PLEASANTON, Calif. -- Safeway said it sees the shareholder vote to re-elect Steve Burd as chairman at its annual meeting here last week as a sign of support for the embattled executive and a validation of his strategies.
Eighty-three percent of shareholders voted to re-elect Burd, who also holds the titles of chief executive officer and president, despite an effort by a coalition of institutional investors to put pressure on the board to remove him.
The dissident investors had waged a two-month campaign to encourage shareholders to withhold their votes for Burd and two other directors, arguing the company's poor performance in recent years deflated the stock price. They had sought to get 25% or more of the shareholders to withhold their votes.
In an interview after the annual meeting, the company's new executive vice president and chief financial officer, Robert Edwards, told SN that Safeway initiated discussions with holders of 70% of the company's stock after the campaign by the dissident investors began, just three days after Edwards came on board. Some of the discussions were with the dissident investors, he said.
"Shareholders have voiced their vote in favor of what Safeway is doing long term," he said. "They understand Steve's strategy and support that strategy. Those talks with those shareholders were a healthy dialogue about corporate governance and other matters."
He said the governance changes the company announced earlier this month were a direct result of that dialogue and addressed many of the shareholders' concerns.
"Given the vote, shareholders showed overwhelming support for Burd," he said. "They are convinced that he has the leadership skills to lead the company forward. At 83% of the vote, that's an affirmation of that. We're not going to ignore the 17%, but the average withholding vote for CEOs is significantly higher."
The company presented statistics after the meeting illustrating that several other CEOs from large companies had received higher "withhold" votes and retained their posts.
In a response to the shareholder vote, four members of the dissident investor coalition described the 17% withhold vote as "remarkably strong."
"[It] sends a clear and unequivocal message to Steve Burd and leadership at Safeway," the group said in a prepared statement. "Shareholders will not tolerate board policies and management decisions that delay or obfuscate the serious and substantial corporate governance changes that are desperately needed."
The group said it would continue to press for additional reforms to make Safeway's board more independent.
Two other directors, William Tauscher and Robert MacDonnell, were re-elected with votes of approximately 85%. The funds also were seeking to remove those men from the board, citing a lack of independence and alleged conflicts of interest.
The only representative from the coalition who spoke during the question-and-answer period of the meeting was Bill Atwood of the Illinois Board of Investment, who questioned the independence of the board.
Outside the meeting, protesters from United Food & Commercial Workers Union and individuals who were opposed to the chain's use of farm-raised salmon staged assemblies. Much of the audience discussion during the annual meeting focused on the latter topic.
Burd also spent much of the meeting talking about the company's need to reduce its labor costs, defending the hard line it took during the 20-week strike against the company in Southern California that ended in February.
"If we had acquiesced to the union in Southern California, Safeway would have ceased to exist within 10 to 12 years," he said. "Our goal is to restructure our labor contracts to have a minimal effect on workers, but we can't assure our future paying extraordinary health and pension costs."
He said the company must restructure all its labor contracts to prevent paying "above-market wages, pension and health care" in order to survive.
In response to a comment from a 24-year Safeway employee who felt Safeway's approach hurts employees, Burd said, "It may not seem like it to you, but what we're doing will save your job and secure your retirement."