This excerpt taken from the SWY DEF 14A filed Apr 2, 2008.
STOCKHOLDER PROPOSAL REGARDING USE OF RULE 10(b)5-1 TRADING PLANS
The American Federation of State, County & Municipal Employees, 1625 L. Street, NW, Washington, DC, which owns 2,886 shares of our Common Stock, has given notice that it intends to present the following proposal for consideration at the Annual Meeting:
Resolved, that stockholders of Safeway urge the board of directors (the Board) to adopt a policy regarding the use of prearranged trading plans for senior executives adopted to make use of the safe harbor from insider trading liability contained in the Securities and Exchange Commissions Rule 10b5-1 (10b5-1 Plans), including the following principles:
We believe that 10b5-1 plans, with proper safeguards, can serve a useful function. These plans, which are supposed to eliminate executives discretion over transactions in company stock, allow executives to diversify their holdings to meet legitimate personal needs while reducing the risk of insider trading liability.
Concern has been raised recently, however, that executives may be abusing 10b5-1 plans. A study by Stanfords Alan Jagolinzer found evidence that trades executed within 10b5-1 plans were more lucrative for the insiders than trades executed by insiders at the same firms who had not adopted 10b5-1 plans, and that early terminations of 10b5-1 plans are associated with impending disclosures of negative news. Jagolinzer concluded that insiders with 10b5-1 plans engage in some level of strategic trade despite the rules purpose. (Alan Jagolinzer, SEC Rule 10b5-1 and Insiders Strategic Trade, at 9-11 (Sept. 2007) (available on www.ssrn.com); see also Insiders with a Curious Edge, Business Week (Dec. 18, 2006))
Linda Chatman Thomsen, director of the SECs Division of Enforcement, stated in a March 2007 speech that the Jagolinzer study raises the possibility that plans are being abused in various ways to facilitate trading on inside information. Were looking at that hard. (Mar. 8, 2007 speech to the Corporate Counsel Institute, available at http://www.sec.gov/news/speech/2007/spch0308071ct2.htm)
The suggested elements of the policy would help ensure that 10b5-1 plans are not abused. The limitations on amendment and early termination and the waiting period would constrain senior executives ability to trade (or terminate a plan and thus refrain from trading) based on material nonpublic information. The disclosure-related principles aim to increase transparency regarding 10b5-1 plans. Requiring that the broker handling 10b5-1 plan trades not handle other trades for an executive minimizes the likelihood that the executive will inadvertently communicate material nonpublic information to the broker. We believe such a policy would be useful here at Safeway, where Chairman and CEO Steven Burd has adopted several 10b5-1 plans over the years and sold $47.7 million in company stock in 2007.
We urge stockholders to vote for this proposal.