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Disney annual meeting likely to address executive pay and coronavirus impact

[March 11, 2020] By Helen Coster

(Reuters) - Executive compensation and coronavirus are likely to be the focus of investor questions at Walt Disney Co's <DIS.N> annual meeting on Wednesday - the first to feature the company’s new chief executive officer, Bob Chapek.

Chapek is leading Disney at a time when coronavirus threatens revenue at the company's parks and on its cruises, and may keep movie fans away from theaters. Chapek also needs to keep the Disney+ streaming service competitive as new rivals launch this year.

Former CEO Bob Iger, who stepped down from that post on Feb. 25 but remains at the company as executive chairman, will focus on content creation until he retires at the end of 2021.

At the meeting in Raleigh, N.C., shareholders will not officially vote on Chapek's compensation - only on a pay plan for named executives, which do not include him, in fiscal year 2019 which ended Sept. 28. That plan set Iger’s 2019 compensation at $47.5 million, according to a Jan. 17, 2020 filing.

But Julian Hamud, senior director at proxy advisory firm Glass Lewis, said via e-mail that the vote "will be a bit of a blurred line covering both Mr. Chapek's new package and the pay for Mr. Iger's shift to executive chairman. Both transitions are quite expensive, and it was not lost on us that Mr. Chapek's employment agreement explicitly states that he reports to the executive chairman."

Glass Lewis advised shareholders to oppose the 2019 executive pay plan in a non-binding vote, as did other proxy advisers Institutional Shareholder Services and Egan-Jones. “Specifically, the CEO's base salary is more than double that of company peers at $3 million," ISS wrote in its own report.

Disney has previously faced criticism over Iger’s pay, which was $65.6 million in the company’s 2018 fiscal year, up 80% from the previous year. At its 2017 annual meeting, Disney suffered a rare rebuke when a majority of shareholders opposed its executive pay in a non-binding vote.

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Bob Chapek, chairman of Walt Disney Parks and Resorts, speaks during the 10th anniversary ceremony of Hong Kong Disneyland in Hong Kong, China September 11, 2015. REUTERS/Tyrone Siu/File Photo

In the current proxy statement, the company acknowledged the pushback, stating that during the fiscal year 2019, members of management and the board spoke with 11 of the company’s top 20 shareholders and contacted approximately 74% of its largest 50 investors, "seeking input on compensation and governance matters." Based on that feedback, Iger agreed to reduce his compensation on three different occasions.

In his new role as chairman, Iger’s employment agreement will continue unchanged. So until he retires at the end of 2021, Disney will be paying for both Iger and Chapek, whose compensation is set at a minimum of $25 million annually.

The Florida State Board of Administration, which manages pension assets for Florida state and other local authority employees and had 2.3 million shares of Disney as of the end of 2019, voted against the compensation plan this year. “It seems to be maximized for payout without sufficient ties to the performance levels," said Jacob Williams, corporate governance manager with the organization.

In a March 5 filing, Disney defended the plan, writing that "Iger’s compensation in fiscal 2019 reflected the considerable value he generated for the company and its shareholders, with the completion of the acquisition of Twenty-First Century Fox and implementation of the company’s transformative direct-to-consumer strategy, culminating in the successful launch of Disney+.

More than 90% of Iger’s compensation is performance-based, and under his leadership since 2005, Disney has delivered total shareholder return of 559%, compared to just 223% for the S&P 500 as of fiscal year-end 2019."

(Reporting by Helen Coster in New York; additional reporting by Ross Kerber in Boston; Editing by Cynthia Osterman)

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