Wednesday, March 11, 2009

Disney's Annual Shareholder Meeting (2009)

The Walt Disney Company (DIS) had its annual shareholder meeting in Oakland at the Paramount Theater. Refreshments were minimal--tea, no-name coffee, and O.J. were available, but no pastries or other food items. Mickey and Pluto roamed the halls and signed autographs upon request. More Disney characters appeared after the meeting was over. Security was tight--rent-a-cop guards were everywhere.

The Chairman of the Board, John Pepper, started the meeting. He mentioned Disney's very-timely Pixar acquisition and Disney's #1 ranking (among entertainment companies) in Fortune magazine's most admired companies. After a short speech, he introduced the Board of Directors. Steve Jobs, Disney's largest individual shareholder and a director, was not present.

Next, Disney treated shareholders to an upbeat video presentation that highlighted its diverse product lines. Most people associate Disney with classic films like Cinderella, as well as theme parks and Mickey Mouse, but Disney is really a media company. It derives most of its net revenue from advertising. As a result, Disney has its hands in music (Jonas Brothers), cable (Disney Channel), broadcast (ABC), sports (ESPN), and almost every form of media imaginable. Showing shareholders a short video of Disney's products reminded shareholders that their company was a force to be reckoned with.

After the short video presentation, CEO Robert Iger introduced, for the first time, a trailer for the film, Up, a comedy about a 78-year-old curmudgeon and an 8-year-old boy scout who travel together on an unexpected adventure. Disney then presented an unfinished scene from an upcoming film, The Princess and the Frog. Both sneak previews received vigorous rounds of applause from the audience and can be found on the Internet/Youtube.

After the video presentations, CEO Iger emphasized Disney's commitment to social responsibility. He mentioned Disney's focus on environmental conservation; reducing the influence of cigarettes in the media; and accommodating disabled guests (note: a sign language interpreter was present at the meeting). More information can be found at this website.

The much-hyped "Are You 23?" turned out to be an official online community for Disney fans. See this this link for more information. The "23" refers to the date Disney was founded, i.e., 1923. After all the build-up, I was a little disappointed. I expected more than another vehicle for Disney to stay in touch with their fans.

CEO Iger then turned the meeting over to Chairman Pepper, who introduced and countered various shareholder proposals. All shareholder proposals opposed by Disney failed to pass. There was some controversy relating to the non-DVD-release and non-distribution of the film, The Path to 9/11. For more information, readers can check out the film, Blocking the Path to 9/11: The Anatomy of Smear. One audience member, who self-identified himself as "independent," made comments that supported Disney's refusal to distribute The Path to 9/11. His comments seemed to be well-researched but rehearsed, almost to the point where he seemed like a Disney plant.

Several shareholders lambasted CEO Iger's compensation package. One shareholder was unhappy with the Board's oversight on executive compensation, saying that after Enron, Lehman Brothers, AIG, and Bear Stearns, "The days of 'Just trust us' are over."

AFSCME, an association of government employees, asked Disney to eliminate "golden coffins," i.e., where guaranteed benefits are triggered by an executive's death. AFME's representative pointed out the obvious: "golden coffin" compensation arrangements lack a "pay for performance" connection. There was some irony in having an organization of public employees demand that the private sector rein in unreasonable benefits. After all, public employee pensions are a major source of concern because of incorrect or unreasonable actuarial projections. More on this issue here.

After the shareholder proposals were discussed and voted upon, Disney moved on to the Q&A session. No question really stood out except for one shareholder mentioning that Disney ought to protect itself in case Steve Jobs was unable to vote his numerous shares in the future. Various shareholders also asked Disney to continue its direct direct stock purchase plan to facilitate gifts to their grandchildren.

After the meeting, both CEO Iger and Chairman Pepper spoke with shareholders who did not have a chance to ask questions publicly. This willingness to talk to all shareholders is a welcome change from the norm. Generally speaking, after most shareholder meetings, directors and executives flee outside, flanked by investor relations personnel. This practice is disturbing, because small shareholders can only meet corporate executives at annual shareholder meetings, and companies know this. Thus, a company's willingness to communicate with small shareholders at the annual shareholder meeting is a small but important test of its culture and humility. One day a year is not much to ask from corporate boards and executives. Disney seemed to understand this basic idea. Kudos to Chairman Pepper for setting the tone.

After the meeting, I shook Chairman Pepper's hand and was very impressed with the way he ran the meeting. He personifies confidence, tact, and professionalism. CEO Iger also answered all questions competently and seems to have a firm grasp of the company's business. I overheard various shareholders saying privately that CEO Iger seemed more uptight than Chairman Pepper. After the meeting, shareholders were given a gold-colored D23 pin to commemorate the official launch of Disney's online community.

With its diverse line of businesses, Disney appears poised to rebound once the economy improves. I wish the company would try harder to appeal to adults, especially men, in their 20's and 30's. Outside of ESPN, Disney seems to be ignoring the adult male consumer. For example, it did not get the "March Madness" media contract and seems to be focusing exclusively on children, parents, grandparents, and teenage girls. That's an impressive customer base, but it seems strange to have a major media company ignore younger adults, who are a large segment of the national and international population.

Disclosure: I own an insignificant number of shares in Disney (DIS).

Update on March 12, 2009: Check out this story on the March Madness contract. Apparently, Disney might be able to bid on the tournament rights after next year.

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