NEW YORK, May 21, 2004 – Six Directors of The Walt Disney Company (NYSE: DIS) Board met today with representatives of seven public pension funds that collectively hold 39.9 million shares of Disney stock, about two percent of shares outstanding, to review specific steps the company’s management is taking to build long-term shareholder value as well as steps the Board is taking in the area of governance. The Board members, led by Disney Chairman George Mitchell, also solicited detailed input regarding specific performance and governance initiatives.
The Disney presentation included a discussion of the company’s financial performance; executive succession planning; the separation of roles between the Chair and CEO and the selection process for a new independent director. Tom Staggs, Disney senior executive vice president and CFO, also attended to present financial information.
“The Disney Board takes seriously the responsibility to listen to all shareholders. This meeting was part of that process,” Mitchell said following the meeting. “Today’s meeting included a thorough exchange of views and ideas. The Board members continue to respect and understand the specific issues raised by this group. We hope these leaders now have a better understanding as to why the Board remains firm in its view that the Disney management team, led by Michael Eisner and Bob Iger, is executing against its strategic plan in order to continue to drive long-term shareholder value, as evidenced by the most recent earnings report, and to strengthen the company’s position as the global leader in quality family entertainment.”
Independent Directors Judith Estrin, chair of the Compensation Committee; Monica Lozano, chair of the Governance and Nominating Committee, Robert Matschullat, chair of the Audit Committee; and Aylwin Lewis, as well as Director Bob Iger, Disney’s president and chief operating officer, also attended the meeting.
Among the items also discussed during the meeting were Disney’s short- and long-term financial performance and trends, a review of the company’s corporate governance guidelines including duties for the Chair, director independence, the Board’s ongoing search for a new independent director, and succession planning for the CEO and other senior executives.
“The Disney Board plans to continue to hold management accountable for performance, by measuring management’s success based on its ability to execute on its strategic priorities, and to prepare for the company’s future,” Mitchell said. “We expect this success to manifest itself in, among other things, continued growth in earnings, increased free cash flow, and increased returns on invested capital.”
In terms of performance, Disney stock in the past year has risen 29 percent. For calendar year 2003, Disney stock rose 43 percent, compared to 26 percent for the S&P 500 and 25 percent for the Dow Jones Industrial Average. Over the long term, Disney has provided an impressive return for shareholders. An investment of $10,000 made when Eisner became Disney’s CEO in Sept. 1984 would be worth more than $200,000 today, representing nearly 85 percent more than the S&P 500 would have returned on that investment. And the Company’s future prospects look bright. As the Company stated in its most recent earnings release, “Barring negative changes in the environment and given the strength of our recent results and the positive trends we are seeing in our businesses, we now believe we will deliver growth in earnings for the full year of 50 percent or more, excluding the potential impact from items like the sale of the Disney Stores. We are also keeping an eye on the exposure we have from airline lease investments made in the early 90’s which could impact our outlook?. We are also expecting to deliver double-digit average annual earnings growth from 2004 through at least 2007.”
Disney Board members also discussed the Board’s corporate governance guidelines, specifically those on succession and Board member independence. The Disney Board’s guidelines call for the chief executive officer to meet with non-management Directors at least once yearly to discuss potential successors. The non-management directors also are to meet in executive session, without management present, to discuss succession. In addition, the CEO also is to review periodically with the non-management directors the performance of other key members of the senior management team, as well as succession arrangements for those key senior management members.
The Disney Board has adopted a policy that a “substantial majority” of its Directors will be independent of the company and its management, under independence standards that are set out in the guidelines that meet or exceed those that are required by the NYSE. In addition, all members of the Audit, Compensation and Governance and Nominating committees must be deemed independent under Board guidelines and NYSE rules.
On March 19, 2004, Disney sent a letter to more than 100 institutional investors asking for continued feedback, and especially for input on key attributes, skills and characteristics the Board’s Governance and Nominating Committee should consider in recruiting a new independent director. The Board has stated the intention to identify and elect a ninth independent director before year’s end.
Certain statements in this release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made and management does 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.”