Safeway Takes Heat for Not Acting on Promises
By George Anderson
If it’s the difference between what you say and what you do that gets you in trouble, then Safeway can teach other businesses a valuable lesson.
One year after a contentious annual shareholders’ meeting, the AFL-CIO is asking why Safeway has not yet followed through on its pledge to remove members of its board, William
Tauscher and Robert MacDonnell, from committees where potential conflicts of interest might exist.
“They essentially reneged on a commitment,” said Mike Garland, the corporate transactions coordinator for the AFL-CIO’s Office of Investment. “I think shareholders deserve an
explanation.”
The commitment that Safeway made publicly was to change the roles of William Tauscher and Robert MacDonnell on the company’s board of directors. In a press release issued last
May, Safeway said it would name a new director to succeed Mr. Tauscher as chairman of the executive compensation committee, and Mr. MacDonnell would no longer serve on the audit
committee.
Robert Gordon, Safeway’s general counsel, according to the Contra Costa Times, said the company still intends to replace Mr. Tauscher as chairman of the executive compensation
committee “in the near future” after new directors have gained more experience.
The company has kept Mr. MacDonnell on its audit committee because Safeway believed the alleged conflicts of interest no longer applied.
Moderator’s Comment: What is your assessment of Safeway’s handling of issues related to its board of directors? What, if anything, does it need to do
now? –
George Anderson – Moderator
Safeway in California has not faced the Wal-Mart juggernaut and, if their house is in disarray, the speeding train is going to demolish them in the same manner as Winn-Dixie. It’s bad for the employees, including the executives.
Ideally, Safeway would realize that they have poor leadership and have bungled all their recent acquisitions. I’m not quite certain how out of touch with reality Steve Burd and the board of directors are. Because of Burd’s fabulous compensation package, I would think he would do whatever it takes to keep that gravy train a rollin’, which means keeping all his buddies on the board. And that’s all fine and dandy. The competition is hoping they will do just that. No one is forced to own Safeway stock. If the shareholders don’t like what is going on, then I would suggest selling the stock and moving on. I think over the next couple of years, they will do just that. Safeway cannot continue to keep subsidizing all these low volume stores forever. Eventually, the years of financial abuse will take their toll. Safeway is no longer taken seriously from a competitive standpoint due to their “Winn-Dixie type” of store operations and execution. Let’s check back in two years and see where they are.
Safeway has fallen so far in so many ways. The biggest question would now appear to be – how long can they last? They seem to be headed in the same direction as Winn-Dixie and other once successful chains. They could also write a book on how not to deal with unions and customers. They seem to have an almost equal disregard for both.
With all the issues Safeway has on their plate, I would think that restoring organizational credibility and investor confidence would be a high priority. Doing what you say you will do is a very basic first step. Safeway has the right to run its business and make the decisions that it feels are best for the organization. But as a “pledge” has been made, at the very least, an explanation would be appropriate.
Safeway has long reminded me of certain political factions made up of the “good old boys” mentality. Making promises and then not keeping them just reinforces this stance. It’s clear that stuffing their pockets is the #1 priority as they have continued to ignore labor disputes, supplier issues and general customer dissatisfaction. No wonder their market share is dropping. They seem to be taking a page out of the Cubs operations manual.