Risk & Compliance

Safeway Adds Independent Directors

One major shareholder wish still remains unmet, however.
Stephen TaubMay 4, 2004

Safeway Inc. is the latest company to cave in to shareholder pressure regarding its corporate governance practices.

The grocery giant announced that it will name three independent directors to replace George Roberts, James Greene Jr., and Hector Ley Lopez.

Roberts and Greene, who have served on the board for nearly 20 years, are partners of Kohlberg Kravis Roberts & Co. Governance experts had deemed the pair to be insiders since KKR had led a management buyout two decades ago. The private equity firm is not currently involved in the management of the company.

The trio will leave the board as soon as appropriate replacements are selected, said Safeway. Once the appointments are completed, added the company, eight of Safeway’s nine directors will be independent.

Last month five pension funds announced that that they would withhold votes from Steven Burd — Safeway’s chairman, president, and chief executive officer — as well as from Robert MacDonnell and William Tauscher. They are the only board members on the ballot at the company’s May 20 annual meeting since the grocery giant has a staggered board of directors.

The pension funds had claimed that eight of the nine current board members are not truly independent.

Safeway also elected Paul Hazen, a current board member, as lead independent director. In addition, the company announced that its board would name a new independent director to succeed Tauscher as chair of the executive compensation committee and that MacDonnell will no longer serve on the audit committee. Both individuals, however, will remain on the Board as “independent directors,” added Safeway.

In addition, Safeway announced that it will limit the number of public company boards on which directors may serve; establish a mandatory retirement age of 72 for directors; commit to set minimum share ownership guidelines for directors and executive officers, amend the company’s stock option plan to expressly prohibit the repricing of stock options without stockholder approval; expressly eliminate loans to all officers for exercising stock options; and require directors to submit a letter of resignation for the board’s consideration if they change their primary employment.

“With these important steps, Safeway has now implemented all stockholder proposals that have received a majority vote at annual meetings of the company,” said Burd.

One shareholder wish still remains unmet, however: The ouster of Burd himself, who the pension funds hold responsible for the erosion of $20 billion in the company’s stock value over the past five years.