SAN FRANCISCO – Vilified by disillusioned workers and disgruntled shareholders, Safeway’s chairman and CEO, Steve Burd, will defend his track record – and job – in a showdown today at the struggling supermarket giant’s annual meeting.
The dissident shareholders, led by a group of public pension funds, are hoping the meeting becomes the coup de grace in an eight-week campaign to pressure Burd into relinquishing some of his power after 11 years as Safeway’s CEO. His opponents want him to turn the chairman’s role over to a leader with no previous ties to the Pleasanton, Calif.-based grocery chain.
Burd, 54, has steadfastly refused, brushing off the complaints as the biased views of a few pension funds catering to politically powerful labor unions that are trying to punish him for his prominent role in a bitter Southern California grocery strike that ended in February.
But the shareholder misgivings may not be so isolated. Burd suffered a significant setback earlier this month when two influential advisory firms – Institutional Shareholder Services and Glass, Lewis &Co. – recommended withholding votes for his re-election as chairman.
Echoing the concerns of unhappy shareholders, the advisory firms say Burd should be held accountable for leading a board that lacks the independence from management to protect shareholder interests.
Safeway investors have had plenty of reasons to be disappointed. Two-thirds of the company’s market value has evaporated since the end of 2000, wiping out more than $20 billion in shareholder wealth. What’s more, the company has lost $998 million in the last two years, as supermarket takeovers engineered by Burd in Illinois and Texas have soured and labor tensions have mounted.
Burd primarily has blamed the company’s woes on a sluggish economy and tougher competition as discount king Wal-Mart Stores Inc. muscles into the grocery industry. Despite the troubles, Safeway’s shares, which closed at $20.95 Wednesday on the New York Stock Exchange, remain well above their split-adjusted price of $3.78 when Burd became CEO in April 1993.
The company’s long-term success has richly rewarded Burd. During his Safeway reign, he has pocketed stock option windfalls totaling $58 million, including $30 million since September.
Even as the company has staunchly defended itself, Safeway has made some concessions since shareholders began clamoring for change. Most significantly, the company has agreed to replace three directors on its nine-member board later this year.
But the dissident shareholders, along with the proxy advisory firms, insist Safeway hasn’t gone far enough. The critics say investors shouldn’t be satisfied until Burd splits the CEO and chairman jobs. The division is becoming increasingly common among major companies as they try to draw a clearer line between management and the board.
The dissatisfied shareholders are particularly troubled by three red flags: the defection of four key executives in 2002 and 2003; a confrontational approach to labor negotiations that has alienated many Safeway employees; and flopped acquisitions that have cost Safeway more than $2 billion.
“There is a nagging sense that these things are all symptomatic of a management team that isn’t managing very well and a board that isn’t overseeing management very well,” said Bill Atwood, executive director of the Illinois State Board of Investment, one of the dissidents.
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