Safeway (SWY)

Supporting Statement

Every chicken sold by Safeway is killed using the electric immobilization process, which involves dumping and shackling live birds, shocking them in an electrified water bath, slitting their throats, and defeathering them in tanks of scalding-hot water. Electric immobilization lowers product quality and is cruel:

CAK is USDA-approved and improves product quality, yield, and animal welfare:

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Although CAK improves product quality and the treatment of animals – and is a matter of significant social and public policy – Safeway has yet to produce a report on the feasibility of requiring its suppliers to adopt the technology. Clearly, it is in the company’s best interests that shareholders vote for this resolution.

Board Recommendation

Supporting Statement

The report should include the company’s definition of sustainability, as well as a company-wide review of company policies and practices related to long-term social and environmental sustainability.

We recommend that the company use the Global Reporting Initiative’s Sustainability Reporting Guidelines (“The Guidelines”) to prepare the report. The Global Reporting Initiative (www.globalreporting.org) is an international organization with representatives from the business, environmental, human rights and labor communities. The Guidelines provide guidance on report content, including performance in six categories (direct economic impacts, environmental, labor practices and decent work conditions, human rights, society, and product responsibility). The Guidelines provide a flexible reporting system that permits the omission of content that is not relevant to company operations. Over 700 companies use or consult the Guidelines for sustainability reporting.

Board Recommendation

Supporting Statement

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 Exchange’s and Safeway’s 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 Board’s executive compensation, audit, nominating and corporate governance committees. Using Safeway’s 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.

Board Recommendation

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. Tauscher’s transaction, rendering this proposal unnecessary and moot.

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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 Company’s 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.