Disney wins fight over board vote

SEC confirms staff has reversed position

Walt Disney has emerged victorious after weeks of tit-for-tat with the Securities and Exchange Commission and likely won’t have to include a provision in its upcoming proxy empowering Mouse shareholders to nominate independent directors to the board.

The SEC confirmed Wednesday that its staff has reversed itself on a previous position that could have pushed Disney to include the shareholder-generated provision. Disney management had written to the SEC declaring its intention to exclude the measure, with its opinion that such exclusion was legally justified. The staff originally said it couldn’t go along with Disney’s action.

But Wednesday, the commission made public a staff letter promising no action on the SEC’s part if Disney excludes the provision. The issue has not yet come to the commissioners for a vote, but staff recommendations are seen as a reliable roadmap for a final decision.

State retirement funds, as well as a group representing state, county and city workers, had sought to nominate members to the Disney board.

Alan Beller, director of the SEC division of corporate finance, sent a letter to Disney lawyer Martin Lipton on Tuesday, stating there was some basis for the Disney point of view.

The commission has been debating the high-profile issue of shareholder access and proposed last year to allow shareholders to nominate directors if there was widespread dissatisfaction. But the proposal met with sharp criticism from the business community.

Shareholders, including the American Federation of State, County and Municipal Employees (AFSCME), the California Public Employees’ Retirement System, the New York State Common Retirement Fund and the Illinois State Board of Investment said in the proposal that director nominations would give shareholders access to a closed system and that “such responsiveness is especially important now, in the context of a search” for a successor to CEO Michael Eisner.

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