Walt Disney Company: Proxy Score 25

Walt Disney Company: Board Proposals

As mentioned above, I voted “Against” the pay package and auditor. As is my habit, when I vote against the pay package, I also vote against/withhold on the compensation committee. I also took the advice of Egan-Jones and voted against Robert Iger, since I share their belief that the CEO and Chair positions should be separated.

Egan-Jones also recommended

clients “WITHHOLD” votes from Affiliated outside directors John S. Chen, Fred H. Langhammer, current members of the Audit Committee; Affiliated outside director Susan E. Arnold, current member of the Compensation Committee; Affiliated outside director Robert W. Matschullat, current member of the Audit and Nominating committees; Affiliated outside director Aylwin B. Lewis, current member of the Audit and Compensation committees of the Board. We believe that key Board committees namely Audit, Compensation and Nominating committees should be comprised solely of Independent outside directors for sound corporate governance practice.

That seems like excellent advice to me, so I did the same.

Walt Disney Company: Shareholder Proposals

#5 Report on Lobbying Payments and Policy

This proposal is from Zevin Asset Management on behalf of David Fenton, the Sisters of Saint Francis of Philadelphia, the Congregation of Sisters of St. Agnes, the Center for Community Change, and Daniel Altschuler. Justice Kennedy appears to have thought all this information was already reported to shareholders on a routine basis when he wrote the Citizens United decision.

With the advent of the Internet… Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.

Such information is not already reported to shareholders. Here is our opportunity to get that right at the Walt Disney Company. Vote #5 ‘FOR.’

#6 Proxy Access Bylaw Amendments

James McRitchie (that’s me) is the proponent. I voted ‘FOR.’ While Disney amended their proxy access bylaws after last year’s vote on my previous proposal, two significant changes are still needed.

Current bylaws allow shareholders to nominate only two, easily isolated, directors. My proposal would up that to 25%, yielding 3 nominees.

Current bylaws limit nominating groups to 20 members. The Council of Institutional Investors studied such provisions and found their members, who hold in excess of $3 trillion in assets, would not be able to meet the requirement of 3% held for 3 years with a 20-member limit. The proposal seeks removal of the cap on the number of members that can form a group.

One thing few take into account is that shares are not consistently held. Funds frequently buy or sell shares. For example, during the last reporting period (quarter), the top 50 institutional shareholders at Disney bought or sold an average of 9% of their shares. That drastically reduces the likelihood that 20 shareholders can get to 3% since many will have held only a small fraction, if any, of the shares they hold today for the entire three year period. According to PoliticFact, the average holding time for all stocks has fallen to four months. Disney and other companies have provided no evidence their restrictive proxy access bylaws are anything but an illusion.

Like all the shareholder proposals on Disney’s proxy, proposal #6 is advisory. The Board has flexibility in implementing (or not implement) any proposal. For example, the Board could lift the cap on nominating groups from 20 members to 50 members. That certainly would go a long way in giving shareholders genuine proxy access. Vote FOR #6.

Walt Disney Company: Votes Against Board Position in Bold 

As mentioned above, ProxyDemocracy.org had collected the votes of four funds when I voted.  Proxy Insight reported additional votes from Canada Pension (CPPIB), Teacher Retirement System of Texas (TRS), and several others. All voted FOR #7 amendments to Disney’s proxy access bylaws.

Looking at SharkRepellent.net for other provisions unfriendly to shareowners. The main outstanding issue is proxy access:

• Special meetings can only be called by shareholders holding not less than 25% of the voting power.
• Proxy access lite. Proxy access provision whereby a stockholder, or group of no more than 20 stockholders, holding at least 3% of the outstanding common stock continuously for at least three (3) years may nominate directors, constituting up to the greater of two individuals, or 20% of the Board. 

Walt Disney Company: Mark Your Calendar

To be eligible for inclusion in the proxy statement for our 2018 Annual Meeting, shareholder proposals must be received by the Company’s Secretary no later than the close of business on September 15, 2017. 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.

Warnings

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.