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Safeway Adopts My Poison Pill Bylaw Proposal

By Harvard Law School Program on Corporate Governance

Safeway and I have reached an agreement under which the company adopted a by-law provision I proposed for limiting the adoption of poison pills. Safeway is the second company in this proxy season, and the fourth overall, to adopt a poison pill bylaw I proposed.

The adopted by-law is based on a shareholder proposal to amend the company’s by-laws that I submitted for the company’s upcoming annual meeting. Following my agreement with the company, the company?s board adopted the new by-law and I withdrew the shareholder proposal. The amended by-laws of Safeway, including the new section 9 of Article VI, were filed yesterday and are available here.

Under the new by-law provision, any extension of a poison pill plan not ratified by the shareholders must be approved by at least 75% of the members of the board of directors, and a pill not so extended will expire one year after its adoption or last such extension.

My shareholder proposal and the by-law adopted by Safeway are based on a model by-law that was the subject of a court decision in the CA case, which led CA to abandon its attempt to exclude my proposal from the corporate ballot. An article about this case and my model by-law is available here.

Safeway?s adoption of my poison pill by-law was preceded by an adoption last month by CVS Caremark, an adoption by Disney, and an adoption by Bristol-Myers Squibb. Disney amended its by-laws after my proposal won 57% of the votes in Disney?s annual meeting, while CVS Caremark and Bristol-Myers Squibb, like Safeway now, amended their by-laws following an agreement with me that made a shareholder vote unnecessary.

I commend Safeway’s board of directors for agreeing to adopt the pill-limiting by-law. I hope that other public companies will follow the example set by Safeway, CVS, Disney, and Bristol-Myers and adopt similar by-law provisions.

I would like to thank Michael Barry and Ananda Chaudhuri from the law firm of Grant & Eisenhofer for their valuable legal advice and legal representation in connection with my shareholder proposals in general and the pill by-law proposals in particular. I also wish to thank Greg Taxin and Julie Gresham of Spotlight Capital Management for advising me on engagement with companies.

Full post as published by The Harvard Law School Corporate Governance Blog on March 12, 2008 (boomark / email).