Safeway (SWY)

C. Procedure for Determining Executive Officer Compensation

The base salary of Steve Burd, our Chief Executive Officer (“CEO”), is determined annually by the Board of Directors. At the end of each fiscal year, our Lead Independent Director (currently, Paul Hazen) collects information regarding Mr. Burd’s performance and discusses relevant issues and matters with him. The Lead Independent Director then reports on his findings and discussions to the Committee, which reviews the CEO’s salary each year. The Committee periodically obtains information regarding the compensation of the chief executive officers of our peer group companies. The Committee then meets, without the CEO present, and makes a recommendation to the Board about the CEO’s base salary for the next fiscal year. The Board subsequently meets in executive session, without the CEO present, and conducts a formal performance review of the CEO, and sets his base salary for the next fiscal year. Other regular elements of compensation for the CEO – bonus levels and long-term incentive equity award grants – are also established by the Committee and the Board in conformity with our general compensation principles (examining peer group levels and allowing increased compensation when the Company outperforms its peers). (See discussion below under those elements of compensation.) In a procedure that is expected to be repeated in future years, in early 2007, Mr. Burd proposed written objectives against which his performance in the 2007 fiscal year should be measured. The Committee reviewed this proposal and then established the written objectives for Mr. Burd for the 2007 fiscal year.

With respect to our Executive Vice Presidents, the Committee obtains compensation data concerning comparable positions at our peer group companies, which it reviews with Mr. Burd. Mr. Burd assesses the individual performance of each executive and proposes the base salaries for each of the Executive Vice Presidents. The Committee then sets these salaries. The procedure is similar for our other executive officers.

On at least an annual basis, the Committee reviews tally sheets for each of the named executive officers. These documents collect in one place the total compensation received by each such named executive officer, and the compensation each such named executive officer would receive under various events, including retirement, termination and change in control. The Committee reviews these tally sheets so it understands how these various events would affect the compensation received by these officers.