(March 1, 2013) — Institutional investors have filed a shareholder proposal to try and force The Walt Disney Company’s bosses to allow them to nominate candidates to the board and thereby encourage improved accountability.
Hermes Equity Ownership Services (EOS), which advises on assets of over $161 billion from a range of institutional clients, has filed the proposal requesting proxy access ahead of the Walt Disney’s AGM on March 6.
The shareholder group said the proposal was a direct response to the board’s “surprise move” to appoint CEO Robert Iger as chairman of the board at last year’s AGM and contractually guaranteeing his chairmanship through 2016, without suitable transparency and input from shareholders. The move was a blatant reversal of its 2004 commitment to maintain an independent chair, Hermes EOS said.
Tim Goodman, head of North American engagement at Hermes EOS, said: “We want to see Walt Disney endure as the ‘Magic Kingdom’, not the ‘Tragic Kingdom’. Proxy access is imperative, and our non-binding shareholder resolution is designed to offer a constructive avenue towards improving corporate governance at the company by protecting the interests and enhancing the rights of its long-term shareholders.”
Walt Disney had not returned requests for comment at the time of going to press.
The shareholder group said it also had fundamental concerns about the company’s “flawed approach to executive compensation.” It said that an “excessive focus on short-term awards, guaranteed minimum pay-outs”, adding that the company had “vague and unchallenging performance conditions tied to pay”.
Hermes EOS cited 42% of the annual advisory vote that went against proposals on executive pay at last year’s AGM and said it was disappointed that the company had not acted upon this more meaningfully.
“Walt Disney’s board, its remuneration committee and long-term shareholders need to join together to address this defective system of compensation,” Goodman said.
He added that despite improvements in some cases in North America, there was still a long way to go before good corporate governance spread across the entire community.
“Despite recent enhancements to the dialogue process, there is more to be done to drive better governance, accountability, and transparency,” said Goodman. “Walt Disney is a perfect case of poor dialogue between the board and its long-term shareholders which creates a detriment to all.”
Last year Institutional Shareholder Services published a report on its corporate governance survey of 97 investors (including asset owners and managers) and 273 respondents from debt-issuing corporations. Notably, executive compensation was the top area of concern for both groups, but investors and corporations had different takes on how to improve the situation.
The full related story: Touchy Subject: Institutional Investors on CEO Pay