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UNFI shareholders question compensation, climate action

United Natural Foods Inc.
CEO Sandy Douglas says a new ESG report will come out soon; company is waiting for approval of science-based targets to reduce waste and carbon emissions.

Shareholders of United Natural Foods Inc. asked board members about executive compensation and the company's commitment to climate action during Tuesday's virtual  annual meeting.

Anonymous shareholders questioned why executives didn't receive straight salaries, as "almost all employees in the U.S. receive their compensation this way" and asked why the executives believe they deserve "huge amounts of compensation."

"Why not start a trend and give back to your employees, who really make the company go? You know they deserve more," the question continued, as read by Jill Sutton, chief legal officer for UNFI.

Director Daphne Dufresne, chair of the compensation committee, answered both questions, saying that compensation must be competitive with what other, similar companies offer and that incentives inspire the executives to make the company more profitable and align their interests with those of the stockholders.

To answer questions about hourly employee pay, Dufresne said the company is committed to offering competitive salaries to associates. In many markets, the wage scales at distribution centers have been adjusted over the past two years and the company has introduced a profit-sharing plan for hourly employees.

The board also pointed out that UNFI's hourly employees have access to a profit-sharing plan and have received raises. The gap between current staffing and ideal staffing has closed 30%, Dufresne said.

Executive compensation approved

Despite the questions, shareholders approved the executive compensation packages for fiscal 2021 as the compensation committee proposed:

  • CEO Steven Spinner— Base salary of $1.2 million; target incentive of $2.1 million; with stock awards, 401(k) contributions and other benefits. total compensation of $8.4 million.
  • CFO John Howard—Base salary $618,750; target incentive $717,453; total compensation $2.55 million.
  • Chief Operating Officer Eric Dorne—Base salary $750,000; target incentive $869,640; total compensation $3.13 million.
  • Chief Legal Officer Jill Sutton—Base salary $562,500; target incentive $539,612; total compensation $2.38 million.
  • President Christopher Testa—Base salary $750,000; target incentive $869,640; total compensation $3.13 million.

As required by the Securities and Exchange Commission, the compensation committee reported that Spinner's total compensation was 155 times the compensation of the company's median employee, which it calculated at $54,114.

Other shareholder concerns

Shareholders—including one who identified as an employee—also asked about the company's plans to reduce food waste and its carbon footprint.

New CEO Sandy Douglas pointed to the goals outlined in UNFI's ESG reports, including reducing food waste 50% by 2025 and achieving zero waste by 2030. A task force is working on the means to achieve those goals, Douglas said.

UNFI also has submitted science-based goals to the Science Based Targets initiative and its comments are expected soon, he said. A new ESG report also will be released soon, he added.

A shareholder also asked if the company will be buying back stock or offering dividends. Chief Financial Officer John Howard said the company would consider those options when its leverage improves.

During the company's fireside chat at the ICR Conference on Monday, though, Howard said the terms of UNFI's loans—used to purchase Supervalu in 2018—prevent it from doing anything for stockholders until its debt-to-equity ratio is lower.

Now that the company's leverage is 3.0, UNFI can spend more on capital improvements such as data management, improving the supply chain and automating the distribution centers, he said.

UNFI has paid more than $1 billion in debt since the acquisition of the conventional foods distributor, Howard said.

"As our leverage improves to 3.0, that door cracks open a little bit, not dramatically," he said. "But once that leverage drops below 2.5, that door is kicked wide open for us. That gives us more flexibility as to where we can allocate that capital."

All board directors re-elected

Shareholders re-elected all 10 of UNFI's incumbent directors (all ages listed as of Nov. 15):

  • Eric Artz, 54, director since October 2015.
  • Ann Toree Bates, 63, director since October 2013.
  • Gloria Boyland, 61, director since January 2021.
  • Denise Clark, 64, director since February 2013.
  • Daphne Dufresne, 49, director since October 2016.
  • Michael Funk, 67, director since February 1996.
  • James L. Muehlbauer, 60, director since April 2019.
  • Peter Roy, 65, director since June 2007.
  • Jack Stahl, 68, independent chair, director since June 2019.
  • Sandy Douglas, 60, chief executive officer, director since August.

UNFI's board, with four women, is more diverse than most, according to a Q3 2021 survey of the Russell 3000 companies reported by 50/50WOB. The data show that women hold 26.1% of the 27,141 seats on the 2,958 active companies in the index.

Two women on UNFI's board, Boyland and Dufresne, are Black. The Conference Board and ESGuage, an analytics firm, found in 2021 that among companies in the S&P Midcap 400 Index, only 6.8% of new directors were Black and only 9% of all directors were Black. Among Russell 3000 companies, Black people accounted for 10.9% of all directors.

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