1.The Board reaffirmed its strong support for Michael Eisner, Bob Iger, and the entire management team. The Board noted that the Company’s performance has been strong, with a greater than 50% increase in earnings projected in the current fiscal year and, barring a downturn in the environment, double-digit growth in earnings targeted through at least 2007. The Company is also on track to deliver record free cash flow in fiscal 2004, up from the previous record set last year.
The Board took special note of the fact that today marks the 20th anniversary of Michael Eisner’s service as Chief Executive Officer. The Board formally acknowledged Michael’s recent decision regarding the CEO position, thanked him for his outstanding creative leadership, and looks forward to his continued leadership through the rest of his tenure.
The Walt Disney Company’s condition and prospects are excellent. It has strong and effective leadership. The Board is committed to keeping the Company on the right path, the creative path, the path to attractive economic returns and value creation for our shareholders.
2. The Compensation Committee approved a redesigned Management Incentive Bonus Program for its senior executives and managers to further clarify and formalize the company’s practice of linking executive compensation and performance. The Management Incentive Bonus Program is one component of the company’s overall executive compensation program, which also includes salary and long-term incentive compensation.
Under the new program, which takes effect for Disney’s 2005 fiscal year beginning October 1, 70% of the annual bonus compensation determination for the most senior corporate executives and 70% of the bonus pool determination for other corporate executives and managers will be based on performance against specific financial measures established at the outset of each fiscal year by the Compensation Committee. For fiscal year 2005, the company-level financial performance metrics relevant to the bonus and bonus pool determinations will include targeted levels of operating income, economic profit (operating profit after taxes and a charge for capital employed), after-tax free cash flow and earnings per share.
The remaining 30% of the determination will be based upon the Committee’s assessment of other individual, company-wide or business segment performance objectives. The most senior corporate executives’ bonuses will also be subject to further adjustment up or down by as much as 20%, depending upon how the company’s earnings per share (EPS) performance for the year compares to EPS performance of the Standard &Poor’s 500 Index of companies over the same period.
In the case of the most senior executive officers, the new program will be subject to additional performance criteria and payment limitations under the Company’s 2002 Executive Performance Plan, as approved by the Company’s stockholders, allowing these bonuses to be tax deductible to the Company under Section 162(m) of the Internal Revenue Code.
For executives and managers at the company’s business segments, 50% of the bonus pool determination will be based on segment-level financial performance and 50% will be based on performance against the company-level financial goals and other objectives.
“By further clarifying and making more formal the company’s practice of linking bonus compensation and financial performance, the Board is underscoring its commitment to strong governance and to motivating and holding accountable the management team in a way that drives meaningful shareholder value,” said Judith Estrin, Disney director and chair of the Compensation Committee. “The Compensation Committee and the Board believe this redesigned bonus compensation program will allow Disney to attract, retain and motivate the best talent in the world by rewarding outstanding performance while ensuring that the company’s leaders’ compensation is thoroughly aligned with the interests of shareholders. The plan focuses on the key drivers of long term shareholder value and will help reinforce management’s commitment to these important financial metrics.”
For more information on Disney’s redesigned Management Incentive Bonus Program, see www.disney.com/investors.
3. The Board will engage in a thorough, careful, and reasoned process to select as the next CEO the best person for the company, its shareholders, employees, customers, and for the many millions of others who care so much about The Walt Disney Company. The Board is keenly aware of the special place our company holds in the hearts of people all over the world and the importance of its responsibility in choosing a CEO.
To achieve its objective, the Board will:
- 1. Engage an executive search firm to assist it in selecting a CEO who possesses the qualities and experience the Board believes are necessary for this important position.
- 2. Consider both internal and external candidates. Bob Iger is the one internal candidate. He is an outstanding executive and the Board regards him as highly qualified for the position. However, the Board believes that the process should include full consideration of external candidates as well.
- 3. Complete the process and announce a successor as soon as possible, with an expected date of completion of June 2005.
- 4. Michael Eisner and the Board will work to assure a smooth and effective transition. The Board regards its responsibility on succession as so significant that all members should participate actively and fully in the entire process; and each has committed to do so.
4. Directors are elected for a one year term. The Board’s retirement policy provides that “no Director may stand for reelection following the calendar year in which that Director turned 72 years of age.” Senator Mitchell will turn 72 in August 2005. He has informed the Board that, if elected a Director at the 2005 annual meeting, he will act in accordance with the Board’s policy and not stand for reelection at the 2006 annual meeting.
Following its announcement of a successor CEO, the Board will engage in thorough, careful, and reasoned review and will then select and announce a successor Chairman.
FORWARD LOOKING STATEMENTS
Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of our views and assumptions regarding future events and business performance as of the time the statements are made and we do not undertake any obligation to update these statements. Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including restructuring or strategic initiatives and information technology improvements, as well as from developments beyond the Company’s control, including international, political, health concern and military developments that may affect travel and leisure businesses generally and changes in domestic and global economic conditions that may, among other things, affect the performance of the Company’s theatrical and home entertainment releases, the advertising market for broadcast and cable television programming, expenses of providing medical and pension benefits and demand for consumer products. Changes in domestic competitive conditions and technological developments may also affect performance of all significant company businesses. Additional factors are set forth in the Company’s Annual Report on Form 10-K for the year ended September 30, 2003 under the heading “Factors that may affect forward-looking statements.”