Shareholders And The Mouse House

Disney's annual shareholder meeting is underway, and the issues on the agenda are particularly telling of the big issues facing media—and all corporate giants—today. The bottom line is that customer relationships matter and executive compensation is under scrutiny. The big event in Northern California, where Disney's Pixar animation is located— is a lightening rod for both Disney's biggest fans and its harshest critics.

In light of the stock's dramatic drop over the past year—DIS is down some 47 percent—CEO Bob Iger is sure to focus on creating value for the long term. During a recession it seems obvious to me that the people who will still be willing to pay up for Disney products are its die-hard fans. So Disney is wisely launching some new fan initiatives targeting that devoted group. (You know, the adults who wear Mickey Mouse watches, I'd assume they’d keep buying mouse ears for their kids). The company is expected to launch a new fan club, a 21st century take on the venture, replete with social networking and a new website. The company is also looking to launch a new annual event for fans to get sneak peaks at new products and movies.

The company's last Mickey Mouse Club under its previous CEO, Michael Eisner, went awry. The club turned into a mail order merchandise business that pushed fans to spend lots of money on not-too-exciting Mickey Mouse logo products. That's no way to thank your fans. So I hear Disney is going to be really careful to avoid that kind of crass commercialism. Of all consumers, Disney needs these on its side.

On the other side of the coin, today's meeting also presents frustrated shareholders with an opportunity to shake things up. The issues at hand are quite telling of our times and, no surprise, Disney advocates that shareholders votes against all three proposals.

On the heels of a galvanizing presidential campaign—and with Disney playing a starring role in the Obama girls' social lives—perhaps it makes sense that shareholders want more info on the company's political orientation. The Free Enterprise Action Fund is demanding a semi-annual report detailing Disney's political contribution policies. The organization also wants transparency about which employees are contributing what to different candidates and causes.

And no surprise, executive compensation is a hot button issue. Disney faces nothing like the demands for compensation controls at auto giants or Wall Street firms which are getting government bailouts, but following the industry-wide trend, shareholders are eager to guarantee compensation is performance-based. A true articulation of shareholder demand for compensation control, Walden Asset Management wants shareholders to be able to vote every year to ratify executive pay. Proxy voting service RiskMetrics Group supports this compensation measure, but Disney says it already has plenty of means in place to have a dialogue on compensation, and that this kind of vote would slow things down.

Another shareholder vote, opposing Disney's "Golden Coffin" policy should be colorful to say the least. AFSCME's pension fund opposes Disney's after-death CEO pay benefits, which would currently give CEO Iger's estate $4.5 million in the event of his death. AFSCME is protesting what it calls a "golden coffin," with a prop golden coffin out front to illustrate its point.

Shareholder demand for transparency and performance makes total sense in this market. But Iger is well respected as a CEO and I suspect the company's relative strength, compared to its peers, should help it maintain control of its compensation system. I can see how getting involved shareholders in the nitty gritty could make already complex governance even tougher. But the worse the stock price the more up-in-arms shareholders are sure to be. If any of the exec compensation proposals do pass, it will indicate what we can expect at other companies' shareholder meetings.

Questions? Comments?