Reversing an earlier decision, the Securities and Exchange Commission (SEC) gave Walt Disney Co. permission to withhold from its proxy a proposal to let shareholders directly nominate...
LOS ANGELES — Reversing an earlier decision, the Securities and Exchange Commission (SEC) gave Walt Disney Co. permission to withhold from its proxy a proposal to let shareholders directly nominate board members.
The SEC staff said Tuesday it would not recommend any enforcement action against Disney if it excludes the proposal from its 2005 proxy, which is expected to be printed this week.
“The division has reconsidered its position and there appears to be some basis for your view that Disney may exclude the proposal,” said Alan Beller, director of the SEC’s division of corporation finance, in a letter to Disney lawyer Martin Lipton. Lipton’s office provided the letter in an e-mail.
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The reversal puts pressure on SEC Chairman William Donaldson to define how shareholders may nominate directors, or to drop the issue. The regulator last year proposed letting investors put candidates on proxy ballots under some conditions, although the plan stalled after the Business Roundtable, a Washington, D.C., corporate lobby group, and similar organizations said it would leave boards vulnerable to special interests.
The nonbinding proposal would have allowed individual or groups of shareholders that own more than 5 percent of Disney’s shares for more than two years to directly nominate candidates for the board.
Given the size of Disney’s board, the proposal would have meant that qualifying shareholders could nominate as many as two candidates.
The proposal was submitted in October by the American Federation of State, County and Municipal Employees’ pension plan as well as several state pension funds, including those of California, New York and Illinois.
The groups have urged the SEC to allow shareholder access to company boards, instead of shareholders having to use the more difficult and expensive process of running a challenge slate.
The SEC staff said last month it would allow the proposal to be included on Disney’s proxy statement, which would have given investors the chance to vote on it at the 2005 shareholders meeting.
The staff reversed its decision after it was appealed by Disney’s attorneys. Disney said the proposal should not be allowed to circumvent the SEC’s own rule-making process. The company also noted that the proponents own less than 1 percent of outstanding shares of the company.
Disney had no comment yesterday on the reversal.
Proponents of the plan late yesterday asked the full SEC to reconsider the staff decision.
“This points to the need for the SEC to move quickly to resolve the stalemate around the proxy access rule so shareholders have a tool to use when company boards have failed and remain unaccountable to shareholders,” said Richard Ferlauto, AFSCME’s director of pension investment policy.
Material on SEC officials Alan Beller and William Donaldson provided by Bloomberg News.