RW - Shareholder Initiatives: Disney

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Status

Annual meeting held Mar. 19, 2003

% voting YES: 14.5%

Shareholder resolutions face a variety of obstacles. For this reason, it is considered significant if a resolution garners at least 5% of the vote. Votes over 10% indicate exceptional shareholder support for an issue.

Filers of "social-issue" resolutions generally don't expect their resolution to receive a majority vote and be adopted by management. Rather, filers use these resolutions to get management's attention, and to raise the issue with other shareholders. They hope to achieve a vote sufficient to allow them to return the next year.

According to SEC rules, a resolution must receive 3% of the vote the first year it is filed, 6% in year two and 10% thereafter in order to be included on the proxy the following year.

Disney

Executive Compensation Review

WHEREAS, while Disney CEO Michael Eisner has received compensation exceeding $700 million 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 when Mr. Eisner received a stock option grant of 24 million shares (split-adjusted), through August 30, 2002, Disney shareholders lost 22.6% of their investment. Over the same period, the Standard & Poors 500 index gained 45.1% and the Standard & Poors Entertainment and Leisure Index rose 46.4%;

WHEREAS, Disney’s compensation policies concentrate large amounts of stock options in the hands of a small number of executives. According to Disney’s SEC filings, the company’s top five executive officers, representing 0.004% of Disney’s workforce, control 15.6% of the total stock options granted to all employees.

WHEREAS, there is a 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.

WHEREAS, in 2001, Disney’s Compensation Committee violated its own performance-based pay standards in granting three executive officers (Messrs. Meisinger, Murphy and Staggs) bonuses ranging from $300,000 to $1,000,000, despite the company losing money, missing financial targets and laying off thousands of employees. “Because the pay was not tied to performance, Disney lost tax deductions on some of it.” reported the New York Times. (April 7, 2002)

RESOLVED, that the Board conduct a comprehensive executive compensation review and publish a report of this review, omitting proprietary information and prepared at a reasonable cost. This report shall be available to all shareholders, upon request, by August 15, 2003. At a minimum, this review should consider the following:

1) Would shareholder value be enhanced if Disney established a policy limiting the concentration of stock options among executive officers?

2) Would shareholder value be enhanced if Disney granted executive officers indexed stock options that would reward executives only if Disney stock outperformed its peer group?

3) Would shareholder value be enhanced if Disney adopted an executive pay policy freezing executive officer pay during periods of large layoffs?

4) Would shareholder value be enhanced if Disney established a policy establishing a maximum ratio between highest paid executive officer and lowest paid employee?

5) Would shareholder value be enhanced if Disney adopted a policy of seeking shareholder approval for any executive severance payments beyond the terms negotiated in employment contracts?

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 six years, and thousands of loyal Disney employees have lost their jobs to layoffs. It is time for the company to try a different approach.

PLEASE VOTE FOR THIS RESOLUTION.

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