Safeway (SWY)

Our Board of Directors recommends a vote “AGAINST” this proposal for the following reasons:

Our Board of Directors opposes this proposal because it believes that the benefits we have offered and currently offer upon the death of an executive to his or her survivors are reasonable within the overall structure of our compensation programs, are not excessive and are similar to the benefits offered by many other companies. Our Board of Directors believes that our Executive Compensation Committee must have the flexibility to exercise discretion and make decisions regarding executive compensation that are in the best interests of the Company and our stockholders.

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We provide death benefits to all executives who are Senior Vice Presidents or higher under our non-qualified and unfunded defined benefit pension plans (known as the RRP). Approximately 40 of our current senior executives are eligible for the death benefit under the RRP. Pursuant to this benefit, if any of the eligible participants dies while employed as an executive (the pre-retirement death benefit), the executive’s beneficiary will receive a benefit equal to four times the executive’s base salary at the time of death, up to a maximum of $4 million, less any amount otherwise payable by Company-provided life insurance. As noted earlier in this Proxy Statement, we pay for life insurance for each corporate employee (including executives) in an amount equal to two times annual salary, up to a maximum of $1 million. As a result, for almost all of our executives, the maximum benefit payable under the death benefit, after taking into account Company-provided life insurance, will be two times the executive’s base salary at the time of death, and the true maximum RRP death benefit is $3 million.

Contrary to the statement made by the proponent in its supporting statement, the post-retirement death benefit under the RRP is not four times an eligible participant’s salary. The beneficiaries of an eligible participant who retires after age 55 will be entitled to benefits at the time of the participant’s death as follows: (1) for death before age 70, the benefit is 100% of the participant’s final average annual compensation at the time the participant retired from the Company, with a maximum benefit of $1 million; or (2) for death after age 70, the benefit is 25% of the amount determined in (1) above. The same formula applies to all participants in the RRP who are eligible for the death benefit, including the Company’s named executive officers.

In December 2008, our Board amended the death benefit under the RRP to eliminate the post-retirement death benefit for any individual below the level of Senior Vice President who is promoted to the position of Senior Vice President or higher on or after December 15, 2008 and for any new employee who joins the Company on or after December 15, 2008. Therefore, going forward, Company employees who become Senior Vice Presidents or higher after December 15, 2008 will be eligible for a death benefit only if the participant dies while employed by the Company. Historically, this has been a very rare occurrence. In fact, during a time period spanning more than 20 years, we have paid a death benefit to the beneficiaries of an employee who has died while employed only twice, with the aggregate payments to the two beneficiaries totaling less than $1,350,000.

The death benefits that we offer are not excessive, and many other companies afford comparable death benefit protection to their executives through similar benefit plans and the purchase of life insurance. Over a third of all companies provide a pre-retirement death benefit in addition to basic life insurance coverages, and almost 40% of retail companies provide such a benefit.

The proposal asks the Executive Compensation Committee to adopt a policy that would preclude it from offering the death benefits under the RRP (or similar death benefits) to new senior executives. However, to attract and retain a qualified and effective management team in the marketplace for executive talent, it is vital that we offer an overall compensation and benefit package that is competitive with those offered by companies with which we compete for this talent. Staying competitive in many cases requires us to adapt rapidly to fast-moving trends in the marketplace and to the circumstances of individual executive candidates. Prohibiting our Executive Compensation Committee from including benefits payable upon death in a senior executive’s overall compensation package could impair our ability to fill critical executive positions by impeding our ability to negotiate agreements or implement policies that address the competitive market, the needs of our Company and the nature of the particular situation. Our Board of Directors believes that our Executive Compensation Committee must have the flexibility to provide competitive compensation arrangements that offer benefits of all types, including those to be paid upon an executive’s death, which can be an important inducement to attract and retain executives who seek to provide economic security for their families in the event of their death. Our Board of Directors opposes this proposal because it believes that the requirements of the proposal would place us at a competitive disadvantage in attracting and retaining executive talent and that allowing our Executive Compensation Committee the flexibility to structure competitive compensation arrangements that offer benefits of all types is in the best interests of the Company and our stockholders.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “AGAINST” THE ADOPTION OF THIS STOCKHOLDER PROPOSAL, and your proxy will be so voted unless you specify otherwise.

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Our Board of Directors recommends a vote “AGAINST” this proposal for the following reasons:

The Board believes the concerns raised in the proponent’s supporting statement regarding the misuse of inside information by executive officers, and many of the enumerated principles contained in the proposal, are adequately addressed by SEC rules, by existing criminal and civil legal prohibitions against insider trading and by our insider trading policies and restrictions. Pursuant to Section 16 of the Securities Exchange Act of 1934, our executive officers already must report on Forms 4 any transactions in our stock, whether through a 10b5-1 trading plan or otherwise, within two business days of the completion of such transactions. These filings are available for review by our stockholders on our Web site at www.safeway.com/investor_relations and the SEC Web site at www.sec.gov. We comply with all existing legal requirements regarding the adoption and use of 10b5-1 trading plans. If the proponent is concerned about the potential misuse of these plans, the proponent should more appropriately address these concerns to the SEC.

Further, we have already implemented a number of the enumerated principles contained in the proposal. Prior to adoption of a 10b5-1 trading plan by an executive officer, Safeway’s legal department must review and sign off on the proposed plan. The legal department specifically looks for a requirement that at least 30 days must elapse between adoption or amendment of a 10b5-1 trading plan and trading under the plan. Likewise, any amendment of an executive’s 10b5-1 trading plan requires legal department sign-off. To date, amendments or terminations of 10b5-1 trading plans by our executive officers have been rare. During the last five years, only one of our executive officers has amended a 10b5-1 trading plan (and in each case the amendment occurred during an open trading window period and at least three months elapsed between the date of the amendment and the first sale of shares pursuant to the amendment), and none of our executive officers has terminated a 10b5-1 trading plan. In accordance with our insider trading policy, described in more detail below, an executive may adopt or amend a 10b5-1 trading plan only during an open trading window period and only if the executive is not then in possession of material nonpublic information about Safeway or our securities.

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The Board believes the restrictions included in the proponent’s proposed policy regarding the use of 10b5-1 plans by senior executives, particularly the principle that an executive may not trade in our stock outside of a 10b5-1 plan, would impede our ability to recruit or retain talented executives and would therefore be detrimental to the interests of our stockholders. Similar to other companies of comparable size across all industries, we have adopted certain benefit plans through which executives, and other employees, may purchase our Common Stock. The Safeway Stock Fund portion of our 401(k) Plan allows participants to invest portions of their retirement savings in our Common Stock. Both the Safeway Employee Stock Purchase Plan and our Direct Stock Purchase and Dividend Reinvestment Plan allow participants to invest a portion of their wages or salary in our Common Stock on a regular basis. The Board believes these plans not only provide executives and employees with valuable benefits, which helps us attract and retain talented executives by offering compensation and benefits packages that are comparable to those provided by companies competing for executive talent, but also encourage executives and employees to purchase our Common Stock, which helps further align their interests with the interests of our stockholders. The proposal’s proposed restriction that would prevent an executive from trading in our stock outside a 10b5-1 plan would preclude executives from participating in these benefits plans and would put us at a significant competitive disadvantage in attracting or retaining executive talent.

We also have a strict insider trading policy applicable to all employees, including executives, that prohibits employees from buying or selling our securities, or entering into derivative transactions with respect to our securities, at a time when the employee is in possession of material nonpublic information about Safeway or our securities. In addition to other restrictions, the policy provides that each of our executive officers, directors and key employees must pre-clear any and all transactions in our securities (including the adoption of a 10b5-1 trading plan) with our General Counsel or Trading Compliance Officer. Additionally, this strict pre-clearance requirement extends to spouses and children of an executive officer, director or key employee and to any other person with whom an executive officer, director or key employee may have a direct or indirect pecuniary interest in any of our equity securities owned by them. The Board believes our insider trading policy, with its restrictions on trading and strict pre-clearance requirements, successfully ensures that executive officers comply with insider trading laws while allowing us to attract and retain talented executive officers by offering competitive benefits plans.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “AGAINST” THE ADOPTION OF THIS STOCKHOLDER PROPOSAL, and your Proxy will be so voted unless you specify otherwise.

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The Board of Directors recommends a vote “AGAINST” this proposal for the following reasons:

The Company has a long-standing commitment to the humane treatment of animals. The Company has shown its commitment to animal welfare by adopting a proactive set of animal welfare policies and guidelines. Since 2001 Safeway has maintained a professional association with a number of well-recognized experts in animal welfare. The Company recently decided to establish a more formal and fully functioning Animal Welfare Council composed of both Company and independent animal welfare members. The Council’s broad mandate is to provide guidance and counsel to the Company on matters relating to the humane treatment of animals in the food production system. The Company is continually working with its suppliers to ensure that the newest slaughter procedures are thoroughly tested and scientifically evaluated and, if satisfactory to the Company and its suppliers, implemented by its suppliers. Some of the Company’s suppliers have evaluated, and continue to evaluate, different methods of animal handling and care, including controlled atmosphere stunning, a method the proponent refers to as “CAK.” These evaluations considered a number of factors, including: animal welfare; scientific research and studies; production methods used commercially both in the U.S. and internationally; food safety and product quality; the safety of humans involved in the slaughter process; technical difficulties in operating equipment and procedures; environmental factors; and expected costs. The research is incomplete and inconclusive as to whether controlled atmosphere stunning is a better and more humane method of stunning than conventional stunning methods.

Moreover, the Company’s suppliers believe further research should be conducted to evaluate controlled atmosphere stunning and its effects on food safety and product quality issues. The Company’s first priority has always been the safety and quality of its products. The Company is also committed to the humane treatment of animals. The Company does not own, raise, transport or process livestock. However, the Company contracts with suppliers who perform these functions and we require that our suppliers adhere to the highest animal welfare standards. The Company believes that handling animals in a humane manner and preventing neglect or abuse is the right thing to do.

The Company’s commitment, leadership and results with respect to animal welfare matters are well established and recognized within the industry. The Company works hard to be a good corporate citizen and is a strong advocate of good animal handling practices. Our policies are designed to help achieve humane treatment of animals. The Company has been, and will continue to be, committed to upholding and abiding by our established policies and principles. In addition, we continually monitor our suppliers for compliance with the policies we establish. As noted above, the Company and its suppliers have already reviewed and continue to evaluate controlled atmosphere stunning as a new slaughtering technique; however, based on the testing results and scientific data currently available, the Company and its suppliers consider it premature to implement the technique at this time. The Company believes the proposed report is unnecessary and would not result in any additional benefit to stockholders. The proposed report would be costly and time-intensive, and it is duplicative of many existing policies, initiatives and efforts.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “AGAINST” THE ADOPTION OF THIS STOCKHOLDER PROPOSAL, and your Proxy will be so voted unless you specify otherwise.

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The Board of Directors recommends a vote “AGAINST” this proposal for the following reasons:

The Board believes that Safeway’s current policies and practices concerning social, environmental and economic issues address the concerns raised by this stockholder proposal. The Company’s statement of philosophy and vision since its founding in 1926 is to “provide value for our customers and give back to the communities we serve.” Operating under this philosophy and vision, Safeway is committed to providing financial support to various local non-profit organizations, fostering its employees’ volunteer efforts, operating safe and environmentally responsible facilities and maintaining socially diverse supplier and employee bases.

Moreover, Safeway makes available to stockholders and other interested parties numerous publications that specifically address the issues raised by this proposal. A separate sustainability report would duplicate this information and be a waste of Company resources.

Most recently, Safeway has been recognized for its social and environmental commitment and efforts through the following awards in 2005 and 2006: Catalyst Award, presented annually to three companies for initiatives that advance women in the workplace; Red Cross – Circle of Humanitarian Award, presented for raising $3 million for the South Asian Tsunami relief effort; Easter Seals Chairman’s Corporate Roundtable Award, presented for raising $1.6 million for Easter Seals’ and its local affiliated agencies, which serve people with disabilities; Project Open Hand – Most Outstanding Partner Award, presented for its record of assisting Project Open Hand, which provides home-delivered hot meals to AIDS victims and the homebound in the San Francisco Bay Area; Green Power Leadership Award, presented for Safeway’s leadership in purchasing wind energy to power a range of different stores and fuel stations in the United States; Waste Reduction Award Winner, presented by the California Waste Management Board for Safeway’s efforts to recycle and reduce solid waste; and Proggie Award, presented by the People for the Ethical Treatment of Animals for the Company’s requirement that its private label suppliers not use animal testing in the manufacture of cosmetics or household goods.

In addition, in January 2006, KLD Research and Analytics, Inc. (“KLD”) informed the Company of Safeway’s inclusion in KLD’s Domini 400 Social Index. KLD is an independent investment research firm that provides tools for investment strategies based on corporate social and environmental performance. To be included in the Index, companies must exhibit positive records with regard to the environment, community relations, human rights, product quality and safety, and corporate governance.

In 2005, The Safeway Foundation and our eScrip program contributed $53 million to charitable and non-profit organizations and causes in communities where we do business in the United States and Canada. In

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addition, during 2005 Safeway donated food and merchandise worth approximately $110 million to various entities that serve the needy.

Safeway also has extensive policies and programs to ensure that we conduct our operations to provide a safe, diverse and healthy workplace and to safeguard the environment.

Safeway maintains Diversity Advisory Boards in each of its operating areas whose mission is to recognize, celebrate and benefit from the uniqueness of each employee and customer, to value, respect and support these differences in the workplace and to reflect this diversity in the communities we serve. In addition, Safeway’s Supplier Diversity Program’s mission is to promote supplier participation reflective of the diverse communities in which Safeway does business, while encouraging economic development. Safeway’s Environmental Affairs and Risk Management departments develop and administer our environmental programs, which include recycling programs to reduce environmental impacts and costs associated with waste disposal (of the Company’s materials, products and packaging), programs to reduce chemical use, waste volume and water usage and other programs to use non-ozone depleting substances in Safeway’s store refrigeration systems and effect more efficient uses of energy in Safeway’s stores and other facilities. The Company also conducts environmental assessments for its real property transactions.

Wherever it operates, Safeway strives to be a good corporate citizen and promote social and human rights, sound labor practices, product responsibility and economic and environmental practices to address sustainability. Safeway will continue its commitments to the environment, the workplace, its employees, customers and the communities in which it operates and will strive to expand its social responsibility and safe environmental practices. As noted, Safeway makes available to stockholders and other interested parties numerous publications and information on its web site, www.safeway.com, in the “Our Company,” “Club Card,” and “Community” sections that specifically address the issues raised by this stockholder proposal. Such publications include Safeway’s Annual Fact Book, Annual Report, The Safeway Foundation Newsletter, the Safeway Supplier Handbook, the Corporate Governance Guidelines and Director Independence Standards and the Environmental Status Report. A separate sustainability report would merely duplicate the information that is already provided to and easily accessed by our stockholders and the public. Thus, the Board believes that preparing the special sustainability report requested by the stockholder proposal is unnecessary and would constitute a waste of Company funds and resources.

This proposal was also presented by The New York City Office of the Comptroller at the Company’s 2004 and 2005 Annual Meetings and was defeated by a vote of over 80% and over 83%, respectively, against the proposal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “AGAINST” THE ADOPTION OF THIS STOCKHOLDER PROPOSAL, and your Proxy will be so voted unless you specify otherwise.