Shareholder Proposals Aim to Get Attention of Disney Board
WALL STREET WEST
Walt Disney Co. has had little trouble angering its shareholders in recent weeks, what with its corporate governance problems and recent bonuses for executives despite its lagging stock performance.
But the company has also attracted the attention of a socially responsible investing firm, which for two years has irked the company with proposals to improve working conditions for Disney’s Chinese employees, in addition to requesting a full report of injuries resulting from amusement park rides.
According to Disney’s most recent proxy statement, the company’s shareholders are being asked to vote on two proposals from Napa-based Harrington Investments, a money management firm that touts its history of social and financial returns.
Harrington has used shareholder proposals to get the attention of several companies, including Coca-Cola Co., Oracle Corp. and Nike Inc. The Disney proposals will be voted on at the company’s annual meeting of shareholders in March.
“When we write letters we don’t usually get a response, but when we file a shareholder proposal we use it as leverage to start a dialogue with the company,” said Alana Smith, director of research and development for Harrington Investments, which has $100 million in assets under management.
Disney declined comment.
The first Harrington proposal asks Disney shareholders to adopt a new set of Chinese labor standards and to have the company issue annual statements to the China Working Group, a trade organization, on its efforts. Disney recommends shareholders vote against this proposal, in part because the same measure was voted down last year, but also because the company has its own set of international labor standards that it adopted in 1996.
“Our ILS program goes well beyond the principles in the shareholder proposal,” said Disney’s board in its supporting statement.
The second proposal, proposed by the Burke-Lazarus Trust, whose shares are managed by Harrington, asks Disney to provide shareholders with a two-year history of every recorded injury caused by its rides, as well as a copy of the company’s amusement park safety policies.
Disney recommends shareholders vote against that proposal, too, since it was virtually identical to Harrington’s proposal last year, which received a mere 4.9 percent of the vote.
“We believe that The Walt Disney Company is already an industry leader in promoting theme park safety, and that a further special report on the subject would not meaningfully benefit the Company or its shareholders,” Disney’s board said in its supporting statement.
Smith conceded the proposals have little chance of getting enough votes to be incorporated into Disney’s by-laws, but that wasn’t really the point in the first place.
“It’s just a suggestion to management, and as shareholders we have every right to tell management how we feel about several issues,” she said.
Los Angeles venture capital firm San Vicente Group, whose takeover by investors was chronicled by the Business Journal in January 2002, has filed for Chapter 11 bankruptcy protection so the company won’t have to pay the legal bills of the ousted management it has been battling in court.
“This was the most appropriate way for us to protect your interest and that of creditors against those who were seeking to destroy them,” San Vicente’s board of directors said in a letter to shareholders explaining the bankruptcy filing.
The legal battle pits San Vicente’s shareholders against the company’s former management. Shareholders took the company over in late 2001 and sued the former management, alleging it was using the company as its personal piggy bank. That prompted a counter-suit, and because of a provision in the company’s by-laws, the company was stuck paying all the bills.
“They have filed a bankruptcy that we consider to be a sham,” said Michael Diamond, head of the Los Angeles litigation group at Milbank Tweed Hadley & McCloy, who represents some members of the ousted group. “It’s just to avoid their obligations under Delaware law.”
Last year, San Vicente’s shareholders voted to return $17.6 million in cash to investors, leaving the firm with $5 million to manage the its investment portfolio and fight the legal battle. Assets in the portfolio, purchased for $5.4 million, are now worth just $500,000, said Peter Fuhrman, San Vicente’s current chief executive.
“These lawyers are billing something in excess of $50,000 a day by our estimate,” Fuhrman said. “This outrageous legal spending left us with no alternative but to file for Chapter 11 to protect the interests of our shareholders and creditors.”
Wells Fargo & Co. has broken off its Orange County unit from Los Angeles.
As part of the breakoff, managers in Orange County are responsible for profits, expansion, hiring and community giving activities previously done in Los Angeles.
“It made sense for us to financially be our own bank,” said Kim Young, regional president and executive vice president of Wells Fargo Community Bank. “The bank has acknowledged that we should break away so that we aren’t subsidizing L.A.”
Other new duties for Orange County managers include accounting, marketing and corporate communications.
Wells is the first major bank to split off Orange County as its own region. Bank of America Corp. has centralized operations in Los Angeles, although Bank of America has its own Orange County market president. Washington Mutual Inc. operates its Orange County arm separately from Los Angeles but along with San Diego.
Orange County Business Journal
Glendale Firm Acquired
Newport Beach-based ClearLight Partners LLC has invested $20 million to $40 million in Glendale’s Futurelogic Inc., a maker of printers used at gas stations, casinos and parking lots.
ClearLight picked up a majority stake and was the only equity investor in the deal, according to Michael Kaye, managing partner at the $300 million private equity firm. Futurelogic’s managers kept a minority stake in the deal, which closed last month.
Futurelogic was started in 1983. One of the company’s three partners was looking to sell his stake, so they contacted ClearLight and other private equity funds in mid-2002.
Futurelogic’s thermal printers, which use heat to create images on special coated paper, are designed to work in tough settings.
Another area where thermal printers are common: casinos. Some slot machines use them to print out winnings via a barcode that’s taken to a cashier or used to gamble more.
Orange County Business Journal