Disney Compromises With Shareholders on Chairman-CEO Role

Walt Disney Co. reached a compromise with shareholders, saying it will split the roles of chairman and chief executive officer in the future under what the company called “normal” circumstances.

Disney, the world’s largest entertainment company, amended governance guidelines that already say the chairman will be an independent director, unless the board decides “the best interests of shareholders would be otherwise better served,” according to a regulatory filing today. The change outlines steps to be taken when the chairman isn’t independent.

The move averted a showdown at Disney’s annual meeting, held today in Portland, Oregon, and led by Chairman and Chief Executive Officer Robert Iger. A group of investors had sought a shareholder vote on a measure to let owners of 3 percent or more of the stock nominate board candidates. That plan was withdrawn after talks with the company, according to the filing.

The proposal was submitted by Hermes Equity Ownership Services, the California State Teachers Retirement System and the Connecticut Retirement Plans & Trust Funds, according to a January filing by Burbank, California-based Disney. They cited the board’s decision to make Iger chairman and CEO.

Connecticut “expressly reserves its rights to re-file the resolution for the 2015 proxy season, if the engagement between the co-filers and Disney does not continue to demonstrate transparency on board leadership issues,” state Treasurer Denise L. Nappier said in a statement.

Annual Review

In its filing today, Disney said that, when the chairman isn’t independent, it will evaluate the arrangement annually and include a written explanation in proxy materials.

Iger, 63, has been CEO since 2005 and added the role of chairman in 2012. The board has turned back calls to split the positions in previous years. Disney appointed an independent chairman in 2004 amid a shareholder revolt against then-CEO Michael Eisner.

At today’s meeting, investors voted 80 percent in favor of the company’s executive compensation plan, an increase from less than 60 percent the past two years. They also rejected a shareholder proposal to limit accelerated executive pay in the event of a change in control.

Iger earned $34.3 million in total compensation in fiscal 2013, a 15 percent decline as Disney failed to beat its targets as handily as in the prior year. The company posted record sales and profit for the third straight year.

Adviser’s Take

Institutional Shareholder Services Inc., an advisory firm, recommended that investors back the executive pay plan this year after suggesting they reject it in 2013.

“CEO pay and company performance are reasonably aligned for the year in review, and CEO total pay decreased, for the first time since 2009,” ISS said in a Feb. 25 report. “The company has engaged with shareholders to seek input following notable investor dissent to the say-on-pay proposal last year.”

So-called say-on-pay proposals, required by the U.S. Securities and Exchange Commission, give shareholders a nonbinding advisory vote on executive pay.

At the meeting, Iger said the company plans a pirate-themed land in Shanghai Disneyland when it opens at the end of 2015. He announced a third installment to “Cars,” the Pixar film series, and said the “Star Wars” picture scheduled for 2015 will take place 30 years after “Return of the Jedi.”

Disney rose 0.7 percent to $81.99 at the close in New York. The stock has advanced 7.3 percent this year.

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