Safeway Rewards 11 Top Execs

Safeway Inc. recently awarded 11 senior and executive vice presidents millions of dollars in stock grants and options under a new compensation plan that is drawing fire from labor leaders and others.

The plan came together in the wake of four high-profile corporate defections last year, including that of the chief financial officer, Vasant Prabhu, who left to join Starwood Hotels & Resorts Worldwide. A Safeway spokesman said the stock and options awards were necessary because after two years of wage freezes and undersized bonuses, it was becoming difficult to attract and keep talent.

There have been questions about the timing and the appropriateness of the move to reward upper management, given the company's declining profitability and its demand that the next contract with workers in Central and Southern California institute a new tier of lower wages and less attractive benefits for new hires.

"I think it's wrong as a matter of substance and appearance," said Nell Minow, editor of the Corporate Library, which tracks executive compensation. "Why is anyone getting a bonus? The company's performance has been poor for some time."

Officials of the United Food and Commercial Workers union, which launched a strike against Safeway's Vons and Pavilions stores Oct. 11, said pay should be tied to performance at Safeway.

"Executives should not be rewarded for losing money," said Rick Icaza, president of UFCW Local 770 in Los Angeles. "It is obscene to reward executives with fat bonuses when more than 20,000 employees have given up their own paychecks."

Safeway, based in Pleasanton, Calif., posted net income of $202.5 million, or 45 cents a share, in its third quarter ended Sept. 6, down 28% from the previous year. The firm will post fourth-quarter earnings Feb. 12.

Analysts expect the strike to cost Safeway hundreds of millions of dollars in lost sales. Albertsons Inc. and Kroger Co.-owned Ralphs supermarkets, which locked out their union workers the day after the Safeway strike began, also are forgoing sales in Southern and Central California.

Safeway spokesman Brian Dowling said the company decided to award the stock grants and options because "we are looking for ways to attract and retain the best people so we can see the company grow."

In December, eight senior and executive vice presidents received grants of restricted stock. The 409,352 shares were worth nearly $9.4 million at Friday's closing price of $22.95. The eight officers can sell the shares in 25% increments over the next four years.