Safeway shareholders deny Burd 17% of vote

Josh Fineman

Thursday, May 20, 2004 | 10:51 a.m.

PLEASANTON, Calif. -- Safeway Inc. shareholders today withheld 17 percent of votes to re-elect Chief Executive Steven Burd to the board, a setback for pension funds that led a campaign to oust him as chairman of the No. 3 U.S. grocer.

Investors for Safeway, owner of Von's supermarkets in Las Vegas, also withheld 15 percent of ballots for directors Robert MacDonnell and William Tauscher, the company said after a preliminary tally at its annual meeting in Pleasanton, Calif. The board members, running unopposed, needed only one vote each to be re-elected.

The vote caps a campaign begun in March by the New York State Common Retirement Fund and three other pension funds to make room on the Safeway board for more independent directors. The company earlier this month said George Roberts and James Greene, two of four directors with ties to buyout firm Kohlberg Kravis Roberts & Co., Safeway's former owner, would step down.

"Regardless of the size of the vote, we accomplished a lot," said Maria Grove, a spokeswoman for the Connecticut Retirement Plans and Trust Fund, one of the pension plans leading the protest. "We got the word out. Our position was endorsed by two major proxy advisers, and Safeway has already taken steps to reform its corporate governance."

The state pension funds have said eight of nine Safeway board members have business ties to the grocery chain that limit their independence. The funds also have cited poor acquisitions, a strike by workers, the company's loss of about half its market value since 2001 among their concerns.

Institutional Shareholder Services, the biggest adviser to pension funds, had recommended that its clients withhold votes for Burd alone because of his performance and governance.

"I think a double-digit number sends a message," said David Dietze, president of New York-based Point View Financial Services, who manages $75 million, including Safeway shares. "People are fed up."

The Safeway "vote no" campaign follows a similar one at the Walt Disney Co. In March, 43 percent of shareholders withheld their votes to reelect Chief Executive Officer Michael Eisner as board chairman. After the vote, the Disney board removed Eisner as chairman and gave the job to George Mitchell.

Shares of Pleasanton, Calif.-based Safeway fell 6 cents to $20.89 in New York Stock Exchange composite trading today. They had risen 2.3 percent since the March 25 start of the campaign to oust Burd.

KKR's presence on the board stems from its 1986 buyout of Safeway. KKR sold the last of its Safeway shares in 2000.

Safeway said earlier this month that KKR founder Roberts and partner Greene will leave the board along with director Hector Ley Lopez. The company at the same time named Paul Hazen, another director who is chairman of a KKR-affiliated company, as its lead independent director.

Tauscher will be replaced on the board's executive compensation committee and MacDonnell will leave the audit committee, the company said. Both will remain on the board.