The Shareholder ForumTM

Electronic Participation in Shareholder Meetings

Forum Home Page [see Broadridge note below]

"E-Meetings" Home Page

"E-Meetings" Program Reference


Wall Street Journal, March 13, 2012 article


Need a Real Sponsor here


BUSINESS   |   March 12, 2012, 7:52 p.m. ET

Disney Takes on Proxy Adviser


What a difference a year makes in the battle over executive pay.

Last year, Walt Disney Co. bowed to criticism from Institutional Shareholder Services Inc., the biggest proxy-advisory firm, by killing a controversial pay practice days before its annual meeting. This year, however, the media giant came out swinging.

[PROXY] Getty Images

Disney CEO Robert Iger with Mickey Mouse at Disneyland in May.


ISS is "out of touch," Disney said in a regulatory filing March 1, after the proxy-advisory firm said CEO Robert Iger's performance didn't justify his compensation, valued at $31.4 million in the year ended Oct. 1. Disney said ISS "offhandedly and improperly dismissed the board's well considered judgment."

A showdown looms Tuesday, when Disney shareholders will again cast their annual-meeting ballots in a mandatory vote of confidence in the company's executive-pay practices. There will be a lot of people in investor relations departments cheering Disney on.

Companies have long locked horns with ISS, which advises investors like pension funds and mutual funds on corporate votes. But unease with the firm's ability to sway "say-on-pay" votes, which aren't binding but can be embarrassing for companies to lose, has kicked the antagonism up a notch.

Already, Disney's more aggressive stance seems to be having an effect. The California Public Employees' Retirement System will ignore ISS and support the media and entertainment giant's pay practices, an official of the biggest U.S. public pension fund said.

Calpers owns about 5.7 million Disney shares. A Disney spokeswoman declined further comment.

"Many companies are telling their pay story better,'' said Glenn Booraem, a principal of Vanguard Group Inc. He oversees its corporate governance program for U.S. investments worth more than $800 billion.

Many money managers have long followed ISS's recommendations on shareholder proposals, director elections and other ballot issues, which can be a problem for companies now that a 2010 financial overhaul law requires them to conduct regular votes on executive pay.

Companies complain ISS has a stranglehold on how performance-related pay is judged. ISS rejects the criticism. "There is not a monolithic group of investors following one proxy adviser,'' says Carol Bowie, the advisory firm's head of research for the Americas.

But the firm's advice does carry a lot of weight. On average, a negative ISS recommendation influences between 13.6% and 20.6% of votes cast on management proposals, according to a study published in the journal Financial Management. And ISS has made a lot of negative recommendations on pay, advising investors to oppose 11% of roughly 3,300 say-on-pay votes during 2011, according to Ms. Bowie.

In response, companies have begun lobbying investors aggressively with challenges to ISS's assessments and alternative ways of measuring how CEO pay is tied to performance. About 100 companies challenged negative ISS recommendations last year, estimated James D. C. Barrall, an executive-pay specialist at law firm Latham & Watkins LLP. He said he wouldn't be surprised "to see at least twice as many challenges in 2012, given the emerging battle over different ways to measure the alignment between pay and performance.''

At Disney, ISS dropped its 2011 negative recommendation after the company decided to eliminate "gross-up" provisions in employment agreements for Mr. Iger and three fellow executives. Under those provisions, the company would have paid taxes on payments due the executives if they lost their jobs following an acquisition. Disney's say-on-pay vote received support from 77% of votes cast last year.

Qualcomm Inc. tried fighting ISS this year, with mixed results. The semiconductor company's CEO, Paul Jacobs, received $21.7 million in total compensation in the year ended Sept. 25, as his stock awards more than doubled to $14.3 million.

ISS recommended a "no" vote, saying the pay was high compared with Qualcomm's peers. Qualcomm lashed back in a Feb. 21 filing, saying ISS "fails to recognize our unique business structure'' and wrongly compared Mr. Jacobs's package to companies with similar revenue rather than market capitalization.

ISS spokesman Ted Allen defended the methodology, saying revenue "is a widely accepted measure of a company's complexity and management challenges.''

Qualcomm won approval of its pay practices at the March 6 annual meeting. But the margin of victory—at nearly 69%—fell from nearly 95% last year. A Qualcomm spokeswoman declined to comment.

Another common gambit is for companies to try to take investors' attention away from the potential value of stock or options awards at the time an executive receives them. ISS focuses on that figure, which is what companies have to report under Securities and Exchange Commission rules.

Now, more companies are pairing those figures with "realized pay" or "realizable pay''—calculations that purport to do a better job of reflecting what executives actually take home.

The approach "can only decrease the impact of ISS," said Charles G. Tharp, CEO of the Center on Executive Compensation, a business lobbying group.

Write to Joann S. Lublin at

A version of this article appeared Mar. 13, 2012, on page B3 in some U.S. editions of The Wall Street Journal, with the headline: Disney Takes On Proxy Adviser.


Copyright ©2012 Dow Jones & Company, Inc. All Rights Reserved




This Forum program is open, free of charge, to anyone concerned with investor interests in the development of standards for conducting shareholder meetings with electronic participation. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The organization of this Forum program was encouraged by Walden Asset Management, and is proceeding with the invited leadership support of Broadridge Financial Solutions, Inc. and Intel Corporation to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of leadership relating to the issues being addressed.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.