The California Public Employees Retirement System (CalPERS), the 29th largest single shareholder in Disney, has announced its decision to withhold voting for Michael Eisner for the position of chairman/ceo of The Walt Disney Company at Disneys annual shareholder meeting on March 3, 2004. CalPERS cited the firms dismal performance for the past five years and its lack of confidence in the long-term strategic vision of the company for its decision. In addition, CalPERS will withhold votes for the three members who constitute the Disneys audit committee because it has authorized the auditor "to perform an unquantifiable amount of non-audit services such as tax examination assistance and other services regarding internal controls."
We have lost complete confidence in Mr. Eisners strategic vision and leadership in creating shareholder value in the company, said Sean Harrigan, president of the CalPERS board of administration. The company has lost more than 23% for the five year period nearly five times more than the losses incurred by the S&P 500 index for the comparable period. We believe shareholders should send the message loudly and strongly that it is time for Disney to get a more focused strategy that will improve shareholders return on invested capital.
CalPERS did say it would vote for other Disney directors who have begun to develop better governance measures.
Our vote recognizes the fact that the Disney board is beginning to increase its attention on improving corporate governance, said Mark Anson, chief investment officer. They adopted enhanced governance guidelines in January; they added a code of conduct and business ethics for directors; and they recently added two independent directors that meet the CalPERS definition of independence."
However, officials at CalPERS remain concerned that Disney board members Monica Lozano, Robert Matschullat and Leo J. ODonovan, S.J. have failed to abide by the highest possible standard when it comes to audit practices. If we learned anything from recent corporate scandals, it is that audits must be beyond reproach, said Harrigan. An auditing firm that receives money for other work beyond the audit just raises the risks for questionable audits."
Though this is a big boost to former board members Roy Disney and Stanley Gold's campaign to oust Eisner, CalPERS said it does not endorse or oppose the messages sent by the dissident groups seeking reforms at Disney.
CalPERS is the nations largest public pension fund with assets of approximately $165 billion. The System provides retirement and health benefits to 1.4 million state and local public employees and their families. It holds 9.9 million Disney shares, valued at more than $235 million.