INVESTORS ASK SAFEWAY TO DROP DIRECTOR

ELLIOT ZWIEBACH

PLEASANTON, Calif. -- Financial officials in four states and representatives of two retirement funds have asked Safeway not to renominate William Y. Tauscher as one of the chain's independent directors because of alleged business dealings with the chain that might compromise his objectivity.

Tauscher was elected as a Safeway director in 1998, and was reelected in 2001.

A Safeway proxy statement said Tauscher is chairman of TemTex Industries; former chief executive officer of MainStreet USA Corp., an e-commerce venture; and former chairman, president and CEO of Vanstar Corp., a technology service and networking company.

Tauscher could not be reached last week for comment. Brian Dowling, a Safeway spokesman, told local media Tauscher had done nothing specified in the letter that would disqualify him from being renominated as an independent director.

The letter, dated Dec. 18, was sent to Safeway on the official stationery of Denise L. Nappier, treasurer of the State of Connecticut, and was signed by Alan G. Hevesi, New York's controller; William Thompson Jr., New York City's controller ; Steve Westly, California's controller; Phil Angelides, California's treasurer; Edward Smith, chairman of the Illinois Board of Investment; Jack Ehnes, CEO of the California State Teachers' Retirement System; and Rob Feckner, chairman of the investment committee of the California Public Employees' Retirement System.

The letter was sent to Rebecca A. Stim, chairman for the nominating and corporate governance committee of Safeway's board of directors. It said Tauscher's track record "of engaging in business deals with Safeway has fatally compromised his objectivity as an independent director.

"Of Safeway's outside directors, we believe Mr. Tauscher has the most serious conflicts of interest and is least able to act independently," the letter stated.

"Since joining the board ... [he] appears to have engaged in approximately $3.5 million in related-party transactions involving Safeway ... [and] we urge [Safeway's] nominating committee to select an alternative director nominee ... for election at next year's annual shareholder meeting."