Pension Funds Demand Ability to Nominate Independent Directors

Oct 12, 2004  •  Post A Comment

Shareholders should have the right to nominate The Walt Disney Co.’s directors, four big pension funds said in a resolution submitted today to the Securities and Exchange Commission.

The proposal was made by the California Public Employees’ Retirement System (CalPERS), the New York State Common Retirement Fund, the Illinois State Board of Investment and the American Federation of State, County, and Municipal Employees Pension Funds.

It calls for shareholders with at least a 5 percent stake in Disney to have the ability to nominate at least two directors to the media giant’s board and have them included in the company’s proxy statement.

However, it is unclear whether the pension funds calling for the change would benefit. Combined, the four funds hold around 18 million shares, which represents around 1 percent of the outstanding stock in Disney.

The proposal is the latest in a struggle between Disney’s board and several of its big shareholders to force changes in how the company is managed. Disney’s board has long been criticized as being beholden to CEO Michael Eisner, and earlier this year was often chastised by shareholders for failing to hold executives accountable for some of Disney’s past missteps.

Already, the pressure imposed by several big pension funds has played a role in convincing the Disney board to strip Mr. Eisner of his chairman title, and was a factor in the board’s decision to move ahead with a search for a successor to Mr. Eisner, who is set to retire in September 2006. Furthermore, non-executive Chairman George Mitchell has said the company is likely to add another independent director by year-end.

“The first step in restoring investor confidence was for Michael Eisner to step down, the second was to search for a successor as the CEO, but the third step-getting independent directors to serve next year and in the years ahead-is the most important step of them all,” said Sean Harrigan, president of CalPERS.