Push by Disney Investors Loses Weight of SEC

Reversing an earlier opinion, the Securities and Exchange Commission staff has sided with Walt Disney Co., in effect preventing shareholders from being able to nominate directors to the board.

At the annual shareholders meeting next spring, some had hoped to put to a vote a proposal that would have allowed shareholders to nominate as many as two independent directors. Earlier this month, SEC staffers said Disney should include the proposal on the ballot and suggested the commission might take action if it did not.

On Tuesday, however, a senior SEC staff member informed an attorney representing Disney that the agency would not, in fact, take any enforcement action. The SEC’s change of heart drew an angry response from pension fund officials who had been pressing Disney to give shareholders a greater voice on the board.

“It’s extremely unusual,” said Richard Ferlauto, director of pension and benefits policy for the American Federation of State, County and Municipal Employees. “This had been vetted extremely closely by the SEC. There must have been a huge lobbying effort on the part of Disney to overturn this.... It shows their further disregard for shareholder opinion.”

A Disney spokeswoman declined to comment.

In a statement, the SEC said: “The staff has reconsidered its earlier position and on the basis of the specific proposals and the arguments made, granted the request for a no-action position.”

SEC spokesman John Heine declined to elaborate.

The proposed measure would have set up a process to not only allow shareholders to nominate as many as two directors to the board, but also to have those nominees included in the company’s proxy mailings. If the measure had passed, shareholders would have been able to vote on the investor-nominated directors in 2006.

Currently, it is prohibitively expensive for shareholders to nominate directors because ballots must be mailed to every Disney shareholder.

When the pension funds put forth the proposal in October, Disney said it would oppose the measure partly because it would create confusion among the voters.