Disney Shareholders Push Back on Board’s Executive Compensation Plan

Disney Shareholders Push Back on Board’s Executive Compensation Plan

Bob Iger, the CEO of the Walt Disney Company, received a total compensation of $36.3 million in fiscal year 2017, if all goes well, could earn more than twice that figure this year. The company’s investors, however, have balked at the board’s plan to reward Iger so generously, voting 52–44 percent against a non-binding advisory resolution approving Disney’s executive compensation pan at its annual shareholder meeting, Bloomberg reports.

Three proxy advisors had urged investors to reject the plan, which they said was misaligned with performance, but the board insists that Iger’s compensation package is worth making sure he remains on board through the completion of Disney’s ongoing $52.4 billion deal to purchase 21st Century Fox:

“The board decided it was imperative that Bob Iger remain as chairman and CEO through 2021 to provide the vision and proven leadership required to successfully complete and integrate the largest, most complex acquisition in the company’s history,” Aylwin Lewis, head of the Disney board’s compensation committee, said Thursday.

Bloomberg notes that this is the first time Disney shareholders have pushed back on an executive compensation package since federal regulators began encouraging these “say on pay” votes in the 2010 Dodd-Frank Act. Indeed, such rejections are still a rare occurrence in corporate America generally. Just 1.2 percent of S&P 500 companies had their advisory pay resolutions opposed by a majority of investors in 2017, Reuters reports, citing data from ISS Analytics.

The Disney investors’ demurral, being a non-binding resolution, does not obligate the board to revise its compensation plans, and there is no regulatory mechanism in the US for forcing it to heed shareholders’ concerns (Though governments in the UK and Australia have started putting pressure on boards that ignore “say on pay” votes). Nonetheless, when these votes fail, they do put pressure on directors to reconsider their plans.

Investors are increasingly voting to hold these “say on pay” votes more regularly and demanding more transparency and influence around compensation generally: For example, institutional investors have urged the Securities and Exchange Commission not to delay a rule created by Dodd-Frank that that would require public companies to disclose the ratio between the compensation of the CEO and the median annual compensation of every other employee in their proxy statements, starting with the 2017 fiscal year. The SEC ultimately eased compliance standards for the pay ratio reporting rule, but did not delay its implementation.

Institutional investors have also been vocal in advocating that the SEC mandate human capital disclosures. These increasingly hands-on shareholder behaviors reflect something we have observed in our research at CEB, now Gartner: Shareholders are paying more attention than ever before to talent issues. Our Investor Talent Monitor (which CEB Corporate Leadership Council members can read in full here) found last year that organizational culture, recruiting strategies, diversity and inclusion, and other talent-related concerns were coming up with greater frequency on investor calls over time.