California Pension Fights Disney Over Iger Chairman Role

The California State Teachers’ Retirement System, in a governance dispute with Walt Disney Co., will oppose the election of six directors, including Chairman and Chief Executive Officer Robert Iger.

The $158 billion state pension, with 5.28 million Disney shares, will oppose an amendment to the company’s stock incentive plan and cast a “no” advisory vote on executive pay, according to a statement today. Calstrs also will vote in favor of splitting the chairman and CEO roles in the future.

The opposition comes after Disney, the world’s largest entertainment company, reported earnings-per-share growth of 24 percent in its last fiscal year and share-price returns more than double the S&P 500 Index. Iger, 62, has said he will step down as chief executive in March 2015 and serve as chairman until June 2016. His predecessor, Michael Eisner, had tangled with investors over board composition before his departure.

“Here we go again, sliding back into a governance structure that has already proved detrimental to the company’s long-term growth and to its shareholders’ interests,” Anne Sheehan, Calstrs director of corporate governance, said in the statement. “We’ve been through this fight before, in 2004-05, which resulted in the ouster of then-CEO Michael Eisner and a shareholder revolt that led to the separation of the board chair and CEO positions.”

Stock Grants

Disney has come under fire from investors and proxy advisers in the past year over its executive pay and the decision to combine the top jobs under Iger. The Burbank, California-based company’s CEO received $40.2 million in total compensation last year, based on regulatory reporting rules.

Disney’s standards for electing a chairman are “clear and workable,” the company said in a January filing. The suggestion “that the current standard led to a poor decision to elect Mr. Iger Chairman is unfounded.”

According to the filing, Disney changed Iger’s pay criteria based on feedback from investors. He must now meet earnings per share and stock-price targets before receiving all of his stock grants. Ninety-two percent of the target value of Iger’s compensation is contingent on financial results and the stock’s performance, according to the filing.

Earnings Growth

The company declined to comment today beyond what it previously published in the Jan. 18 proxy statement.

Disney’s earnings rose 24 percent to $3.13 a share in the fiscal year ended Sept. 29. Over Iger’s eight-year tenure as CEO, earnings have risen at a 14.8 percent average annual rate, according to Disney’s filings.

Disney’s total return to shareholders for the fiscal year was 76 percent, more than double the 30 percent return for the Standard & Poor’s 500 Index.

The stock fell 0.2 percent to $54.88 at the close in New York York, after hitting an all-time high last week. Disney has gained 10 percent this year.

At last year’s annual meeting, Calstrs opposed Disney’s executive pay plan and the decision to combine the top jobs. This year’s shareholder meeting is scheduled for March 6 in Phoenix, Arizona.