Walt Disney Co. today settled government charges that it violated securities laws by failing to disclose business relationships and expenses involving current and former directors, including the employment of board members' relatives.
The settlement between the Securities and Exchange Commission and Burbank-based Disney comes more than two years after the government inquiry into the company's disclosure practice first came to light. The SEC determined that Disney failed to fully inform investors about business connections to board members in proxy statements and annual reports filed with the agency between 1999 and 2001.
"Shareholders have a significant interest in information regarding relationships between the company and its directors," said Linda Chatman Thomsen, deputy director of the SEC's Division of Enforcement, in a statement. "Failure to comply with the SEC's disclosure rules in this area impedes shareholders' ability to evaluate the objectivity and independence of directors."
Among the violations, Disney failed to inform shareholders that that director Reveta Bowers' son once worked for its Internet group; director Stanley Gold's daughter works in consumer products; and director Raymond Watson's son works for the Disney channel. In addition, director John Bryson's wife, Louise, earned $1.35 million as a top executive at the Lifetime cable channel, in which Disney has a 50% stake.
Under SEC regulations, companies are supposed to disclose relatives of board member who receive compensation in excess of $60,000 annually.
In addition, Disney did not report payments of more than $600,000 to Air Shamrock, which is owned by former board members Roy E. Disney and managed by then-Disney director, Stanley Gold. Roy Disney regularly traveled on Air Shamrock planes when traveling on Disney-related business trips.
Also, Disney failed to tell investors about a leased car and driver as well as office and secretarial expenses worth $268,000 provided to Thomas Murphy, who was head of Capital Cities/ABC when Disney bought it in 1996.
In late 2002, Disney revealed the payments after the SEC began its investigation and the company began to implement new corporate governance policies.
Today, Disney, which did not admit to or deny the SEC charges, agreed to refrain from future violations, according to the SEC.
Times Staff Writer James Bates contributed to this story.