Citing the Walt Disney Co.’s dismal performance for the last five years and a lack of confidence in the long-term strategic vision of the company, the California Public Employees’ Retirement System (CalPERS) has decided to withhold votes for Michael Eisner’s reelection to the post of Board chairman/CEO. CalPERS holds 9.9 million Disney shares, valued at more than $235 million, making it the 29th largest single shareholder.
“We have lost complete confidence in Mr. Eisner’s strategic vision and leadership in creating shareholder value in the company,” says Sean Harrigan, president of the CalPERS Board of Administration. “The company has lost more than 23%for the five-year period–nearly five times more than the losses incurred by the S&P 500 index for the comparable period. We believe shareholders should send the message loudly and strongly that it is time for Disney to get a more focused strategy that will improve shareholders return on invested capital.”
In response to the news, Roy E. Disney and Shamrock Holdings business partner Stanley P. Gold issued the following statement: “We are obviously pleased and gratified with the ‘vote no’ momentum that is building as we head toward the March 3 Disney annual meeting in Philadelphia.”
CalPERS also intends to withhold votes for the three members who constitute the company’s audit committee–Monica Lozano, Robert Matshllat, and Fr. Leo J. O’Donovan, S.J.–because they have authorized the auditor to perform non-audit services such as tax examination assistance and other services regarding internal controls. “If we learned anything from recent corporate scandals, it is that audits must be beyond reproach,” said Harrigan. “An auditing firm that receives money for other work beyond the audit just raises the risks for questionable audits.”
Other Disney directors, however, will get CalPERS’ vote. “Our vote recognizes the fact that the Disney board is beginning to increase its attention on improving corporate governance,” comments Mark Anson, CalPERS chief investment officer. “They adopted enhanced governance guidelines in January; they added a code of conduct and business ethics for directors; and they recently added two independent directors that meet the CalPERS definition of independence.”
CalPERS is the nation’s largest public pension fund with assets of approximately $165 billion. The System provides retirement and health benefits to 1.4 million Sate and local public employees and their families. For more information, visit www.calpers.ca.gov.