CalSTRS Votes Against Combined CEO-Chairman Post and Compensation Plan at Disney’s Annual Meeting
Disney remains the happiest place on Earth–for Robert Iger

News release Ricardo Duran

WEST SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) today voted against the Walt Disney Company’s decision to combine the Chairman and Chief Executive Officer (CEO) position. CalSTRS also opposed Disney’s compensation plan for the CEO, calling the governance and nominating committee actions a return to poor governance practices of the past.

CalSTRS voted its approximately 5 million shares of Disney stock against the company’s return to the combined position of CEO and Chairman of the Board. These two positions were separated in 2004 under shareholder prodding. CalSTRS holdings in Disney stock as of December 31, 2011, were valued at more than $191.2 million. CalSTRS detailed its opposition in a letter (PDF; 40KB) dated March 12, 2012.

“CalSTRS long standing view holds that separating the two positions is in the best interest of a company’s shareholders since the CEO and Chairman jobs have entirely different, and at times, conflicting purposes,” said CalSTRS Director of Corporate Governance Anne Sheehan. “By not involving the shareholders before reversing a precedent that many see as the best standard of practice in the marketplace, we feel the governance and nominating committee failed in its role as our representatives in the board room.”

CalSTRS voted against Disney’s compensation proposal because it creates a disconnect between company performance and executive pay. For example, over the past three years, the pay of Chairman and CEO Robert Iger amounted to more than $44 million in cash compensation, separate from any equity awards. Meanwhile, Disney’s overall return during that period was 0.7 percent compared to a peer median of 3.7 percent.

In addition, CalSTRS takes issue with the practice of aligning the executive pay structure with one group of peers while comparing performance to another peer group. Disney bases its executive compensation structure on the five major publicly held entertainment companies. Its performance metrics, however, include a broader cross-industry group and S&P 500 companies.

Say-on-pay proposals on average receive 90 percent support. In contrast, the support for Disney’s compensation is moving in the opposite direction, receiving only 76 percent support last year, and a mere 56 percent this year.

The California State Teachers’ Retirement System, with a portfolio valued at $149 billion as of January 31, 2012, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits. CalSTRS serves California’s 856,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.

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