heART on CenterSafeway CEO Steven Burd has said that giving striking workers what they want will cost the grocery giant $130 million over the next three years-in other words, $43 million a year.
Ironically, that's roughly the same amount Burd's pocketed over the past four months, thanks to stock options he's accumulated since becoming a Safeway executive a decade ago. Safeway owns Vons grocery stores.
Stock options allow an employee of a publicly traded company to purchase a certain amount of stock at a certain price-usually what the company's stock was going for when the employee was first hired-and then immediately sell that stock at market price. During the hi-tech boom of the 1990s, stock options made lots of people very rich if they sold at the right time-when their company's stock was at its peak. For employees who held onto options for too long, if their company went under, the stock options went with it.
Safeway stock is hardly at its peak. At around $20 a share, it's a sad shadow of the fat and happy days of $45 in the spring of 2002. Burd's actions might suggest he isn't expecting those days to return. As San Diego State University professor of economics Tony Cherin put it, “I don't think he's particularly sanguine about the future of Safeway.”
Over the past 15 weeks, like clockwork, Burd's bought up 50,000 shares of Safeway at $6.50 a share and immediately cashed them in at market value. His first buy/sell was on Sept. 8, netting him $1,285,700. From his most recent trade, on Dec. 8, he pocketed $987,200-a $298,500 loss compared to four months ago, but nevertheless a lofty figure from the view of his striking employees.
So far, since that first trade, he's made $14,176,600 off stock options-merely a dent in the $76,752,557 in options the guy's reportedly accumulated. Burd's also made $27,223,400 from two “planned sales” (one coming the day strike talks broke off).
Last year, Burd took a 41-percent pay cut, knocking his $2,209,000 annual salary down to $1.3 million. In comparison, Albertson's CEO Lawrence Johnston makes $12,200,000 annually while Kroger (owner of Ralphs) CEO Joseph Pichler earns $3,930,000.
Unlike his announced salary cut, Burd's decision to exercise his stock options was never announced to the public. Since the strikes began, Safeway has issued two press releases-Oct. 21 and Nov. 13-announcing that four of the company's higher-ups had filed papers with the Securities and Exchange Commission in order to cash in their stock options. According to SEC documents, Burd set up the same sort of plan in August of this year. A search, however, of Safeway's press release index shows no announcement of the CEO's plans. This doesn't make Burd's actions illegal-just sneaky, perhaps. A Safeway spokesperson failed to respond to CityBeat's request for comment.
Regardless of what goes on behind boardroom doors, publicly Safeway has promised investors that the company will prevail in strike negotiations and that investors will profit from the money saved by cutting worker benefits. As one Associated Press article put it, “Safeway's 2004 comeback plan includes significant savings from employee concessions on health care, wages and pensions.”
Safeway also plans to close a crippled Chicago supermarket chain, Dominick's, that it acquired in 1998 for $1.9 billion. Burd's been criticized for botching the Dominick's acquisition and setting the stage for his company's decline. Last year, Safeway estimated Dominick's value at $315 million-$1.6 billion less than it was worth five years ago.
San Diego law firm Milberg Weiss filed two lawsuits last month on behalf of two Florida-based pension funds, accusing Burd of a five-year mismanagement spree that's cost stockholders $15 billion.
United Food and Commercial Workers, the union representing striking grocery workers, has claimed that Burd is the reason negotiations have dragged on for so long.
Follow Burd's stock frenzy for yourself: http://biz.yahoo.com/t/34/154.html
Steven Burd fun-fact: Burd's contributed lots of money to George W. Bush's re-election campaign, earning himself the title of “ranger.” In Bush/Cheney 2004 lingo, “rangers” are supporters who've contributed $200,000 or more.
