The Walt Disney Company (DIS): How I Voted – Proxy Score 60

waltdisney_def14a1x2x1The Walt Disney Company, $DIS, is one of the stocks in my portfolio. Their annual meeting is coming up on 3/18/2014. had collected the votes of three funds when I checked and voted on 3/9/2014.  I voted with management 60% of the time.  View Proxy Statement.

Warning: Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime)

I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs

Disney’s Summary Compensation Table (page 35 not hyperlinked from table of contents) shows Chairman and CEO Robert A. Iger was the highest paid named executive officer (NEO) at about $34.3M in 2013. I’m using Yahoo! Finance to determine market cap ($144B) and Wikipedia’s rule of thumb regarding classification. Disney is a large-cap company. According to Equilar (page 6), the median CEO compensation at large-cap corporations was $9.7 million in 2012, so Costco is well over that median. I voted in against the pay package and members of the compensation committee (Susan E. Arnold (Chair), John S. Chen, Fred H. Langhammer, and Aylwin B. Lewis).


The GMIAnalyst report I reviewed gave Disney an overall D for several reasons, including concerns in executive compensation.

As an example, CEO Robert A. Iger’s fiscal 2012 total summary compensation is well over six times the median for the other named executive officers. This amount includes a base salary ($2.5 million) that is 250% over the limit for deductibility under Section 162(m), $16.52 million in cash bonuses, over $3 million in pension increases, $7.8 million in market-priced stock options, $9.5 million in performance-based restricted stock, and $800,700 in perks. Executive perks for Mr. Iger includes $190,439 in personal air travel paid by the company and $574,331 for security expenses. Not included in this total are $33.4 million in equity profits from the exercise of stock options and vested stock awards. In terms of annual equity awards, stock options simply vest over time. Market-priced stock options may provide rewards due to a rising market alone, regardless of individual performance. Moreover, performance-based restricted stock awards cover a three-year performance period and pay outs 100% for underperforming half the company’s peer group. Finally, the CEO is entitled to a potential payment of nearly $105 million in the event of termination without a change in control. Taken together, these facts suggest that compensation practices are not aligned with shareholders’ interests.

The board has proposed to amend its certificate of incorporation to include the right of shareholders with at least 25% of outstanding shares to call a special meeting. They do so in order to avoid including my proposal with a lower 10% threshold. I don’t like the way the SEC interprets rule 14a-8(i)(9) as I explained at Take Action: Mickey Mouse Rule at SEC Needs Amending. If you agree, please send a brief email to the SEC as explained in that post. Since 25% is better than no right, I voted in favor of the proposal.

I voted in favor of the proxy access proposal submitted by Hermes, Connecticut Retirement Plans and Trust Funds, and CalSTRS. I don’t like the high thresholds (3% held for 3 years) required. However, again half a loaf is better than none. As I have explained elsewhere in a great many posts, proxy access is a fundamental right that shareowners at all companies should enjoy. The proxy is not management’s, it belongs to shareowners. We should be able to use it to include our nominees.

I also voted in favor of William Steiner’s proposal to limit accelerate executive pay and ensure that any unvested award will vest on a pro rata basis up to the time of the senior executive’s termination.  Pay is already crazy through the roof; don’t let them accelerate pay for being fired. 

How I voted (CorpGov) below:

1aSusan E. ArnoldForForAgainstForFor
1bJohn S. ChenForAgainstAgainstForFor
1cJack DorseyForForForForFor
1dRobert A. IgerForAgainstForForFor
1eFred H. LanghammerForForAgainstForFor
1fAylwin B. LewisForAgainstAgainstForFor
1gMonica C. LozanoForForForForFor
1hRobert W. MatschullatForForForForFor
1iSheryl K. SandbergForForForForFor
1jOrin C. SmithForForForForFor
2Ratify AuditorsForForForForAgainst
3Ratify NEO Pay ForAgainstAgainstForFor
4Provide Right to Call Special MeetingForForForForFor
5Adopt Proxy Access RightAgainstForForForFor
6Pro-rata Vesting of Equity AwardsAgainstForForForFor

Mark your calendar:

To be eligible for inclusion in the proxy statement for our 2015 Annual Meeting, shareholder proposals must be received by the Company’s Secretary no later than the close of business on September 26, 2014. Proposals should be sent to the Secretary, The Walt Disney Company, 500 South Buena Vista Street, Burbank, California 91521-1030 and follow the procedures required by SEC Rule 14a-8.

  Looking at, Disney has a supermajority vote requirement (66.67%) to amend certain charter provisions.

From Yahoo! Finance, The Walt Disney Company’s ISS Governance QuickScore as of Mar 1, 2014 is 6. The pillar scores are Audit: 1; Board: 6; Shareholder Rights: 4; Compensation: 8. Brought to you by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosures. Vote “for” every item on the proxy ballot and watch those scores go up next year.

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