Oregon Fund Joins Safeway Ouster Effort

April 7, 2004 (PLANSPONSOR.com) - Oregon pension officials are mad as heck about goings on at supermarket chain Safeway Inc., and - like many of their state pension fund brethren around the country - aren't going to take it any more.

The Oregon Public Employees Retirement fund will use its 566,000 Safeway shares to vote for the ouster of company CEO Steven Burd at the company’s May 20 annual meeting, according to an Associated Press report.

The vote will be one of the first visible effects of the Oregon Investment Council’s decision to follow the lead of a number of other public pension organizations and try to wield Oregon’s clout as an investor to demand better governance from private companies. Oregon and four other states’ pension funds hold a controlling 55% of the company’s stock.

The states’ shares will be voted to protest a 60% decline in Safeway’s stock price in the past five years, directors’ ties to buyout firm Kohlberg Kravis Roberts & Co. and their business links to the number three U.S. supermarket chain, state officials said (See  Activist Funds Set Governance Sights on Safeway ).

“The board is so replete with conflicts of interest and related-party transactions we have no confidence in the current directors to turn things around,” Connecticut state Treasurer Denise Nappier said at New York news conference. “This is just the start of a long process.”

The campaign to oust Burd includes the Illinois State Board of Investment and the New York City Comptroller, and is trying to persuade investors to withhold board re-election votes for Burd and directors William Tauscher and Robert MacDonnell at the company’s annual meeting. Even one vote for Burd would allow him to remain on the board; however, a large number of withheld votes would increase pressure for changes.

Also on Tuesday, the Washington State Investment Board took steps toward joining the effort. The Washington pension fund’s public markets committee voted to ask the fund’s staff to draft a letter to Barclays Global Investors. The committee wants to express support for Burd’s ouster from the Safeway board, along with Tauscher and MacDonnell.

“We need to give a very clear message as a fiduciary,” state Treasurer Michael Murphy said at the committee meeting in Olympia. “This is not something we ought to tolerate.”

The California Public Employees’ Retirement System (CalPERS), the largest U.S. public pension fund with $155 million in assets and 1.8 million Safeway shares, has publicly expressed its displeasure with Safeway.

A Safeway company spokesman said the grocery chain is already turning around. “Safeway has plans in place to improve performance,” spokesman Brian Dowling said in a statement. “Our efforts to maximize shareholder value are well underway.”