GLOBAL – Stewardship service provider Hermes Equity Ownership Services (Hermes EOS) has filed a shareholder proposal requesting proxy access ahead of Walt Disney's AGM on 6 March.

It intends to gain support for this proposal on behalf of its clients as it will provide shareholders with the right to nominate candidates to the board, thus encouraging improved board accountability.

The filing of the shareholder proposal is a direct response to the board's surprise move to appoint chief executive Robert Iger as chairman of the board at the 2012 AGM and contractually guarantee his chairmanship through 2016, without suitable transparency and input from shareholders.

According to Hermes, these conditions, in conjunction with fundamental concerns about the company's approach to executive compensation, constitute a material failure of governance and are a blatant reversal of Walt Disney's 2004 commitment to maintain an independent chair.

Tim Goodman, head of North American Engagement at Hermes EOS, said: "Improved board accountability and alignment between the Walt Disney Company and its owners is vital to improving the overall corporate governance of the company.

"We want to see Walt Disney endure as the 'Magic Kingdom', not the 'Tragic Kingdom'.  Proxy access is imperative, and our non-binding shareholder resolution is designed to offer a constructive avenue towards improving corporate governance at the company by protecting the interests and enhancing the rights of its long-term shareholders.

"Beyond the simple re-combination of the roles, the timing of last year's announcement immediately following the shareholder proposal filing deadline, and the guarantee that any board member, particularly the CEO, will hold the chair position for a multi-year period, should be highly troublesome to all shareholders."

Hermes EOS has been engaging with Walt Disney on the subject of proxy access, as well as other concerns surrounding its overall corporate governance, specifically its leadership structure, board accountability and remuneration.

There is mounting concern surrounding the remuneration structures within Walt Disney and an insufficient alignment of pay-for-performance, it said.

It said this was a result of excessive focus on short-term awards, guaranteed minimum payouts, and vague and unchallenging performance conditions tied to pay.

Hermes EOS said it was disappointing that Walt Disney had not responded more meaningfully to address these deficiencies in response to growing shareholder opposition to its annual advisory vote on executive pay, which last year topped 42%.

Goodman added: "Flawed remuneration schemes create inappropriate incentives. Walt Disney's board, its remuneration committee and long-term shareholders need to join together to address this defective system of compensation. Only effective reforms will reconnect the company with its employees, clients and other stakeholders and provide the basis to generate long-term value."

Hermes EOS also argues that US corporate governance must go beyond the recently granted additional rights intended to enable shareholders to hold boards of directors to account, and has revised its US Corporate Governance Principles.

In the paper, Hermes EOS states that enhanced dialogue between companies and shareholders must becomes the norm in the market.

"Encouraging and enabling better dialogue between independent board directors and shareholders is essential in order to hold board members accountable to their owners," Goodman said.

"Moreover, it facilitates an exchange of views and an opportunity for shareholders to better understand and, where appropriate, constructively engage with the boards of companies in which they are invested for beneficial change.

"Despite recent enhancements to the dialogue process, there is more to be done to drive better governance, accountability and transparency. Walt Disney is a perfect case of poor dialogue between the board and its long-term shareholders, which creates a detriment to all."

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