Safeway removes two directors

Monday, May 3, 2004 | 10:59 a.m.

BLOOMBERG NEWS

PLEASANTON, Calif. -- Safeway Inc., the No. 3 U.S supermarket chain and owner of Vons stores in Las Vegas, today said Kohlberg Kravis Roberts & Co. founder George Roberts and KKR partner James Greene will leave its board after pension funds complained about their business ties to the grocer.

Roberts and Greene, as well as director Hector Ley Lopez, will depart after Safeway appoints three independent board members, the company said in a statement. Safeway will also name board member Paul Hazen as lead independent director.

The California Public Employees' Retirement System and three other funds have been seeking the ouster of Safeway Chairman Steven Burd, 54, and two other directors, citing board conflicts and company losses. Investors said the changes to Safeway's board don't go far enough partly because Hazen, who is chairman of Accel-KKR, was appointed lead independent director.

"This is a bad version of window dressing," said William Atwood, executive director of the Illinois Board of Investment, which owns 156,000 Safeway shares. "If they were really listening to investors they would have appointed a truly independent lead director. Hazen is only on the board because of his links to KKR."

State pension funds have played a leading role recently in the removal of other officers. Last September, a group led by Calpers called for New York Stock Exchange Chairman Richard Grasso to resign after his $140 million pay package was disclosed. Grasso resigned the next day.

In addition to changing directors, Safeway said it will set new share ownership guidelines, limit the number of boards on which members may serve, and force them to retire by age 72. The retailer, based in Pleasanton, Calif., also plans to expense stock options starting in 2005, a change approved by shareholders last year.

Safeway shares rose 6 cents to $23.01 at 9:42 a.m. today.