Safeway Adopts My Poison Pill Bylaw Proposal

Editor’s Note: This post is from Lucian Bebchuk of Harvard Law School.

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.

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