SEC Says Disney Can Exclude
Shareholder Resolution After All
By BRUCE ORWALL and DEBORAH SOLOMON
Staff Reporters of THE WALL STREET JOURNAL
December 29, 2004; Page C4
Staff of the Securities and Exchange Commission reversed a decision it made just weeks ago, allowing Walt Disney Co. to withhold from its proxy an annual-meeting resolution to let shareholders propose their own board candidates.
Last month, the SEC staff gave its blessing to a nonbinding resolution, submitted for Disney's 2005 annual meeting, that would have opened a new avenue for investors to pressure company boards. The SEC itself has considered its own "proxy access" rules, but so far hasn't acted amid opposition by business groups.
The proposed Disney resolution was submitted by the American Federation of State, County and Municipal Employees, the California Public Employees' Retirement System, the New York State Common Retirement Fund and the Illinois State Board of Investment. If it had been allowed to stand, the SEC's position would have broken new ground in the debate over investor access to corporate proxies.
But Disney challenged the staff opinion. High-powered New York attorney Martin Lipton, on behalf of Disney, sent a letter to the SEC complaining that the staff opinion was "an end run around the Commission's rule-making process." The staff's decision was appealed to the five-member commission but the SEC staff reversed itself before the full commission had a chance to consider Disney's challenge.
Yesterday, the director of the SEC's division of corporation finance, Alan Beller, sent a letter to Mr. Lipton saying it has "reconsidered its position, and there appears to be some basis for your view that Disney may exclude the proposal." A Disney spokeswoman had no comment.
An SEC spokesman declined to be more specific about why the staff had reversed course but said staff "has reconsidered its earlier position and, on the basis of the specific proposal and the arguments made, granted the request" by Disney not to take enforcement action against the company if it excluded the proposal.
People familiar with the matter said staff may have been concerned that the proposal didn't adhere closely enough to a rule proposed last year by the SEC that would allow shareholders to nominate directors when they can show widespread dissatisfaction. The rule, which has languished and been watered down amid intense opposition from business interests, would require companies to allow shareholder-backed nominees in certain cases, including if a majority of shareholders approved such a shareholder-access proposal.
Richard Ferlauto, AFSCME's director of pension investment policy, said the move yesterday "emphasizes the need for the SEC to move swiftly to rule making to determine whether shareholders have got any right at all to nominate directors on company proxies." He said AFSCME was disappointed that such access apparently will be denied in the coming 2005 proxy season, but that it will continue to press for change.
Disney in 2004 faced a shareholder revolt that saw 45% of the shares voted at its annual meeting withholding support from the re-election of Chief Executive Michael Eisner to the company board. Mr. Eisner was stripped by the Disney board of the chairman's title he had long held. Later in the year, a coalition of public pension funds submitted the names of potential new directors to the company, but the board instead selected another candidate.
"If any company was deserving of proxy access coming out of the 2004 proxy season," Mr. Ferlauto said, "it was Disney, and they're off the hook."
Write to Bruce Orwall at bruce.orwall@wsj.com and Deborah Solomon at deborah.solomon@wsj.com
Shareholder Resolution After All
By BRUCE ORWALL and DEBORAH SOLOMON
Staff Reporters of THE WALL STREET JOURNAL
December 29, 2004; Page C4
Staff of the Securities and Exchange Commission reversed a decision it made just weeks ago, allowing Walt Disney Co. to withhold from its proxy an annual-meeting resolution to let shareholders propose their own board candidates.
Last month, the SEC staff gave its blessing to a nonbinding resolution, submitted for Disney's 2005 annual meeting, that would have opened a new avenue for investors to pressure company boards. The SEC itself has considered its own "proxy access" rules, but so far hasn't acted amid opposition by business groups.
The proposed Disney resolution was submitted by the American Federation of State, County and Municipal Employees, the California Public Employees' Retirement System, the New York State Common Retirement Fund and the Illinois State Board of Investment. If it had been allowed to stand, the SEC's position would have broken new ground in the debate over investor access to corporate proxies.
But Disney challenged the staff opinion. High-powered New York attorney Martin Lipton, on behalf of Disney, sent a letter to the SEC complaining that the staff opinion was "an end run around the Commission's rule-making process." The staff's decision was appealed to the five-member commission but the SEC staff reversed itself before the full commission had a chance to consider Disney's challenge.
Yesterday, the director of the SEC's division of corporation finance, Alan Beller, sent a letter to Mr. Lipton saying it has "reconsidered its position, and there appears to be some basis for your view that Disney may exclude the proposal." A Disney spokeswoman had no comment.
An SEC spokesman declined to be more specific about why the staff had reversed course but said staff "has reconsidered its earlier position and, on the basis of the specific proposal and the arguments made, granted the request" by Disney not to take enforcement action against the company if it excluded the proposal.
People familiar with the matter said staff may have been concerned that the proposal didn't adhere closely enough to a rule proposed last year by the SEC that would allow shareholders to nominate directors when they can show widespread dissatisfaction. The rule, which has languished and been watered down amid intense opposition from business interests, would require companies to allow shareholder-backed nominees in certain cases, including if a majority of shareholders approved such a shareholder-access proposal.
Richard Ferlauto, AFSCME's director of pension investment policy, said the move yesterday "emphasizes the need for the SEC to move swiftly to rule making to determine whether shareholders have got any right at all to nominate directors on company proxies." He said AFSCME was disappointed that such access apparently will be denied in the coming 2005 proxy season, but that it will continue to press for change.
Disney in 2004 faced a shareholder revolt that saw 45% of the shares voted at its annual meeting withholding support from the re-election of Chief Executive Michael Eisner to the company board. Mr. Eisner was stripped by the Disney board of the chairman's title he had long held. Later in the year, a coalition of public pension funds submitted the names of potential new directors to the company, but the board instead selected another candidate.
"If any company was deserving of proxy access coming out of the 2004 proxy season," Mr. Ferlauto said, "it was Disney, and they're off the hook."
Write to Bruce Orwall at bruce.orwall@wsj.com and Deborah Solomon at deborah.solomon@wsj.com