Paramount among the changes at the Pleasanton, California-based supermarket chain was a commitment to appoint two new independent directors “as soon as practicable.” The two new directors will be replacing George Roberts and James Greene, Jr., who have served on the Board for nearly 20 years and are partners of Kohlberg Kravis Roberts & Co. (KKR).
The move to replace the two KKR partners may have been a bow to pressure by the nation’s largest public pension fund, the California Public Employees’ Retirement System (CalPERS). CalPERS previously announced it might stop investing with KKR unless the firm severs its Safeway ties.
In March, CalPERS, in conjunctionwith pension officials from New York, Illinois, Connecticut and Oregon kicked off a campaign to oust Steven Burd, Safeway’s chairman and chief executive, and two outside directors. The funds blame bad management for the company’s precipitous share price plunge from $60 five years ago to around $20 today (See Activist Funds Set Governance Sights on Safeway ). As it turns out though, Burd was retained by the company’s shareholders in both roles.
Other Safeway Moves
In addition, the Board will appoint another new independent director by the end of this year to replace current Board member Hector Ley Lopez. Safeway says after all the appointments are made, eight of company’s nine directors will be independent.
“Excellence in governance and superior financial performance go hand in hand, and these steps support Safeway’s efforts to improve shareholder returns,” said Burd in announcing the changes.
“Our goal is to make this Board even stronger and more responsive to shareholders,” added Paul Hazen, a current Board member who was elected to the Lead Independent Director post. In the post, Hazen will serve as the liaison between the Chair and the other independent directors, approving the agendas and other information sent to the Board, and calling meetings of independent directors. Hazen has been on the Safeway Board since 1990.
Other governance moves by the company include:
- a commitment to expense stock options in 2005;
- setting limits on the number of public company boards upon which directors may serve;
- establishing a mandatory retirement age of 72 for directors;
- committing to set minimum share ownership guidelines for directors and executive officers;
- amending the Company’s stock option plan to expressly prohibit the repricing of stock options without stockholder approval;
- expressly eliminating loans to all officers for exercising stock options;
- requiring directors to submit a letter of resignation for the Board’s consideration if they change their primary employment.
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