This excerpt taken from the SWY DEF 14A filed Apr 12, 2005.
STOCKHOLDER PROPOSAL REGARDING DIRECTOR ELECTION MAJORITY VOTE
The Company has been notified by the United Brotherhood of Carpenters Pension Fund, 101 Constitution Avenue, NW, Washington, D.C. 20001, which owns 7,300 shares of Common Stock, that it intends to present the following proposal for consideration at the Annual Meeting:
Resolved: That the shareholders of Safeway, Inc. (Company) hereby request that the Board of Directors initiate the appropriate process to amend the Companys governance documents (certificate of incorporation or bylaws) to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders.
Supporting Statement: Our Company is incorporated in Delaware. Among other issues, Delaware corporate law addresses the issue of the level of voting support necessary for a specific action, such as the election of corporate directors. Delaware law provides that a companys certificate of incorporation or bylaws may specify the number of votes that shall be necessary for the transaction of any business, including the election of directors. (DGCL, Title 8, Chapter 1, Subchapter VII, Section 216). Further, the law provides that if the level of voting support necessary for a specific action is not specified in the certificate of incorporation or bylaws of the corporation, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.
Our Company presently uses the plurality vote standard for the election of directors. We feel that it is appropriate and timely for the Board to initiate a change in the Companys director election vote standard. Specifically, this shareholder proposal urges that the Board of Directors initiate a change to the director election vote standard to provide that in director elections a majority vote standard will be used in lieu of the Companys current plurality vote standard. Specifically, the new standard should provide that nominees for the board of directors must receive a majority of the vote cast in order to be elected or re-elected to the Board.
Under the Companys current plurality vote standard, a director nominee in a director election can be elected or re-elected with as little as a single affirmative vote, even while a substantial majority of the votes cast are withheld from that director nominee. So even if 99.99% of the shares withhold authority to vote for a candidate or all the candidates, a 0.01% for vote results in the candidates election or re-election to the board. The proposed majority vote standard would require that a director receive a majority of the vote cast in order to be elected to the board.
It is our contention that the proposed majority vote standard for corporate board elections is a fair standard that will strengthen the Companys governance and the Board. Our proposal is not intended to limit the judgment of the Board in crafting the requested governance change. For instance, the Board should address the status of incumbent directors who fail to receive a majority vote when standing for re-election under a majority vote standard or whether a plurality director election standard is appropriate in contested elections.
We urge your support of this important director election reform.
The Board of Directors recommends a vote AGAINST this proposal for the following reasons:
The plurality voting threshold is the accepted standard for the election of directors of nearly all of the largest corporations in America. This methodology is known to and understood by stockholders and is used by corporations that have been identified as leaders in corporate governance reforms. We believe the plurality standard provides a good mechanism for electing an independent Board that is committed to delivering long-term stockholder value.
The proposals accompanying statement asserts that the proposed majority vote standard will strengthen the Companys governance and the Board. The Board of Directors believes this statement is misleading, especially when combined with the 99.99% withhold vote example. Every director nominee of Safeway consistently has received an affirmative vote greater than 75 percent of the shares voted through the plurality process. The proposal suggests, however, that the Companys Board is being elected by minimal affirmative votes, which clearly is not supported by the facts.
The higher threshold voting proposal could make it more difficult for stockholders to elect a full Board and could have a negative impact on stockholders who wish to elect someone other than a Board recommended nominee. For example, if only 75 percent of the outstanding shares are represented at an annual meeting, election of a director would then require a two-thirds affirmative vote of the shares voting. This would make it more difficult to fill Board seats and to elect director nominees proposed by stockholders. Additionally, the proposal may have the unintended consequence of unnecessarily increasing the cost of soliciting stockholder votes. The Company may need to employ a proactive telephone solicitation, a second mailing or other vote-getting strategy to obtain the required vote. The end result may be increased spending by the Company in routine elections. The directors believe this would not be a good expenditure of stockholder funds.
The Board believes that we already have a strong corporate governance process designed to identify and propose director nominees who will serve the best interests of the Company and its stockholders. Eight of the Companys nine directors are independent as defined by the NYSE and the Companys more stringent Director Independence Standards. Director nominees are evaluated and recommended for election by the Nominating and Corporate Governance Committee, which is comprised solely of independent, non-employee directors. The Nominating and Corporate Governance Committee recommends members who are highly qualified and reflect a diversity of experience and viewpoints.
Our commitment to effective and independent board leadership is shown by, among other things, our Corporate Governance Guidelines, which are available on the Companys web site, http://www.safeway.com/investor_relations. Our Board believes that these Guidelines, not the procedure contemplated by the proposal, provide the best foundation for a strong and effective board and excellence in corporate governance.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL, and your Proxy will be so voted unless you specify otherwise.