CINCINNATI -- The Securities and Exchange Commission ruled last week that Kroger Co. here must let shareholders vote on a proposal that, according to dissident shareholders, would improve corporate governance at the company.
The submission, according to a draft obtained by SN, requires Kroger to create a shareholders' committee if a proposal approved by a majority of shareholders at the company's annual meeting is not acted upon by Kroger's board of directors within 180 days. The proposal calls for the committee to meet with the board at least twice between the time it is formed and the company's next annual meeting.
The dissidents said their proposal is necessary because the board has failed to act after majorities of shareholders at the company's previous four annual meetings had approved the annual election of directors instead of the current staggered-term system.
A Kroger spokesman said the company would not appeal the SEC ruling and the proposal to create the shareholder committee would appear on this year's proxy statement. Kroger's annual meeting is scheduled to be held here June 26.
Richard Ferlauto, director of pension investment policy, American Federation of State, County and Municipal Employees, Washington, which submitted the proxy proposal, said his group was "looking for some method to compel board to engage with the shareholders."
He added, "The bottom line is the Kroger board has been non-responsive to its owners. Shareholders now understand it's important to flex their muscles. Corporate boards that are not held accountable are liable to do things not in the interest of the shareholders."
Kroger is not the only company where AFSCME has introduced shareholder proposals, Ferlauto noted. "We're a very active shareholder," he said. "This year we've filed resolutions with about 25 different companies that we think need to improve their corporate governance practices significantly."
