Disney shareholders to vote on cyber-security proposal

Feb 26, 2019
Board urges vote against using additional cyber-security and data privacy metrics in executive compensation

Shareholders in The Walt Disney Company will have a chance to press the Magic Kingdom owner on cyber-security and its lobbying activities on March 7 by voting on two proposals at the company’s AGM in St Louis, Missouri.

Disney’s board has urged shareholders to vote against the proposals, one of which calls for it to publish a report assessing ‘the feasibility of integrating additional cyber-security and data privacy metrics into the performance measures of senior executives under Disney’s compensation incentive plans.’

Cyber-security, with widespread media coverage and talk about threats from attackers both internal and external, including state actors, has become a key concern for both investors and companies. A recent survey by Morrow Sodali finds that institutional investors rank cyber-security risk management as the third-most important topic when pushing for more sustainability disclosure in 2019.

James McRitchie, publisher of CorpGov.Net and the person who filed the proposal, notes in a supporting statement that Disney links senior executive compensation to performance metrics such as information security metrics.

‘Cyber-security and data privacy are vitally important issues for Disney and should be integrated as appropriate into senior executive compensation to incentivize leadership to reduce needless risk, enhance financial performance and increase accountability,’ he writes. ‘Rewarding executives for risk mitigation as well as growth generation will better position Disney as a trusted brand.’

But the board recommends in its proxy statement that shareholders vote against the proposal because ‘it is unnecessary and would not promote enhanced protection of data security and data privacy.’ The company’s compensation program for senior executives already incorporates broad financial measures that the compensation committee believes promote the creation of long-term shareholder value, it states.

‘At the same time, the program incorporates a consideration of non-financial performance factors in setting individual awards, which includes an assessment of individual executives’ fulfillment of direct responsibilities,’ the board adds. ‘The performance of an individual executive with responsibility for data security and privacy matters would already be considered in this context.’

This approach allows the committee to incentivize those executives with direct responsibility for data security and data privacy on an individual basis and does not put ‘undue emphasis’ on these matters for executives who do not have direct responsibility for them, the board argues.

The other proposal is brought by Zevin Asset Management on behalf of Emma Creighton Irrevocable Trust, the Congregation of the Sisters of Saint Agnes, the Congregation of the Sisters of Saint Joseph and Walden Asset Management, according to the proxy statement.

If approved, it would request that the board authorize the preparation of a report, updated each year, disclosing:

  • Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications
  • Payments by Disney used for direct or indirect lobbying or grassroots lobbying communications, in each case including the amount of the payment and the recipient
  • Disney’s membership of and payments to any tax-exempt organization that writes and endorses model legislation
  • Description of management’s decision-making process and the board’s oversight for making such payments.

Political lobbying, which has been a popular shareholder proposal in recent years, remained popular in the 2018 proxy season. The board recommends against shareholders supporting the proposal, adding that this is the fourth year it has been presented and it has yet to gain majority support. The board argues that Disney already provides substantial disclosure regarding its political activities, including lobbying. For example, its contributions to candidates for office are disclosed each year on the company’s website.

‘Many companies do not currently disclose the information sought by the proposal and the board believes [it] would put the company at a disadvantage in advancing shareholder interests through political activities by compelling disclosure of information about the company’s priorities and methods to the advantage of our adversaries on policy issues and without providing meaningful new information to our shareholders,’ the board states.

A request for comment from Disney was not returned immediately.


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