This excerpt taken from the SWY DEF 14A filed Apr 12, 2005.
STOCKHOLDER PROPOSAL REGARDING INDEPENDENT BOARD COMMITTEES
The Company has been notified by the AFL-CIO Reserve Fund, 815 Sixteenth Street, N.W., Washington, D.C. 20006, which owns 300 shares of Common Stock, that it intends to present the following proposal for consideration at the Annual Meeting:
Resolved: Shareholders of Safeway Inc. (Safeway) urge the Board of Directors (the Board) to adopt a policy that all members of the executive compensation, audit, and nominating and corporate governance committees shall be independent; provided, however, that in the event that the Board lacks sufficient independent directors, compliance with this policy is excused. For the purposes of this policy, an independent director is one who in the last five years has not:
For purposes of this definition, Safeway includes any affiliate of Safeway.
The above resolution is based on a director independence definition developed by the Council of Institutional Investors, an organization of over 130 pension funds with $3 trillion in assets. In our view, the New York Stock Exchanges and Safeways own director independence standards may not sufficiently prohibit potential conflicts of interest that may compromise director objectivity.
For example, Safeway Director William Tauscher has served as a member of the Boards executive compensation, audit, nominating and corporate governance committees. Using Safeways own director independence standard, the Board has determined that Mr. Tauscher is independent. We believe that Mr. Tauscher should not be considered an independent director.
Mr. Tauscher has a history of related-party transactions with Safeway that we believe may have compromised his independence. To cite just one example, according to the 2001 proxy statement, Mr. Tauscher received 100,000 stock options as compensation for serving as a consultant for Safeway. Between 2000 and 2002, Safeway took a net $400,000 charge against earnings for these option grants.
In our view, good corporate governance requires truly independent directors. For the above reasons, please vote FOR this proposal.
The Board of Directors recommends a vote AGAINST this proposal for the following reasons:
The Board of Directors agrees that it is important for all members of the key committees of the Board to be independent, and has already taken effective measures to achieve this objective. All members of our Executive Compensation, Audit, and Nominating and Corporate Governance Committees are independent directors in accordance with SEC rules, the New York Stock Exchange listing rules and the more stringent Director Independence Standards that the Board has voluntarily adopted. Our Director Independence Standards are described in detail on page 4 of this Proxy Statement. The proponent cites the Council of Institutional Investors (CII) independent director definition which, in addition to the specific criteria listed in the proposal, states an independent director is someone whose only nontrivial professional, familial, or financial connection to the corporation, its chairman, CEO or another executive officer is his or her directorship. The definition does not define nontrivial. However, the transaction referenced by proponent that occurred nearly five years ago involving Mr. Tauscher would, under any definition, be considered trivial. In addition, the five-year look back period contained in the CII definition will expire in June of 2005 on Mr. Tauschers transaction, rendering this proposal unnecessary and moot.
In further support of the Directors commitment to Board and committee independence, during 2004 and early 2005, the Board replaced four retiring directors with new directors, all of whom qualify as independent. The Nominating and Corporate Governance Committee and Board have carefully reviewed all directors relationships to Safeway both business and personal and have affirmatively determined that all directors except for Mr. Burd are independent under the NYSE listing rules and the Companys Director Independence Standards.
Your board believes that the concerns raised in this proposal are adequately addressed by the independence measures that we have taken with respect to all directors. Thus, the Board of Directors believes that the goal of this proposal has already been achieved and that the proposal is therefore unnecessary and not in the best interests of the stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS STOCKHOLDER PROPOSAL, and your Proxy will be so voted unless you specify otherwise.