Disney Board Gives Shareholders More Clout

Walt Disney Co.’s board has joined a growing number of U.S. companies in amending corporate governance guidelines to give shareholders more clout in the removal of directors.

The changes announced Thursday would require directors who receive a majority of “withhold” votes from shareholders to submit letters of resignation to the board’s governance and nominating committee, which in turn would make a recommendation to the full board.

Until now, directors in uncontested elections have needed to receive only one vote -- including his or her own -- to be assured a seat on the board.

“If your only opponent is yourself and you can’t get a majority, then you shouldn’t serve,” said Charles Elson, director of the University of Delaware’s Corporate Governance Center.

Patrick McGurn, executive vice president of Institutional Shareholder Services, said Disney joins a number of other companies that have recently adopted similar policies.

“This is part of a broader corporate debate about switching from a plurality to a majority-vote standard,” he said.

The Disney board also has adopted a shareholder’s “greenmail” proposal, prohibiting the company from buying back its own stock at above-market prices from those attempting hostile takeovers.

“Today’s action is the latest in a series of steps we have taken to further strengthen Disney’s corporate governance practices,” board Chairman George J. Mitchell said in a statement.

The latest reforms came a week after a Delaware judge criticized Disney board members, particularly Chief Executive Michael Eisner, for their hiring and firing of former President Michael Ovitz. They also follow a March 2004 shareholder revolt that culminated in a 45% withhold vote by shareholders for Eisner. Eisner lost his chairmanship but retained his board seat, as he would have even if the new majority-vote standard were in place.

Elson, who has followed the Disney board’s travails, said Thursday’s developments were a step forward, but just one step.

“It’s positive,” Elson said, “but I would not say that this puts Disney at the forefront of the corporate governance movement.”