SALISBURY, N.C. -- Ralph Ketner, the executive who founded founded Food Lion in 1957 with his brother and a mutual friend, hasn't been in active management of the chain for some years. But he is an active observer of the chain.
ter the resignation of Tom E. Smith, Ketner said he was troubled by how much money Smith was being paid and related costs. Ketner gave SN a copy of the letter.
Throughout the letter, Ketner used quotation marks around the word resignation when referring to Smith, "because I find it impossible to believe that the Food Lion board would give [Smith] perks worth millions of dollars if Tom, indeed, did resign," Ketner wrote.
"My memory of past Food Lion employment contracts did not obligate Food Lion in the event of employees' voluntary resignations."
The letter was sent to McCanless a few days before Food Lion's annual meeting here in early May. At the end of the two-hour-plus meeting, Ketner stood up and complained, "None of my questions have been answered."
McCanless said at the meeting he and other members of management had attempted to answer some of the questions raised in Ketner's letter and by other shareholders during the question-and-answer portion of the meeting.
What follows are Ketner's questions, and management's responses given during and after the meeting:
Ketner asked if a first-quarter charge of $2.4 million relating to part of the company's settlement with Smith was the extent of the payoff to Smith or if there would be a further payout.
During the meeting, a shareholder said he was not happy with the payment to Smith since Smith had resigned voluntarily.
The company told SN the $2.4 million charge ends the company's obligations to Smith.
Ketner noted Food Lion had paid $249,939 during 1998 to two motels in which Smith owns 50% of the common stock. "Surely, competitive bids were gotten in the past, but if not, good business practices demand that you do so in the future," he wrote.
The company told SN housing in local motels had been put out for competitive bids, as indicated in the proxy.
Commenting on the resignation of Pamela Kohn as Food Lion's senior vice president of merchandising just seven days after Smith left the company, Ketner said, "Many people have asked me if there is a connection. Is there?"
Food Lion officials told SN Kohn's position had been eliminated to flatten the company's reporting responsibilities.
Ketner questioned why Delhaize would offer Food Lion the opportunity to invest $10 million in an ongoing Delhaize joint venture in Thailand.
"I would suggest that before voting, the directors ask themselves, if this is such a good investment opportunity, why is Delhaize offering to share with Food Lion," Ketner said. "I was in Thailand in January , and the economy was in very bad shape."
Pierre-Olivier Beckers, chairman of Food Lion and chief executive officer of Delhaize, said the investment allowed both companies to expand in Thailand "where opportunities are available."
Commenting on the company's prohibition against cumulative voting, Ketner said, "Delhaize hand-picks the directors with no chance whatsoever of a true representative of the shareholders being elected."
The company told SN Ketner was a member of the board when it changed its procedures to conform with new North Carolina rules that prohibited cumulative voting.
During the meeting a shareholder asked why, with Delhaize controlling 52% of the voting stock, the company even bothers to send out proxies. "Why spend the money on tabulating the votes?" he asked, a question that was followed by audience applause.
McCanless replied that proxies were necessary to comply with Securities and Exchange Commission regulations, "and from a practical standpoint, it gives shareholders the opportunity to vote for or against the director nominees."