Safeway CEO in ’04 Earned $19.5 Million

Safeway Inc. Chief Executive Steven Burd’s pay package totaled $19.5 million in 2004 -- a tumultuous year marked by a Southern and Central California labor dispute that embittered the grocer’s workers and alienated shoppers.

Burd generated $17.2 million of the windfall by cashing in 1.15 million of the stock options that he had accumulated since becoming Safeway’s CEO in 1993. He also received a $1.14-million base salary and a $1.15-million bonus, according to documents filed Tuesday with the Securities and Exchange Commission.

The 2004 compensation package represented a 39% increase from 2003, when Burd pocketed $14 million, including $13 million from the redemption of stock options.

In late 2003, Safeway joined two other major grocers, Kroger Co. and Albertsons Inc., to seek wage and benefit concessions. The demands, triggered by intensifying competition from discount retailers, provoked a 4 1/2 -month strike and lockout that ended early last year.

This year, Burd’s base salary will increase to $1.3 million, up from the $1 million he had earned every year since 2000, according to the filing.

Pleasanton, Calif.-based Safeway also owns the Vons and Pavilions supermarket chains.

Safeway didn’t give Burd any new stock options last year. He ended 2004 with 4.9 million vested stock options worth $37.4 million.

Safeway’s overall performance in 2004 improved from 2003, when the supermarket labor dispute began. In 2003, the company was pushed to a $169.8-million loss on sales of $35.7 billion; last year, Safeway rebounded to earn $560.2 million on sales of $35.8 billion.

But analysts considered Safeway’s performance last year decidedly lackluster as the company failed to regain all of the business it lost during the strike and because its gross profit margin declined on greater discounting to lure customers back.

Given this performance and cuts in new workers’ wages and benefits in Southern California, union officials said Burd’s pay raise was surprising.

“This is outrageous,” said Rick Icaza, president of United Food and Commercial Workers Local 770 in Los Angeles, which was involved in the labor dispute. “It doesn’t make any sense as to performance. They are just taking our money and giving it to him.”

Although Burd’s increase in compensation was substantial, some analysts said it was not necessarily excessive for a company of Safeway’s size.

“It looks like a lot of money,” said David Leach, managing director of Los Angeles-based ECG Advisors. “But it’s a big company.”

Safeway executives said the pay increase rewarded Burd for his efforts in getting the company back on track.

“In spite of 2004 being a difficult year, under Burd’s leadership the company made excellent progress on several fronts and laid the foundation to support future growth,” Safeway spokesman Brian Dowling said.

Safeway shares gained 24 cents Tuesday to $20.71 on the New York Stock Exchange. In 2004, Safeway’s stock fell almost 10%.

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Associated Press was used in compiling this report.