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Safeway chairman survives pension funds' push to oust him

By Michael Liedtke
The Associated Press

PAUL SAKUMA / AP Demonstrators hold up Safeway Chairman Steve Burd's photo in front of Safeway headquarters in Pleasanton, Calif., where the supermarket giant held its annual shareholders meeting yesterday.

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Burd, Safeway's chief executive for the past 11 years, scored a major victory early in the company's three-hour meeting, when management announced 83 percent of shareholders had voted to re-elect him as chairman.

The 17 percent disapproval vote represented an unusual level of dissent in corporate America, where directors rarely are spurned by more than 10 percent of shareholders.

But the outcome fell well short of disapproval levels expressed in other recent shareholder uprisings and missed the 25 percent goal set by a group of public pension funds spearheading the Safeway rebellion.

In another key decision, 66.8 percent of shareholders rejected a proposal urging Burd to split up the chairman and CEO roles, a division more major companies are making to strengthen independence between management and the board.

Safeway drummed up more shareholder support earlier this month by announcing several changes in corporate governance, including the appointment of an existing board member, Paul Hazen, as lead director and a commitment to replace three other board members this year.

Those reforms still hadn't satisfied shareholders or two influential advisory firms. Both Institutional Shareholder Services and Glass Lewis had recommended withholding votes from Burd.

Not surprisingly, Safeway management and the dissident shareholders interpreted yesterday's results differently.

The outcome shows "overwhelming support for Steve's leadership," said Chief Financial Officer Robert Edwards. "We believe shareholders support the strategy we are pursuing and believe we have the right senior-management team to carry out the job."

Pension funds in New York, Connecticut and Illinois, which are critical of Burd, issued a statement hailing the vote as "a victory of substance over illusion."

"I hope the company doesn't go back to business as usual," said Bill Atwood, executive director of the Illinois State Board of Investment.
 
Safeway investors have had plenty of reasons to be disappointed recently. Two-thirds of the company's market value has evaporated since the end of 2000, wiping out more than $20 billion in shareholder wealth.

The grocer reported losses totaling $998 million in the past two years, as supermarket takeovers engineered by Burd in Illinois and Texas have soured and labor tensions have mounted.

During an hourlong presentation yesterday, Burd said Safeway will snap out of its slump. He painted a portrait of a supermarket chain that will provide "world-class" customer service to distinguish itself from Wal-Mart and other discounters at the same time the wage gap narrows with rivals that use nonunion workers.

Skeptics, including a mix of shareholders, store workers and industry analysts, have questioned how Safeway can improve service while lowering wages and benefits to future workers.

Joann Saraceno, a Vons cashier in Studio City, Calif., who has worked for the chain for 24 years, went to yesterday's meeting to let Burd know his strategy has decimated employee morale in Southern California and prompted many longtime workers to quit.

"I would like to know my company cares about me, so I can be loyal to my company," Saraceno said, choking back tears. "You cannot do superior service if you have no employees to do the service. They are fleeing the company."

Burd defended Safeway's treatment of employees, saying they make the highest wages in the retail industry. He said newly hired employees will make less, but "as long as they are making a market wage, they should be content."