Investing in the Future for Burd Means Take the Money and Run
Safeway's Chief Executive Officer, Steven Burd is making millions off of the backs of those who made the company great while they have been forced out of their jobs and on strike to save affordable health care.
Burd cashed out his Safeway stock while it was still hot, selling 300,000 shares of company stock between September 3 and October 14, making $5.2 million. Had Burd waited to sell until after the talks broke off and workers went on strike he would have made nearly $1 million less, due to lower stock value.
Burd has been the driving force behind the company's resistance to negotiate a fair contract. He has even characterized the employers' attempt to hold down labor costs--forcing a strike--as "an investment in our future."
Burd’s idea of investing in the company's future seems to be about picking the pockets of their workers to feed the company's bottom line.
Read more on Burd:
- Safeway's Merger Loss Eclipses Labor Woes by Michael Hiltzik, Los Angeles Times, October 23, 2003
During a recent conference call with a claque of Wall Street analysts, he characterized the employers' attempt to hold down labor costs as "an investment in our future" and predicted that lost sales during the present work stoppage would prove to be "infinitesimal, compared to the cost of not doing this." Capitulating on this contract, he said, could cost Safeway as much as $130 million over its three-year term.
Burd's math inspired me to do some arithmetic of my own. Assuming his figure is right (and I have no reason to doubt it), I calculated that by these terms it would take the company's local unionized workforce the better part of three decades to do as much damage to Safeway's bottom line as Burd did with a single merger deal in 1998.
I am speaking of Safeway's notorious acquisition of the 113-store Dominick's supermarket chain in Chicago. Dominick's was a modestly upscale grocery when Safeway bought it from Yucaipa Cos., a Los Angeles company run by grocery magnate Ron Burkle, for $1.8 billion in cash and assumed debt.
For Yucaipa, which had purchased the chain three years earlier for $693 million, this deal was a windfall. Under its management, sales had grown steadily, although they were flattening out a bit in 1997-98, just before Safeway took over. From that point on, as Safeway later disclosed, business at Dominick's headed straight down.
By the time it placed the chain up for sale last November, Safeway was valuing Dominick's on its own books at about $315 million. That suggests the company squandered more than $1 billion of its shareholders' money on this deal. Compared with that sum, the $130 million that Burd is trying to shave from the local union contract may not exactly be "infinitesimal." But it is, well, way smaller....
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