Snow White in the Disney Boardroom

22 August 2005

The Walt Disney Company, rarely perceived as an exemplar of pristine corporate governance under the baton of outbound ceo Michael D Eisner, has announced two new standards that place it on a new peak of boardroom probity.

The first of these is the 'majority vote' rule - under which directors who fail to win a majority of shareholder votes when standing for election or reelection, must tender their resignation to the board's governance and nominating committee.

This body would, in turn, consider the circumstances of the vote, then recommend to the board either acceptance or rejection of each mandatory resignation.

The genesis of the new rule springs from Disney's 2004 annual meeting when forty-five percent of the votes cast withheld support for the reelection of Michael Eisner, then holding the dual role of chairman/ceo.

Had the new standard been in force at that time, Eisner would have teetered on the edge of mandatory resignation. Even so, the devastating loss of investor confidence compelled him to cede his chairman's role to former US senator George Mitchell, although continuing as ceo.

A second significant governance change amends the company's bylaws to require shareholder majority-approval for the buyback of any shares at above-market prices from any holder of more than 2% of Disney's voting shares.

The news brought declarations of delight from the US investment industry - whose own murky waters are equally overdue for a corporate probity enema.

"This is a very positive development both for Disney, its shareholders and the world of corporate governance at large," opined Greg Taxin, ceo of Glass, Lewis & Co in San Francisco.

"It's clear this is a proactive step by [Disney] and one that is very shareholder friendly and that's unusual for the board. This may signal a change in tone and attitude from the board that shareholders should welcome."

Data sourced from Wall Street Journal Online; additional content by WARC staff