Safeway Inc. has reached an agreement with Harvard LawSchool Professor Lucian Bebchuk to adopt a bylaw provision for limiting theadoption of shareholder rights plans, also known as poison pills.
The proposed bylaw is based on a shareholder proposalthat would amend Safeway’s bylaws, which Bebchuk put forward for the company’s upcomingannual meeting. Under the new provision, an extension of a poison pill notendorsed by shareholders must be approved by at least 75 percent of the board,and a pill not extended would expire one year after its adoption or lastsuch extension, according to Bebchuk. Safeway’sboard, as a result of the agreement, adopted the new bylaw and Bebchuk in turn withdrew his shareholderproposal.
Safeway is the fourth company – the second this proxy season– to adopt a poison-pill bylaw that Bebchuk has proposed. Last month, he reached a similar agreement with CVS Caremark, whose now-adopted bylaw is based on a model bylaw Bebchuk developed that was the basis of a courtdecision in a case with CA Inc., during which CA abandoned its attempt toexclude Bebhcuk’s shareholder proposal from the corporate ballot. The bylawmodel basically requires directors to establish a poison pill only upon aunanimous vote, and every director would also need to vote in favor of such anamendment in order to extend a pill beyond one year.
Meanwhile, Walt Disney Co.’s board last summer adopted abylaw amendment based on a revision of a proposal Bebchuk submitted in the Fallof 2006 that won 57 percent of the votes cast during that year’s annualmeeting. He also reached an agreement with Bristol-Myers Squibb.
Bebchuk, in his pursuit of having his proposals adopted bysuch companies, says there hasn’t been much friction on the road thus far inapproaching them. “I have found companies in this proxy season to be relativelyopen to adopting my pill bylaw proposals,” he says. “This might be partly dueto companies’ recognition that investors are likely to support these proposalsin the event they would come to a vote. It might also be partly due tocompanies’ natural tendency to be more willing to adopt arrangements alreadypresent in other companies.”