Not far from the "Happiest Place on Earth," some unhappy shareholders of Walt Disney Co. will gather this week for what is expected to be an unusually raucous annual meeting.
Disney shareholders have been a relatively contented bunch for the past decade. That comes as no surprise considering the company's stock price has risen by a factor of 25 (adjusting for stock splits) during the 13-year tenure of CEO Michael Eisner, while annual revenues have increased twelvefold to more than $21 billion.
But several high-profile incidents in the past few months have led to considerable unrest among shareholders.
Among the issues are a severance package for ex-President Michael Ovitz, another rich contract for Eisner, and allegations that Disney contracts with foreign manufacturers with unfair labor practices.
On Tuesday, about 14,000 Disney shareholders will converge on the Arrowhead Pond in Anaheim to vote on such matters as Eisner's salary package and two shareholder proposals aimed at reducing executive compensation and assuring fair labor conditions among Disney contractors.
The cash and stock options given to Ovitz following his December departure after 14 months on the job estimated to be worth between $90 million and $140 million depending on Disney's future stock price have spurred two shareholder lawsuits against the company.
Meanwhile, Disney reached a 10-year agreement last month with Eisner (who is already the highest-paid corporate executive in U.S. history) granting him options on 8 million Disney shares, with an estimated value of more than $195 million. Eisner's existing options before the deal are worth about $358 million, based on the stock's current value.
Further alienating shareholders is the close relationship between Eisner and attorney Irwin Russell, who serves on Disney's board of directors and is chairman of the company's Compensation Committee. That committee reviews, recommends and approves Disney's executive contracts. Russell also served as Eisner's personal attorney during his contract negotiations.
"Mr. Russell's personal service to Mr. Eisner raises serious concerns about a potential conflict of interest," states a report from Institutional Shareholder Services, a Bethesda, Md.-based company that advises institutional investors on how to vote their proxies.
Disney officials have countered by saying that Russell excused himself from discussion or voting on Eisner's contract while serving on the committee.
Nevertheless, Institutional Shareholder Services recommends that discontented shareholders express their dissatisfaction by withholding their votes from the five directors nominated by the company. One of those nominees is Walt Disney's nephew Roy Disney.
Russell is not up for re-election.
The first shareholder proposal on Tuesday's agenda calls for a report on Disney's contract supplier standards. It requests a summary of current policy, a list of standards defining workers' rights and procedures to encourage suppliers to raise standards.
The other proposal asks for an executive compensation review that, among other things, would compare the wages of Disney officers with the average wages of contract workers in the United States, and consider whether a cap should be placed on compensation packages.
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