Disney’s annual meeting took place in Salt Lake City earlier today. One can only hope the meeting was as exciting as the events leading up to it.
ISS recommended that investors vote ‘no’ on the company’s executive compensation plan, and Disney didn’t take it lying down. In an unprecedented move, the amusement park and media company filed additional proxy materials early this month refuting the apparent basis of ISS’ recommendation, namely the fact that Disney ‘recently extended excise tax gross-ups.’
‘In point of fact,’ the new proxy materials state, ‘the company’s compensation committee has adopted a policy, fully disclosed in the proxy statement, that prohibits excise tax gross-ups in any future agreements with executive officers…’
Disney also refutes the basis for ISS’ recommendation in support of a shareholder proposal regarding performance tests for restricted unit awards: ‘ISS made frequent reference to what it argued was the short-term nature of a one-year earnings per share component of the company’s current performance test. In point of fact, however, the EPS test is a three-year test,’ Disney’s proxy supplements state.
Disney’s moxie is winning praise from some ISS critics, who are encouraging other companies to act in kind.
‘Companies should proactively use their CD&As to anticipate ISS negative recommendations, point out the flaws in its methods for determining performance and valuing pay, and most importantly, explain to their shareholders how their CEO and executive pay (as actually delivered, not as valued on a Black-Scholes grant basis) is aligned with company performance,’ says Jim Barrall, a partner in Latham & Watkins’ Los Angeles office. ‘While this likely will not cause ISS to change its recommendations, it will be persuasive to thoughtful shareholders, could be critical to some votes and could help reshape the dialogue between companies and their shareholders on executive compensation matters ."
But, on Friday, Disney caved, changing its executive compensation plan to provide that it will no longer pay the taxes on the severance packages of its CEO, Bob Iger, or three of the company’s other senior executives in the event they are fired.
ISS has reportedly since recommended that shareholders vote in favor of Disney’s compensation plan.
