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Web links throughout this
document are provided for convenience only, and the content on the referenced
websites does not constitute a part of this Proxy Statement.
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PROPOSAL 1 – ELECTION OF
DIRECTORS
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Size of Board of
Directors
Our Board of Directors
currently consists of 12 members. All 12 members of the Board of Directors are
elected by the holders of our common stock.
Board of Directors
Recommendation
THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS
SET FORTH IN THIS PROPOSAL 1.
Vote
Required
Election of each director
requires the affirmative vote of a majority of the votes cast by the holders of
shares represented at the meeting and entitled to vote.
Current
Nominees
The director nominees are Dr.
John Elstrott, Mary Ellen Coe, Shahid (Hass) Hassan, Stephanie Kugelman, John
Mackey, Walter Robb, Jonathan Seiffer, Morris (Mo) Siegel, Jonathan Sokoloff,
Dr. Ralph Sorenson, Gabrielle Sulzberger and William (Kip) Tindell, III. Each of
the nominees is currently a member of the Board of Directors and each has been
nominated for election at the Annual Meeting to hold office until the later of
the next annual meeting or the election of his/her respective successor. Our
director nomination process is discussed below where we describe the purpose of
our Nominating and Governance Committee.
The Board of Directors, upon
the advice of the Nominating and Governance Committee, has determined that all
of the director nominees, other than Mr. Mackey and Mr. Robb, are “independent
directors” as defined in Rule 5605 of the NASDAQ Listing Rules. This
independence question is analyzed annually in both fact and appearance to
promote arms-length oversight. The Board of Directors considered the following
information in determining whether or not our directors are independent. Mr.
Mackey is a current Company officer and the Company announced that Mr. Robb will
resign as an
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officer effective December 31,
2016, and accordingly the Board of Directors has concluded that neither is
currently an independent director. With respect to our other directors, some
serve on the boards of or have an ownership interest in privately held
companies, including some companies that are vendors of the Company. Several of
these directors have been entrepreneurs in the organic foods industry for a
number of years and our Board of Directors believes that their industry
experience is valuable to the Company. As reported to us by our directors, in
many cases the ownership interest of any board member in a vendor amounted to
less than 2% of the vendor’s outstanding ownership interests, and in all cases
amounted to less than 5% of the vendor’s outstanding ownership interests.
Collectively, the Company’s purchases of product from all vendors in which any
of our directors noted a fiscal year 2016 ownership interest and/or noted
service as a director represented approximately 2.2% of the Company’s purchases
during fiscal year 2016. Furthermore, Jonathan Seiffer and Jonathan Sokoloff are
both partners of Leonard Green & Partners, L.P., which is an affiliate of
Beacon Holding Inc. During 2011, Beacon Holding Inc. purchased BJ’s Wholesale
Club, Inc., which is a leading warehouse club operator in the eastern United
States. Messrs. Seiffer and Sokoloff are each a director of BJ’s Wholesale Club,
Inc.
Further discussion concerning
director independence is in our Corporate Governance Principles, Board of
Directors’ Mission Statement & Role Definition, which is available on our
website at:
http://investor.wholefoodsmarket.com/investors/corporate-governance/governance-documents/default.aspx.
The information provided below
is biographical information about each of the nominees, including other public
company board memberships. Age and other information in each nominee’s biography
are as of November 2016.
Dr. John
Elstrott
, 68, has served as the
Chairman of the Board since 2009 and has served as a director of the Company
since 1995, serving as Lead Director from 2001 to 2009. Dr. Elstrott is an
Emeritus Professor of Entrepreneurship and the founding director of the
Levy-Rosenblum Institute for Entrepreneurship at Tulane University’s Freeman
School of Business, which he started in 1991. Dr. Elstrott served as a director
and member of the audit, compensation and nominating and governance committees
of the board of directors of Stewart Enterprises, Inc. from April 2011 to
December 2013; Dr. Elstrott served as Stewart’s lead independent director from
January 2012 to December 2013. Dr. Elstrott has a PhD in Economics and
significant business experience, including over 40 years of experience as an
entrepreneur and investor. Dr. Elstrott brings to our Board of Directors
leadership, financial and risk assessment experience as well as his
entrepreneurial experience and history with the Company.
Mary Ellen
Coe
, 49, has served as a director
of the Company since November 2016. Ms. Coe has served as Vice President of
Sales and Product Operations at Google since November 2012. Ms. Coe brings to
our Board of Directors marketing strategy, digital strategy, leadership
experience and branding experience.
Shahid (Hass)
Hassan
, 68, has served as a
director of the Company since 2005. Mr. Hassan has been a General Partner of
Greenmont Capital, an investment firm, since 2006. Mr. Hassan was a co-founder,
President and CEO of Alfalfa’s Market and President of Wild Oats Marketplace. In
1999, Mr. Hassan founded Fresh & Wild, Ltd., an organic food retailer in the
United Kingdom. Mr. Hassan served as President and Executive Chairman of Fresh
& Wild from 1999 until 2004, when it was acquired by the Company. Mr. Hassan
has over 35 years of experience in the retail grocery business in both public
company and private company settings. Mr. Hassan brings to our Board of
Directors financial and risk assessment experience as well as his grocery
retail, entrepreneurial and leadership experience and history with the
Company.
Stephanie
Kugelman
, 69, has served as a
director of the Company since November 2008. Ms. Kugelman serves as a principal
of A.S.O., A Second Opinion, a strategy and branding consultancy she founded in
2007, and since January 2015 as Vice Chairman at Solera Capital, a private
equity firm. She was previously Vice Chairman and Chief Strategic Officer of
Young & Rubicam Brands, a worldwide marketing communications company, where
she held positions of increasing responsibility commencing in 1971. Ms. Kugelman
also serves on the board of directors of HSNi. Ms. Kugelman brings to our Board
of Directors entrepreneurial, leadership, financial and risk assessment
experience as well as her marketing strategy and branding experience.
John Mackey
, 63, co-founder of the Company, has served as
Chief Executive Officer since January 2017. He was Co-Chief Executive Officer
from May 2010 to December 2016, was Chief Executive Officer from 1978 to May
2010 and was President from 2001 to 2004. Mr. Mackey has served as a director of
the Company since 1978 and served as Chairman of the Board from 1978 through
December 2009. Mr. Mackey brings to our Board of Directors financial and risk
assessment experience as well as his grocery retail, entrepreneurial and
leadership experience and history with the Company.
Walter Robb
, 63, served as Co-Chief Executive Officer of the
Company from May 2010 to December 2016. Mr. Robb also served as Co-President and
Co-Chief Operating Officer from 2004 to May 2010, as Chief Operating Officer
from 2001 to
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2004, and as Executive Vice
President from 2000 to 2001. Mr. Robb joined the Company in 1991 and previously
served as Store Team Leader and President of the Northern California Region. On
November 2, 2016, the Company announced that Mr. Robb would resign as Co-Chief
Executive Officer effective as of December 31, 2016, and that he would continue
to serve as a senior advisor to the Company from January 1, 2017 to September
24, 2017. Mr. Robb has served as a director of the Company since May 2010. Mr.
Robb also serves on the board of directors of The Container Store. Mr. Robb
brings to our Board of Directors financial and risk assessment experience as
well as his grocery retail, entrepreneurial and leadership experience and
history with the Company.
Jonathan
Seiffer
, 45, has served as a
director of the Company since December 2008. He is a Senior Partner of Leonard
Green & Partners, L.P. and joined Leonard Green & Partners, L.P. in
1994. Mr. Seiffer has over 20 years of experience in investment banking and
private equity. Mr. Seiffer brings to our Board of Directors investment banking,
financial, leadership and risk assessment experience.
Morris (Mo)
Siegel
, 67, has served as a
director of the Company since 2003. Mr. Siegel is currently self-employed,
having operated Capital Peaks Investments, an investment firm, since 2002. Mr.
Siegel was the co-founder of Celestial Seasonings, Inc., serving as Chairman and
CEO from 1970 until 2002. Celestial Seasonings merged with The Hain Food Group,
forming The Hain Celestial Group of which Mr. Siegel served as Vice Chairman
from 2000 until retiring in 2002. Mr. Siegel also served on the board of
directors of Spicy Pickle Franchising, Inc. until September 2011. Mr. Siegel
brings to our Board of Directors financial and risk assessment experience as
well as his food products, entrepreneurial and leadership experience and history
with the Company.
Jonathan
Sokoloff
, 59, has served as a
director of the Company since December 2008. He is Managing Partner of Leonard
Green & Partners, L.P., which he joined in 1990. Mr. Sokoloff serves on the
boards of directors of The Container Store, Shake Shack Inc. and Signet Jewelers
Limited. Mr. Sokoloff brings to our Board of Directors investment banking,
financial, leadership and risk assessment experience.
Dr. Ralph
Sorenson
, 83, has served as a
director of the Company since 1994. Dr. Sorenson is the Managing General Partner
of the Sorenson Limited Partnership, which focuses on venture capital
investments in a diverse range of entrepreneurial startups. Dr. Sorenson is
President Emeritus of Babson College (1974-1981); Professor Emeritus and former
Dean of the University of Colorado Business School (1992-present); former
Chairman and CEO of Barry Wright Corporation, a NYSE company (1981-1989); and a
former professor at the Harvard Business School (1964-1974, 1989-1992). Dr.
Sorenson is a former director of the Federal Reserve Bank of Boston, a Life
Trustee and former Chairman of the Board of the Boston Museum of Science,
Trustee Emeritus of Babson College, a member of the President’s Council of Olin
College of Engineering, and a director of the Toyota Mobility Foundation. Over
the years he has served on the boards of directors of more than a dozen public
companies. Dr. Sorenson brings to our Board of Directors leadership, financial
and risk assessment experience as well as his entrepreneurial experience and
expertise and history with the Company.
Gabrielle
Sulzberger
, 56, has served as a
director of the Company since 2003. Ms. Sulzberger has served as a Principal of
a diversified investment fund, Rustic Canyon/Fontis Partners, LP, since its
inception in October 2005. In addition, Ms. Sulzberger served as Chief Financial
Officer of the Villanueva Companies, a private holding company with diverse
investment interests, from 2002 through 2005. Ms. Sulzberger also serves on the
boards of directors of Teva Pharmaceutical Industries Ltd. and Brixmor Property
Group Inc. Ms. Sulzberger served on the board of directors of Stage Stores, Inc.
until June 2015. Ms. Sulzberger brings to our Board of Directors financial,
leadership and risk assessment experience as well as her entrepreneurial
experience and history with the Company.
William (Kip) Tindell,
III
, 63, has served as a director
of the Company since November 2008. He co-founded The Container Store in 1978
and is its Chairman and served as its CEO until July 2016. Mr. Tindell serves as
the Chairman of the Board of the National Retail Federation, and was inducted
into the Retailing Hall of Fame in 2006. Mr. Tindell brings to our Board of
Directors financial and risk assessment experience as well as his
entrepreneurial and retail leadership experience.
The Nominating and Governance
Committee, consisting solely of “independent directors” as defined in Rule 5605
of the NASDAQ Listing Rules, recommended the 12 directors set forth in Proposal
1 for nomination by our full Board of Directors. Based on this recommendation
and each nominee’s credentials and experience outlined above, the Board of
Directors has determined that each such nominee can make a significant
contribution to the Board of Directors and should serve as a director of the
Company. Our Board of Directors nominated such directors for election at the
Annual Meeting. All nominees are currently directors, and each nominee has
agreed to be named in this Proxy Statement and to serve if elected. Although we
know of no reason why any of the nominees would not be able to serve, if any
nominee is unavailable for election, the
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proxy holders may vote for
another nominee proposed by the Board of Directors. The Board of Directors may
also choose to reduce the number of directors to be elected, as permitted by our
Bylaws.
CORPORATE
GOVERNANCE
Corporate Governance
Highlights
We have long supported strong
corporate governance practices. Our Board of Directors continually reviews our
practices and ensures that they evolve to appropriately balance the interests of
our stakeholders. Set forth below are examples of practices that demonstrate
this commitment to our stakeholders.
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Practice
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Explanation
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Director
Independence
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We have an independent
Chairman of the Board.
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10 of 12 director
nominees are independent.
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All committee members
are independent.
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Independent directors
regularly meet in executive sessions.
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Board Succession and
Development
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In December 2016, our
Board of Directors adopted a Board Succession and Development Plan, which
is described below.
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Practices of our Board
of Directors and Committees
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Our directors conduct
annual self-evaluations.
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All of our Audit
Committee members are “audit committee financial experts.”
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We have a diversity
policy that our Nominating and Governance Committee considers in selecting
and recommending candidates for election.
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None of our directors
serve on more than four public company boards.
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We have a director stock
ownership policy in place that generally requires our non-management
directors to meet a share ownership level with a value equal to or
exceeding three times the cash compensation received for service on the
Board of Directors for the prior fiscal year. See the “Director
Compensation Program for Fiscal Year 2016” section below for a description
of the policy.
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Shareholder Rights
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Directors are elected
annually.
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Directors must be
elected by a majority vote standard in uncontested elections.
|
|
|
|
An incumbent director
who is not re-elected must promptly offer to resign.
|
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|
Our bylaws contain
simple majority vote requirements.
|
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|
Our proxy access bylaw
provides that a single shareholder or groups of up to 20 shareholders
collectively owning at least 3% of our relevant voting power for at least
three continuous years can include nominees in our proxy statement, up to
a total number of such nominees not to exceed 20% of the number of
directors then serving, subject to the eligibility, procedural and
disclosure requirements set forth in the bylaws.
|
|
Shareholder Outreach
|
|
We have a strong
shareholder engagement program. We engage with our shareholders to ensure
that both management and the board are made aware of issues that matter
most to our investors so that these issues are addressed on a timely
basis. We engage regularly with our largest shareholders to hear their
views on both general and company specific governance
matters.
|
|
Compensation
|
|
See the “Summary of
Compensation Practices for Fiscal Year 2016” section of this Proxy
Statement for a discussion of our leading compensation
practices.
|
Directors and Committee
Assignments
Assuming election of all 12
nominees listed above, the following is a list of persons who will constitute
the Company’s Board of Directors following the meeting, including their
committee assignments as of December 2016.
- 7 -
Table of Contents
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Nominating and
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Audit
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Compensation
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Governance
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Name
|
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Committee
|
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Committee
|
|
Committee
|
|
Dr. John Elstrott
*
|
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✓
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|
✓
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|
✓
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|
Mary Ellen Coe
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✓
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|
Hass Hassan
|
|
✓
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✓**
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Stephanie Kugelman
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✓
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John Mackey
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Walter Robb
|
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Jonathan Seiffer
|
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✓**
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|
Mo Siegel
|
|
✓
|
|
✓
|
|
|
|
Jonathan Sokoloff
|
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|
✓
|
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|
Dr. Ralph Sorenson
|
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|
✓
|
|
✓
|
|
Gabrielle Sulzberger
|
|
✓
|
|
|
|
✓**
|
|
Kip Tindell
|
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|
✓
|
* Chairman of the
Board
** Chair of Committee
Committees and
Meetings
Committees
The Board of Directors
maintains the following three standing committees: the Audit Committee, the
Compensation
Committee and the
Nominating and Governance Committee. The current members of the various
committees are identified in the preceding table. The charter of each committee
can be found in the “Corporate Governance” section of our website at
http://investor.wholefoodsmarket.com/investors/corporate-governance/governance-documents/default.aspx.
The duties of each committee are set forth in its charter.
Audit Committee
.
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling its responsibility for monitoring risks and the Company’s internal
control system, overseeing the quality and integrity of the accounting, auditing
and reporting practices of the Company and the audits of the Company’s financial
statements, and other such duties as directed by the Board of Directors.
The Committee is expected to
maintain free and open communication with the independent auditors, the Director
of Internal Audit and the management of the Company. In discharging this
oversight role, the Committee is empowered to investigate any matter brought to
its attention, with full power to retain outside counsel or other experts for
this purpose.
The Audit Committee’s
responsibilities include: (i) selecting, hiring and evaluating our independent
auditor; (ii) reviewing and discussing the adequacy and effectiveness of the
Company’s internal control over financial reporting; (iii) overseeing the
integrity of our financial statements and monitoring our compliance with legal
and regulatory requirements as they relate to financial statements or accounting
matters; (iv) overseeing internal auditing processes; (v) reviewing with
management our audited financial statements, earnings announcements, regulatory
filings and other public announcements regarding our results of operations; (vi)
inquiring about significant risks, reviewing our risk assessment and management
policies, and assessing steps taken to control these risks; (vii) establishing
procedures for receipt, retention and treatment of complaints regarding
accounting, internal accounting controls and auditing matters; and (viii)
overseeing and reviewing the Company’s internal audit function.
The Board of Directors has
determined that all Audit Committee members are “audit committee financial
experts” under the regulations promulgated by the Securities and Exchange
Commission. The Board of Directors has also determined that each of the
directors serving on our Audit Committee is “independent” within the meaning of
the applicable rules of the Securities and Exchange Commission and the NASDAQ
Listing Rules.
- 8 -
Table of Contents
Compensation
Committee
. The purpose of the
Compensation Committee is to assist the Board of Directors in carrying out its
responsibilities with respect to overseeing the Company’s compensation policies
and practices, review and approve annual compensation and compensation
procedures for the Company’s executive officers, and oversee and recommend
director compensation to the Board of Directors.
The Compensation Committee’s
responsibilities include: (i) overseeing the Company’s overall compensation
structure, policies and programs, and assessing whether the Company’s
compensation structure establishes appropriate incentives for management and
employees; (ii) making recommendations to the Board of Directors with respect
to, and administering, the Company’s incentive compensation and equity-based
compensation plans, including the Company’s stock option plan and team member
stock purchase plan; (iii) reviewing and approving compensation procedures for
the Company’s executive officers; (iv) recommending to the independent directors
for approval the compensation of the Co-Chief Executive Officers based on
relevant corporate goals and objectives and the Board of Directors’ performance
evaluation of the Co-Chief Executive Officers; (v) reviewing and approving the
compensation of executive officers other than the Co-Chief Executive Officers;
(vi) reviewing and recommending to the Board of Directors employment and
retention agreements and severance arrangements for executive officers,
including change-in-control provisions, plans or agreements; (vii) annually
reviewing the compensation of directors for service on the Board of Directors
and its committees and recommending changes in compensation to the Board of
Directors; (viii) monitoring directors’ compliance with the Company’s stock
ownership guidelines; (ix) at least annually, reviewing and assessing the
adequacy of the charter and participating in an evaluation of the committee; (x)
and working with Company management to address any conflict of interest with any
compensation adviser engaged by the Compensation Committee. The Compensation
Committee Charter does not provide for any delegation of these
duties.
Regarding most compensation
matters, including executive and director compensation, the Company’s executive
team provides recommendations to the Compensation Committee.
The Board of Directors has
determined that each of the directors serving on our Compensation Committee is
“independent” within the meaning of the applicable rules of the Securities and
Exchange Commission and the NASDAQ Listing Rules.
Neither the Compensation
Committee nor Company management engaged any outside consultants regarding
fiscal year 2016 executive compensation.
Nominating and Governance
Committee
. The Nominating and
Governance Committee’s purpose is to monitor and oversee matters of corporate
governance, including the evaluation of the Board of Directors’ performance and
processes and the “independence” of directors, and select, evaluate and
recommend to the Board of Directors qualified candidates for election or
appointment to the Board of Directors.
The Nominating and Governance
Committee identifies director candidates through recommendations made by members
of the Board of Directors, management, shareholders and others, including the
possibility of a search firm. At a minimum, a Board of Directors nominee should
have significant management or leadership experience which is relevant to the
Company’s business, as well as personal and professional integrity. The Board of
Directors believes it is in the best interest of the Company and its
shareholders to identify and select highly qualified candidates to serve as
directors and for the Board of Directors to be comprised of a diverse group of
individuals with different backgrounds and perspectives. Recommendations are
developed based on the nominee’s knowledge and experience in a variety of
fields, and research conducted by the Company’s staff at the Nominating and
Governance Committee’s direction. More details about the committee’s process for
identifying and recommending board candidates is discussed below under the
heading “Board Succession and Development.”
Any shareholder recommendation
should be directed to the attention of the Company Secretary and should include
the candidate’s name, home and business contact information, detailed
biographical data, relevant qualifications for Board of Directors membership,
information regarding any relationships between the candidate and the Company
within the last three years, and a written indication by the recommended
candidate of his or her willingness to serve.
In determining whether to
nominate a candidate, whether from an internally generated or shareholder
recommendation, the Nominating and Governance Committee will consider the
current composition and capabilities of serving board members, as well as
additional capabilities considered necessary or desirable in light of existing
and future Company needs. The Nominating and Governance Committee also exercises
its independent business judgment and discretion in evaluating the suitability
of any recommended candidate for nomination.
- 9 -
Table of Contents
In fiscal year 2016, the
Nominating and Governance Committee and the Board of Directors used the services
of a third party search firm to assist in evaluating and identifying director
candidates.
The Board of Directors has
determined that each of the directors serving on our Nominating and Governance
Committee is “independent” within the meaning of the applicable NASDAQ Listing
Rules.
Fiscal Year 2016
Meetings
During fiscal year 2016, the
Board of Directors and the various committees held the following number of
meetings: Board of Directors, six meetings; Audit Committee, nine meetings;
Compensation Committee, two meetings; and Nominating and Governance Committee,
four meetings. Other than Mr. Sokoloff, no director attended fewer than 75% of
the meetings of the Board of Directors (and any committees thereof) that he or
she was required to attend. It is a policy of the Board of Directors to
encourage directors to attend each Annual Meeting of Shareholders. All members
of the Board of Directors attended the Company’s 2016 Annual Meeting of
Shareholders, other than Ms. Coe, who was not yet a director on that
date.
Board Succession and
Development
In December 2016, the Board of
Directors implemented a Board Succession and Development Plan to strengthen the
Board of Directors’ ability to further the best long-term interests of the
Company’s shareholders and other stakeholders. The Board of Directors recognizes
that the Company is a uniquely mission-driven company, driven by the Company’s
Core Values and focused on achieving sustainable profits and maximizing
long-term shareholder value while creating value for all of the Company’s major
stakeholders, each of whom are interdependently linked. The Board of Directors’
quality, culture and dedication have been important factors to the Company’s
success, and the Board of Directors recognizes the importance of good governance
in relation to board succession and development planning.
The key principles underlying
the Board Succession and Development Plan include:
|
●
|
continuing to review
periodically the Board of Directors’ own composition to ensure it reflects
the knowledge, experience, skills and diversity that will best enable the
Board of Directors to fulfill its duties and looking ahead and considering
both current and future needs of the Company, especially as the Company’s
strategies, initiatives and business conditions change over time. The
results of the Board of Directors and its committees’ regular
self-evaluation practices will continue to be incorporated into director
succession and nomination decisions;
|
|
●
|
seeking to achieve a
variety of backgrounds, ages, tenures and experiences within the boardroom
to help ensure robust oversight, board quality, stability and continuity
of experience while infusing new insights and perspectives into Board
discussions. A balanced Board of Directors will also enable the strong
mentoring and development that has been infused into the management of the
Company to also occur at the board level, with more seasoned and
experienced members of the Board of Directors offering insight and
guidance to newer members and newer members sharing their perspectives
with longer-tenured directors as well;
|
|
●
|
having a strong pipeline
of candidates to consider from time to time for membership on the Board of
Directors, using the criteria determined by the Board of Directors and the
Nominating and Governance Committee as reflected in the Corporate
Governance Principles and the charter of the Nominating and Governance
Committee, to facilitate an orderly identification and selection of new
directors;
|
|
●
|
in determining whether
to nominate any individual director for re-election, the Board of
Directors will annually review and evaluate the on-going contribution of
such director to the overall effectiveness of the Board of Directors as a
whole;
|
|
●
|
seeking to bring the
average tenure of the Board of Directors more in line with peer practices
over the next three to five years through a combination of adding new
directors and anticipated director retirements;
|
|
●
|
following two objective
mechanisms to facilitate the goals of the Board Succession and Development
Plan, specifically that, beginning with the 2018 annual meeting, (1) for
all independent directors whose terms began in 2008 or after, and who join
the Board of Directors in the future, such directors will not stand for
re-election after 15 years of service and (2) for other independent
directors, such directors will not stand for re-election after 15 years of
service or after reaching the age of 72, whichever occurs
later;
|
|
●
|
if a director’s
principal occupation or business association changes substantially during
the director’s tenure on the Board of Directors, the director will be
expected to promptly notify the Nominating and Governance Committee,
following which the committee will evaluate the propriety of continued
service on the Board of Directors and make a recommendation to the Board
of Directors what action, if any, should be taken;
|
|
●
|
prioritizing strong
director onboarding as well as on-going director education and tutorials
to accelerate the ability of newly added directors to get up to speed and
contribute quickly while also ensuring that continuing directors stay
apprised of current developments and contribute effectively on an on-going
basis; and
|
- 10 -
Table of Contents
|
●
|
the Board of Directors
and the Nominating and Governance Committee will continue to regularly
review the Board Succession and Development Plan, assess whether changes
or updates are needed and evaluate progress against the
plan.
|
The rotation in December 2016
of the chairmanships of the Company’s key committees, including the Audit
Committee, the Compensation Committee, and the Nominating and Governance
Committee, such that all committees have new leadership, also reflects the
Company’s commitment to ensuring the practices of the Board of Directors
continue to evolve and benefit from fresh perspectives. Committee memberships
have also been updated. In addition, reflecting the implementation of the Board
Succession and Development Plan, incumbent director Dr. Ralph Sorenson will not
stand for re-election at the 2018 annual meeting.
The 2016 addition to the Board
of Directors of independent director Mary Ellen Coe is reflective of the
principles underlying the Board Succession and Development Plan. An executive at
Google, Ms. Coe’s deep experience in marketing, digital strategy, and brand
strategy is valuable to the Board of Directors and her leadership, expertise and
understanding of evolving marketplaces is already enhancing board deliberations
and oversight as the Company remains focused on strategic investments in
marketing and elevating the digital experience to create shareholder value. Ms.
Coe is also the third woman member of our Board of Directors, and her
appointment followed a robust and extensive director search process aligned with
the Board of Directors’ self-evaluation process, featuring the use of a
nationally recognized, third-party director search firm and adherence to the
commitments made in the Corporate Governance Principles and Nominating and
Governance Committee Charter. These commitments included prioritizing experience
relevant to the Company’s strategy and business, ensuring that candidates with a
diversity of ethnicity and gender are included in each pool of candidates from
which Board of Directors nominees are chosen and including potential candidates
from varied backgrounds, including going beyond the traditional “former CEO”
corporate background as a required criteria for new candidates. The Company will
continue to evaluate board composition and opportunities to strengthen the Board
of Directors.
Board Oversight of
Enterprise Risk
Risk management is primarily
the responsibility of the Company’s management team. However, our Board of
Directors oversees the management team’s assessment of the material risks faced
by the Company at both the full Board of Directors level and at the committee
level. In accordance with our Audit Committee charter, the Audit Committee is
responsible for assisting the Board of Directors in fulfilling its
responsibility for monitoring Company risk and the Company’s internal control
system and for assisting the Board of Directors in fulfilling its responsibility
for oversight of the quality and integrity of the accounting, auditing and
reporting practices of the Company. To assist the Audit Committee in assessing
the Company’s approach to risk management, the management team prepares a list
of what it perceives to be the most significant risks facing the Company, along
with a statement reflecting any associated action the Company is taking to
mitigate each type of risk. The Audit Committee reports on risk to the full
Board of Directors as necessary.
In addition, each quarterly
board report from management addresses matters of particular importance or
concern including any significant areas of risk that require Board of Directors
and/or committee attention. Throughout the year the Board of Directors and
committees receive a variety of management presentations on different business
topics that include discussion of associated significant risks.
Risk Considerations in our
Compensation Programs
As part of our regular review
of compensation practices, management conducted a comprehensive review of our
compensation policies and practices for all team members for fiscal year 2016 in
order to determine whether risks arising from any of those policies and
practices are reasonably likely to have a material adverse effect on the
Company.
Management’s conclusion was
presented to and discussed with the Compensation Committee.
In its review, management
analyzed each of our compensation policies and practices, including any
potential risks arising from the policies and practices and factors that
mitigate risk. Based on its review, management concluded that the Company does
not have compensation policies or practices that create risks that are
reasonably likely to have a material effect on the Company. Factors that
management believes mitigate risks include the following:
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●
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As a food retailer, we
are not engaged in activities that present a high risk related to our team
member compensation relative to other businesses;
|
|
●
|
Our executives’
compensation mix of base salary and short-term and long-term incentives
provides compensation opportunities measured by a variety of time horizons
to balance our short-term and long-term strategic
goals;
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- 11 -
Table of Contents
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●
|
The relationship between
the incremental achievement levels and corresponding payouts in our
incentive plans is appropriate;
|
|
●
|
Our incentive bonus
payouts are effectively “capped” due to our salary cap;
|
|
●
|
Our bonuses for our
executive officers and the rest of our leadership network employ a
reasonable mix of performance metrics and are not concentrated on a single
metric;
|
|
●
|
Criteria for payments to
our executive officers and the rest of our leadership network under our
annual bonus are closely aligned with our strategic goals and shareholder
interests;
|
|
●
|
Payout curves are
reasonable and do not contain steep “cliffs” that might encourage
unreasonable short-term business decisions to achieve payment
thresholds;
|
|
●
|
For our executive
officers and the rest of our leadership network, a significant portion of
variable pay is delivered through long-term incentives which carry vesting
schedules over multiple years;
|
|
●
|
Equity awards for team
members are subject to service-based vesting schedules over multiple
years;
|
|
●
|
Our Code of Business
Conduct, our internal controls and other measures implemented by us help
mitigate risk;
|
|
●
|
We have a recoupment
policy for our executive officers with respect to financial restatements;
and
|
|
●
|
We have a policy against
hedging and pledging arrangements by Section 16 officers entered into
after January 24, 2013.
|
Leadership
Structure
The roles of Chairman of the
Board of Directors and Chief Executive Officer are currently separated at the
Company. The Board of Directors believes that the right leadership structure for
the board should be determined from time to time by the needs and circumstances
of the Company, including taking into account the dynamic and evolving landscape
in which the Company operates. The Board of Directors believes the current
separation of the roles is appropriate at this time, including because it
enables the Chief Executive Officer to focus on strategic leadership, execution
and day-to-day management of our business, while the Chairman focuses on
board-level leadership and facilitating the board’s ability to be a strategic
partner with management and provide oversight and monitoring. The Board of
Directors will continue to review the board’s leadership structure.
Compensation Committee
Interlocks and Insider Participation
The following individuals
served as members of our Board of Directors’ Compensation Committee during
fiscal year 2016: Mo Siegel (Chair during fiscal year 2016), Jonathan Sokoloff,
Dr. Ralph Sorenson and Gabrielle Sulzberger. No member of the fiscal year 2016
Compensation Committee has served as one of our officers or employees at any
time. During fiscal year 2016, none of our executive officers served as a member
of the compensation committee of any other company that had an executive officer
serving as a member of our Board of Directors or our Compensation Committee.
During fiscal year 2016, none of our executive officers served as a member of
the board of directors of any other company that had an executive officer
serving as a member of our Board of Directors’ Compensation
Committee.
Code of Business
Conduct
The Company expects all of its
team members and directors to act in accordance with the highest standards of
personal and professional integrity at all times, and to comply with the
Company’s policies and procedures and all laws, rules and regulations of any
applicable international, federal, provincial, state or local government. The
Board of Directors has adopted a Code of Business Conduct, which is posted on
the Corporate Governance section of the Company’s website at http://
investor.wholefoodsmarket.com/investors/corporate-governance/governance-documents/default.aspx.
The Code of Business Conduct applies to the Company’s principal executive
officers, principal financial officer, principal accounting officer, controller
and other persons who perform similar functions for the Company, in addition to
the corporate directors and employees of the Company.
DIRECTOR
COMPENSATION
Director Compensation
Program for Fiscal Year 2016
For fiscal year 2016, each of
our non-employee directors received the following: a $10,243 quarterly retainer;
$7,537 for each Board of Directors’ meeting attended in person; $1,380 for each
committee meeting attended in person in conjunction with a Board of Directors
meeting; $5,522 for each committee meeting attended in person apart from a Board
of Directors meeting; $1,841 for each Board of Directors/committee meeting
greater than two hours in length attended by telephone in which a majority of
directors/committee members participated; $1,380 for each Board of
Directors/committee meeting between one
- 12 -
Table of Contents
and two hours in length
attended by telephone in which a majority of directors/committee members
participated; and $691 for each Board of Directors/committee meeting between
fifteen minutes and one hour in length attended by telephone in which a majority
of directors/committee members participated. Each quarter a retainer was paid to
the Chairman of the Board in the amount of $11,715. Finally, each quarter the
committee Chairs received the following retainers: $4,387 for the Audit
Committee Chair; $2,300 for the Compensation Committee Chair; and $2,300 for the
Nominating and Governance Committee Chair.
We strive to promote an
ownership mentality among key leadership and our Board of Directors. In December
2016, we amended our Corporate Governance Principles to provide that
non-management members of the board are required to meet a share ownership level
with a value equal to or exceeding three times the cash compensation received
for service on the Board of Directors for the prior fiscal year. “Share
ownership” is defined to include shares of the Company’s common stock (including
unvested restricted stock) and restricted stock units (whether vested or
unvested) that the director directly or indirectly beneficially owns for
purposes of Section 16 of the Securities Exchange Act of 1934. Directors are
expected to meet the stated ownership level within three years of joining the
board. If for two consecutive years a director has not satisfied the ownership
requirement amount by the compliance deadline, he or she must retain all shares
acquired on the vesting of equity awards or the exercise of stock options (in
all cases net of exercise costs and taxes) until compliance is achieved.
Compliance with this policy will be measured as of the first trading day of the
fiscal year. Based upon the directors’ share ownership levels at the time that
this policy was adopted, all directors would have been in compliance on
September 26, 2016, which was the first day of fiscal year 2017, other than Ms.
Coe, who was not yet a director on that date. See the “Other Information –
Beneficial Ownership” section of this Proxy Statement for information regarding
the Company ownership interests of each member of our Board of Directors. The
members of our Board of Directors receive regular grants of options and
restricted stock. Options and restricted stock become exercisable in four equal
installments each year beginning on the first anniversary of the grant
date.
Director Compensation Table
for Fiscal Year 2016
The following table provides
compensation information for the fiscal year ended September 25, 2016 for each
non-employee member of our Board of Directors who served during the fiscal year.
The Summary Compensation Table in the “Executive Compensation” section of this
Proxy Statement contains compensation disclosure for Mr. Mackey and Mr. Robb.
Neither Mr. Mackey nor Mr. Robb received any compensation for serving as a
member of the Board of Directors. Ms. Coe did not serve as a director during the
fiscal year.
|
|
|
Fees
Earned or
|
|
|
|
|
|
|
|
All
Other
|
|
|
|
|
|
|
Paid
in Cash
|
|
Stock Awards
|
|
Option Awards
|
|
Compensation
|
|
Total
|
|
|
|
|
|
|
(1)
|
|
(2)
|
|
(3)
|
|
|
|
|
Dr. John Elstrott
|
|
$
|
143,512
|
|
$
|
34,980
|
|
$
|
17,858
|
|
$
|
2,744
|
|
$
|
199,094
|
|
Hass Hassan
|
|
|
96,652
|
|
|
34,980
|
|
|
17,858
|
|
|
2,744
|
|
|
152,234
|
|
Stephanie Kugelman
|
|
|
96,652
|
|
|
34,980
|
|
|
17,858
|
|
|
2,744
|
|
|
152,234
|
|
Jonathan Seiffer
|
|
|
95,961
|
|
|
34,980
|
|
|
17,858
|
|
|
2,744
|
|
|
151,543
|
|
Mo Siegel
|
|
|
105,852
|
|
|
34,980
|
|
|
17,858
|
|
|
2,744
|
|
|
161,434
|
|
Jonathan Sokoloff
|
|
|
70,443
|
|
|
34,980
|
|
|
17,858
|
|
|
2,744
|
|
|
126,025
|
|
Dr. Ralph Sorenson
|
|
|
105,161
|
|
|
34,980
|
|
|
17,858
|
|
|
2,744
|
|
|
160,743
|
|
Gabrielle Sulzberger
|
|
|
112,860
|
|
|
34,980
|
|
|
17,858
|
|
|
2,744
|
|
|
168,442
|
|
Kip Tindell
|
|
|
95,290
|
|
|
34,980
|
|
|
17,858
|
|
|
2,744
|
|
|
150,872
|
(1)
Amounts represent the grant date fair value of
stock awards granted in fiscal year 2016. See Note 14 to the consolidated
financial statements in the Company’s Annual Report for the fiscal year ended
September 25, 2016 regarding assumptions underlying the valuation of equity
awards. The total number of shares granted to each specified director during
fiscal year 2016 was 1,200. At fiscal year end the aggregate number of stock
awards outstanding for each director was 4,757.
(2)
Amounts
represent the aggregate grant date fair value of option awards granted in fiscal
year 2016. See Note 14 to the consolidated financial statements in the Company’s
Annual Report for the fiscal year ended September 25, 2016 regarding assumptions
underlying the valuation of equity awards. The total number of options granted
to each specified director during fiscal year 2016 was 2,250. At fiscal year end
the aggregate number of option awards outstanding for each director was as
follows: Dr. John Elstrott 43,500; Hass Hassan 39,000; Stephanie Kugelman
43,500; Jonathan Seiffer 34,500; Mo Siegel 43,500; Jonathan Sokoloff 34,500; Dr.
Ralph Sorenson 43,500; Gabrielle Sulzberger 43,500; and Kip Tindell 43,500.
Leonard Green & Partners, L.P. had 18,000 options outstanding which were
granted in respect of Mr. Seiffer’s and Mr.
- 13 -
Table of Contents
Sokoloff’s service on our
Board of Directors. These options may be considered beneficially owned by Mr.
Seiffer and Mr. Sokoloff.
(3)
Amounts represent dividends on restricted stock
paid in fiscal year 2016.
PROPOSAL 2 – ADVISORY VOTE TO APPROVE
THE COMPENSATION OF THE
NAMED EXECUTIVE OFFICERS
|
Pursuant to Section 14A of the
Securities Exchange Act of 1934, shareholders have an opportunity to cast an
advisory vote to approve the compensation of our named executive officers as
disclosed in this Proxy Statement. This proposal, commonly known as a
“say-on-pay” proposal, gives shareholders the opportunity to approve on an
advisory basis our fiscal year 2016 executive compensation programs and policies
and the compensation paid to the named executive officers. At the Company’s 2011
Annual Meeting, the majority of our shareholders voted to advise us to include a
say-on-pay proposal every year, and the Board of Directors determined that the
Company will hold an advisory shareholder vote on the compensation of our named
executive officers every year. A non-binding, advisory vote on the frequency of
say-on-pay proposals must be held at least once every six years, including this
year (see Proposal 3).
As discussed in the following
“Compensation Discussion and Analysis” section of this Proxy Statement, the
primary objective of our compensation program, including our executive
compensation program, is to attract and retain qualified, energetic team members
who are enthusiastic about the Company’s mission and culture in order to achieve
our corporate objectives and increase shareholder value.
This proposal allows our
shareholders to express their opinions regarding the decisions of our
Compensation Committee on the prior year’s annual compensation of the named
executive officers. Your advisory vote will serve as an additional tool to guide
our Board of Directors and Compensation Committee in continuing to improve the
alignment of the Company’s executive compensation programs with the interests of
the Company and its shareholders, and is consistent with our commitment to high
standards of corporate governance.
Board of Directors
Recommendation
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE “FOR” APPROVAL OF THE FOLLOWING ADVISORY
RESOLUTION:
RESOLVED, that the Company’s
shareholders approve, on an advisory basis, the compensation paid to the
Company’s named executive officers as disclosed in this Proxy Statement pursuant
to the Securities and Exchange Commission’s compensation disclosure rules,
including the Compensation Discussion and Analysis section, the compensation
tables and the related narrative discussion.
Vote
Required
Approval of this proposal
requires the affirmative vote of the holders of a majority of the shares
entitled to vote on, and who vote for or against, the proposal.
Because the vote on this
proposal is advisory in nature, it will not affect any compensation already paid
or awarded to any named executive officer and will not be binding on or overrule
any decisions by the Board of Directors, and it will not create or imply any
additional fiduciary duty on the part of the Board of Directors. The
Compensation Committee will take into account the outcome of this advisory vote
when considering future compensation arrangements for our named executive
officers.
PROPOSAL 3 –
ADVISORY VOTE ON THE FREQUENCY OF SHAREHOLDER VOTES
ON EXECUTIVE
COMPENSATION
|
Shareholders have an
opportunity to advise the Board of Directors as to whether the Company should
conduct an advisory vote with respect to its executive compensation at every
annual, second annual or third annual meeting of shareholders. Shareholders may
vote at this Annual Meeting on the frequency with which the Company should
conduct an advisory vote on the executive compensation as described in the
“Executive Compensation” section of the Proxy Statement for that meeting.
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Table of Contents
Shareholders may vote for
every one, two or three years, or abstain from voting on this proposal. The
advisory vote is non-binding, but the Board of Directors and the Compensation
Committee will take into account the outcome of the vote when making future
decisions about how often the Company conducts an advisory shareholder vote on
its executive compensation.
While the Board of Directors
believes that the Compensation Committee and the Board of Directors are in the
best position to determine executive compensation, the Board of Directors
appreciates and values shareholders’ views. The Board of Directors has
determined that an advisory vote on executive compensation every year is
currently the best approach for the Company so that the Board of Directors and
the Compensation Committee receive shareholder feedback each year as part of
their regular review of executive compensation.
Board of Directors
Recommendation
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE TO CONDUCT AN ADVISORY VOTE ON EXECUTIVE COMPENSATION AT THE
ANNUAL MEETING OF SHAREHOLDERS EVERY “ONE YEAR.”
The frequency option – one
year, two years, or three years – that receives the most votes “for” of all
votes cast on the proposal will be the frequency option approved by the
shareholders.
Because the vote on this
proposal is advisory in nature, it will not be binding on or overrule any
decisions by the Board of Directors, will not create or imply any additional
fiduciary duty on the part of the Board of Directors, and will not restrict or
limit the ability of shareholders to make proposals for inclusion in proxy
materials related to executive compensation. The Compensation Committee will
take into account the outcome of the vote when considering the frequency of
advisory votes for compensation paid to our named executive
officers.
EXECUTIVE
COMPENSATION
Compensation Discussion and
Analysis
Overview
The following section explains
our compensation programs, with an emphasis on the fiscal year 2016 compensation
of our Chief Executive Officer, former Co-Chief Executive Officer, Chief
Financial Officer, and three most highly compensated executive officers other
than our Chief Executive Officer, former Co-Chief Executive Officer and Chief
Financial Officer, each of whom we refer to as our “named executive officers”
for discussion purposes in this document only:
|
●
|
John Mackey, our Chief
Executive Officer
|
|
●
|
Walter Robb, our former
Co-Chief Executive Officer
|
|
●
|
A.C. Gallo, our
President and Chief Operating Officer
|
|
●
|
Glenda Flanagan, our
Executive Vice President and Chief Financial Officer
|
|
●
|
David Lannon, one of our
two Executive Vice Presidents of Operations
|
|
●
|
Jason Buechel, our
Executive Vice President and Chief Information
Officer
|
2016 Shareholder Advisory
Vote on Executive Compensation
At our 2016 Annual Meeting, a
substantial majority of our shareholders approved the compensation of our named
executive officers, with approximately 95% of the votes cast in favor of our
executive compensation proposal. Our Compensation Committee took this strong
approval into account as one of many factors it considered in connection with
the discharge of its responsibilities. Our Compensation Committee did not
implement any changes to our executive compensation program for 2016, partly
because it believed that the shareholder vote demonstrated that our shareholders
support the overall design of the program.
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Table of Contents
Summary of Compensation
Practices for Fiscal Year 2016
We continually evaluate our
compensation practices to ensure that they help us to achieve our compensation
goals and align with our core values. Set forth below are some examples of
practices that demonstrate our commitment to our goals and values.
|
Compensation
Practice
|
|
Explanation
|
|
Salary cap
|
|
As further described in
the section entitled “Cash Compensation,” our compensation philosophy
emphasizes internal pay equity. In this regard, we have generally limited
the cash compensation of any team member (including our executive
officers) to a certain multiple of the average annual wage of all
full-time U.S. team members, with limited exceptions described below. For
2016, this multiple was 19 times the average annual wage.
|
|
Guideline on executive officers’
annual equity grants
|
|
As a guideline, we
generally seek to limit the total number of shares issuable under our
stock incentive plan to the members of the Whole Foods Leadership Network
(which includes our executive officers) to approximately 20% of all shares
issuable under equity grants made to all team members in a fiscal year.
This guideline is part of our internal pay equity considerations when we
set executive compensation.
|
|
Recoupment policy
|
|
We adopted a recoupment
policy that applies to compensation paid in fiscal year 2014 and going
forward. Under the policy, our Compensation Committee may seek to recoup
from our current and former named executive officers any excess incentive
based cash compensation awarded as a result of an accounting restatement
due to material noncompliance with financial reporting requirements under
the U.S. federal securities laws. Although we may need to revise our
policy depending on the final recoupment rules under the Dodd-Frank Wall
Street Reform and Consumer Protection Act, we believe this policy is a
good governance practice that would be beneficial for our Company even
ahead of the final rules.
|
|
Benchmarking
|
|
While our Compensation
Committee may review practices of other companies to have a point of
reference when making compensation decisions, we do not “benchmark” our
executive officers’ compensation so that it must equal a certain
percentage of compensation awarded by other companies. We believe that
such benchmarking has been a factor in the exponential growth in executive
compensation that is common at other companies, and that it is not the
best practice for our own Company’s stakeholders.
|
|
Pay equity among executive
officers
|
|
Except as noted below,
each of our executive officers generally receives the same base salary and
annual bonus (before any reductions due to the salary cap) and the same
size annual “leadership grant” of stock options, although we from time to
time award additional equity grants which may vary in size among the
executives. Our executive officers act as a team, and we believe this pay
equity emphasizes their teamwork and is fair to them and our stakeholders.
Effective January 1, 2007, Mr. Mackey voluntarily reduced his salary to $1
and elected to forgo any future bonus and equity awards.
|
|
Egalitarian welfare benefit
structure with limited perquisites
|
|
Our executive officers
generally receive the same benefits that other full-time team members
receive, including a team member purchase discount card and health
insurance.
|
|
No Section 280G tax gross
ups
|
|
We do not provide
Internal Revenue Code Section 280G “golden parachute” tax gross
ups.
|
|
No new hedging or pledging
arrangements by executive officers
|
|
Since January 2013, our
insider trading policy has prohibited our executive officers (and other
Section 16 insiders) from entering into any new hedging or pledging
arrangements involving our stock.
|
Objectives of Our
Compensation Programs
Our compensation and benefit
programs reflect our philosophy of egalitarianism. While the programs and
individual pay levels will always reflect differences in job responsibilities,
geographies and marketplace considerations, the overall structure of
compensation and benefit programs should be broadly similar across the
organization.
The primary objective of our
compensation programs, including our executive compensation program, is to
attract and retain over the long term qualified and energetic team members who
are enthusiastic about our mission and culture, providing them with sufficient
income and other benefits to keep them focused on the Company as their employer.
A further objective of our compensation programs is to reward each of our team
members for their contribution to the Company. Finally, we endeavor to ensure
that our compensation programs are perceived as fundamentally fair to all
stakeholders.
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Table of Contents
Our Compensation Committee is
empowered to review and approve, or in some cases recommend for the approval of
the full Board of Directors, the annual compensation and compensation procedures
for our executive officers.
Elements of Executive
Compensation Program
The elements of our executive
compensation program are similar to the elements used by many companies and are
as follows:
|
|
1.
|
Cash Compensation
– including base salary and
bonus
|
|
|
2.
|
Equity Compensation
– including stock option grants and, in some
years, restricted share issuances
|
|
|
3.
|
Executive Retention Plan and Non-Compete
Arrangement
|
The exact base pay, bonus
formulas, equity grants, cash salary cap, and agreement terms are chosen in an
attempt to balance our competing objectives of fairness to all stakeholders and
attracting/retaining team members who may have other attractive employment
opportunities. Other than benefit hours pool balances (described below), cash
compensation generally is paid as earned.
Cash
Compensation
: What Our
Compensation Program Is Designed to Reward
Annual executive officer cash
compensation consists of a base salary component and the incentive component
discussed below. Our cash compensation program is designed to reward teamwork
and each team member’s contribution to the Company.
Our executive officers (other
than Mr. Mackey, who voluntarily reduced his salary to $1 and elected to forgo
future cash compensation and equity awards effective January 1, 2007)
participated in our Bonus Plan in fiscal year 2016. Under this plan, in
measuring the executive officers’ contribution to the Company, our Compensation
Committee considers numerous factors, including the Company’s growth and
financial performance through reference to the metrics set forth below and
general marketplace conditions. The Bonus Plan includes qualitative and
quantitative components.
The qualitative bonus amount
is determined at the end of each fiscal year by our Compensation Committee in
its discretion, provided this amount is limited to no more than 30% of the
applicable executive officer’s annual base salary. Historically, the committee
has determined the quantitative and qualitative portions of the bonus for the
executive officers as a group, and has not differentiated among the officers
based on personal performance. In determining the qualitative bonus amount, our
Compensation Committee attempts to reward specific accomplishments that are
important to the long-term health of the Company. For example, the committee may
consider subjective factors such as long-term strategy development, future
company leader development, product differentiation plans, vendor relationships,
and generally how smoothly the executive team is working together. Our
Compensation Committee believes that such factors may not be reflected in a
single year’s quantitative results. The qualitative portion of the Bonus Plan
also may be used to recognize and reward the role of the executive officers in
meeting other challenges that are not reflected in the quantitative bonus
criteria, either because they are unanticipated or because they are due to
general economic conditions. For example, if the Company’s results of operations
were below expectations as a result of an unexpectedly weak U.S. economy, but
the Company significantly outperformed most other food retailers and/or our own
revised expectations due to the management team’s appropriate strategic
adjustments, the quantitative bonus might not function as intended and the
qualitative portion of the bonus would reward performance.
- 17 -
Table of Contents
The following five
quantitative bonus criteria were selected at the beginning of the fiscal year by
the Compensation Committee in its discretion, which were the same criteria used
in fiscal year 2015:
|
1.
|
|
Comparable store sales growth - the
year-over-year sales growth at existing stores, calculated on a
store-by-store basis. Sales of a store are calculated on a constant
currency basis and deemed to be comparable commencing in the 57th full
week after the store opened or was acquired.
|
|
2.
|
|
Year-over-year improvement in
earnings before interest, taxes and non-cash expenses (“EBITANCE”) - the
year-over-year increase in earnings before interest, taxes and non-cash
expenses. Non-cash expenses include depreciation, amortization, fixed
asset impairment charges, non-cash share-based payment expenses, deferred
rent and last-in, first-out (“LIFO”) charge.
|
|
3.
|
|
Return on invested capital
(“ROIC”) - the result of dividing net income by average invested capital.
Invested capital reflects a trailing four-quarter average.
|
|
4.
|
|
Year-over-year improvement in
Economic Value Added (“EVA”) - the year-over-year increase in net
operating profits after taxes minus a charge on the cost of invested
capital necessary to generate those profits.
|
|
5.
|
|
Positive free cash flow -
the Company’s net cash provided by operating activities minus capital
expenditures.
|
In selecting bonus criteria,
associated amounts and weightings, the Compensation Committee attempts to
determine which factors will better measure the executive officers’ performance,
taking into consideration the Company’s current major goals and financial
forecast, as well as general economic conditions. For example, if the Company
were to dramatically increase its growth plan, positive free cash flow would be
negatively impacted and the Compensation Committee might choose a different
amount/weighting of this metric or choose a completely different metric. For
fiscal year 2016, with regard to the selected criteria, the following formulas
and relative weightings were also approved at the beginning of the fiscal year
by the Compensation Committee:
|
1.
|
|
Comparable store sales growth
|
|
$5,000 is earned for every 10 basis points of
improvement, and the total is multiplied by 20% to weight this portion of
the quantitative bonus amount.
|
|
2.
|
|
Year-over-year improvement in
EBITANCE
|
|
For every dollar of results,
$0.005 (or 0.50%) is earned, and the total is multiplied by 20% to weight
this portion of the quantitative bonus amount.
|
|
3.
|
|
ROIC
|
|
$8,000 is earned for every
10 basis points of return, and the total is multiplied by 20% to weight
this portion of the quantitative bonus amount.
|
|
4.
|
|
Year-over-year improvement in
EVA
|
|
For every dollar of results,
$0.0175 (or 1.75%) is earned, and the total is multiplied by 20% to weight
this portion of the quantitative bonus amount.
|
|
5.
|
|
Positive free cash
flow
|
|
For every dollar of
results, $0.0015 (or 0.15%) is earned, and the total is multiplied by 20%
to weight this portion of the quantitative bonus
amount.
|
All criteria are adjusted for
inflation. These incentive compensation elements are designed to be attainable
and collectively intended to increase the executive’s overall compensation for a
fiscal year. With regard to the performance criteria selected for fiscal year
2016, all performance criteria resulted in positive dollar amounts except the
performance criteria “Comparable store sales growth” and “Year-over-year
improvement in EVA.” Performance criteria that resulted in positive dollar
amounts were summed to determine the quantitative bonus amount. Performance
criteria that resulted in a negative dollar amount were not subtracted from or
otherwise had any impact on the quantitative bonus amount. Stock price
performance has not been a factor in determining annual cash compensation
because the price of the Company’s common stock is subject to a variety of
factors, many of which are outside the control of our executive
officers.
Cash
Compensation
: How We Choose
Amounts and/or Formulas for Each Element
Our Compensation Committee
intends to set total executive cash compensation sufficiently high to attract
and retain a strongly motivated leadership team, but not so high that it has a
long-term negative impact on our other stakeholders. Each executive’s current
and prior compensation is considered in setting future compensation. The
incentive bonus under the Bonus Plan is included in compensation to help align
the financial incentives with the financial interests of our shareholders,
primarily growth and return on invested capital. The criteria used to calculate
the quantitative portion of the Bonus Plan were chosen because we believe they
are currently the best objective measures of our overall financial performance.
The smaller qualitative portion of the Bonus Plan is included to provide the
committee with some level of planned discretion in granting executive
bonuses.
We review the compensation
practices of other companies generally to better understand the market and the
spectrum of compensation philosophies and options across the United States. To
some extent, our compensation plan is based on the
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market and companies against
which we compete for team members, including executives, and we must remain
competitive; however, our compensation philosophy emphasizes internal pay equity
and fair treatment of all stakeholders.
We are committed to stakeholder equity as a principle. This principle has
led us to generally limit the maximum cash compensation we pay team members in
relation to any calendar year, which we refer to as the “salary cap.” Cash
payments, including base salary and amounts paid under our incentive
compensation plan, fall within the scope of our salary
cap.
1
The salary cap is set each
fiscal year by our Compensation Committee through use of a multiple of our
full-time U.S. team members’ average annual wage. In reviewing the multiple for
a fiscal year, our Compensation Committee looks to general marketplace
conditions and the compensation levels it believes to be required to attract and
retain outstanding team members. We have increased this multiple three times
since the salary cap policy was first adopted approximately 30 years ago. Each
of these increases was made to keep the compensation paid to our executives
competitive in the marketplace.
The following is the salary
cap calculation used for the past five calendar years:
|
|
|
Average
|
|
Average
|
|
|
|
|
|
|
|
|
Hourly
Wage
(1)
|
|
Annual
Wage
(2)
|
|
Multiple
|
|
Salary Cap
|
|
2016
|
|
$
|
20.15
|
|
$
|
41,911
|
|
19
|
|
$
|
796,300
|
|
2015
|
|
|
19.70
|
|
|
40,976
|
|
19
|
|
|
778,500
|
|
2014
|
|
|
19.16
|
|
|
39,853
|
|
19
|
|
|
757,200
|
|
2013
|
|
|
18.89
|
|
|
39,289
|
|
19
|
|
|
746,500
|
|
2012
|
|
|
18.63
|
|
|
38,747
|
|
19
|
|
|
736,200
|
(1)
Average Hourly
Wage is the total cash compensation of all U.S. full-time team members in a
fiscal year divided by the total hours worked by all such team members in that
year.
(2)
Average Annual
Wage is the product of the Average Hourly Wage and 2,080 hours. The Company uses
2,080 hours in the calculation as it represents the product of 40 hours per week
and a 52-week year.
Equity
Compensation
: What Our
Compensation Program Is Designed to Reward
As previously stated, stock
price performance has not been a factor in determining annual cash compensation.
However, because we believe a relationship exists between our stock price and
our team members’ performance—through driving sales and improving earnings—our
compensation program is designed to reward team members, including our executive
officers, for positive stock price performance, through equity grants pursuant
to our broad-based plan. We believe this strategy helps to more closely align
the economic interest of our team members and our shareholders.
All of our full-time and
part-time team members are eligible to receive stock options through annual
leadership grants or through service hour grants once they have accumulated
6,000 service hours (approximately three years of full-time employment). We
believe that stock options are a beneficial compensation tool because they link
our team members’ interests with those of our shareholders, they are well suited
to broad-based grants, they are easy to understand, and team members can control
the timing of their taxable event. As of 2016 fiscal year end, approximately 94%
of all equity awards granted pursuant to our stock plan since its inception in
1992 have been granted to team members who are not executive officers. Each of
our executive officers (other than Mr. Mackey, who has voluntarily elected not
to receive stock option grants) receives stock option grants under the Company’s
stock incentive plan. Service hour grants are allocated to each eligible team
member (including our executive officers) based on the proportion of their total
accumulated service hours. With respect to annual leadership grants, our
Compensation Committee typically provides a discretionary award of a similar
number of options to each executive officer.
____________________
1
Team members may take time off without pay in
order to reduce their salary earned and increase the amount of bonus that can be
paid within the cap. Additionally, any team member may elect to receive a cash
payment in exchange for their unused paid time off at 75% of the value otherwise
due, to which amount the salary cap does not apply. Employee benefits, equity
awards and any other form of non-cash compensation, such as the 401(k) match,
are not included in determining and applying the salary cap. The salary cap does
not apply in the team member’s year of termination or retirement, at which time
he or she may receive a cash payment in exchange for unused paid time off at
100% of the value otherwise due. In addition, the salary cap may not apply to
compensation arrangements found in agreements related to change of control or
termination of employment, nor does it apply to dividends paid on any of the
Company’s common stock held by any team member.
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Table of Contents
From time to time, our
Compensation Committee may determine that additional equity grants, including
possible restricted share issuances, are warranted in order to reward
exceptional performance, motivate future strong performance, retain valuable
team members and keep the Company competitive.
Equity
Compensation
: How We Choose
Amounts and/or Formulas for Each Element
Our Compensation Committee
does not have an exact formula for allocating between cash and non-cash
compensation, and its allocation may change from year to year. In determining
the amount of such awards, our Compensation Committee considers a number of
factors, including historic practice such as the amount of prior grants, our
recent performance, general market conditions, the need to retain and motivate
team members, the pool of discretionary grants for all team members, and our
philosophy of fairness to all stakeholders.
Our Compensation Committee
intends to limit the number of shares granted to all team members in any one
fiscal year so that annual earnings dilution from share-based payment expense
will not exceed 10%. The Company’s actual dilution from share-based payment
expense for each fiscal year since 2006 has been less than 10%.
Historically, as a guideline,
our Compensation Committee has sought to limit the total number of shares
issuable under equity grants to the members of the Whole Foods Leadership
Network (which we refer to as “WFLN” and which consisted of 33 members as of
fiscal year end), which includes our named executive officers, to a percentage
of all shares issuable under equity grants made to all team members in such
fiscal year. The guideline for fiscal year 2016 was 20%. The Company grants to
WFLN have been under 20% of all equity grants for the fiscal year in each fiscal
year since WFLN was established more than a decade ago.
For fiscal year 2016, all
equity grants were recommended by the executive team, and the final
determination was made by our Compensation Committee after discussions among the
executive team and the committee, taking into consideration: (1) our usual
broad-based grants, (2) our recent performance, (3) the proportion of awards
granted to WFLN, and (4) our stakeholder fairness philosophy, including the
requirement to expense equity grants and our current intent to limit the number
of shares granted in any one year so that annual earnings dilution from
share-based payment expenses will not exceed 10%.
In each fiscal year, we
establish a pool of grants based on prior year grants to all team members with a
growth factor. We then estimate earnings dilution from share-based payment
expense (to set the dilution guideline for our Compensation Committee) and
determine the portion that should be granted to WFLN. As necessary, the
Compensation Committee reviews whether or not circumstances exist that suggest a
deviation from our general practices.
Subject to certain exceptions,
we schedule equity grant dates well in advance of any actual grant. The grant
date is established when our Compensation Committee approves the grant, and all
key terms have been determined and are expected to be communicated to recipients
within a relatively short period of time. The exercise price of each of our
stock option grants is the market closing price on the grant date. Our general
policy is for the primary annual grant to occur within two weeks after the
official announcement of our second quarter results so that the stock option
exercise price reflects a fully informed market price. At times we make grants
that are in addition to the primary annual grant, including the grant made to
Jason Buechel in connection with his promotion to Executive Vice President. If
at the time of any planned equity grant date any member of our Board of
Directors or executive team is aware of material non-public information, we
would not generally make the planned grant. In such event, as soon as practical
after material information is made public, our Compensation Committee generally
would have a special meeting and/or otherwise take all necessary steps to
authorize the delayed grant. Executives are not treated differently from other
team members in the grant process. Our Compensation Committee has delegated to
our executive team the power to administer, subject to and within the
limitations of the express provisions of our stock incentive plan, all aspects
of outstanding and future grants of equity under the plan. This delegation,
however, does not include the authority to (i) determine when and how each award
will be granted; what type or combination of types of awards will be granted;
the time or times when an award may be exercised; the number of shares with
respect to which an award will be granted to each participant; the exercise
price or the purchase price for shares under an award; or the terms, performance
criteria or other similar conditions, vesting periods or any restrictions for an
award or any restrictions on shares acquired pursuant to an award; (ii) change
the name of participant for whose benefit an award is or will be granted under
the plan; (iii) accelerate or defer the vesting of any rights under an award
(except that such authority exists with respect to participants other than
directors and executive officers); or (iv) amend any award agreement with
respect to the foregoing provisions, other than to correct any defect, omission,
or inconsistency in any award agreement granted to persons who are not executive
officers.
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Table of Contents
Executive Retention Plan
and Non-Compete Arrangement
: What
Our Compensation Program Is Designed to Reward
Through use of our Executive
Retention Plan and Non-Compete Arrangement, we reward each executive’s long-term
service with the Company and set forth the terms under which the Company and
each executive, other than Mr. Mackey, may agree to protect our confidential
information and market position after any such executive’s employment is
terminated. Through this arrangement, we also encourage our executives’
continued services in the event a change in control becomes likely and/or
occurs.
We believe this arrangement
will protect our market position by discouraging our executives’ seeking
employment with our competitors and by protecting our confidential information.
In the case of a change of control, we believe the arrangement strikes a balance
between incentive and executive retention without providing the benefits to an
executive who continues to be employed by an acquiring company.
Executive Retention Plan
and Non-Compete Arrangement
: How
We Choose Amounts and/or Formulas for Each Element
The elements of this
arrangement were determined by generally studying the compensation arrangements
of other companies within the United States, specifically non-compete agreements
and change-of-control agreements. In applying these types of arrangements to the
Company, our Compensation Committee considered the need to protect our market
position, our current compensation programs and the need to motivate compliance
with the arrangement through sufficiently high payments.
This arrangement is discussed
in detail under the “Potential Payments on Termination/Change of Control – 2010
Executive Retention Plan and Non-Compete Arrangement” section of this Proxy
Statement.
Tax and Certain Other
Factors Considered by the Compensation Committee
In structuring our
compensation programs, we take into account Internal Revenue Code Section
162(m). Under Internal Revenue Code Section 162(m), a limitation is placed on
tax deductions of any publicly held corporation for individual compensation to
certain executives exceeding $1,000,000 in any taxable year, unless the
compensation is performance-based. Although our salary cap usually causes
non-performance-based compensation to be below the $1,000,000 threshold, in
certain years our executives may have compensation which results in
non-deductibility under Internal Revenue Code Section 162(m).
Regarding most compensation
matters, including the form and amount of executive and director compensation,
our executive team provides recommendations to our Compensation Committee. These
recommendations include recommendations with respect to changes to executive
team salaries, changes to the bonus plan, annual stock option grants, restricted
stock grants, discretionary bonuses, other incentive awards and the fees paid to
directors. Our Compensation Committee considers a number of factors in
establishing executive compensation, including executive team recommendations,
general marketplace conditions and the Company’s growth and financial
performance. However, the committee does not delegate any of its functions to
others in setting compensation.
Neither our Compensation
Committee nor Company management engaged any outside consultants regarding
fiscal year 2016 executive compensation.
Review of 2016
Compensation
John Mackey
Effective January 1, 2007,
John Mackey, our Chief Executive Officer, voluntarily reduced his salary to $1
and elected to forgo any future bonus and equity awards. In 2013, Mr. Mackey
extended this election so that he would accrue no additional paid time off. For
fiscal year 2016, Mr. Mackey earned $1 in base salary. Mr. Mackey will continue
to receive the same non-cash benefits that other full-time team members receive,
including a team member purchase discount card and health insurance.
Named Executive Officers
Other Than John Mackey
Cash
compensation
. For fiscal year
2016, the Compensation Committee increased the salary of each of our named
executive officers to $501,110. For each named executive officer, the
quantitative portion of the bonus was calculated to be $308,250 for fiscal year
2016. Although the Compensation Committee gave the executive team high marks for
its long-term company
- 21 -
Table of Contents
strategy development, future
company leader development and most other relevant metrics, based on the
Compensation Committee’s determination that the Company’s financial performance
was an overriding factor this fiscal year, no qualitative bonus was awarded for
fiscal year 2016. The actual amount paid to the named executive officers under
the Bonus Plan was limited by the salary cap. The salary cap caused our named
executive officers to forfeit $13,060 in cash compensation that they otherwise
earned. The named executive officers also received a matching contribution to
his or her 401(k) plan in the amount of $157, which is calculated according to a
formula consistent with the matching contribution available to all participating
team members.
Benefit hours (paid time
off) bank
. Our named executive
officers received additional compensation during the fiscal year in relation to
their benefit hours in the following amounts: Mr. Robb received $29,799; Mr.
Gallo received $22,339; Mr. Lannon received $57,053; and Mr. Buechel received
$38,624. The amount represents the net increase in the executive’s balance from
last fiscal year, and includes (1) any paid time off hours earned in excess of
hours used, (2) an amount equal to the lesser of the cash compensation forfeited
due to the salary cap and the value of paid time off that the executive used,
and (3) any increase in the executive’s rate of pay during the fiscal year
applied to paid time off hours earned but not yet used from prior years. Ms.
Flanagan used 100% of her benefit hours earned during fiscal year
2016.
Equity
incentives
. Each of our named
executive officers other than Mr. Gallo received a leadership grant of stock
options to purchase 4,500 shares in connection with our annual grant process on
May 13, 2016. Mr. Gallo received a leadership grant of stock options to purchase
4,250 shares. Also in connection with our annual grant process, our named
executives other than Mr. Buechel (who had not been with the Company long enough
to qualify for a service hour grant) received a grant of options on May 13, 2016
based on his or her years of service with the Company in the following amounts;
Mr. Robb received options to purchase 314 shares; Mr. Gallo received options to
purchase 239 shares; Ms. Flanagan received options to purchase 308 shares; and
Mr. Lannon received options to purchase 247 shares. In addition, Mr. Buechel
received options to purchase 50,000 shares on November 6, 2015 in connection
with his promotion to Executive Vice President.
Leadership Change Announced
in Fiscal Year 2017
On November 2, 2016, the
Company entered into a Separation, Advisory, and Noncompetition Agreement with
Walter Robb. The Separation, Advisory, and Noncompetition Agreement provides for
Mr. Robb’s resignation as Co-Chief Executive Officer, effective as of December
31, 2016, and his provision of advisory services to the Company during the
period commencing on January 1, 2017 and ending on September 24, 2017 (i.e., the
last day of the Company’s 2017 fiscal year) (which we refer to as the “advisory
period”). The Separation, Advisory, and Noncompetition Agreement includes a
confidentiality covenant and a 30-month post-resignation noncompetition covenant
in favor of the Company, among other covenants.
Under the Separation,
Advisory, and Noncompetition Agreement, Mr. Robb will be entitled to receive,
among other things, (a) an advisory fee for his services during the advisory
period equal to the salary cap for the 2017 fiscal year ($750,000 of which will
be payable in biweekly installments and the balance, if any, of which will be
payable following determination of the cap for the 2017 fiscal year); (b) an
aggregate fee of $10 million for agreeing to the noncompetition covenant set
forth in the Separation, Advisory, and Noncompetition Agreement; (c) a lump sum
cash payment in respect of health insurance premiums payable by Mr. Robb between
July 2018 and the month he attains age 65; (d) a lifetime discount card for
purchases made at Company stores; and (e) reimbursement for relocation of Mr.
Robb’s personal possessions from Mr. Robb’s Company office in Austin, Texas to
California.
In connection with the
foregoing, Mr. Robb’s existing Executive Retention Plan and Non-Compete
Arrangement Agreement was amended to provide that Mr. Robb’s ownership and
operation of a single retail store or coffee shop with his family in certain
limited circumstances will not constitute a breach of Mr. Robb’s noncompetition
obligations under that agreement. Upon his resignation, Mr. Robb will be
entitled to receive the payments and benefits set forth in the Executive
Retention Plan and Non-Compete Arrangement Agreement, subject to his compliance
with the agreement.
Compensation Committee
Report
The following Report of the
Compensation Committee is not to be deemed to be “soliciting material” or to be
“filed” with the Securities and Exchange Commission or subject to Regulation 14A
or 14C or to the liabilities of Section 18 of the Securities Exchange Act of
1934, except to the extent we specifically request that such information be
treated as soliciting material or we specifically incorporate it by reference
into any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934.
- 22 -
Table of Contents
We have reviewed and discussed
with management the forgoing Compensation Discussion and Analysis to be included
in this Proxy Statement for the Company’s 2017 Annual Meeting of Shareholders,
filed pursuant to Section 14(a) of the Securities Exchange Act of 1934. Based on
the review and discussion referred to above, we recommend to the Board of
Directors that the Compensation Discussion and Analysis referred to above be
included in this Proxy Statement.
Compensation Committee (as
of September 25, 2016)
Mo Siegel
(Chair)
Jonathan Sokoloff
Dr. Ralph Sorenson
Gabrielle
Sulzberger
Summary Compensation Table
for Fiscal Year 2016
The following table includes
information concerning compensation for the one-year periods ended September 25,
2016, September 27, 2015 and September 28, 2014 in reference to our named
executive officers. Cash compensation received by the named executive officer is
found in the Salary, Bonus or Non-Equity Incentive Plan Compensation columns of
this table. Total cash compensation received for each named executive officer in
relation to each fiscal year is limited to the Company’s salary cap for such
fiscal year, with some exceptions
2
, none of which have occurred in
the last three years. For fiscal years 2016, 2015 and 2014, the salary cap was
$796,300, $778,500 and $757,200, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All
Other
|
|
|
|
|
Fiscal Year
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
|
|
|
(1)(2)
|
|
(3)(4)
|
|
(5)
|
|
(5)
|
|
(6)(7)(8)
|
|
(9)
|
|
|
|
|
John Mackey –
Chief Executive Officer
|
|
2016
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
2015
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
2014
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Walter Robb –
Former Co-Chief
Executive Officer
|
|
2016
|
|
|
501,110
|
|
|
—
|
|
|
—
|
|
|
38,208
|
|
|
295,190
|
|
|
57,772
|
|
|
892,280
|
|
2015
|
|
|
486,510
|
|
|
—
|
|
|
600,022
|
|
|
570,177
|
|
|
291,990
|
|
|
102,223
|
|
|
2,050,922
|
|
2014
|
|
|
472,350
|
|
|
59,840
|
|
|
1,000,013
|
|
|
968,161
|
|
|
225,010
|
|
|
38,207
|
|
|
2,763,581
|
|
A.C. Gallo –
President and Chief Operating Officer
|
|
2016
|
|
|
501,110
|
|
|
—
|
|
|
—
|
|
|
35,629
|
|
|
295,190
|
|
|
50,312
|
|
|
882,241
|
|
2015
|
|
|
486,510
|
|
|
—
|
|
|
600,022
|
|
|
626,857
|
|
|
291,990
|
|
|
81,037
|
|
|
2,086,416
|
|
2014
|
|
|
472,350
|
|
|
59,840
|
|
|
1,000,013
|
|
|
967,817
|
|
|
225,010
|
|
|
87,021
|
|
|
2,812,051
|
|
Glenda Flanagan –
Executive
Vice President and Chief Financial Officer
|
|
2016
|
|
|
501,110
|
|
|
—
|
|
|
—
|
|
|
38,161
|
|
|
295,190
|
|
|
5,849
|
|
|
840,310
|
|
2015
|
|
|
486,510
|
|
|
—
|
|
|
300,039
|
|
|
456,642
|
|
|
291,990
|
|
|
5,803
|
|
|
1,540,984
|
|
2014
|
|
|
472,350
|
|
|
59,840
|
|
|
500,033
|
|
|
695,837
|
|
|
225,010
|
|
|
67,174
|
|
|
2,020,244
|
|
David Lannon –
Executive Vice President of Operations
|
|
2016
|
|
|
501,110
|
|
|
—
|
|
|
—
|
|
|
37,677
|
|
|
295,190
|
|
|
62,902
|
|
|
896,879
|
|
2015
|
|
|
486,510
|
|
|
—
|
|
|
300,039
|
|
|
455,888
|
|
|
291,990
|
|
|
82,142
|
|
|
1,616,569
|
|
2014
|
|
|
472,350
|
|
|
59,840
|
|
|
500,033
|
|
|
695,620
|
|
|
225,010
|
|
|
58,793
|
|
|
2,011,646
|
|
Jason Buechel –
Executive Vice
President and Chief Information Officer
|
|
2016
|
|
|
501,110
|
|
|
—
|
|
|
—
|
|
|
425,701
|
|
|
295,190
|
|
|
40,378
|
|
|
1,262,379
|
|
2015
|
|
|
362,920
|
|
|
—
|
|
|
—
|
|
|
202,199
|
|
|
241,520
|
|
|
77,332
|
|
|
883,971
|
(1)
Amounts shown in the Salary column of this table
for fiscal year 2016 reflect each named executive officer’s annual rate of
pay.
(2)
Effective January 1, 2007, Mr. Mackey voluntarily
reduced his annual salary to $1 and elected to forgo earning any future cash
compensation, stock awards and/or option awards. In 2013, Mr. Mackey extended
this election so that he would accrue no additional paid time off.
____________________
2
See footnote 1 in
the Compensation Discussion and Analysis for a discussion of salary cap
exceptions.
- 23 -
Table of Contents
(3)
Under the Bonus Plan, subject to the salary cap,
any related amounts were earned and paid to the named executive officer for the
fiscal year. Based on the elements of this compensation structure and applicable
disclosure rules, only the qualitative portion of the Bonus Plan compensation is
disclosed in this column (see the
Non-Equity Incentive Plan
Compensation column of this table for additional compensation under the
quantitative portion of the Bonus Plan).
(4)
For fiscal year 2016, the Compensation Committee
did not award a qualitative portion of the bonus.
(5)
Amounts represent grant date fair value. See Note
14 to the consolidated financial statements in the Company’s Annual Report for
the fiscal year ended September 25, 2016 regarding assumptions underlying the
valuation of equity awards.
(6)
Under the Bonus Plan, subject to the salary cap,
related amounts were earned and paid to the named executive officer for the
fiscal year. Based on the elements of this compensation structure and applicable
disclosure rules, only the quantitative portion of the Bonus Plan compensation
is disclosed in this column (see the
Bonus column of this
table for additional compensation under the qualitative portion of the Bonus
Plan, if any).
(7)
The amount shown in this column for fiscal year
2016 is the total amount paid under the Bonus Plan.
(8)
For fiscal year 2016, the quantitative portion of
the Bonus Plan was calculated to be $308,250. The portion of the Bonus Plan
bonus disclosed in this column is the actual total cash paid under the Bonus
Plan (see also the Bonus column of this table) after the application of the
salary cap.
(9)
The amounts in this column consist of benefit
hours accumulated during the fiscal year (see the Registrant Contributions in
Last Fiscal Year column of the Non-Qualified Deferred Compensation Table);
401(k) match payments, which are available to all team members; and dividends on
restricted stock paid in the fiscal year. For fiscal year 2016, the amounts in
this column represent (i) dividends on restricted stock paid in the fiscal year
in the following amounts: $27,816 for each of Mr. Robb and Mr. Gallo, $5,692 for
each of Ms. Flanagan and Mr. Lannon and $1,597 for Mr. Buechel; (ii) benefit
hours accumulated during the fiscal year in the following amounts: $29,799 for
Mr. Robb, $22,339 for Mr. Gallo, $57,053 for Mr. Lannon and $38,624 for Mr.
Buechel; and (iii) $157 in 401(k) match payments for each executive other than
Mr. Mackey. Ms. Flanagan used 100% of the benefit hours earned during fiscal
year 2016, thus her amount in this column does not reflect any increase for
accumulated benefit hours.
Grants of Plan-Based Awards
for Fiscal Year 2016
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan
|
|
Awards:
|
|
Awards:
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Awards
|
|
Number of
|
|
Number of
|
|
Exercise or
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
Securities
|
|
Base Price
|
|
of Stock
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
Stock or
|
|
Underlying
|
|
of Option
|
|
and Option
|
|
Name
|
|
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Awards
|
|
|
|
|
|
|
|
(2)
|
|
|
|
|
|
(3)
|
|
|
|
(4)
|
|
John
Mackey
(1)
|
|
|
|
|
|
$
|
—
|
|
|
|
—
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Walter Robb
|
|
|
|
|
|
|
295,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
4,500
|
|
|
30.30
|
|
|
35,716
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
314
|
|
|
30.30
|
|
|
2,492
|
|
A.C. Gallo
|
|
|
|
|
|
|
295,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
4,250
|
|
|
30.30
|
|
|
33,732
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
239
|
|
|
30.30
|
|
|
1,897
|
|
Glenda
|
|
|
|
|
|
|
295,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flanagan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
4,500
|
|
|
30.30
|
|
|
35,716
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
308
|
|
|
30.30
|
|
|
2,445
|
|
David Lannon
|
|
|
|
|
|
|
295,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
4,500
|
|
|
30.30
|
|
|
35,716
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
247
|
|
|
30.30
|
|
|
1,961
|
|
Jason Buechel
|
|
|
|
|
|
|
295,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/6/2015
|
|
|
|
|
|
|
|
|
—
|
|
50,000
|
|
|
31.11
|
|
|
389,985
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
—
|
|
4,500
|
|
|
30.30
|
|
|
35,716
|
- 24 -
Table of Contents
(1)
Effective January 1, 2007, Mr. Mackey voluntarily
reduced his salary to $1 and elected to forgo earning any future cash
compensation, stock awards and/or option awards.
(2)
The Bonus Plan
has a qualitative discretionary component (see the Bonus column of the Summary
Compensation Table) and a quantitative component, which is described here. The
quantitative component of the Bonus Plan does not provide for threshold or
maximum payment amounts, except that the payment may be limited due to the
salary cap. Specified targets under the quantitative portion of the Bonus Plan
are described above under the heading “
Cash Compensation
: What
Our Compensation Program Is Designed to Reward.” The amount disclosed as the
“target” under the quantitative portion of the Bonus Plan for fiscal year 2016
is a representative amount. This disclosed figure was determined by calculating
the difference between the executives’ base salary and the salary cap. Each
named executive officer’s compensation under the Bonus Plan for fiscal year 2016
is subject, together with base salary, to the salary cap described in the
“Compensation Discussion and Analysis” section above.
(3)
Options become
exercisable in four equal installments each year beginning on the first
anniversary of the grant date.
(4)
See Note 14 to
the consolidated financial statements in the Company’s Annual Report for the
fiscal year ended September 25, 2016 regarding assumptions underlying the
valuation of equity awards.
Outstanding Equity Awards
Value at Fiscal Year-End 2016
The following table includes
certain information with respect to the value of all restricted stock and
unexercised options previously awarded to the named executive officers as of the
fiscal year ended September 25, 2016. The number of restricted stock and options
held at September 25, 2016 includes awards granted under the Whole Foods Market,
Inc. 2009 Stock Incentive Plan.
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised
|
|
|
|
|
|
|
|
Shares or Units of Stock
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
|
That
Have Not Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Expiration
|
|
|
|
|
Market
|
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
Unexercisable
|
|
Exercise Price
|
|
Date
|
|
|
Number
|
|
Value
|
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
(2)
|
|
|
|
|
John Mackey
|
|
|
|
—
|
|
—
|
|
$
|
—
|
|
|
|
|
—
|
|
$
|
—
|
|
Walter Robb
|
|
5/14/2010
|
|
72,700
|
|
—
|
|
|
20.42
|
|
5/14/2020
|
(3)
|
|
|
|
|
|
|
|
|
5/13/2011
|
|
9,442
|
|
—
|
|
|
31.25
|
|
5/13/2018
|
|
|
|
|
|
|
|
|
|
2/10/2012
|
|
20,000
|
|
—
|
|
|
40.81
|
|
2/10/2019
|
|
|
|
|
|
|
|
|
|
5/11/2012
|
|
9,368
|
|
—
|
|
|
44.27
|
|
5/11/2019
|
|
|
|
|
|
|
|
|
|
12/4/2012
|
|
15,000
|
|
5,000
|
|
|
46.04
|
|
12/4/2019
|
|
|
|
|
|
|
|
|
|
2/21/2013
|
|
8,388
|
|
23,212
|
|
|
42.47
|
|
2/21/2020
|
|
|
26,362
|
|
|
751,844
|
|
|
|
5/31/2013
|
|
3,521
|
|
1,173
|
|
|
51.86
|
|
5/31/2020
|
|
|
|
|
|
|
|
|
|
2/14/2014
|
|
25,000
|
|
25,000
|
|
|
52.25
|
|
2/14/2021
|
|
|
9,569
|
|
|
272,908
|
|
|
|
5/16/2014
|
|
2,375
|
|
2,374
|
|
|
37.91
|
|
5/16/2021
|
|
|
|
|
|
|
|
|
|
2/13/2015
|
|
7,500
|
|
22,500
|
|
|
56.15
|
|
2/13/2022
|
|
|
8,015
|
|
|
228,588
|
|
|
|
5/13/2016
|
|
—
|
|
4,814
|
|
|
30.30
|
|
5/13/2023
|
|
|
|
|
|
|
|
A.C.
Gallo
|
|
5/14/2010
|
|
94
|
|
—
|
|
|
20.42
|
|
5/14/2017
|
|
|
|
|
|
|
|
|
|
5/14/2010
|
|
43,054
|
|
—
|
|
|
20.42
|
|
5/14/2020
|
(3)
|
|
|
|
|
|
|
|
|
5/13/2011
|
|
9,392
|
|
—
|
|
|
31.25
|
|
5/13/2018
|
|
|
|
|
|
|
|
|
|
2/10/2012
|
|
20,000
|
|
—
|
|
|
40.81
|
|
2/10/2019
|
|
|
|
|
|
|
|
|
|
5/11/2012
|
|
9,412
|
|
—
|
|
|
44.27
|
|
5/11/2019
|
|
|
|
|
|
|
|
|
|
12/4/2012
|
|
15,000
|
|
5,000
|
|
|
46.04
|
|
12/4/2019
|
|
|
|
|
|
|
|
|
|
2/21/2013
|
|
8,588
|
|
23,212
|
|
|
42.47
|
|
2/21/2020
|
|
|
26,362
|
|
|
751,844
|
|
|
|
5/31/2013
|
|
3,536
|
|
1,178
|
|
|
51.86
|
|
5/31/2020
|
|
|
|
|
|
|
|
|
|
2/14/2014
|
|
25,000
|
|
25,000
|
|
|
52.25
|
|
2/14/2021
|
|
|
9,569
|
|
|
272,908
|
|
|
|
5/16/2014
|
|
2,362
|
|
2,360
|
|
|
37.91
|
|
5/16/2021
|
|
|
|
|
|
|
|
|
|
2/13/2015
|
|
7,500
|
|
22,500
|
|
|
56.15
|
|
2/13/2022
|
|
|
8,015
|
|
|
228,588
|
|
|
|
5/15/2015
|
|
1,183
|
|
3,548
|
|
|
43.08
|
|
5/15/2022
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
—
|
|
4,489
|
|
|
30.30
|
|
5/13/2023
|
|
|
|
|
|
|
- 25 -
Table of Contents
|
Glenda Flanagan
|
|
5/14/2010
|
|
8,842
|
|
—
|
|
|
20.42
|
|
5/14/2017
|
|
|
|
|
|
|
|
|
5/14/2010
|
|
33,500
|
|
16,500
|
|
|
20.42
|
|
5/14/2020
|
|
|
|
|
|
|
|
|
5/13/2011
|
|
9,450
|
|
—
|
|
|
31.25
|
|
5/13/2018
|
|
|
|
|
|
|
|
|
2/10/2012
|
|
20,000
|
|
—
|
|
|
40.81
|
|
2/10/2019
|
|
|
|
|
|
|
|
|
5/11/2012
|
|
9,372
|
|
—
|
|
|
44.27
|
|
5/11/2019
|
|
|
|
|
|
|
|
|
12/4/2012
|
|
15,000
|
|
5,000
|
|
|
46.04
|
|
12/4/2019
|
|
|
|
|
|
|
|
|
5/31/2013
|
|
3,521
|
|
1,173
|
|
|
51.86
|
|
5/31/2020
|
|
|
|
|
|
|
|
|
2/14/2014
|
|
17,500
|
|
17,500
|
|
|
52.25
|
|
2/14/2021
|
|
|
4,785
|
|
136,468
|
|
|
|
5/16/2014
|
|
2,374
|
|
2,372
|
|
|
37.91
|
|
5/16/2021
|
|
|
|
|
|
|
|
|
2/13/2015
|
|
5,250
|
|
15,750
|
|
|
56.15
|
|
2/13/2022
|
|
|
4,008
|
|
114,308
|
|
|
|
5/15/2015
|
|
1,201
|
|
3,600
|
|
|
43.08
|
|
5/15/5022
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
—
|
|
4,808
|
|
|
30.30
|
|
5/13/2023
|
|
|
|
|
|
|
David Lannon
|
|
5/14/2010
|
|
4,400
|
|
6,600
|
|
|
20.42
|
|
5/14/2020
|
|
|
|
|
|
|
|
|
5/13/2011
|
|
4,702
|
|
—
|
|
|
31.25
|
|
5/13/2018
|
|
|
|
|
|
|
|
|
5/11/2012
|
|
59,422
|
|
—
|
|
|
44.27
|
|
5/11/2019
|
|
|
|
|
|
|
|
|
12/4/2012
|
|
15,000
|
|
5,000
|
|
|
46.04
|
|
12/4/2019
|
|
|
|
|
|
|
|
|
5/31/2013
|
|
3,540
|
|
1,180
|
|
|
51.86
|
|
5/31/2020
|
|
|
|
|
|
|
|
|
2/14/2014
|
|
17,500
|
|
17,500
|
|
|
52.25
|
|
2/14/2021
|
|
|
4,785
|
|
136,468
|
|
|
|
5/16/2014
|
|
2,365
|
|
2,364
|
|
|
37.91
|
|
5/16/2021
|
|
|
|
|
|
|
|
|
2/13/2015
|
|
5,250
|
|
15,750
|
|
|
56.15
|
|
2/13/2022
|
|
|
4,008
|
|
114,308
|
|
|
|
5/15/2015
|
|
1,185
|
|
3,553
|
|
|
43.08
|
|
5/15/2022
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
—
|
|
4,747
|
|
|
30.30
|
|
5/13/2023
|
|
|
|
|
|
|
Jason Buechel
|
|
5/31/2013
|
|
40,875
|
|
13,625
|
|
|
51.86
|
|
3/31/2020
|
|
|
|
|
|
|
|
|
2/14/2014
|
|
10,000
|
|
10,000
|
|
|
52.25
|
|
2/14/2021
|
|
|
2,392
|
|
68,220
|
|
|
|
5/16/2014
|
|
2,250
|
|
2,250
|
|
|
37.91
|
|
5/16/2021
|
|
|
|
|
|
|
|
|
2/13/2015
|
|
3,000
|
|
9,000
|
|
|
56.15
|
|
2/13/2022
|
|
|
|
|
|
|
|
|
5/15/2015
|
|
1,175
|
|
3,525
|
|
|
43.08
|
|
5/15/2022
|
|
|
|
|
|
|
|
|
11/6/2015
|
|
—
|
|
50,000
|
|
|
31.11
|
|
11/6/2022
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
—
|
|
4,500
|
|
|
30.30
|
|
5/13/2023
|
|
|
|
|
|
(1)
Other than
grants made on May 14, 2010 that expire in 2020 and the grants made on February
21, 2013, options become exercisable in four equal installments each year
beginning on the first anniversary of the grant date. Grants made on May 14,
2010 that expire in 2020 become exercisable in nine equal installments each year
beginning on the first anniversary of the grant date. The February 21, 2013
grant to Mr. Robb becomes exercisable as follows: the options became exercisable
with respect to 650 shares on the second anniversary of the date of grant; and
become exercisable with respect to 7,738 shares on each of third, fourth and
fifth anniversaries of the date of grant and 7,736 shares on the sixth
anniversary of the date of grant. The February 21, 2013 grant to Mr. Gallo
becomes exercisable as follows: the options became exercisable with respect to
850 shares on the second anniversary of the date of grant; and become
exercisable with respect to 7,738 shares on each of third, fourth and fifth
anniversaries of the date of grant and 7,736 shares on the sixth anniversary of
the date of grant.
(2)
Other than with
respect to the February 21, 2013 grant to Mr. Robb and Mr. Gallo, restricted
stock vests in four equal installments each year beginning on the first
anniversary of the grant date. Mr. Robb’s February 21, 2013 restricted stock
grant vests as follows: 650 shares vested on the second anniversary of the date
of grant; 8,788 shares vest on each of the third, fourth and fifth anniversaries
of the date of grant; and 8,786 shares vest on the sixth anniversary of the date
of grant. Mr. Gallo’s February 21, 2013 restricted stock grant vests as follows:
1,050 shares vested on the second anniversary of the date of grant; 8,788 shares
vest on each of the third, fourth and fifth anniversaries of the date of grant;
and 8,786 shares vest on the sixth anniversary of the date of grant.
(3)
In February 2013 Mr. Robb and Mr. Gallo rescinded
a portion of these options in the following amounts: options with respect to
67,300 shares for Mr. Robb and options with respect to 67,946 shares for Mr.
Gallo. The rescinded portions are not included in the amounts shown in the
table.
- 26 -
Table of Contents
Option Exercises and Stock
Vested for Fiscal Year 2016
The following table includes
certain information with respect to the options exercised by the named executive
officers and restricted stock awards vesting during the fiscal year ended
September 25, 2016.
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
Name
|
|
Acquired on
|
|
Realized on
|
|
Acquired on
|
|
Realized on
|
|
|
|
Exercise
|
|
Exercise
|
|
Vesting
|
|
Vesting
|
|
John Mackey
|
|
—
|
|
$
|
—
|
|
—
|
|
$
|
—
|
|
Walter Robb
|
|
—
|
|
|
—
|
|
16,245
|
|
|
504,412
|
|
A.C. Gallo
|
|
—
|
|
|
—
|
|
16,245
|
|
|
504,412
|
|
Glenda Flanagan
|
|
—
|
|
|
—
|
|
3,728
|
|
|
114,263
|
|
David Lannon
|
|
—
|
|
|
—
|
|
3,728
|
|
|
114,263
|
|
Jason Buechel
|
|
—
|
|
|
—
|
|
1,196
|
|
|
36,657
|
Non-Qualified Deferred
Compensation for Fiscal Year 2016
The table below provides
information concerning the benefit hours related to accrued paid vacation and
other personal time for each of our named executive officers during the fiscal
year ended September 25, 2016.
Upon termination of
employment, all team members are entitled to receive a lump sum payment for
unused benefit hours, and in such year of termination of employment, total cash
compensation received may be in excess of the salary cap. If a termination of
employment had occurred as of September 25, 2016, in addition to other benefits
discussed herein, each executive would have been entitled to receive the amount
specified in the Aggregate Balance at Last Fiscal Year End column
of
this table.
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
|
Contributions in
|
|
Contributions in
|
|
Earnings in Last
|
|
Withdrawals
|
|
Balance at Last
|
|
Name
|
|
Last
Fiscal Year
|
|
Last
Fiscal Year
|
|
Fiscal Year
|
|
Distributions
|
|
Fiscal Year End
|
|
|
|
|
|
|
(1)
|
|
|
|
|
(2)
|
|
(3)
|
|
John Mackey
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
456,269
|
|
Walter Robb
|
|
|
—
|
|
|
29,799
|
|
|
—
|
|
|
—
|
|
|
716,319
|
|
A.C. Gallo
|
|
|
—
|
|
|
22,339
|
|
|
—
|
|
|
—
|
|
|
563,116
|
|
Glenda Flanagan
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74,174
|
|
|
475,725
|
|
David Lannon
|
|
|
—
|
|
|
57,053
|
|
|
—
|
|
|
—
|
|
|
432,696
|
|
Jason Buechel
|
|
|
—
|
|
|
38,624
|
|
|
—
|
|
|
—
|
|
|
151,832
|
(1)
Reflects the
net increase in amount from last fiscal year, including: (a) any paid time off
hours credited this year in excess of hours used; and (b) any increase in
executives’ rates of pay during the fiscal year applied to paid time off hours
earned but not yet used from prior years. Amounts reported in this column are
also reported in the “All Other Compensation” column of the Summary Compensation
Table.
(2)
Reflects the net decrease from last fiscal year in
paid time off used in excess of hours earned.
(3)
Amounts are
calculated using paid time off hours earned at the executives’ 2016 rate of pay
of $240.92 per hour ($214.06 per hour for Mr. Mackey, who in fiscal year 2013
elected to accrue no additional paid time off), as follows: Mr. Mackey 2,132
hours paid time off; Mr. Robb 2,973 hours; Mr. Gallo 2,337 hours; Ms. Flanagan
1,975 hours; Mr. Lannon 1,796 hours; and Mr. Buechel 630 hours. Amounts in this
column were also reported in the “All Other Compensation” column of the Summary
Compensation Table in previous fiscal years.
- 27 -
Table of Contents
Potential Payments on
Termination/Change of Control
2010 Executive Retention
Plan and Non-Compete Arrangement
During fiscal year 2010, the
Company entered into agreements pursuant to our Executive Retention Plan (which
we refer to as the “Plan”) with Mr. Robb, Mr. Gallo, Ms. Flanagan and Mr.
Lannon. During fiscal year 2015, the Company entered into an agreement pursuant
to the Plan with Mr. Buechel. In keeping with his voluntary decision to reduce
his annual salary to $1 and forgo earning any future cash compensation, stock
awards and options awards, Mr. Mackey opted not to execute such agreement. As
discussed in the “Compensation Discussion and Analysis” section of this Proxy
Statement under the heading
Leadership Change Announced in Fiscal Year 2017
, Mr. Robb resigned effective December 31, 2016.
SEC rules require that we describe in this section the potential payments that
he would have received upon a termination or change of control that was
effective on the last day of fiscal year 2016. Accordingly, for Mr. Robb, this
section describes the arrangement that was in place on September 26, 2016 and
not the arrangement that was announced by the Company on November 2,
2016.
Non-Compete and
Non-Solicitation Portion of Arrangement
Pursuant to these agreements,
if at any time one of the above-named executive’s employment is terminated other
than for “cause” (as defined in the Plan), death or disability, and if within 45
days of such termination, the executive signs a release and continues compliance
with the confidentiality, non-compete, non-solicitation, non-disparagement and
other restrictions of the Plan, then the executive will receive the following
from the Company:
|
●
|
up to a designated
amount, for a maximum of five years, paid in equal semiannual
installments;
|
|
●
|
other than with respect
to the stock options granted on May 13, 2016, all stock options will vest
and become immediately exercisable and remain exercisable until the
earlier of the fifth anniversary of termination or the original expiration
date of the stock option;
|
|
●
|
restricted stock will
vest; and
|
|
●
|
reimbursement by the
Company of COBRA premiums paid by the named
executive.
|
With respect to the stock
options granted on May 13, 2016 and subject to the executive signing the
release, in the case of a termination other than for cause, death or disability,
the options will continue to vest on their original vesting dates only so long
as the executive complies with the terms of his or her separation agreement
(including any restrictive covenants).
The confidentiality and
non-disparagement restrictions are of unlimited duration. The non-compete and
non-solicitation restrictions apply for a period of five years following the
termination of the named executive’s employment.
If one of the above-named
executive’s (other than Walter Robb) employment is voluntarily terminated by
such person for a reason other than a “good reason” (as defined in the Plan),
“disability” (as defined in the Plan) or death, the Plan provides that the
benefits described above shall not be paid, but instead are subject to future
negotiation between either one of the two Co-Chief Executive Officers of the
Company and the named executive except as follows. Under the Plan, in the event
either of the two Co-Chief Executive Officers of the Company are involuntarily
terminated or if both of the Co-Chief Executive Officers die and/or otherwise
terminate employment with the Company within 45 days of each other and the named
executive subsequently terminates employment with the Company, the benefits
described in the bullets above will be payable. In the case of the negotiation
of benefits due to a voluntary termination without good reason, the semiannual
non-compete payment shall not exceed $800,000 for A.C. Gallo, nor $600,000 for
Glenda Flanagan, nor $400,000 for David Lannon or Jason Buechel, adjusted to
reflect the increase, if any, in the Consumer Price Index. In the case of the
negotiated benefits due to a voluntary termination without good reason, as of
the following dates, the amount of the semiannual non-compete payment negotiated
for each executive officer, other than Mr. Robb and Mr. Buechel, shall not be
less than the specified percentage of the maximum amount set forth in the
preceding sentence: as of October 1, 2012, 20%; as of October 1, 2013, 40%; as
of October 1, 2014, 60%; as of October 1, 2015, 80%; and as of October 1, 2016,
100%. Accordingly, the maximum semi-annual non-compete payment is now fully
vested for these executives. In the case of the negotiated benefits due to a
voluntary termination without good reason, as of the following dates, the amount
of the semiannual non-compete payment negotiated for Mr. Buechel shall not be
less than the specified percentage of the $400,000 maximum amount set forth
above: as of October 1, 2016, 20%; as of October 1, 2017, 40%; as of October 1,
2018, 60%; as of October 1, 2019, 80%; and as of October 1, 2020,
100%.
Under the Plan, if Walter
Robb’s employment was voluntarily terminated by him for a reason other than a
good reason, disability or death, the benefits described in the bullets above
would not have been paid, but instead would have been subject to future
negotiation between him and John Mackey except as follows. In the event that Mr.
Mackey had died or terminated
- 28 -
Table of Contents
employment with the Company
for any reason and Walter Robb subsequently terminated his employment with the
Company, the benefits described above would have been payable. In the case of
the negotiation of benefits due to a voluntary termination without good reason,
the semiannual non-compete payment, if any, would not have exceeded $800,000 for
Walter Robb, adjusted to reflect the increase, if any, in the Consumer Price
Index. In the case of the negotiated benefits due to a voluntary termination
without good reason, as of the following dates, the amount of the semiannual
non-compete payment negotiated would not have been less than the specified
percentage of the maximum amount set forth in the preceding sentence: as of
October 1, 2012, 20%; as of October 1, 2013, 40%; as of October 1, 2014, 60%; as
of October 1, 2015, 80%; and as of October 1, 2016, 100%. Accordingly, the
maximum amount of Mr. Robb’s semiannual non-compete payment became fully vested
on October 1, 2016.
In the case of the above-named
executive’s termination due to death or disability, under the Plan, the
executive or his or her estate will receive the payments and benefits that would
be due upon a termination by the Company without cause, the release will be
deemed to have been signed, and the executive will be deemed to have complied
with the confidentiality provisions and restrictive covenants.
If a termination of the
executive’s employment, not by the executive and other than for cause, had
occurred as of September 25, 2016, and if the
executive elected or was deemed to comply with non-compete and other material
provisions, we estimate the value of the benefits described above would have
been as follows:
|
|
|
|
|
|
Accelerated or
|
|
|
|
|
Monthly
|
|
|
|
Semiannual
|
|
Continued
|
|
Accelerated
|
|
Reimbursement
|
|
|
|
Payment
|
|
Vesting of Stock
|
|
Vesting of
|
|
of
COBRA
|
|
Named Executive Officer
|
|
Amount
|
|
Options
|
|
Restricted Stock
|
|
Premiums
|
|
|
|
(1)
|
|
(2)
|
|
(3)
|
|
(4)
|
|
Walter Robb
|
|
$
|
800,000
|
|
$
|
—
|
|
$
|
1,253,340
|
|
$
|
272
|
|
A.C. Gallo
|
|
|
800,000
|
|
|
—
|
|
|
1,253,340
|
|
|
971
|
|
Glenda Flanagan
|
|
|
600,000
|
|
|
133,650
|
|
|
250,776
|
|
|
231
|
|
David Lannon
|
|
|
400,000
|
|
|
53,460
|
|
|
250,776
|
|
|
741
|
|
Jason Buechel
|
|
|
400,000
|
|
|
—
|
|
|
68,220
|
|
|
260
|
(1)
Paid in equal
semiannual installments for a maximum of five years, subject to executive’s
continued compliance with non-compete and other material provisions of the Plan.
Assuming the executive complied with such restrictions for the entire five-year
period, the total amount payable would be: $8,000,000 for Mr. Robb; $8,000,000
for Mr. Gallo; $6,000,000 for Ms. Flanagan; $4,000,000 for Mr. Lannon; and
$4,000,000 for Mr. Buechel. The executives would receive an additional
semiannual payment reflecting the increase in the Consumer Price Index between
the date of the executive’s agreement under the Plan and the month preceding his
or her termination date. For a September 25, 2016 termination date, each
additional semiannual payment would range in amount from $19,205 to $38,410 for
executive officers other than Mr. Buechel. Mr. Buechel entered into an agreement
which was effective on September 26, 2015, and his additional semiannual payment
would be $4,882.
(2)
Reflects the
value of options that would accelerate and vest or would continue to vest, in
each case based upon the Company’s stock price on the last trading day of the
fiscal year of $28.52 minus the exercise price of such options.
(3)
Reflects the
value of restricted stock that would accelerate and vest based upon the
Company’s stock price on the last trading day of the fiscal year of
$28.52.
(4)
Paid monthly
for a maximum of 18 months, subject to the executive’s continued compliance with
non-compete and other material provisions of the Plan. Assuming the executive
complied with such restrictions for the entire 18-month period, the total amount
payable would be: $4,896 for Mr. Robb; $17,478 for Mr. Gallo; $4,158 for Ms.
Flanagan; $13,338 for Mr. Lannon; and $4,680 for Mr. Buechel.
Change of Control Portion
of Arrangement
These agreements also provide
that for the two-year period following a change of control:
|
●
|
the named executives’
annual base salary will be at least equal to 26 times the highest
bi-weekly base salary rate applicable to the executive in the one-year
period immediately preceding the month in which the change of control
occurs;
|
- 29 -
Table of Contents
|
●
|
the named executive’s
annual bonus will be calculated according to the formula used to calculate
the executive’s last annual bonus paid prior to the change of control
(unless any comparable bonus under the Company’s successor plan would
result in a higher payment to the executive);
|
|
●
|
the named executive will
be entitled to participate in all long-term cash incentive, equity
incentive, savings and retirement plans, practices, policies and programs
applicable generally to similarly titled persons of the Company or
affiliated companies, in each case not less favorable, in the aggregate,
than the most favorable of those provided by the Company and affiliated
companies for such persons under such plans, practices, policies and
programs as in effect prior to the change of control or, if more
favorable, those provided generally at any time after the date of the
change of control;
|
|
●
|
the named executive will
be eligible to participate in the Company’s medical, dental, disability,
life and other insurance programs, in each case not less favorable, in the
aggregate, than the most favorable of those provided by the Company and
affiliated companies for such persons under such programs as in effect
prior to the change of control or, if more favorable, those provided
generally at any time after the date of the change of control;
and
|
|
●
|
the named executive will
receive certain other benefits consistent with those provided prior to the
change of control or, if more favorable, such benefits as provided
generally at any time after the date of the change of
control.
|
If a change of control had
occurred as of September 25, 2016 and the executives continued in the employ of
the Company for the two-year period, we estimate the value of the benefits
described above would have been as follows:
|
|
|
|
|
|
|
|
|
Participation in
|
|
Participation in
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive and
|
|
Insurance
|
|
|
|
|
Named Executive Officer
|
|
Salary
|
|
Bonus
|
|
Retirement Plans
|
|
Programs
|
|
Other Benefits
|
|
|
|
(1)
|
|
(2)
|
|
|
|
|
|
|
|
(3)
|
|
Walter Robb
|
|
$
|
1,002,220
|
|
$
|
590,380
|
|
$
|
—
|
|
$
|
6,648
|
|
$
|
6,025
|
|
A.C. Gallo
|
|
|
1,002,220
|
|
|
590,380
|
|
|
—
|
|
|
28,288
|
|
|
6,025
|
|
Glenda Flanagan
|
|
|
1,002,220
|
|
|
590,380
|
|
|
—
|
|
|
5,548
|
|
|
6,025
|
|
David Lannon
|
|
|
1,002,220
|
|
|
590,380
|
|
|
—
|
|
|
23,767
|
|
|
6,025
|
|
Jason Buechel
|
|
|
1,002,220
|
|
|
590,380
|
|
|
—
|
|
|
6,237
|
|
|
6,025
|
(1)
Calculated as
two times the current base salary.
(2)
Calculated as
approximately two times the bonus amount payable under the Bonus Plan for fiscal
year 2016, starting with the salary cap and deducting the fiscal year 2016 base
salary amount.
(3)
Figure
represents an estimate of certain other benefits that might be provided after
the date of the change of control.
In addition, during such
two-year period, if a named executive officer is terminated other than for cause
or if a named executive officer voluntarily terminates employment with good
reason (collectively an “involuntary termination”) or dies, then the named
executive officer or his or her estate or beneficiaries, as applicable, will be
entitled to receive from the Company a lump sum amount equal to three times the
sum of (a) the executive’s annual base salary and (b) the average of the last
three bonuses paid to the executive. If a change of control and involuntary
termination or death of the named executive officers had occurred as of
September 25, 2016, we estimate the value of this lump sum amount would have
been as follows:
|
|
|
Lump
Sum
|
|
|
|
Severance
|
|
Named Executive Officer
|
|
Payment
|
|
|
|
(1)
|
|
Walter Robb
|
|
$
|
2,375,400
|
|
A.C. Gallo
|
|
|
2,375,400
|
|
Glenda Flanagan
|
|
|
2,375,400
|
|
David Lannon
|
|
|
2,375,400
|
|
Jason Buechel
|
|
|
2,309,600
|
(1)
Payment is
based on three times the sum of (a) the named executive’s annual base salary and
(b) the average of the last three bonuses paid to the executive calculated by
starting with the applicable salary cap in each year and deducting the
executive’s annual base salary for the year.
In addition to the payments
above, each of the named executive officers is entitled to a payout of his or
her balance found in the Non-Qualified Deferred Compensation table in the
Aggregate Balance at Last Fiscal Year End column.
- 30 -
Table of Contents
1991 Retention
Agreement
In 1991, the Company entered
into a retention agreement with Mr. Mackey. This agreement provides for certain
benefits upon an involuntary termination of employment, other than for cause,
after a “Triggering Event.” A Triggering Event includes (1) a merger of the
Company with and into an unaffiliated corporation if the Company is not the
surviving corporation or (2) the sale of all or substantially all of the
Company’s assets. The benefits to be received by Mr. Mackey if his employment is
terminated after a Triggering Event occurs include: receipt of a lump sum
severance payment equal to the executive’s then-current annual salary and prior
year’s bonus; continuation of life, health and disability benefits for one year
after the termination of employment; and the immediate vesting of any
outstanding stock options granted to such executive officer with up to six
months to exercise.
If a Triggering Event and an
involuntary termination of employment other than for cause had occurred as of
September 25, 2016, we estimate the value of the benefits under the Retention
Agreement would have been as follows:
|
|
|
Lump
Sum
|
|
Continuation of
|
|
Accelerated
|
|
|
|
Severance
|
|
Insurance
|
|
Vesting of Stock
|
|
Named Executive Officer
|
|
Payment
|
|
Benefit
|
|
Options
|
|
|
|
(1)
|
|
|
|
|
|
|
|
John Mackey
|
|
$
|
1
|
|
$
|
7,767
|
|
$
|
—
|
(1)
Payment based
on Mr. Mackey’s fiscal year 2016 salary of $1 plus receipt of no bonus under the
Bonus Plan.
In addition to the payments
above, Mr. Mackey is entitled to a payout of his balance found in the
Non-Qualified Deferred Compensation table in the Aggregate Balance at Last
Fiscal Year End column.
|
PROPOSAL 4 – RATIFICATION OF INDEPENDENT
AUDITOR
|
General
Information
The Audit Committee of the
Board of Directors has appointed Ernst & Young LLP as the Company’s
independent auditor for fiscal year 2017. The submission of this matter for
ratification by shareholders is not required by current law, rules or
regulations; however, the Board of Directors believes that such submission is
consistent with best practices in corporate governance and is an opportunity for
shareholders to provide direct feedback to the Board of Directors on an
important issue of corporate governance. If the selection is not ratified, the
Audit Committee will consider whether it is appropriate to select another
independent registered public accounting firm. Even if the selection is
ratified, the Audit Committee in its discretion may select a different
independent registered public accounting firm at any time during the year if it
determines that such a change would be in the best interests of the Company and
our shareholders.
Representatives of Ernst &
Young will be present at the 2017 Annual Meeting of Shareholders, will have the
opportunity to make a statement at the meeting if they so desire, and will be
available to respond to appropriate questions.
Board of Directors
Recommendation
THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF ERNST & YOUNG LLP AS OUR
INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING SEPTEMBER 24,
2017.
Vote
Required
Approval of this proposal
requires the affirmative vote of the holders of a majority of the shares
entitled to vote on, and who vote for or against, the proposal.
Independent Public
Accountants
Ernst & Young LLP has
served as our independent auditor since April 2001. Ernst & Young has issued
its reports, included in the Company’s Form 10-K, on the audited consolidated
financial statements of the Company and internal control over
- 31 -
Table of Contents
financial reporting for the
fiscal year ended September 25, 2016. Our Audit Committee has appointed Ernst
& Young as our independent auditor for fiscal year 2017.
The following table presents
aggregate fees billed to the Company for services rendered by Ernst & Young
for fiscal years ended September 25, 2016 and September 27, 2015 (in
thousands):
|
|
|
2016
|
|
2015
|
|
Audit fees
|
|
$
|
2,185
|
|
$
|
2,004
|
|
Audit-related fees
|
|
|
—
|
|
|
—
|
|
Tax
fees
|
|
|
—
|
|
|
—
|
|
All
other fees
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
2,185
|
|
$
|
2,004
|
Services rendered by Ernst
& Young in connection with fees presented above were as follows:
Audit Fees
. In fiscal years 2016 and 2015, audit fees
consist of fees paid for the annual audit of the Company’s consolidated
financial statements included in the Annual Report on Form 10-K and of the
Company’s internal control over financial reporting, review of the Company’s
consolidated financial statements included in the quarterly reports on Form
10-Q, and consents and review of other documents filed with the Securities and
Exchange Commission.
Audit-Related
Fees
. We did not engage Ernst
& Young for audit-related services in fiscal year 2016 or 2015.
Tax Fees
. We did not engage Ernst & Young for tax
compliance matters in fiscal year 2016 or 2015.
All Other
Fees
. We did not engage Ernst
& Young for other services in fiscal year 2016 or 2015.
Audit Committee
Pre-Approval Policies and Procedures
Among its other duties, the
Audit Committee is responsible for appointing, setting compensation for and
overseeing the work of the independent auditor. The Audit Committee has
established a policy regarding pre-approval of all audit and non-audit services
provided by the independent auditor. On an ongoing basis, management
communicates specific projects and categories of service for which the advance
approval of the Audit Committee is requested. The Audit Committee reviews these
requests and advises management if the committee approves the engagement of the
independent auditor. On a periodic basis, management reports to the Audit
Committee regarding the actual spending for such projects and services compared
to the approved amounts. All services performed by Ernst & Young for fiscal
years 2016 and 2015 were approved in accordance with the Audit Committee’s
pre-approval guidelines.
Audit Committee
Report
The following Report of the
Audit Committee is not to be deemed to be “soliciting material” or to be “filed”
with the Securities Exchange Commission or subject to Regulation 14A or 14C or
to the liabilities of Section 18 of the Securities Exchange Act of 1934, except
to the extent we specifically request that such information be treated as
soliciting material or we specifically incorporate it by reference into any
filing under the Securities Act of 1933 or the Securities Exchange Act of
1934.
Management of the Company is
responsible for the preparation and presentation of the Company’s financial
statements, the effectiveness of internal control over financial reporting, and
procedures that are reasonably designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditor, Ernst
& Young, is responsible for performing an independent audit of the
consolidated financial statements and of the Company’s internal control over
financial reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States). The Audit Committee’s responsibility
is to monitor and oversee these processes on behalf of the Board of Directors.
In fulfilling our oversight responsibilities, we have reviewed and discussed
with management and Ernst & Young the audited financial statements for the
fiscal year ended September 25, 2016. We also reviewed and discussed with
management and Ernst & Young the quarterly financial statements for each
quarter in such fiscal year, management’s assessment of the effectiveness of the
Company’s internal control over financial reporting as of September 25, 2016,
Ernst & Young’s evaluation of the Company’s internal control over financial
reporting as of that date, and audit plans and results. We have also discussed
with Ernst & Young the matters required to be discussed with the independent
registered public accounting firm by Auditing Standard No. 16,
Communications with Audit
Committees
, as adopted by the
Public Company Accounting Oversight Board.
- 32 -
Table of Contents
We have received and reviewed
the written disclosures and the letter from the independent registered public
accounting firm required by Rule 3526 of the Public Company Accounting Oversight
Board, Communications with Audit Committees Concerning Independence. We have
also considered whether the provision of specific non-audit services by the
independent auditor is compatible with maintaining its independence and believe
that the services provided by Ernst & Young for fiscal year 2016 were
compatible with, and did not impair, its independence.
In reliance on the reviews and
discussions referred to above, we have recommended to the Board of Directors
that the financial statements referred to above be included in the Company’s
Annual Report on Form 10-K for the fiscal year ended September 25,
2016.
Audit Committee (as of
September 25, 2016)
Gabrielle Sulzberger
(Chair)
Dr. John Elstrott
Hass Hassan
Jonathan Seiffer
Mo
Siegel
PROPOSAL 5 – SHAREHOLDER PROPOSAL REGARDING REVISIONS TO THE
COMPANY’S PROXY
ACCESS BYLAW
|
We received a formal
shareholder proposal. The Company will promptly provide to any shareholder the
name, address and number of the Company’s voting securities held of/by the
person submitting this proposal (to whom we refer as the “Proponent”) upon
receiving an oral or written request from such shareholder made to Company
counsel, via phone at 512-542-0676, or via email at
proxy.information@wholefoods.com. Proponent has furnished evidence of ownership
of no less than $2,000 (market value) of shares of Whole Foods Market, Inc.
common stock for at least one year prior to the date the proposal was submitted.
The Proponent’s proposal and supporting statement are quoted verbatim
below.
For the reasons set forth by
the Company in the section titled Our Statement in Opposition, following the
Proponent’s proposal and supporting statement, the Company disagrees with
Proponent’s proposal and supporting statement.
Board of Directors
Recommendation
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE “AGAINST” THE ADOPTION OF THIS PROPOSAL.
Vote
Required
Approval of this proposal
requires the affirmative vote of the holders of a majority of the shares
entitled to vote on, and who vote for or against, this proposal.
|
PROPONENT’S PROPOSAL AND SUPPORTING
STATEMENT
|
Proposal 5 - Shareholder Proxy
Access Amendment
RESOLVED: Shareholders of
Whole Foods Market, Inc. (the “Company”) ask the board of directors (the
“Board”) to amend its “Proxy Access for Director Nominations” bylaw, and any
other associated documents, to include
essential elements
for
substantial implementation to
better facilitate meaningful proxy access by more shareholders
as follows:
|
|
1.
|
The number of “Shareholder Nominees”
eligible to appear in proxy materials shall be 25% of the directors then
serving or 2, whichever is greater.
Current bylaws restrict Shareholder Nominees
to 20% of directors. Under the current 11-member board, this change would
have no immediate impact but could ensure shareholders a meaningful
proportion of representation if the number of directors
changes.
|
|
|
2.
|
No limitation shall be placed on the number
of stockholders that can aggregate their shares to achieve the 3%
“Required Ownership Percentage” for an “Eligible Shareholder.”
Under current provisions,
even if the 20 largest
|
- 33 -
Table of Contents
|
|
|
public pension funds
were able to aggregate their shares, they would not meet the 3% criteria
at most of companies examined by the Council of Institutional Investors.
Allowing an unlimited number of shareholders to aggregate shares will
facilitate greater participation by individuals and institutional
investors in meeting the “Required Ownership Percentage” of
3%.
|
|
|
3.
|
No limitation
shall be imposed on the re-nomination of “Shareholder Nominees” based on
the number or percentage of votes received in any election.
Such limitations do not
facilitate the shareholders’ traditional state law rights and add
unnecessary complexity
|
Supporting
Statement:
The SEC’s universal proxy
access Rule 14a-11 (https://www.sec.gov/rules/final/2010/33-9136.pdf) was
vacated after a court decision regarding the SEC’s cost-benefit analysis.
Therefore, proxy access rights must be established on a company-by-company
basis. Subsequently,
Proxy Access
in the United States: Revisiting the Proposed SEC Rule
(http://www.cfapubs.org/ doi/pdf/10.2469/ccb.
v2014.n9.1) a cost-benefit analysis by CFA Institute, found proxy access would
“benefit both the markets and corporate boardrooms, with little cost or
disruption,” raising US market capitalization by up to $140.3 billion.
Public Versus Private Provision of
Governance: The Case of Proxy Access
(http://ssrn.com/abstract=2635695) found a 0.5 percent average increase
in shareholder value for proxy access targeted firms.
Proxy Access Best
Practices
(http://www.cii.org/files/publications/misc/08_05_15_Best%20Practices%20-%20Proxy%20Access.pdf)
by the Council of Institutional Investors, “highlights the most troublesome
provisions” in recently implemented proxy access bylaws.
Although the Company’s board
adopted a proxy access bylaw in June 2016, it contains troublesome provisions,
as addressed above, that significantly impair the ability of shareholders to
participate as Eligible Shareholders, the ability of Shareholder Nominees to
effectively serve if elected, and the ability of Shareholder Nominees to run
again if they receive less than 25% of the vote. Adoption of
all
the requested amendments would largely remedy these issues and would better
ensure meaningful proxy assess is eligible to more shareholders.
Increase Shareholder
Value
Vote for Shareholder Proxy
Access Amendment - Proposal 5
|
OUR
STATEMENT IN OPPOSITION
|
Our Board of Directors has
carefully considered this proposal and recommends a vote against it. As
discussed below, the Company implemented proxy access for its shareholders in
2015. At our 2016 Annual Meeting, shareholders voted against a proxy access
proposal from the Proponent, which generally included all three of the elements
in the Proponent’s current proposal. Our Board of Directors continues to believe
that the form of proxy access it has implemented is most meaningful and
appropriate for the Company and all shareholders.
Our Board of Directors
Adopted Proxy Access for the Benefit of All Shareholders.
Based upon our Board of
Director’s assessment of the relative advantages and disadvantages to
shareholders and the Company of the various proxy access formulations, along
with feedback from many of our large shareholders, our Board of Directors
amended the bylaws of the Company in June 2015 to implement proxy
access.
Under the Company’s form of
proxy access, any shareholder or group of up to 20 shareholders that
beneficially owns at least three percent of our outstanding common stock
continuously for three years is permitted to nominate candidates for election to
the Board of Directors and to require the Company to list such nominees along
with the board’s nominees in the Company’s proxy statement. The qualifying
shareholder or group of shareholders may nominate up to 20 percent of the board,
rounding down to the nearest whole number of board seats, under the proxy access
provisions of the bylaws.
The Proposal’s Allowance
to Nominate Up to 25 Percent of the Board May Result in Excessive Disruption to
the Board and Reduce the Board’s Effectiveness.
Consistent with the best
practices of many other public companies, the Company’s form of proxy access
limits the maximum number of directors who could be nominated through proxy
access to 20 percent of the board (two seats on a board of 12).
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Table of Contents
The Nominating and Governance
Committee has an important role in considering the effectiveness of our Board of
Directors and in identifying nominees who possess a combination of knowledge,
experience, skills and diversity required for the board to fulfill its duties.
The Nominating and Governance Committee also considers whether a candidate would
contribute to an effective and well-rounded and diverse board that operates
openly and collaboratively and represents the best interests of all
shareholders, and not just those with a special interest, including interests
unrelated to long-term shareholder value. With respect to nominations through
proxy access, however, the Nominating and Governance Committee is unable to
consider those factors. Permitting up to 20 percent of the board to be open to
proxy candidates is an appropriate balance that respects shareholders’ concerns
about board accountability and gives proxy nominees a meaningful voice on the
board, while minimizing the potential for abuse and frequent turnover, which
could disrupt the board’s effectiveness.
The Proposal Places No
Limit on the Number of Shareholders Who Can Assemble as a Group to Establish the
Ownership Threshold Required to Make a Proxy Access Nomination, Which May Result
in Excessive Administrative Burden and Expense for the
Company.
Consistent with the best
practices of many other public companies, and in keeping with the limit endorsed
by many institutional shareholders, our proxy access right limits the number of
shareholders who can assemble as a group to 20 holders of record. Allowing a
limited number of holders to act as a group strengthens the principle that we
believe is shared by most of our shareholders: that the right to nominate a
director using the Company’s proxy statement should be available only for those
who have a sufficient financial stake in the Company to cause their interests to
be aligned with the interests of our shareholders as a whole.
We believe that a reasonable
limitation should be established to reduce administrative costs for the Company
and help reduce the risk of abuse of proxy access rights by shareholders with a
special interest, including interests unrelated to long-term shareholder value.
In the absence of a reasonable limitation on the number of shareholders in a
group, the Company could be required to make burdensome and time-consuming
inquiries into the nature and duration of the share ownership of a large number
of individuals participating in a nomination in order to verify their required
share ownership, which could impede the exercise of proxy access rights by other
shareholders.
The Proposal Allows
Shareholders Using Proxy Access to Re-Nominate Proxy Access Candidates Who Did
Not Receive Meaningful Support for Election, which Undermines our
Shareholders.
Our amended bylaws
implementing proxy access provide that a candidate who does not receive more
than 25 percent of shares voted may not be nominated as a proxy access candidate
for the following two years. This provision is designed solely to prevent
shareholders from abusing the proxy access process, putting the Company and
other shareholders through the expense and effort of responding consecutively to
proxy access for a particular candidate whom shareholders did not elect.
We Have an Established
Record of Best Governance Practices and are Responsive to
Shareholders.
In addition to the proxy
access provisions in the Company’s bylaws, there are a number of other key
protections currently in place for shareholders of the Company,
including:
|
●
|
Any shareholder may
nominate directors pursuant to the Company’s bylaws and solicit proxies
for director nominees under federal proxy rules;
|
|
●
|
Any shareholder may
submit proposals for consideration at the Company’s annual meeting and for
inclusion in the Company’s proxy statement, subject to certain conditions
and SEC rules and regulations;
|
|
●
|
Shareholders
representing 10 percent or more of outstanding shares can call a special
meeting;
|
|
●
|
Under our current
regime, shareholders may express their views on our executive compensation
program through an annual “say-on-pay” vote;
|
|
●
|
We have majority voting
and a director resignation policy, requiring directors to offer to resign
if they fail to receive a majority of votes to be elected in an
uncontested election;
|
|
●
|
10 of our 12 directors
are independent under NASDAQ Listing Rules;
|
|
●
|
Shareholders have the
right to propose director nominees to the Nominating and Governance
Committee;
|
|
●
|
Shareholders may remove
any or all directors, with or without cause, at a meeting held for that
purpose;
|
|
●
|
Shareholders may fill
board vacancies at a meeting held for that purpose; and
|
|
●
|
Shareholders have the
right to communicate directly with the Board or with the independent
directors serving on the Board.
|
- 35 -
Table of Contents
For the foregoing reasons, our
Board of Directors believes that our current proxy access right serves the best
interests of our shareholders and that the proponent’s approach is not necessary
or appropriate for the Company and recommends that shareholders vote AGAINST
this proposal.
|
PROPOSAL 6 – SHAREHOLDER PROPOSAL REGARDING FOOD WASTE
REPORTING
|
We received a formal
shareholder proposal. The Company will promptly provide to any shareholder the
name, address and number of the Company’s voting securities held of/by the
person submitting this proposal (to whom we refer as the “Proponent”) upon
receiving an oral or written request from such shareholder made to Company
counsel, via phone at 512-542-0676, or via email at
proxy.information@wholefoods.com. Proponent has furnished evidence of ownership
of no less than $2,000 (market value) of shares of Whole Foods Market, Inc.
common stock for at least one year prior to the date the proposal was submitted.
The Proponent’s proposal and supporting statement are quoted verbatim
below.
For the reasons set forth by
the Company in the section titled Our Statement in Opposition, following the
Proponent’s proposal and supporting statement, the Company disagrees with
Proponent’s proposal and supporting statement.
Board of Directors
Recommendation
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE “AGAINST” THE ADOPTION OF THIS PROPOSAL.
Vote
Required
Approval of this proposal
requires the affirmative vote of the holders of a majority of the shares
entitled to vote on, and who vote for or against, this proposal.
|
PROPONENT’S PROPOSAL AND SUPPORTING
STATEMENT
|
Food Waste
Whereas:
40% of food produced in the
U.S. goes uneaten, costing the American economy $218 billion per year, or 1.3%
of GDP.
Food decomposing in landfills
emits approximately 23% of U.S. methane emissions, a greenhouse gas 84 times as
potent as C02. Production of uneaten food consumes 21% of U.S. freshwater, 19%
of fertilizer and 18% of cropland. If global food waste were a country, its
emissions would be 3rd, behind only China and the United States.
Nearly 50 million Americans,
including 16 million children, are food insecure; reducing food waste by just
15% could feed 25 million people every year.
Some grocery retailers are
taking action to capitalize on related financial opportunities. Stop & Shop
saved an estimated $100 million annually by reducing losses of perishables while
providing items that were 3 days fresher on average. Price Chopper reduced
bakery item losses by $2 million in one year, while increasing sales by
3%.
The 400 members of The
Consumer Goods Forum have committed to halve food waste by 2025. Safeway, Publix
and Kroger have joined the Food Waste Reduction Alliance and have provided
comprehensive, metrics-based disclosure on their food waste management
efforts.
While WFM provides anecdotal
evidence of its food waste reduction efforts in select stores, it has yet to
report on its food waste management strategy or disclose current, company-wide
data on food waste prevention or diversion.
Several states have laws that
commonly require retailers to divert food waste from landfills, creating
regulatory risk for those who lack adequate diversion strategies. Food waste
related legislation has also been introduced in the U.S. Congress and the EPA
announced a national target to reduce food waste 50 percent by 2030.
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Table of Contents
In addition, many
non-governmental organizations are working to raise awareness of the impacts of
food waste that may lead to negative media attention for retailers like
WFM.
In light of these political
and industry trends, we believe Whole Foods Market and its shareholders are
positioned to benefit from a comprehensive approach to food waste prevention and
strategic diversion that can cut costs, provide competitive advantage,
strengthen brand reputation, save resources, help alleviate hunger and reduce
greenhouse gas emissions.
Resolved
: Shareholders request Whole Foods Market issue a
report, at reasonable cost and omitting proprietary information, on company-wide
efforts (above and beyond its existing reporting) to assess, reduce and
optimally manage food waste.
Supporting
Statement
: Items to be covered in
the report can include:
|
●
|
Results of audits to
determine the causes, quantities and destinations of food
waste
|
|
●
|
Estimated cost savings
from optimized food purchasing, handling, and disposal
|
|
●
|
Prioritization of
strategies based on EPA’s Food Recovery Hierarchy
|
|
●
|
Identification of
additional revenue streams and possible tax benefits from new uses of
previously wasted food
|
|
●
|
Time bound targets to
reduce waste and progress towards meeting these
targets.
|
|
OUR STATEMENT IN
OPPOSITION
|
Our Board of Directors has
carefully considered this proposal and, in light of our Company’s track record
and demonstrated commitment to lessening the impact of our business operations
on the environment, including the management of food waste, believes this
proposal would result in additional labor and expense that would provide limited
justifiable benefit.
The Company has been and
remains committed to practicing and advancing various Green Mission initiatives,
including diverting materials from community landfills. Unless located in a
community that does not support recycling and composting, all of our stores are
involved in a recycling program, and most participate in a composting program.
Between our food bank partnerships, composting programs, and recycling efforts,
more than 30 stores have received Zero Waste Certification from the U.S. Zero
Waste Business Council, and we are committed to annually increasing that store
count. To further our efforts, in 2016 we partnered with a national waste
service and tracking provider and are in the process of implementing their
management, tracking and reporting solution across the company.
Sustainability is a core value
of the Company and our environmental commitment extends beyond food waste. In
2007, we introduced fiber packaging in many of our prepared foods departments as
a compostable alternative to traditional petroleum, wood or tree-based
materials. In 2008, we discontinued the use of disposable plastic grocery bags
at the checkouts in all stores, and were the first national retailer to utilize
Forest Stewardship Council certified paper bags originating from 100 percent
post-consumer recycled fiber. We continue to actively work with our vendor
partners to ensure more responsible product packaging, such as eliminating the
use of Styrofoam. Additional information about our sustainability efforts is
available on our website at
http://www.wholefoodsmarket.com/mission-values/core-values/sustainability-and-our-future.
For the foregoing reasons, our Board of Directors believes that this proposal is
unnecessary and recommends that shareholders vote AGAINST this
proposal.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
2016 Related Party
Transactions
During fiscal year 2016, the
Company received lease payments totaling approximately $0.53 million from
BookPeople, Inc. (“BookPeople”), a retailer of books and periodicals
unaffiliated with the Company. Mr. Mackey and Ms. Flanagan, executive officers
of the Company, own approximately 51% and 2%, respectively, of the capital stock
of BookPeople. BookPeople leases retail space from the Company at one of the
Company’s Austin, Texas locations. The lease, which was entered into on December
31, 1993, provides for an aggregate annual minimum rent of approximately $0.5
million.
During fiscal year 2016, the
Company made purchases totaling approximately $1.9 million from Willow Wood
Partners One, LLC d/b/a New Barn, a company in which Ted Robb and Chris Robb,
Walter Robb’s sons, have a collective ownership interest of approximately 25%.
By way of background, the Company’s relationship with New Barn began from the
Company’s Southern Pacific Region’s desire to sell an almond milk product with
simple, quality ingredients at a desirable price point. The region believed that
they found such a product from New Barn. Once this vendor was established, some
- 37 -
Table of Contents
other regions began purchasing
this product to fill a market need. Walter Robb has no influence on the regions’
purchasing decisions with respect to the product; rather, the purchases were
made in arm’s length transactions and reflect market prices. We believe that the
Company currently makes up a significant portion of New Barn’s total
sales.
In addition, during fiscal
year 2016, the Company made purchases totaling approximately $66,260 from
InHouse Creative, Inc., a media production company in which Ted Robb, Walter
Robb’s son, has an ownership interest of approximately 55%.
Related Party Transactions
in General
The Nominating and Governance
Committee of the Board of Directors, pursuant to its written charter, generally
is charged with the responsibility of reviewing certain issues involving
potential conflicts of interest, and reviewing and approving all related party
transactions, including those required to be disclosed as a “related party”
transaction under applicable federal securities laws. The Company’s Code of
Business Conduct requires officers and directors to contact the chairperson of
the Nominating and Governance Committee regarding potential conflicts of
interest which would include potential related party transactions. The
Nominating and Governance Committee has not adopted any specific procedures for
conducting such reviews and considers each transaction in light of the specific
facts and circumstances presented. However, to the extent a potential related
party transaction is presented to the Nominating and Governance Committee, the
Company expects that the committee would become fully informed regarding the
potential transaction and the interests of the related party, and would have the
opportunity to deliberate outside of the presence of the related party. The
Company expects that the committee would only approve a related party
transaction that was in the best interests of the Company, and further would
seek to ensure that any completed related party transaction was on terms no less
favorable to the Company than could be obtained in a transaction with an
unaffiliated third party. Other than as described above, no transaction
requiring disclosure under applicable federal securities laws occurred during
fiscal year 2016 that was submitted to the Nominating and Governance Committee
for approval as a “related party” transaction.
OTHER
INFORMATION
Beneficial
Ownership
The following table presents
the beneficial ownership of our voting securities for (i) each person
beneficially owning more than 5% of the outstanding shares of any class of our
voting securities, (ii) each director of the Company, (iii) our named executive
officers, and (iv) all of our current directors and executive officers as a
group. Except pursuant to applicable community property laws and except as
otherwise indicated, each shareholder possesses sole voting and investment power
with respect to its, his or her shares. In the case of our directors and
executive officers, the ownership levels are as of December 2, 2016. In the case
of shareholders owning more than 5% of our shares, the ownership levels are as
of the latest Form 13G or 13G/A filed with the Securities and Exchange
Commission as of December 2, 2016.
- 38 -
Table of Contents
|
|
|
Common Stock
|
|
|
|
Number of Shares
|
|
|
|
|
|
Beneficially Owned
|
|
Percent of Class
|
|
The Vanguard
Group
(1)
|
|
24,552,616
|
|
7.71%
|
|
BlackRock,
Inc.
(2)
|
|
21,094,224
|
|
6.62%
|
|
Goldman Sachs Asset
Management
(3)
|
|
20,370,464
|
|
6.40%
|
|
Jason
Buechel
(4)
|
|
74,289
|
|
*
|
|
Mary Ellen Coe
|
|
—
|
|
*
|
|
Dr. John
Elstrott
(5)
|
|
89,446
|
|
*
|
|
Glenda
Flanagan
(6)
|
|
368,527
|
|
*
|
|
A.C. Gallo
(7)
|
|
219,168
|
|
*
|
|
Hass
Hassan
(8)
|
|
55,821
|
|
*
|
|
Stephanie
Kugelman
(9)
|
|
44,427
|
|
*
|
|
David
Lannon
(10)
|
|
131,650
|
|
*
|
|
John
Mackey
(11)
|
|
979,967
|
|
*
|
|
Walter
Robb
(12)
|
|
338,977
|
|
*
|
|
Jonathan
Seiffer
(13)
|
|
194,754
|
|
*
|
|
Mo Siegel
(14)
|
|
54,332
|
|
*
|
|
Jonathan
Sokoloff
(15)
|
|
950,224
|
|
*
|
|
Dr. Ralph
Sorenson
(16)
|
|
74,245
|
|
*
|
|
Gabrielle
Sulzberger
(17)
|
|
75,178
|
|
*
|
|
Kip
Tindell
(18)
|
|
98,596
|
|
*
|
|
Including indirect beneficial ownership,
|
|
|
|
|
|
all directors and officers as a
group
(19)
|
|
4,164,045
|
|
1.30%
|
* Indicates ownership of less
than 1% of the outstanding shares of the Company’s common stock. Each of our
executive officers and directors may be contacted at 550 Bowie Street, Austin,
Texas 78703.
(1)
Based upon the
report on Form 13G/A, filed with the Securities and Exchange Commission on
February 11, 2016. The address of The Vanguard Group is 100 Vanguard Blvd.,
Malvern, Pennsylvania 19355. The Form 13G/A reported sole voting power over
648,271 shares, shared voting power over 36,000 shares, sole dispositive power
over 23,867,892 shares and shared dispositive power over 684,724
shares.
(2)
Based upon the
report on Form 13G/A, filed with the Securities and Exchange Commission on
February 10, 2016. The address of BlackRock, Inc. is 55 East 52nd Street, New
York, New York 10055. The Form 13G/A reported sole voting power over 18,000,226
shares, shared voting power over none of the shares, sole dispositive power over
21,094,224 shares and shared dispositive power over none of the
shares.
(3)
Based on the
report on Form 13G, filed with the Securities and Exchange Commission on
February 2, 2016. The address of Goldman Sachs Asset Management is 200 West
Street, New York, New York 10282. The Form 13G reported sole voting power over
none of the shares, shared voting power over 18,278,596 shares, sole dispositive
power over none of the shares and shared dispositive power over 20,370,464
shares.
(4)
Includes 69,800
shares of common stock issuable upon exercise of outstanding stock options and
any shares of which this individual has the right to acquire beneficial
ownership within 60 days.
(5)
Includes 28,377
shares of common stock issuable upon exercise of outstanding stock options and
any shares of which this individual has the right to acquire beneficial
ownership within 60 days.
(6)
Includes
131,010 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days. Includes 20,000 shares beneficially owned
by a family limited partnership for which Ms. Flanagan disclaims beneficial
ownership.
(7)
Includes
150,121 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days.
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Table of Contents
(8)
Includes 23,877
shares of common stock issuable upon exercise of outstanding stock options and
any shares of which this individual has the right to acquire beneficial
ownership within 60 days.
(9)
Includes 28,377
shares of common stock issuable upon exercise of outstanding stock options and
any shares of which this individual has the right to acquire beneficial
ownership within 60 days.
(10)
Includes
118,364 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days.
(11)
Includes 0
shares of common stock issuable upon exercise of outstanding stock options and
any shares of which this individual has the right to acquire beneficial
ownership within 60 days. Includes 100,000 shares beneficially owned by Mr.
Mackey’s spouse for which Mr. Mackey disclaims beneficial ownership.
(12)
Includes
178,294 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days. Includes an aggregate of 14,921 shares of
common stock subject to pledge, all of which Mr. Robb pledged prior to the
adoption of our current policy on hedging and pledging Company stock in
accordance with the terms and conditions of a brokerage firm’s customary margin
account requirements.
(13)
Includes
19,377 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days, which amount includes 4,500 exercisable
stock options held by Mr. Seiffer for the benefit of Leonard Green &
Partners, L.P. (“LGP LP”). LGP LP separately holds a total of 2,280 shares of
stock and 18,000 exercisable stock options in respect of Mr. Seiffer’s and Mr.
Sokoloff’s service on our Board of Directors. These shares of stock and stock
options held by LGP LP might be considered beneficially owned by Mr. Seiffer and
are included in the table.
(14)
Includes
28,377 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days.
(15)
Includes
19,377 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days, which amount includes 4,500 exercisable
stock options held by Mr. Sokoloff for the benefit of LGP LP. Also includes
620,810 shares held by a limited liability company of which Mr. Sokoloff is the
sole manager. Mr. Sokoloff owns 1% of the interests in the limited liability
company, and a trust for certain of his family members owns the other 99%. These
shares of stock held by the limited liability company might be considered
beneficially owned by Mr. Sokoloff and are included in the table. LGP LP
separately holds a total of 2,280 shares of stock and 18,000 exercisable stock
options in respect of Mr. Sokoloff’s and Mr. Seiffer’s service on our Board of
Directors. These shares of stock and stock options held by LGP LP might be
considered beneficially owned by Mr. Sokoloff and are included in the
table.
(16)
Includes
28,377 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days. Also includes 1,867 shares held by a
charitable trust over which Mr. Sorenson possesses voting and investment
power.
(17)
Includes
28,377 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days. Includes an aggregate of 12,448 shares of
common stock subject to pledge, all of which Ms. Sulzberger pledged prior to the
adoption of our current policy on hedging and pledging Company stock in
accordance with the terms and conditions of a brokerage firm’s customary margin
account requirements.
(18)
Includes
28,377 shares of common stock issuable upon exercise of outstanding stock
options and any shares of which this individual has the right to acquire
beneficial ownership within 60 days.
(19)
The 2,280
shares of stock and 18,000 exercisable stock options held by LGP LP in respect
of Mr. Sokoloff’s and Mr. Seiffer’s service on our Board of Directors have only
been counted once in this row and for purposes of this footnote. Amount shown
includes 1,129,856 shares of common stock issuable upon exercise of outstanding
stock options and any shares of which the individuals have the right to acquire
beneficial ownership within 60 days.
Section 16(a) Beneficial
Ownership Reporting Compliance
Based solely upon a review of
Forms 3, 4 and 5 furnished to the Company, the Company believes that all of its
directors, officers and applicable shareholders timely filed these reports for
fiscal year 2016.
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Table of Contents
Deadlines for Submitting
Shareholder Proposals
Pursuant to SEC Rule 14a-8,
any proposal that a shareholder of the Company wishes to have considered in
connection with the 2018 Annual Meeting of Shareholders must be submitted to the
Corporate Secretary at our principal executive offices no later than September
6, 2017, and in accordance with related provisions of the Company’s current
Bylaws.
Shareholder proposals
submitted for consideration at the 2018 Annual Meeting of Shareholders but not
submitted for inclusion in our Proxy Statement for our 2018 Annual Meeting
pursuant to SEC Rule 14a-8, including shareholder nominations for candidates for
election as directors, generally must be delivered to the Corporate Secretary at
our principal executive offices not later than 120 days prior to the anniversary
of the date on which we mailed our proxy materials for our 2017 Annual Meeting
of Shareholders. As a result, any notice given by a shareholder pursuant to the
provisions of our bylaws (other than notice pursuant to SEC Rule 14a-8 or proxy
access nominations, which are discussed below) must be received no later than
September 6, 2017. However, if the date of the 2018 Annual Meeting is not within
30 days of February 17, 2018, notice by the shareholder of a proposal must be
received not later than the close of business on the 10th day following the day
on which public announcement of the date of the 2018 Annual Meeting is
made.
Our Bylaws provide a proxy
access right to permit a shareholder, or a group of up to 20 shareholders,
owning continuously for at least three years shares of our stock representing an
aggregate of at least 3% of the voting power entitled to vote in the election of
directors, to nominate and include in our proxy materials director nominees
constituting up to 20% of the Board of Directors, provided that the
shareholder(s) and the nominee(s) satisfy the requirements in our Bylaws. Under
our Bylaws, compliant notice of proxy access director nominations for the 2018
Annual Meeting must be submitted to the Corporate Secretary at our principal
executive offices no earlier than August 7, 2017 and no later than September 6,
2017 in order to be timely. However, if the date of the 2018 Annual Meeting is
not within 30 days of February 17, 2018, compliant notice of proxy access
director nominations for the 2018 Annual Meeting must be received not later than
the close of business on the 10th day following the day on which public
announcement of the date of the 2018 Annual Meeting is made.
Our Bylaws (and, with respect
to Rule 14a-8 proposals, SEC Rule 14a-8) set forth the calculation of applicable
deadlines (and certain other requirements) by which compliant notice of
shareholder proposals and director nominations must be submitted in order to be
timely. The summaries set forth above are qualified by our Bylaws and Rule
14a-8.
Multiple Shareholders
Sharing the Same Address
As permitted by SEC rules, the
Company will deliver only one Notice of Internet Availability of Proxy Materials
and, if applicable, a single set of annual report and other proxy materials, to
multiple shareholders sharing the same address, unless the Company has received
contrary instructions from one or more of the shareholders. The Company will,
upon written or oral request, deliver a separate copy of the Notice of Internet
Availability of Proxy Materials and, if applicable, a separate set of annual
report and other proxy materials, to a shareholder at a shared address to which
a single copy was delivered and will include instructions as to how the
shareholder can notify the Company that the shareholder wishes to receive a
separate copy in the future. Registered shareholders wishing to receive a
separate Notice of Internet Availability of Proxy Materials and, if applicable,
a separate set of annual report and other proxy materials, in the future or
registered shareholders sharing an address wishing to receive a single copy in
the future may contact Whole Foods Market, Inc., 550 Bowie Street, Austin, TX
78703, Attention: Investor Relations Dept., Telephone: (512) 542-0204.
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Table of Contents
WHOLE FOODS MARKET, INC.
550
BOWIE STREET
AUSTIN,
TX 78703
For registered shares,
your proxy must be received by 11:59 P.M. (Eastern Time) on February 16,
2017.
For participants in the Company's 401(k) plan, your proxy must be
received by 11:59 P.M. (Eastern Time) on February 14, 2017.
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59 P.M.
Eastern Time on the applicable cut-off date. Have your proxy card in hand when
you access the web site and follow the instructions to obtain your records and
to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by
our company in mailing proxy materials, you can consent to receiving all future
proxy statements, proxy cards and annual reports electronically via e-mail or
the Internet. To sign up for electronic delivery, please follow the instructions
above to vote using the Internet and, when prompted, indicate that you agree to
receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up
until 11:59 P.M. Eastern Time on the applicable cut-off date. Have your proxy
card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign
and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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E15908-P82873-Z68665
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION
ONLY
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THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED.
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WHOLE FOODS MARKET, INC.
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The Board of
Directors recommends that you vote
FOR
the following
director nominees:
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1.
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ELECTION OF DIRECTORS:
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For
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Against
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Abstain
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1a.
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DR.
JOHN ELSTROTT
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☐
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☐
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☐
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1b.
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MARY
ELLEN COE
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☐
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☐
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1c.
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SHAHID (HASS) HASSAN
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☐
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☐
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1d.
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STEPHANIE KUGELMAN
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☐
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☐
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☐
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1e.
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JOHN
MACKEY
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1f.
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WALTER ROBB
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1g.
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JONATHAN SEIFFER
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1h.
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MORRIS (MO) SIEGEL
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1i.
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JONATHAN SOKOLOFF
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1j.
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DR.
RALPH SORENSON
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1k.
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GABRIELLE SULZBERGER
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1l.
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WILLIAM (KIP) TINDELL, III
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☐
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The
Board of Directors recommends you vote
FOR
the following company
proposal:
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For
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Against
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Abstain
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2.
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ADVISORY VOTE TO APPROVE THE COMPENSATION OF
THE NAMED EXECUTIVE OFFICERS.
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☐
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☐
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The
Board of Directors recommends you vote every
1 YEAR
on the following company
proposal:
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1 Year
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2 Years
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3 Years
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Abstain
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3.
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ADVISORY VOTE ON THE FREQUENCY OF SHAREHOLDER
VOTES ON EXECUTIVE COMPENSATION.
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☐
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☐
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☐
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The
Board of Directors recommends you vote
FOR
the following company
proposal:
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For
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Against
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Abstain
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4.
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RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITOR FOR THE COMPANY FOR THE FISCAL YEAR
ENDING SEPTEMBER 24, 2017.
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The
Board of Directors recommends you vote
AGAINST
the following shareholder
proposals:
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For
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Against
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Abstain
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5.
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PROPOSAL ASKING OUR BOARD OF DIRECTORS TO ADOPT
REVISIONS TO THE COMPANY'S PROXY ACCESS BYLAW.
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☐
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☐
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☐
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6.
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PROPOSAL ASKING THE COMPANY TO ISSUE A REPORT
REGARDING OUR FOOD WASTE EFFORTS.
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☐
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☐
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☐
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IF
YOU GRANT A PROXY, THE PROXY HOLDERS WILL ALSO HAVE THE DISCRETION TO VOTE
THESE SHARES ON ANY ADDITIONAL MATTERS PROPERLY PRESENTED FOR A VOTE AT
THE MEETING IN ACCORDANCE WITH TEXAS LAW AND THE COMPANY'S
BYLAWS.
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Please date the proxy and
sign your name exactly as it appears hereon. Where there is more than one owner,
each should sign. When signing as an attorney, administrator, executor, guardian
or trustee, please add your title as such. If executed by a corporation, the
proxy should be signed by a duly authorized officer. Please sign the proxy and
return it promptly whether or not you expect to attend the meeting. You may
nevertheless vote in person if you do attend.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint
Owners)
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Date
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Table of Contents
Important Notice
Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy
Statement and Annual Report are available at www.proxyvote.com.
PROXY
WHOLE FOODS MARKET,
INC.
THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby (a)
acknowledges receipt of the Notice of the Annual Meeting of Shareholders of
Whole Foods Market, Inc. (the "Company") to be held on February 17, 2017 at 8:00
a.m., local time, at the JW Marriott Austin, 110 E. 2nd Street, Austin, Texas
78701 and the Proxy Statement in connection therewith, and (b) appoints John
Mackey and Glenda Flanagan and each of them, as proxies with full power of
substitution and revocation, for and in the name, place and stead of the
undersigned, to vote upon and act with respect to all of the shares of stock of
the Company standing in the name of the undersigned or with respect to which the
undersigned is entitled to vote and act at said meeting or at any adjournment
thereof, and the undersigned directs that his/her proxy be voted as specified on
the reverse side.
The undersigned hereby
revokes any proxy or proxies heretofore given to vote upon or act with respect
to such stock. The undersigned further hereby ratifies and confirms all of the
actions that the proxies named above, their substitutes, or any of them, may
lawfully do by virtue of this proxy.
THIS PROXY WILL BE VOTED
AS SPECIFIED ON THE REVERSE SIDE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED:
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FOR ALL NOMINEES
FOR DIRECTORS;
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FOR THE APPROVAL
OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS;
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FOR AN ADVISORY
VOTE EVERY ONE YEAR REGARDING THE FREQUENCY OF SHAREHOLDER VOTES ON
EXECUTIVE COMPENSATION;
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FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITOR FOR THE COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER 24,
2017;
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AGAINST THE
PROPOSAL ASKING OUR BOARD OF DIRECTORS TO ADOPT REVISIONS TO THE COMPANY’S
PROXY ACCESS BYLAW; AND
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AGAINST THE
PROPOSAL ASKING THE COMPANY TO ISSUE A REPORT REGARDING OUR FOOD WASTE
EFFORTS.
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IF YOU GRANT A PROXY, THE
PROXY HOLDERS WILL ALSO HAVE THE DISCRETION TO VOTE THESE SHARES ON ANY
ADDITIONAL MATTERS PROPERLY PRESENTED FOR A VOTE AT THE MEETING IN ACCORDANCE
WITH TEXAS LAW AND THE COMPANY'S BYLAWS.
Whether or not you plan to
attend the Annual Meeting and regardless of the number of shares owned, please
date, sign and return this proxy card in the enclosed envelope (which requires
no postage if mailed in the United States).
CONTINUED AND TO BE
SIGNED ON REVERSE SIDE
Whole Foods Market, Inc. (NASDAQ:WFM)
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