Disney Is Latest Target Of Proxy Advisers Urging Split Of Chair, CEO Roles

February 26, 2013 by Ross Kerber and Lisa Richwine

Proxy advisers ISS and Glass, Lewis & Co. urged Walt Disney Co .shareholders to vote in favor of a proposal to split the chairman and chief executive roles now both held by Robert Iger.

The influential proxy advisers in reports provided on Tuesday also urged shareholders to cast advisory ballots “against” the pay of Iger and others at Disney.

The recommendations could sway undecided shareholders ahead of Disney’s annual meeting scheduled for March 6 in Phoenix, Ariz. A controversial issue at the media and theme park company has been the dual roles of Iger, who has been Disney’s CEO since 2005.

The board added the chairman’s title to Iger’s role at last year’s annual meeting, despite similar objections from ISS and public pension funds at that time that the combination gave him too much power.

Investors have gained traction on this issue at corporations such as JPMorgan Chase & Co., where last year 40 percent of shares were voted in favor of a measure to strip CEO Jamie Dimon of his chairman title. Overseers of government worker pension funds last week said they filed a measure for JPMorgan’s meeting this year.

Sponsors of the JPMorgan measure include pension funds overseen by Connecticut State Treasurer Denise Nappier.

Similarly, at Disney the Connecticut funds are also sponsors this year of a proxy resolution urging the board to split the chairman and CEO roles except in “extraordinary circumstances.” The Disney resolution has already gained support from the California State Teachers’ Retirement System (CalSTRS).

On Tuesday, the Disney measure also won backing from John Liu, New York City comptroller, who oversees pension funds holding Disney shares and is also a sponsor of the JPMorgan resolution.

“The Walt Disney Company needs a board chair who is independent of the company to best oversee management,” Liu said in an emailed statement.

In its proxy statement in January, Disney urged shareholders to vote against the proposal to split Iger’s jobs “because it seeks to replace the current, clear and workable standard for electing a chairman with a vague and unworkable standard.”

A Disney spokesperson said on Tuesday the company recorded a total shareholder return of 139 percent during Iger’s tenure, far above the 36 percent return for the S&P 500 during the same time, as well as record revenue and profit in fiscal 2012.

“Disney has delivered results that speak for themselves,” the spokesperson said.

Ninety-two percent of Iger’s compensation is contingent upon the financial results and stock performance, Disney said.

Disney also named an independent lead director, Orin Smith, in March 2012.

In its report to investors, provided to Reuters on Tuesday, ISS cited issues including whether Iger faced rigorous goals to receive long-term incentive pay.

“With continuing compensation concerns, shareholders may rightly question the non-management directors’ willingness and ability to provide independent oversight over management,” ISS wrote.

ISS is a unit of MSCI Inc.

In its own report to investors, also provided to Reuters on Tuesday, closely held Glass, Lewis wrote that despite the role of Smith as independent lead director, “we ultimately believe vesting a single person with both executive and board leadership concentrates too much oversight in a single person and inhibits the independent oversight intended to be provided by the board on behalf of shareholders.”