2000-2001 Shareholder Resolution Campaign

Disney

Controlling Excessive Executive Compensation

WHEREAS, Walt Disney’s compensation policies concentrate large amounts of stock options in the hands of small numbers of executives. According to Disney’s 2000 Proxy, the company’s top five officers (0.004% of Disney’s workforce), control nearly 17% of outstanding options;

WHEREAS, in 1996, Disney granted CEO Michael Eisner 24 million stock options (split adjusted) in an effort to align the interests of Mr. Eisner and shareholders. This option grant represented 26.2% of the total options granted by Disney that year.

WHEREAS, while Mr. Eisner personally has seen the value of his stock options rise by hundreds of millions of dollars since 1996, Disney shareholders have seen the value of their investment perform poorly compared to the overall stock market. From September 30, 1996 (the date of Mr. Eisner’s 24 million share grant) through August 18, 2000, the total return of Disney’s stock was 89.6%, compared with a 129.9% rise in the Standard & Poors 500 index;

WHEREAS, Business Week commented on Mr. Eisner’s pay, saying: "With three year pay of $636.9 million, the Disney chief is dead last in shareholder return vs. return to the corner office." (Business Week, April 17, 2000, p. 103);

WHEREAS, there is a broad and growing body of research confirming that firms with broad-based employee ownership grow faster, create more jobs, and retain higher quality employees than firms with narrowly concentrated ownership. According to "Unleashing the Power of Employee Ownership," a 1999 report by Northwestern’s Kellogg School of Management and the management consulting firm Hewitt Associates, firms with broad-based stock ownership delivered superior stock market performance and profitability relative to peer firms without employee ownership. Kellogg/Hewitt studied all 380 public firms that established employee stock ownership plans (ESOPs) between 1971 and 1991 and found that in the four years following the adoption of an ESOP firms saw their stock price cumulatively outperform peer firms without widespread employee ownership by 7%. In addition, the return on average assets of firms with broad-based ownership exceeded concentrated ownership firms by 3% per year;

WHEREAS, research confirms that sustained superior performance is due to contributions across a broad range of employee skills, along with shared values within a firm, and not to the efforts of a single employee;

RESOLVED, that the Board limit the stock options received: 1) by any single individual to no more 5% of the total options granted in a single year, and 2) by the group of executive officers to no more than 10% of the total options granted in a single year.

SUPPORTING STATEMENT

Disney’s executive compensation policies have failed to deliver their promise of enhanced shareholder returns. While executives have become rich, shareholders have suffered mediocre returns over the last four years. It is time for the company to try a different approach. The financial benefits of broad-based employee ownership are well documented and offer an attractive alternative to the current failed policies of concentrating stock ownership in the hands of a small number of corporate leaders.

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