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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE WALT DISNEY COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
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[LOGO OF THE WALT DISNEY COMPANY APPEARS HERE]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 23, 1999
----------------
To our Stockholders:
The 1999 annual meeting of stockholders of The Walt Disney Company will be
held at The 5th Avenue Theatre, 1308 5th Avenue, Seattle, Washington, on
Tuesday, February 23, 1999, beginning at 10:00 a.m. local time. At the
meeting, stockholders will act on the following matters:
(1) Election of five directors, each for a term of one year;
(2) Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for fiscal 1999;
(3) Consideration of three stockholder proposals; and
(4) Any other matters that properly come before the meeting.
Stockholders of record at the close of business on December 28, 1998 are
entitled to vote at the meeting or any postponement or adjournment.
IF YOU PLAN TO ATTEND:
PLEASE NOTE THAT SPACE LIMITATIONS MAKE IT NECESSARY TO LIMIT ATTENDANCE TO
STOCKHOLDERS AND ONE GUEST. ADMISSION TO THE MEETING WILL BE ON A FIRST-COME,
FIRST-SERVED BASIS. REGISTRATION AND SEATING WILL BEGIN AT 9:00 A.M. EACH
STOCKHOLDER MAY BE ASKED TO PRESENT VALID PICTURE IDENTIFICATION, SUCH AS A
DRIVER'S LICENSE OR PASSPORT. STOCKHOLDERS HOLDING STOCK IN BROKERAGE ACCOUNTS
("STREET NAME" HOLDERS) WILL NEED TO BRING A COPY OF A BROKERAGE STATEMENT
REFLECTING STOCK OWNERSHIP AS OF THE RECORD DATE. PARKING IS AVAILABLE AT
LOCAL GARAGES; FEES FOR PARKING RANGE FROM $5 TO $10. CAMERAS, RECORDING
DEVICES AND OTHER ELECTRONIC DEVICES WILL NOT BE PERMITTED AT THE MEETING.
By order of the Board of Directors,
/s/ Marsha L. Reed
Marsha L. Reed
Corporate Secretary
January 4, 1999
Burbank, California
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ABOUT THE MEETING......................................................... 1
What is the purpose of the annual meeting?.............................. 1
Who is entitled to vote?................................................ 1
Who can attend the meeting?............................................. 1
What constitutes a quorum?.............................................. 1
How do I vote?.......................................................... 1
Can I vote by telephone or electronically?.............................. 2
Can I change my vote after I return my proxy card?...................... 2
How do I vote my 401(k) shares?......................................... 2
What are the Board's recommendations?................................... 2
What vote is required to approve each item?............................. 2
STOCK OWNERSHIP........................................................... 3
Who are the largest owners of the Company's stock?...................... 3
How much stock do the Company's directors and executive officers own?... 3
ITEM 1--ELECTION OF DIRECTORS............................................. 5
Directors Standing for Election......................................... 5
Directors Continuing in Office.......................................... 6
Certain Relations and Related Transactions.............................. 9
Executive Compensation.................................................. 10
Report of the Compensation Committee and the Executive Performance
Subcommittee on Executive Compensation............................... 10
Compensation Committee Interlocks and Insider Participation........... 12
Employment Agreement with Michael D. Eisner........................... 13
Executive Compensation Summary Table.................................. 14
Option Grants for Fiscal 1998......................................... 15
Option Exercises and Values for Fiscal 1998........................... 16
Retirement Plans...................................................... 16
Comparison of Five-Year and Fourteen-Year Cumulative Total Returns...... 17
ITEM 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS............ 19
ITEM 3--STOCKHOLDER PROPOSALS............................................. 19
Proposal 1--Year 2000................................................... 19
Proposal 2--Contract Supplier Standards................................. 21
Proposal 3--Future Adoption of a Shareholder Rights Plan................ 23
OTHER MATTERS............................................................. 24
ADDITIONAL INFORMATION.................................................... 24
</TABLE>
<PAGE>
[LOGO OF THE WALT DISNEY COMPANY]
500 SOUTH BUENA VISTA STREET
BURBANK, CALIFORNIA 91521
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PROXY STATEMENT
----------------
This proxy statement contains information related to the annual meeting of
stockholders of The Walt Disney Company to be held on Tuesday, February 23,
1999, beginning at 10:00 a.m., at The 5th Avenue Theatre, 1308 5th Avenue,
Seattle, Washington, and at any postponements or adjournments thereof.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, stockholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors, ratification of the Company's independent auditors and
consideration of proposals submitted by stockholders. In addition, the
Company's management will report on the performance of the Company during
fiscal 1998 and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record date,
December 28, 1998, are entitled to receive notice of the annual meeting and to
vote the shares of common stock that they held on that date at the meeting, or
any postponement or adjournment of the meeting. Each outstanding share
entitles its holder to cast one vote on each matter to be voted upon.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed proxies, may
attend the meeting, and each may be accompanied by one guest. Seating,
however, is limited. Admission to the meeting will be on a first-come, first-
served basis. Registration and seating will begin at 9:00 a.m. Each
stockholder may be asked to present valid picture identification, such as a
driver's license or passport. Cameras, recording devices and other electronic
devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in
at the registration desk at the meeting.
Parking is available at local garages; fees for parking range from $5 to
$10.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 2,049,862,650 shares of common stock of the Company were
outstanding. Proxies received but marked as abstentions and broker non-votes
will be included in the calculation of the number of shares considered to be
present at the meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct. If you are a registered
stockholder and attend the meeting, you may deliver your completed proxy card
in person. "Street name" stockholders who wish to vote at the meeting will
need to obtain a proxy form from the institution that holds their shares.
<PAGE>
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
If you are a registered stockholder (that is, if you hold your stock in your
own name), you may vote by telephone, or electronically through the Internet,
by following the instructions included with your proxy card.
If your shares are held in "street name," you will need to contact your
broker or other nominee to determine whether you will be able to vote by
telephone or electronically.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not
by itself revoke a previously granted proxy.
HOW DO I VOTE MY 401(K) SHARES?
If you participate in the Disney Savings and Investment Plan or the ABC,
Inc. Savings and Investment Plan (i.e., the Company's "401(k)" plans), you may
vote an amount of shares of common stock of the Company equivalent to the
interest in the Company's common stock credited to your account as of the
record date. You may vote by instructing Fidelity Management Trust Company,
the trustee of both plans, pursuant to the instruction card being mailed with
this proxy statement to plan participants. The trustee will vote your shares
in accordance with your duly executed instructions received by February 17,
1999. If you do not send instructions, the share equivalents credited to your
account will be voted by the trustee in the same proportion that it votes
share equivalents for which it did receive timely instructions.
You may also revoke previously given voting instructions by February 17,
1999 by filing with the trustee either a written notice of revocation or a
properly completed and signed voting instruction card bearing a later date.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board's recommendation is set
forth together with the description of each item in this proxy statement. In
summary, the Board recommends a vote:
. for election of the nominated slate of directors (see page 5);
. for ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors (see page 19); and
. against approval of each of the stockholder proposals (see pages 19-24).
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes cast
at the meeting is required for the election of directors. A properly executed
proxy marked "WITHHOLD AUTHORITY" with respect to the election of one or more
directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether
there is a quorum.
OTHER ITEMS. For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote
on the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention will have the effect of a negative vote.
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If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF THE COMPANY'S STOCK?
The Company knows of no single person or group that is the beneficial owner
of more than 5% of the Company's common stock.
HOW MUCH STOCK DO THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table shows the amount of common stock of the Company
beneficially owned (unless otherwise indicated) by the Company's directors,
the executive officers of the Company named in the Summary Compensation Table
below and the directors and executive officers of the Company as a group.
Except as otherwise indicated, all information is as of December 28, 1998.
STOCK OWNERSHIP
<TABLE>
<CAPTION>
AGGREGATE NUMBER ACQUIRABLE PERCENT OF
OF SHARES WITHIN 60 SHARES
NAME BENEFICIALLY OWNED(1)(2) DAYS(3) OUTSTANDING(4)
<S> <C> <C> <C>
Reveta F. Bowers.......... 3,529 6,600 *
Roy E. Disney............. 17,825,204 480,000 *
Michael D. Eisner......... 10,770,543(5) 1,999,992 *
Judith L. Estrin.......... 1,000 -- *
Stanley P. Gold........... 12,228 7,200 *
Sanford M. Litvack........ 34,067 1,350,000 *
Ignacio E. Lozano, Jr..... 16,764 7,200 *
George J. Mitchell........ 7,213 7,200 *
Peter E. Murphy........... 3,740 222,700 *
Thomas S. Murphy.......... 3,291,080 7,200 *
Leo J. O'Donovan, S.J..... -- -- --
Sidney Poitier............ 3,899 7,200 *
Irwin E. Russell.......... 13,002 7,200 *
Thomas O. Staggs.......... 6,678 210,000 *
Robert A.M. Stern......... 1,872 7,200 *
Andrea Van de Kamp........ 200 -- *
Raymond L. Watson......... 40,310 7,200 *
Gary L. Wilson............ 3,974 7,200 *
All current directors and
executive officers as a
group (20 persons)....... 32,046,086 4,544,092 1.8%
</TABLE>
* Represents less than 1% of the Company's outstanding common stock.
3
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(1) The number of shares shown includes shares that are individually or
jointly owned, as well as shares over which the individual has either sole
or shared investment or voting authority. Certain of the Company's
directors and executive officers disclaim beneficial ownership of some of
the shares included in the table, as follows:
. Mr. Eisner--88,800 shares held by his wife directly and as custodian for
their children, 36,000 shares held in a trust for his children, 21,600
shares held in trusts of which Mr. Eisner is a trustee and 9,600 shares
held in a trust of which Mr. Eisner is the income beneficiary;
. Mr. Disney--768,960 shares held in trusts for the benefit of his children
or grandchildren, of which Mr. Disney is the trustee; and 1,248 shares
beneficially owned by Shamrock Holdings, Inc., of which both Mr. Disney
and his wife are officers and directors and the shares of which are held
by Mr. Disney, his wife, certain of his children, trusts for the benefit
of his children and custodial accounts for the benefit of certain of his
children and grandchildren;
. Mr. Gold--4,820 shares held by his wife and 1,248 shares beneficially
owned by Shamrock Holdings, Inc., of which he is an officer and director;
. Mr. Litvack--150 shares held by a trust of which he is a co-trustee;
. Mr. Lozano--1,320 shares that he holds as custodian for the benefit of
his child;
. Thomas Murphy--52,170 shares held in trust for the benefit of a non-
family member and 1,320 shares owned by Mr. Murphy's wife; and
. Mr. Staggs--900 shares held in trust for members of his family.
All current directors and executive officers as a group disclaim beneficial
ownership of an aggregate of 986,888 shares.
(2) For executive officers, includes interests in shares held in the Disney
Salaried Savings and Investment Plan, with respect to which participants
have voting power but no investment rights: Mr. Eisner--25,998 shares; Mr.
Litvack--2,567 shares; Peter Murphy--1,740 shares; Mr. Staggs--4,651
shares; and all current executive officers as a group 45,939 shares. For
non-employee directors participating in the Company's 1997 Non-employee
Directors Stock and Deferred Compensation Plan, includes share units
credited as of September 30, 1998, to the director's account: Ms. Bowers--
2,929; Mr. Gold--1,180; Sen. Mitchell--2,113; Mr. Murphy--3,462; Mr.
Poitier--1,124; Mr. Russell--1,002; Mr. Stern--947; Mr. Watson--1,190; and
Mr. Wilson--974. Participating directors do not have current voting or
investment power with respect to these share units, which are payable
solely in shares of common stock upon termination of service.
(3) Reflects the number of shares that could be purchased by exercise of
options available at December 28, 1998 or within 60 days thereafter under
the Company's stock option plans.
(4) Based on the number of shares outstanding at, or acquirable within 60 days
of, December 28, 1998.
(5) Does not include 1,125,000 shares held by The Eisner Foundation, Inc., a
charitable not-for-profit corporation in which Mr. Eisner has no pecuniary
interest.
Based upon a review of filings with the Securities and Exchange Commission
and written representations that no other reports were required, the Company
believes that all of the Company's directors and executive officers complied
during fiscal 1998 with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, with the exception of the purchase of 925
shares by Mr. Poitier in February 1998, which was reported in July 1998, and
an option exercise with respect to 300 shares in July 1998 by Ms. Bowers,
which was reported in September 1998. Both of these late filings resulted from
administrative oversights at the Company. In addition, Mr. Gold inadvertently
failed to report a July 1998 purchase by his wife of 500 shares, as to which
he disclaims beneficial ownership, until November 1998.
4
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ITEM 1--ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
The Board of Directors is currently divided into three classes, having
three-year terms that expire in successive years. During 1998, the Company
amended its certificate of incorporation, after approval by the Company's
stockholders at the 1998 annual meeting, to provide for the elimination of the
classification of the Board by 2001. Under the amended certificate of
incorporation, all directors elected by stockholders after the 1998 annual
meeting, regardless of class, are elected for a one-year term.
The current three-year term of office of directors in Class III expires at
the 1999 annual meeting. The Board of Directors proposes that the nominees
described below, all of whom are currently serving as Class III directors, be
re-elected to Class III for a new term of one year and until their successors
are duly elected and qualified.
Each of the nominees has consented to serve a one-year term. If any of them
should become unavailable to serve as a director, the Board may designate a
substitute nominee. In that case, the persons named as proxies will vote for
the substitute nominee designated by the Board.
CLASS III DIRECTORS. The directors standing for election are:
JUDITH L. ESTRIN Director since 1998
Ms. Estrin, 43, currently serves as Chief Technology Officer and Senior
Vice President of Cisco Systems Inc., a company that develops hardware and
software to link computer systems. She was formerly President and Chief
Executive Officer of Precept Software, Inc., a developer of networking
software of which she was co-founder, from March 1995 until its acquisition
by Cisco in April 1998. Ms. Estrin was a computer industry consultant from
September 1994 to March 1995, and served Network Computer Devices as
President and Chief Executive Officer from October 1993 to September 1994
and as Executive Vice President from July 1988 to October 1993. She also
serves as a director of FDX Corporation, an international provider of
transportation and delivery services, and Sun Microsystems, Inc., a
supplier of network computing products.
SANFORD M. LITVACK Director since 1995
Mr. Litvack, 62, has served as Senior Executive Vice President and Chief of
Corporate Operations of the Company since August 1994, serving concurrently
as the Company's General Counsel until July 1998. He previously served as
Senior Vice President and General Counsel from April 1991 through June 1992
and as Executive Vice President--Law and Human Resources from June 1992 to
August 1994. Mr. Litvack was a litigation partner with the law firm of
Dewey Ballantine from 1987 until joining the Company in 1991.
SIDNEY POITIER Director since 1994
Mr. Poitier, 71, is an actor, director and writer, serving as Chief
Executive Officer of Verdon-Cedric Productions, a film production company.
Mr. Poitier has won many awards, including the Academy Award(R) for Best
Actor, the American Film Institute's Lifetime Achievement Award and the
Kennedy Center Honors. He belongs to numerous civic organizations,
including the Children's Defense Fund, the NAACP Legal Defense and
Education Fund and the Natural Resources Defense Council. In addition, he
is the Ambassador to Japan from the Commonwealth of the Bahamas.
ROBERT A.M. STERN Director since 1992
Mr. Stern, 59, is a practicing architect, teacher and writer. He is Senior
Partner of Robert A.M. Stern Architects of New York, which he founded, and
a Fellow of the American Institute of Architects. Mr. Stern is also Dean of
the Yale School of Architecture and previously served as a professor and
Director of the Historic Preservation Department at the Graduate School of
Architecture, Planning and Preservation at Columbia University. Mr. Stern
is the design architect of the Yacht and Beach Club hotels, the Boardwalk
Hotel and the Casting Center at the Walt Disney World Resort and the
Newport Bay Club and the Cheyenne Hotel at Disneyland Paris. He is also the
design architect of the Feature Animation Building at the Company's
headquarters in Burbank, California.
5
<PAGE>
ANDREA VAN DE KAMP Director since 1998
Ms. Van de Kamp, 55, has served as Chairman of Sotheby's West Coast, a unit
of the international auction company, since 1989, and is a member of the
Board of Directors of Sotheby's North America. She also serves as a
director of City National Bank and Jenny Craig International, and as
Chairman of the Board of the Los Angeles Music Center, Inc. In addition,
Ms. Van de Kamp is a trustee of Pomona College, in Pomona, California.
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS. The following Class I directors were elected at the
Company's 1997 annual meeting for terms ending in 2000:
REVETA F. BOWERS Director since 1993
Mrs. Bowers, 50, has been an administrator and the Head of School for the
Center for Early Education, an independent school for pre-school through
sixth grade located in Los Angeles, since 1976. Mrs. Bowers is a member of
the Board of Directors of several non-profit educational organizations,
including the National Association of Independent Schools, The Institute
for Educational Advancement, The Fulfillment Fund and the Coalition for
Justice.
ROY E. DISNEY Director since June 1984;
also from 1967 to March 1984
Mr. Disney, 68, has been Vice Chairman of the Board of Directors of the
Company since 1984, and since November 1985 has also served as head of the
Company's animation department. In addition, Mr. Disney is Chairman of the
Board of Shamrock Holdings, Inc., which, through its subsidiaries, is
engaged in real estate development and the making of investments. Mr.
Disney is a nephew of the late Walt Disney.
IGNACIO E. LOZANO, JR. Director since 1981
Mr. Lozano, 71, is Chairman of Lozano Enterprises, which publishes La
Opinion, the largest Spanish-language newspaper in the Los Angeles
metropolitan area. Mr. Lozano was Publisher and Editor of La Opinion from
1953 to 1986, except for the period from 1976 through 1977 when he was the
United States Ambassador to El Salvador. Mr. Lozano is a member of the
Boards of Directors of Sempra Energy, a holding company, and its
subsidiaries Southern California Gas Co. and San Diego Gas and
Electric Co.; Pacific Mutual Holding Company and its subsidiaries Pacific
LifeCorp and Pacific Life Insurance Company; and a number of public service
and charitable organizations.
GEORGE J. MITCHELL Director since 1995
Senator Mitchell, 65, is special counsel to the law firm of Verner,
Liipfert, Bernhard, McPherson & Hand in Washington, D.C. and senior counsel
to the firm of Preti, Flaherty, Beliveau & Pachios in Portland, Maine. He
also serves as an advisor to B.T. Wolfensohn, an investment banking firm.
He served as a United States Senator for fifteen years commencing in 1980,
and was Senate Majority Leader from 1989 to 1995. Senator Mitchell is a
member of the Board of Directors of UNUM Corporation, a disability
insurance company; FDX Corporation, an international provider of
transportation and delivery services; Xerox Corporation, a manufacturer of
photocopier equipment; KTI, Inc., a waste management and recycling company;
and Staples, Inc., an office supply company. He is also a trustee of
Starwood Hotels & Resorts. He has also served as Chairman of the Peace
Negotiations in Northern Ireland, the Ethics Committee of the U.S. Olympic
Committee and the National Health Care Commission.
GARY L. WILSON Director since 1985
Mr. Wilson, 58, has been Chairman of the Board of Directors of Northwest
Airlines Corporation since April 1997, having served as Co-Chairman of the
Board of Directors from 1991 to 1997 and as a director since 1989. From
1985 through 1989, he was Executive Vice President and Chief Financial
Officer of the Company. Prior to joining the Company, Mr. Wilson was
Executive Vice President and Chief Financial Officer of Marriott
Corporation, a diversified company involved in lodging, food service and
related
6
<PAGE>
businesses. Mr. Wilson is a director of On Command Corporation, a provider
of in-room, on-demand video entertainment and information services to the
domestic lodging industry, and CB Richard Ellis Services, Inc., a
commercial real estate services company. He also serves on the board of
trustees of Duke University and the board of overseers of the Wharton
School at the University of Pennsylvania.
CLASS II DIRECTORS. The following Class II directors were elected at the
Company's 1998 annual meeting for terms ending in 2001:
MICHAEL D. EISNER Director since 1984
Mr. Eisner, 56, has served as Chairman of the Board and Chief Executive
Officer of the Company since 1984. Prior to joining the Company, Mr. Eisner
was President and Chief Operating Officer of Paramount Pictures Corp.,
which was then a wholly owned subsidiary of Gulf+Western Industries, Inc.
Prior to joining Paramount in 1976, Mr. Eisner was Senior Vice President,
Prime Time Programming, for ABC Entertainment, a division of the American
Broadcasting Company, Inc., with responsibility for the development and
supervision of all prime-time series programming, limited series movies
made for television and the acquisition of talent.
STANLEY P. GOLD Director since 1987;
also from June to September 1984
For more than the past five years, Mr. Gold, 56, has served as President
and Chief Executive Officer of Shamrock Holdings, Inc. Since 1990, Mr. Gold
has been President of Trefoil Investors, Inc., the general partner of
Trefoil Capital Investors, L.P., an investment partnership, as well as
President of Shamrock Capital Advisors, Inc., which acts as manager of the
partnership.
THOMAS S. MURPHY Director since 1996
Mr. Murphy, 73, was Chairman of the Board and Chief Executive Officer of
Capital Cities/ABC, Inc. for 24 years from 1966 to 1990 and from February
1994 until his retirement in February 1996. Mr. Murphy is also a director
of Columbia/HCA Healthcare Corp., a provider of health care services, and
Doubleclick Inc., a provider of Internet advertising services.
LEO J. O'DONOVAN, S.J. Director since 1996
Since 1989, Fr. O'Donovan, 64, has been President of Georgetown University,
where he also holds an appointment as Professor of Theology. He serves on a
number of higher education boards, including that of the Association of
Catholic Colleges and Universities, and is a member of the Steering
Committee of Presidents for the America Reads initiative. He is a former
member of the National Council on the Arts of the National Endowment for
the Arts and past chair of the Consortium on Financing Higher Education.
IRWIN E. RUSSELL Director since 1987
Mr. Russell, 72, is an attorney presently engaged in private practice, who
has served as an attorney and executive in the entertainment industry for
many years. He serves as an independent member of the Board of Directors of
The Lipper Funds, Inc., a mutual fund group, and of the Southern California
Tennis Association, a nonprofit association. He also serves as an ad hoc
arbitrator for the Federal Mediation and Conciliation Service and the
American Arbitration Association.
RAYMOND L. WATSON Director since 1974
Mr. Watson, 72, has served as Chairman of the Executive Committee of the
Company's Board of Directors since 1984 and was Chairman of the Board of
the Company from May 1983 to September 1984. Since 1986, Mr. Watson has
been Vice Chairman of the Board of The Irvine Company, a land development
company. From 1985 to 1986, he was Regents Professor in the Graduate School
of Management at the University of California, Irvine. Mr. Watson is also a
director of Irvine Apartment Communities (IAC), a real estate investment
trust; Pacific Mutual Holding Company and its subsidiaries Pacific LifeCorp
and Pacific Life Insurance Company; Mitchell Energy & Development Co., a
company engaged in oil and gas exploration, production, distribution and
land development; and the Public Policy Institute of California, a non-
profit public policy research institute.
7
<PAGE>
HOW ARE DIRECTORS COMPENSATED?
BASE COMPENSATION. Each non-employee director receives a retainer based on
an annualized rate of $35,000, together with a fee of $1,000 per Board or
Committee meeting attended. Non-employee directors may elect to receive all or
part of their retainer and meeting fees either in common stock or in cash or
stock unit accounts. Any such elections are effective until termination of the
participating director's service as a director. All of the non-employee
directors other than Fr. O'Donovan are currently participating in this plan.
Directors who are also employees of the Company receive no additional
compensation for service as directors.
OPTIONS. Each non-employee director receives an automatic grant, on March 1
of each year, of options to purchase 6,000 shares of common stock. For fiscal
1998, Ms. Bowers, Fr. O'Donovan and Messrs. Gold, Lozano, Mitchell, Murphy,
Poitier, Russell, Stern, Watson and Wilson received grants under this plan.
Each option grant, vesting in equal installments over five years and having a
ten-year term, permits the holder to purchase shares at their fair market
value on the date of grant, which was $36.82 in the case of options granted in
1998.
HOW OFTEN DID THE BOARD MEET DURING FISCAL 1998?
The Board of Directors met six times during fiscal 1998. Each director
attended more than 75% of the total number of meetings of the Board and
Committees on which he or she served.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Executive, Compensation, Audit Review
and Nominating Committees. In addition, the Board has created an Executive
Performance Subcommittee of the Compensation Committee.
BOARD COMMITTEE MEMBERSHIP
<TABLE>
<CAPTION>
EXECUTIVE AUDIT
EXECUTIVE COMPENSATION PERFORMANCE REVIEW NOMINATING
NAME COMMITTEE COMMITTEE SUBCOMMITTEE COMMITTEE COMMITTEE
<S> <C> <C> <C> <C> <C>
Reveta F. Bowers........ * * * *
Roy E. Disney........... *
Michael D. Eisner....... *
Judith L. Estrin........ *
Stanley P. Gold......... * ** **
Sanford M. Litvack......
Ignacio E. Lozano, Jr... * * **
George J. Mitchell...... * *
Thomas S. Murphy........ * **
Leo J. O'Donovan, S.J... *
Sidney Poitier.......... * *
Irwin E. Russell........ *
Robert A.M. Stern.......
Andrea Van de Kamp...... *
Raymond L. Watson....... ** * *
Gary L. Wilson.......... *
</TABLE>
* Member.
** Chair.
8
<PAGE>
EXECUTIVE COMMITTEE. The Executive Committee possesses all of the powers of
the Board except the power to issue stock, approve mergers with nonaffiliated
corporations or declare dividends (except at a rate or in a periodic amount or
within a price range established by the Board), and certain other powers
specifically reserved by Delaware law to the Board. In fiscal 1998, the
Executive Committee held no meetings, but took action by unanimous written
consent four times.
COMPENSATION COMMITTEE. The Compensation Committee is charged with reviewing
the Company's general compensation strategy (except with respect to matters
entrusted to the Executive Performance Subcommittee as described below);
establishing salaries and reviewing benefit programs (including pensions) for
the Chief Executive Officer and those persons who report directly to him;
reviewing, approving, recommending and administering the Company's incentive
compensation and stock option plans and certain other compensation plans; and
approving certain employment contracts. In fiscal 1998, the Compensation
Committee met seven times.
EXECUTIVE PERFORMANCE SUBCOMMITTEE. The Executive Performance Subcommittee
of the Compensation Committee has as its principal responsibility to review
and advise the Board with respect to performance-based compensation of
corporate officers who are, or who are likely to become, subject to Section
162(m) of the Internal Revenue Code. (Section 162(m) limits the deductibility
of compensation in excess of $1,000,000 paid to a corporation's chief
executive officer and four other most highly compensated executive officers,
unless certain conditions are met.) The Subcommittee met three times during
fiscal 1998.
AUDIT REVIEW COMMITTEE. The Audit Review Committee met three times during
fiscal 1998. Its functions are to recommend the appointment of independent
accountants; review the arrangements for and scope of the audit by independent
accountants; review the independence of the independent accountants; consider
the adequacy of the system of internal accounting controls and review any
proposed corrective actions; review and monitor the Company's policies
relating to ethics and conflicts of interests; discuss with management and the
independent accountants the Company's draft annual financial statements and
key accounting and/or reporting matters, including "Year 2000" matters; and
review the activities and recommendations of the Company's management audit
department.
NOMINATING COMMITTEE. The Nominating Committee is responsible for soliciting
recommendations for candidates for the Board of Directors; developing and
reviewing background information for candidates; making recommendations to the
Board regarding such candidates; and reviewing and making recommendations to
the Board with respect to candidates for directors proposed by stockholders.
Any stockholder wishing to propose a nominee should submit a recommendation in
writing to the Company's Secretary, indicating the nominee's qualifications
and other relevant biographical information and providing confirmation of the
nominee's consent to serve as a director. The Nominating Committee met once
during fiscal 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1998, Company subsidiaries retained the firm of Robert A.M.
Stern Architects, of which Mr. Stern is Senior Partner, for architectural
services relating to the Celebration project in Florida and the Anaheim
Stadium in California. Payments to Mr. Stern's firm for these services
aggregated $57,225 during the year. Mr. Stern's firm also provided
architectural services during the year to Oriental Land Co., Ltd., the
Japanese corporation that owns and operates Tokyo Disneyland under license
from the Company's subsidiary Disney Enterprises, Inc., and Euro Disney
S.C.A., the French company that owns and operates the Disneyland Paris Resort,
also under license from Disney Enterprises, Inc. The Company indirectly owns
39% of Euro Disney S.C.A., which is managed by a Company subsidiary. Payments
to Mr. Stern's firm by Oriental Land Co., Ltd., and Euro Disney S.C.A. during
fiscal 1998 totalled $402,738.
Senator Mitchell provides consulting services to the Company with respect to
a variety of matters affecting the Company's international business operations
and development efforts. During fiscal 1998, the Company paid Senator Mitchell
an aggregate of $50,000 for these services.
9
<PAGE>
EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the Executive
Performance Subcommittee and the performance graphs included elsewhere in this
proxy statement do not constitute soliciting material and should not be deemed
filed or incorporated by reference into any other Company filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this Report or the performance
graphs by reference therein.
REPORT OF THE COMPENSATION COMMITTEE AND THE EXECUTIVE PERFORMANCE
SUBCOMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors and the Committee's
Executive Performance Subcommittee have furnished the following report on
executive compensation for fiscal 1998.
WHAT IS THE COMPANY'S PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
The Company's compensation program for executives consists of three key
elements:
.a base salary,
.a performance-based annual bonus, and
.periodic grants of stock options.
The Compensation Committee and the Executive Performance Subcommittee
believe that this three-part approach best serves the interests of the Company
and its stockholders. It enables the Company to meet the requirements of the
highly competitive environment in which the Company operates while ensuring
that executive officers are compensated in a way that advances both the short-
and long-term interests of stockholders. Under this approach, compensation for
these officers involves a high proportion of pay that is "at risk"--namely,
the annual bonus and stock options. The variable annual bonus permits
individual performance to be recognized on an annual basis, and is based, in
significant part, on an evaluation of the contribution made by the officer to
Company performance. (Bonus arrangements applicable to the Company's Chief
Executive Officer are described below.) Stock options relate a significant
portion of long-term remuneration directly to stock price appreciation
realized by all of the Company's stockholders.
BASE SALARY. Base salaries for the Company's executive officers, as well as
changes in such salaries, are based upon recommendations by the Chief
Executive Officer, taking into account such factors as competitive industry
salaries; a subjective assessment of the nature of the position; the
contribution and experience of the officer, and the length of the officer's
service. Under the Chief Executive Officer's direction, the Chief of Corporate
Operations reviews all salary recommendations with the Compensation Committee,
which then approves or disapproves such recommendations. The Chief Executive
Officer reviews any salary recommendations for the Chief of Corporate
Operations with the Compensation Committee.
ANNUAL BONUS. Annual bonuses for fiscal 1998 paid to executive officers of
the Company were granted under the Company's Annual Bonus Performance Plan for
Executive Officers (formerly the 1997 Cash Bonus Performance Plan). This plan,
which permits the payment of awards in stock as well as cash, is administered
by the Executive Performance Subcommittee and provides for performance-based
bonuses for executives who are or in the opinion of the Subcommittee may
become "covered employees" under Section 162(m) of the Internal Revenue Code.
Under the plan, the Subcommittee establishes specific annual "performance
targets" for each covered executive officer for performance periods of one or
more years. The performance targets may be based on one or more of the
following business criteria: net income, return on equity, return on assets or
earnings per share (in each case as defined in the plan), or on any
combination thereof, and must be established while actual performance relative
to the target remains substantially uncertain within the meaning of Section
162(m). At the same time, the Subcommittee establishes an objective formula or
standard for calculating the maximum bonus payable to each participating
executive officer. The maximum bonus for any fiscal year may not exceed
$10,000,000 or, if less, ten times the executive's base salary ($15,000,000
or, if less, 20 times base salary, in the case of the Chief Executive Officer)
or $50,000,000 ($75,000,000 in the case of the Chief Executive Officer)
10
<PAGE>
over the five-year term of the plan. These maximum bonus amounts were set
above the Company's historical bonus levels for executives other than the
Chief Executive Officer because the Section 162(m) regulations allow only
"negative discretion" in respect of this type of plan, and the Subcommittee
wanted flexibility to recognize exceptional individual performance when
warranted.
Within these limits, the Subcommittee has sole discretion to determine the
actual amount of each bonus, and whether payment or vesting of a bonus will be
deferred, subject in each case to the plan's terms and any other written
commitment authorized by the Subcommittee. The Subcommittee may also exercise
"negative discretion" by establishing additional conditions or terms for the
payment of bonuses, such as the establishment of other financial, strategic or
individual goals, which may be objective or subjective.
For fiscal 1998, the Subcommittee established an overall Company performance
target based upon the achievement of a specified level of net income for the
Company as a whole. After the end of the fiscal year, the Subcommittee
confirmed that the 1998 target had been achieved and that annual bonuses could
therefore be paid under the plan. In arriving at an actual bonus amount for
each executive, including the Chief Executive Officer, the Subcommittee then
considered several specific factors, including overall Company performance as
compared to both budgeted and prior fiscal year performance; the extent to
which the Company achieved its overall financial goals of growth in earnings
and return on stockholders' equity; the amount of the Company-wide bonus pool,
as described below; and each executive's individual achievements. Based upon
these factors, the Subcommittee awarded the bonuses set forth below in the
Summary Compensation Table.
For bonus-eligible executives who are not covered by the Annual Bonus
Performance Plan, the Company's Chief Executive Officer, working with the
Chief of Corporate Operations, develops a Company-wide bonus pool following
each fiscal year. The size of the bonus pool is based upon a subjective
assessment of overall Company and individual business unit performance as
compared to both budgeted and prior fiscal year performance and the extent to
which the Company achieved its overall financial goals of growth in earnings
and return on stockholders' equity. The amount of the bonus pool is subject to
the approval of both the Compensation Committee and the Board of Directors as
a whole. Once the overall bonus pool is approved, the Company's senior
management makes individual bonus recommendations to the Compensation
Committee, within the limits of the pool, for eligible employees based upon an
evaluation of their individual performance and contribution to the Company's
overall performance.
STOCK OPTIONS. Under the stock option guidelines adopted by the Compensation
Committee, stock option grants may be made to executive officers upon initial
employment, upon promotion to a new, higher level position that entails
increased responsibility and accountability, in connection with the execution
of a new employment agreement, and/or when all previously granted stock
options have either fully vested or are within twelve months of full vesting.
Using these guidelines, the Chief of Corporate Operations, under the direction
of the Chief Executive Officer, recommends the number of options to be
granted, within a range associated with the individual's salary level, and
presents this to the Compensation Committee (or to the Executive Performance
Committee, in the case of executive officers subject to Section 162(m)) for
review and approval. The Chief Executive Officer and/or the Chief of Corporate
Operations may make recommendations that deviate from the guidelines where
they deem it appropriate. While options typically vest over a minimum five-
year period, options granted to certain executive officers have longer vesting
periods.
HOW IS THE COMPANY'S CHIEF EXECUTIVE OFFICER COMPENSATED?
As Chief Executive Officer, Mr. Eisner is compensated pursuant to an
employment agreement entered into in January 1997, which replaced his 1989
employment agreement. The agreement, which extends through September 30, 2006,
subject to earlier termination under certain circumstances, provides for an
annual base salary of $750,000, the same base salary that Mr. Eisner has
received since 1984. Mr. Eisner's bonuses for fiscal 1997 and 1998 were
determined under the Annual Bonus Performance Plan described above, and
beginning in fiscal 1999 bonuses were to be determined pursuant to a bonus
formula based on a compounded earnings growth rate of the Company above a
specified level. (See "Employment Agreement with Michael D. Eisner" below.)
However, because certain types of transactions of the Company not in the
ordinary course, such as the
11
<PAGE>
Company's acquisition of 43% of the common stock of Infoseek Corporation in
November 1998, could materially affect the determination of the bonus in a
manner not contemplated by the employment agreement, the Company requested a
renegotiation of the bonus formula pursuant to a provision of Mr. Eisner's
employment agreement that permits such a renegotiation under certain
circumstances. (See "Employment Agreement with Michael D. Eisner" below.) As a
result, on December 28, 1998, the Company and Mr. Eisner entered into an
amendment of his employment agreement to provide that Mr. Eisner's bonus for
fiscal year 1999 will continue to be determined pursuant to the Annual Bonus
Performance Plan rather than pursuant to the bonus formula and that during
fiscal 1999 the parties will negotiate and agree upon a new bonus plan
applicable to fiscal years 2000 and beyond.
Because it is the Company's intent to continue to structure Mr. Eisner's
performance-based compensation in a manner that complies with Section 162(m)
of the Internal Revenue Code (see "How is the Company addressing Internal
Revenue Code limits on deductibility of compensation?" below), it is
anticipated that any new bonus plan will be submitted to the Company's
stockholders for approval at the annual meeting of stockholders for the year
2000.
In connection with the 1997 employment agreement, the Compensation Committee
granted Mr. Eisner options to acquire 24,000,000 shares of Company common
stock (as adjusted to give effect to the 1998 stock split), with vesting of
the earliest options delayed for seven years (except in the event of early
termination of his employment under certain circumstances described below) and
with a significant portion vesting later (subject to the same exception) and
bearing exercise prices at 125%, 150% and 200% of fair market value at the
date of grant.
HOW IS THE COMPANY ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's chief executive officer and four other most
highly compensated executive officers as of the end of any fiscal year.
However, the statute exempts qualifying performance-based compensation from
the deduction limit if certain requirements are met. The Executive Performance
Subcommittee currently intends to structure performance-based compensation,
including stock option grants and annual bonuses, to executive officers who
may be subject to Section 162(m) in a manner that satisfies those
requirements.
The Board, the Compensation Committee and the Executive Performance
Subcommittee reserve the authority to award non-deductible compensation in
other circumstances as they deem appropriate. Further, because of ambiguities
and uncertainties as to the application and interpretation of Section 162(m)
and the regulations issued thereunder, no assurance can be given,
notwithstanding the Company's efforts, that compensation intended by the
Company to satisfy the requirements for deductibility under Section 162(m)
does in fact do so.
<TABLE>
<S> <C>
Members of the Compensation Committee Members of the Executive Performance Subcommittee
Thomas S. Murphy (Chairman) Stanley P. Gold (Chairman)
Reveta F. Bowers Reveta F. Bowers
Stanley P. Gold Ignacio E. Lozano, Jr.
Ignacio E. Lozano, Jr. Sidney Poitier
Sidney Poitier
Raymond L. Watson
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Board's Compensation Committee is or has been an
officer or employee of the Company, except Mr. Watson, who was Chairman of the
Board of Directors of the Company from May 1983 to September 1984. Mr. Murphy
was Chairman of the Board and Chief Executive Officer of Capital Cities/ABC,
Inc. prior to its acquisition by the Company, but has not held any office with
the Company or its subsidiaries since the acquisition.
None of the members of the Executive Performance Subcommittee is or has been
an officer or employee of the Company.
12
<PAGE>
EMPLOYMENT AGREEMENT WITH MICHAEL D. EISNER
Mr. Eisner serves as Chief Executive Officer of the Company pursuant to an
employment agreement entered on January 8, 1997, and amended on December 28,
1998. The agreement provides for Mr. Eisner's employment through September 30,
2006 (subject to earlier termination in certain circumstances as described
below), at a base salary of $750,000 per year. Under the agreement, bonus
compensation for fiscal years 1997 and 1998 was determined pursuant to the
terms of the Company's Annual Bonus Performance Plan. Thereafter, Mr. Eisner's
annual bonus compensation was to have been determined through a bonus formula
in his employment agreement which was approved by the Company's stockholders
in 1997. This formula tied Mr. Eisner's bonus each year to the growth of the
Company's earnings per share ("EPS") above an annual growth rate of 7.5% above
the average earnings per share of the Company for fiscal 1997 and 1998. The
formula then provided that the bonus for each year would be determined by
multiplying the amount, if any, by which the Company's reported EPS exceeded
the specified threshold level by a specified "Bonus Percentage," and then
multiplying the resulting amount by the number of outstanding shares used by
the Company in calculating its reported EPS for the fiscal year in question.
However, at the request of the Company Mr. Eisner's employment agreement was
amended on December 28, 1998 to provide that his bonus for fiscal 1999 will be
determined pursuant to the Company's Annual Bonus Performance Plan and that
during fiscal 1999 the bonus provisions of Eisner's employment agreement for
fiscal years 2000 and beyond will be renegotiated (see "How is the Company's
Chief Executive Officer Compensated?" above).
In connection with the employment agreement, the Committee also granted to
Mr. Eisner, on September 30, 1996, stock options with respect to a total of
24,000,000 shares of common stock of the Company under the Company's 1995
Stock Incentive Plan. Of this total, an option with respect to 15,000,000
shares bears an exercise price of $21.10, the fair market value of the
Company's common stock on September 30, 1996 as determined under the Plan, and
vests on September 30, 2003, with an expiration date of September 30, 2008.
Three additional options, each with respect to 3,000,000 shares, bear exercise
prices in excess of fair market value on the date of grant: one, with an
exercise price of $26.38 (125% of fair market value), vests on September 30,
2004; the second, with an exercise price of $31.66 (150% of fair market
value), vests on September 30, 2005; and the third, with an exercise price of
$42.21 (200% of fair market value), vests on September 30, 2006. The three
additional options expire on September 30, 2011.
Mr. Eisner's employment agreement provides that either the Company or Mr.
Eisner may at any time request a renegotiation of the bonus formula if
circumstances arise that cause the results of the bonus formula to be "unfair
and inequitable." These circumstances include a combination with another
company, capital restructuring, material changes in accounting rules or tax
laws, severe or prolonged recession or inflation or any other circumstances,
whether intrinsic or extrinsic to the Company, that could materially affect
the formula results. If in such circumstances the parties are unable to reach
agreement on a substitute formula, the matter may be submitted to arbitration.
In all cases, the Company will be permitted to seek stockholder approval or
take such other steps as are reasonably required in order for the Company to
claim the deductibility of any bonus paid pursuant to a substitute formula.
Any change in the bonus formula may be made only on a prospective basis (i.e.,
only with respect to future years or a year as to which the deadline under
federal tax law for establishing a performance-based plan has not passed) and
could increase (or decrease) the cost to the Company.
Mr. Eisner is entitled to receive the bonuses referred to above for each
year in which he is employed under the new agreement and, in the event of
termination of his employment by the Company in a manner that is a breach of
the agreement or termination by him for "good reason" as described below, for
the full remaining term of the employment agreement and the 24-month period
thereafter, subject to reduction to twelve months if he takes employment with
another major entertainment company (other than as an independent producer)
within twelve months of termination. In the event of termination of employment
as a result of death or disability or upon normal termination of the agreement
in September 2006, Mr. Eisner will receive such bonuses for the year in which
the termination occurs and for the 24 months following such fiscal year. The
employment agreement also provides for a death benefit to Mr. Eisner's estate
in the event of his death during the term of the agreement, in an after-tax
amount equal to $3,000,000.
The Company has the right to terminate Mr. Eisner's employment upon his
death; illness or disability that has incapacitated him for six consecutive
months; or "good cause," which is defined as gross negligence,
13
<PAGE>
malfeasance or resignation without approval of the Company. Mr. Eisner has the
right to terminate the agreement for "good reason" in the event he is not
elected or retained as Chairman and Chief Executive Officer and a director of
the Company, or the Company acts to reduce his duties and responsibilities
materially or to change the location of the performance of his duties from the
Los Angeles area. In the event of any termination of Mr. Eisner's employment
by the Company without "good cause" or by Mr. Eisner for "good reason," or in
the event of his death or disability, all of Mr. Eisner's options granted in
connection with his new employment agreement vest immediately and remain
exercisable until the earlier of five years thereafter or their scheduled
expiration dates, and he or his estate is entitled to a cash payment equal to
the present value of the remainder of the salary and to the bonus payments
provided for in his agreement as described above.
The agreement also provides for Mr. Eisner to serve as a consultant to the
Company after expiration of the agreement at a fee to be mutually agreed
(which may be nominal), plus continuation of his benefits and perquisites
under the agreement, other than salary, bonus, stock options and group health,
pension and employee welfare plan coverage. Any such consulting agreement
would be terminable by the Company if Mr. Eisner were to accept employment
with a third party, render any services to a competitor or become disabled.
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information concerning total compensation
earned or paid to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company who served in such capacities as
of September 30, 1998 (the "named executive officers") for services rendered
to the Company during each of the last three fiscal years.
EXECUTIVE COMPENSATION SUMMARY TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
NUMBER
OF STOCK
NAME AND PRINCIPAL FISCAL OPTIONS ALL OTHER
POSITIONS YEAR SALARY(1) BONUS GRANTED(2) COMPENSATION(3)
<S> <C> <C> <C> <C> <C>
Michael D. Eisner 1998 $764,423 $5,000,000 $3,820
Chief Executive Officer 1997 750,000 9,900,000 -- 3,820
and Chairman of the
Board 1996 750,000 7,900,000 24,000,000 3,520
Roy E. Disney 1998 $509,615 $ 410,000 -- $ 620
Vice Chairman of the
Board 1997 500,000 700,000 -- 620
1996 459,614 700,000 -- 3,520
Sanford M. Litvack 1998 $764,423 $1,100,000 375,000 $3,820
Senior Executive Vice
President 1997 749,616 1,475,000 600,000 3,820
and Chief of Corporate
Operations 1996 650,000 1,100,000 -- 3,520
Peter E. Murphy 1998 $461,443 $ 600,000 -- $3,495
Executive Vice President 1997 297,597 550,000 315,000 3,495
and Chief Strategic
Officer 1996 248,078 450,000 120,000 3,000
Thomas O. Staggs 1998 $381,154 $ 650,000 420,000 $3,495
Executive Vice President 1997 277,885 900,000 -- 3,495
and Chief Financial
Officer 1996 248,078 450,000 120,000 3,000
</TABLE>
(1) Fiscal 1998 included 53 weekly pay periods, while fiscal 1997 and 1996
included 52 such periods.
(2) Adjusted to reflect the Company's three-for-one stock split during
fiscal 1998.
(3) The Company provides the named executive officers with certain group
life, health, medical and other non-cash benefits generally available to
all salaried employees and not included in this column pursuant to
S.E.C. rules. The amounts shown in this column include the following:
. Matching contributions by the Company under the Disney Salaried Savings
and Investment Plan, all of which are invested in common stock of the
Company. During fiscal 1998, the Company's matching contributions were
$3,200 for each of Messrs. Eisner, Litvack, Murphy and Staggs.
Mr. Disney did not participate in the plan.
. Insurance premiums under personal liability insurance plans that the
Company provides for certain key employees with coverage up to
$5,000,000. Benefits under the plan supplement each employee's personal
homeowner's and automobile liability insurance coverage. During fiscal
1998, the Company paid $620 in premiums on behalf of each of the named
executive officers.
14
<PAGE>
OPTION GRANTS FOR FISCAL 1998
The following table sets forth information with respect to option grants to
the named executive officers during fiscal 1998 and the potential realizable
value of such option grants:
.the number of shares of common stock underlying options granted during the
year;
.the percentage that such options represent of all options granted to
employees during the year;
.the exercise price;
.the expiration date; and
. the hypothetical present value, as of the grant date, of the options
under the option pricing model discussed below.
The hypothetical value of the options as of their date of grant has been
calculated below, using the Black-Scholes option pricing model, as permitted
by S.E.C. rules, based upon a set of assumptions set forth in the footnote to
the table. It should be noted that this model is only one method of valuing
options, and the Company's use of the model should not be interpreted as an
endorsement of its accuracy. The actual value of the options may be
significantly different, and the value actually realized, if any, will depend
upon the excess of the market value of the common stock over the option
exercise price at the time of exercise.
OPTION GRANTS DURING FISCAL 1998
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OPTIONS HYPOTHETICAL
OF GRANTED TO EXERCISE VALUE AT
OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE(1) DATE(2)
<S> <C> <C> <C> <C> <C>
Michael D. Eisner..... -- -- -- -- --
Roy E. Disney......... -- -- -- -- --
Sanford M. Litvack.... 375,000 1.39% $36.25 11/24/07 $3,206,250
Peter E. Murphy....... -- -- -- -- --
Thomas O. Staggs...... 420,000 1.56% $38.57 4/21/08 $5,422,200
</TABLE>
(1) The Compensation Committee and the Executive Performance Subcommittee,
which administer the Company's stock option and incentive plans, have
general authority to accelerate, extend or otherwise modify benefits
under option grants in certain circumstances within overall plan
limits, and, with the consent of the affected optionee, to change the
exercise price to a price not less than 100% of the market value of
the stock on the effective date of the amendment. The Committee and
the Subcommittee have no current intention to exercise that authority
with respect to these options.
(2) The estimated present value at grant date of options granted during
fiscal year 1998 has been calculated using the Black-Scholes option
pricing model, based upon the following assumptions: estimated time
until exercise of six years; a risk-free interest rate of 5.4%,
representing the interest rate on a U.S. Government zero-coupon bond
on the date of grant with a maturity corresponding to the estimated
time until exercise; a volatility rate of 23.0%; and a dividend yield
of 0.71%, representing the current $0.20 per share annualized
dividends divided by the fair market value of the common stock on the
date of grant. The approach used in developing the assumptions upon
which the Black-Scholes valuation was done is consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."
15
<PAGE>
OPTION EXERCISES AND VALUES FOR FISCAL 1998
The table below sets forth the following information with respect to option
exercises during fiscal 1998 by each of the named executive officers and the
status of their options at September 30, 1998:
.the number of shares of common stock acquired upon exercise of options
during fiscal 1998;
.the aggregate dollar value realized upon the exercise of such options;
.the total number of exercisable and non-exercisable stock options held at
September 30, 1997, and
.the aggregate dollar value of in-the-money exercisable options at
September 30, 1998.
AGGREGATED OPTION EXERCISES DURING FISCAL 1998
AND
OPTION VALUES ON SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED IN-
SHARES VALUE NUMBER OF UNEXERCISED THE-MONEY OPTIONS
ACQUIRED UPON REALIZED OPTIONS 9/30/98 9/30/98(1)
EXERCISE OF UPON ------------------------- -------------------------
NAME OPTION EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Michael D. Eisner....... 22,000,008 $569,827,702 1,999,992 24,000,000 $39,406,547 $67,812,000
Roy E. Disney........... -- -- 360,000 240,000 3,637,548 2,425,032
Sanford M. Litvack...... 150,000 9,356,355 1,350,000 975,000 17,597,010 2,724,975
Peter E. Murphy......... 45,000 962,825 222,700 450,000 1,624,826 1,001,246
Thomas O. Staggs ....... 30,000 786,098 210,000 600,000 2,166,349 1,001,246
</TABLE>
(1) In accordance with S.E.C. rules, values are calculated by subtracting
the exercise price from the fair market value of the underlying common
stock. For purposes of this table, fair market value is deemed to be
$25.625, the average of the high and low common stock price reported for
New York Stock Exchange transactions on September 30, 1998.
RETIREMENT PLANS
The Company maintains a tax-qualified, noncontributory retirement plan,
called the Disney Salaried Retirement Plan, for salaried employees who have
completed one year of service. Benefits are based primarily on the
participant's credited years of service and average base compensation (base
compensation excludes other compensation such as bonuses) for the highest five
consecutive years of compensation during the ten-year period prior to
termination or retirement, whichever is earlier. In addition, a portion of
each participant's retirement benefit is comprised of a flat dollar amount
based solely on years and hours of credited service. Retirement benefits are
non-forfeitable after five years of vesting service, and actuarially reduced
benefits are available for participants who retire on or after age 55 after
five years of vesting service.
In addition, the Company maintains a nonqualified, unfunded plan, the
Amended and Restated Key Plan, which provides retirement benefits for key
salaried employees. This plan provides retirement benefits in excess of the
compensation limitations and maximum benefit accruals for tax-qualified plans.
In calendar year 1998, the maximum compensation limit under a tax-qualified
plan was $160,000 and the maximum annual benefit accruable under a tax-
qualified defined benefit plan was $430,000. Benefits under this plan are
provided by the Company on a noncontributory basis.
16
<PAGE>
The table below illustrates the total combined estimated annual benefits
payable under these retirement plans to eligible salaried employees for years
of service assuming normal retirement at age 65. The table illustrates
estimated benefits payable determined on a straight-life annuity basis. There
is no offset in benefits under either plan for Social Security benefits.
RETIREMENT PLAN AND RESTATED KEY PLAN
<TABLE>
<CAPTION>
AVERAGE ANNUAL BASE YEARS OF CREDITED SERVICE
COMPENSATION HIGHEST ----------------------------------------
FIVE CONSECUTIVE YEARS 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 150,000....................... $45,444 $60,621 $75,906 $91,050 $104,925
300,000....................... 88,757 118,371 148,094 177,675 205,988
450,000....................... 132,069 176,121 220,281 264,300 307,050
600,000....................... 175,382 233,871 292,469 350,925 408,113
750,000....................... 218,694 291,621 364,656 437,550 509,175
1,000,000....................... 290,882 387,871 484,969 581,925 677,613
</TABLE>
As of December 1, 1998, the estimated annual payments for services under the
Company's retirement plans would be based upon an average compensation of
$750,000 for Mr. Eisner, $438,461 for Mr. Disney, $669,538 for Mr. Litvack,
$295,105 for Mr. Murphy and $274,943 for Mr. Staggs. Messrs. Eisner and Disney
each have fourteen years, Mr. Litvack has eight years, Mr. Murphy has ten
years and Mr. Staggs has nine years of credited service.
COMPARISON OF FIVE-YEAR AND FOURTEEN-YEAR CUMULATIVE TOTAL RETURNS
The following two graphs compare the performance of the Company's common
stock with the performance of the Standard & Poor's 500 Composite Stock Price
Index and a peer group index over two periods extending through the end of
fiscal 1998. The first period covers the five fiscal years beginning on
October 1, 1993, while the second period covers the fourteen fiscal years
beginning on October 1, 1984, shortly after Mr. Eisner became the Company's
Chairman and Chief Executive Officer. The graphs assume that $100 was invested
on, respectively, September 30, 1993 and September 30, 1984 in the Company's
common stock, the S&P 500 Index and each of the peer group indices, and that
all dividends were reinvested.
The peer group represented in the graphs includes the corporations (other
than the Company) that make up the Standard & Poor's Entertainment Index, a
published industry index, together with The News Corporation Limited, which is
not included in the Standard and Poor's Entertainment Index but is engaged in
many of the same businesses as the Company.
17
<PAGE>
PERFORMANCE GRAPHS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE WALT DISNEY COMPANY, S&P 500 AND CUSTOM COPOSITE
INDEX (4 STOCKS)
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
CUSTOM
Measurement Period THE WALT COMPOSITE
(Fiscal Year Covered) DISNEY COMPANY S&P 500 INDEX (4 STOCKS)
- ------------------- -------------- --------- ----------------
<S> <C> <C> <C>
Measurement Pt- 9/93 $100 $100 $100
FYE 9/94 $103 $104 $ 86
FYE 9/95 $154 $135 $103
FYE 9/96 $171 $162 $ 89
FYE 9/97 $219 $227 $105
FYE 9/98 $208 $244 $166
</TABLE>
COMPARISON OF FOURTEEN-YEAR CUMULATIVE TOTAL RETURN
AMONG THE WALT DISNEY COMPANY, S&P 500 AND CUSTOM COMPOSITE
INDEX (4 STOCKS)
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
CUSTOM
Measurement Period THE WALT COMPOSITE INDEX
(Fiscal Year Covered) DISNEY COMPANY S&P 500 (4 STOCKS)
- ------------------- -------------- ------- ---------------
<S> <C> <C> <C>
Measurement Pt- 9/84 $ 100 $100 $100
FYE 9/85 $ 145 $114 $134
FYE 9/86 $ 275 $151 $215
FYE 9/87 $ 543 $216 $359
FYE 9/88 $ 456 $189 $286
FYE 9/89 $ 855 $252 $384
FYE 9/90 $ 644 $228 $204
FYE 9/91 $ 815 $300 $276
FYE 9/92 $1,043 $333 $347
FYE 9/93 $1,092 $376 $594
FYE 9/94 $1,128 $390 $512
FYE 9/95 $1,682 $506 $610
FYE 9/96 $1,867 $608 $529
FYE 9/97 $2,397 $854 $621
FYE 9/98 $2,276 $916 $986
</TABLE>
18
<PAGE>
ITEM 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending September 30, 1998.
PricewaterhouseCoopers LLP has served as the Company's independent accountants
since the incorporation of Walt Disney Productions in 1938. Services provided
to the Company and its subsidiaries by PricewaterhouseCoopers LLP in fiscal
1998 included the examination of the Company's consolidated financial
statements, limited reviews of quarterly reports, services related to filings
with the Securities and Exchange Commission, services in connection with the
monitoring of compliance with the Company's codes of conduct for licensees and
manufacturers and consultations on various tax and information services
matters.
Representatives of PricewaterhouseCoopers LLP will be present at the annual
meeting to respond to appropriate questions and to make such statements as
they may desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR FISCAL 1999. In the event stockholders do not ratify the
appointment, the appointment will be reconsidered by the Audit Review
Committee and the Board of Directors.
ITEM 3--STOCKHOLDER PROPOSALS
The Company has been notified that the following stockholders of the Company
intend to present the proposals set forth below for consideration at the
annual meeting. The address and stock ownership of each of the proponents will
be furnished by the Corporate Secretary of the Company to any person, orally
or in writing as requested, promptly upon receipt of any oral or written
request therefor.
PROPOSAL 1--YEAR 2000
Mr. Dean V. Shahinian has submitted the following resolution:
"The "Year 2000 Computer Problem' has drawn international attention
from business executives, Congress, regulators, journalists and others.
The President of the United States appointed a Year 2000 czar. The US
Congress has held numerous hearings and established a Senate Special
Committee on the Year 2000 Technology Problem, under the chairmanship
of Sen. Robert Bennett. National and international conferences have
been convened and numerous articles in Fortune, Newsweek, and other
periodicals have discussed the scope and serious consequences of the
Year 2000 problem. Noted economist Dr. Edward Yardeni has predicted a
60% chance of a global recession caused by the millennium computer
problems.
"At present, many computer systems are not prepared to operate
successfully after January 1, 2000. Experts say that upgrading the
computer software is the single largest information technology project
undertaken in history.
"On January 1, 2000, computer systems that do not recognize the proper
year may fail. The potential damage from the failure of part of a
company's computer systems, or the computers of a company's suppliers
or customers, may have far reaching effects. Computer systems govern
the automated operation of amusements, broadcast equipment, and myriad
other functions. A serious failure could damage client relationships,
reputation, and financial results, which impact shareholder interests.
"The shareholders, in the Proposal below, ask Disney to report on its
preparedness for computer systems to operate properly after January 1,
2000. Although the company may make limited types of Year 2000
disclosures pursuant to federal securities laws, shareholders support
the Proposal in order to receive all of the significant information
specified below.
19
<PAGE>
PROPOSAL
"The shareholders ask the Board of Directors to inform them in a report
about Disney's preparedness for the Year 2000, i.e. preparing its computer
systems to operate without flaw beginning on January 1, 2000, by providing the
information described below:
"1. A description of the progress of Disney, including a timetable, in
completing five phases of Year 2000 remediation:
"A. Awareness
"B. Assessment
"C. Renovation
"D. Validation
"E. Implementation
"2. Disney's assessment of whether its vendors, suppliers, customers,
or business affiliates operate computer systems are capable of
conducting business without disruption with Disney on and after
January 1, 2000;
"3. Costs that Disney has paid or otherwise incurred in connection with
the remediation efforts to date and estimated additional costs expected
in connection with future remediation efforts;
"4. An estimate of anticipated legal costs and liability outlays
associated with the defense of potential legal actions against the
company resulting from Year 2000 computer system problems; information
about any insurance it has to cover specific Year 2000 computer systems
problems or the defense of legal actions against the company or its
officers and directors arising from Year 2000 problems; and
"5. Contingency plans developed to ensure continuous operation of the
company's essential business functions in the event of Year 2000
problems in the computer systems of Disney or its vendors, suppliers,
customers, or business affiliates.
"Shareholders request that Disney provide this information in a report
sent to shareholders within 90 days of the meeting."
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL FOR THE FOLLOWING REASONS.
The Company has organized a task force, headed by the Company's Chief
Information Officer, to oversee its global efforts to ensure that all critical
computer systems are made "Year 2000 compliant" prior to January 1, 2000, and
to work with the Company's key business counterparts and providers of
infrastructure services such as power and transportation to minimize risks of
disruption resulting from possible failures in their systems. The work of this
task force, including the Company's six-phase program addressing year 2000
issues, is described at pages 55 to 56 of the Company's 1998 annual report
accompanying this proxy statement. (The report also appears at pages 23 to 26
of the Company's 1998 Annual Report on Form 10-K as filed with the Securities
and Exchange Commission, and may be accessed through the Investor Relations
page of the Company's website, Disney.com.) All of the elements of Mr.
Shahinian's proposal relevant to the Company's operations are addressed in
that report, in accordance with the reporting requirements recently
established by the Securities and Exchange Commission.
Updates on the status of the Company's year 2000 efforts will be included as
appropriate in the Company's periodic reports going forward. Under these
circumstances, the Company does not believe any useful purpose would be served
by a costly separate mailing of its report on this issue to stockholders
within 90 days after the annual meeting.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS PRESENTED UNLESS
YOU SPECIFY OTHERWISE.
20
<PAGE>
PROPOSAL 2--CONTRACT SUPPLIER STANDARDS
The Adrian Dominican Sisters, Amalgamated Bank of New York LongView
Collective Fund, As You Sow Foundation, Lois V. Bromson, Burke-Lazarus Trust,
Dominican Sisters of Hope, Domini Social Investments LLC, General Pension and
Benefits Board of the United Methodist Church, Maryknoll Sisters of St.
Dominic, Medical Mission Sisters, Missionary Oblates of Mary Immaculate of
Texas, Oregon Province of the Society of Jesus, Presbyterian Church (USA),
Sisters of the Blessed Sacrament for Indians and Colored People, Sisters of
Charity of the Incarnate Word, Sisters of Mercy of the Americas, Sisters of
Notre Dame, Sisters of St. Dominic and Sisters of St. Joseph have submitted
the following proposal:
"WHEREAS: The public is concerned about the conditions under which the
goods they purchase and the clothing they wear are produced. More companies
are contracting with independent producers for goods and services outside
the United States. A Marymount University survey conducted in 1996
indicates 79% of respondents stated they would avoid shopping in stores if
they were aware that stores sold goods made under sweatshop conditions.
Eighty-three percent said they would be willing to pay a dollar more for a
$20 garment not made in sweatshops.
"Disturbing information has surfaced about independent producers with
regard to abuse of worker rights. In July 1997, a human rights group
released information indicating that workers at Gilanex factories in Haiti,
where shirts are sewn for Disney, receive as little as 28 cents an hour,
which does not allow for workers to meet their basic needs. At least one
major producer of Disney products pulled out of Haiti in late 1997, which
we believe has placed unnecessary hardships on Haitian workers.
"Disney should take actions to ensure it does not and will not do business
with foreign suppliers who manufacture items for sale in the United States
using forced labor, convict labor, or illegal child labor, or who fail to
satisfy all applicable standards and laws protecting their employees'
wages, benefits, working conditions, freedom of association and other
rights.
"We commend Disney for publishing its Code of Conduct and translating it
into the languages of employees where the company has contracts. Disney
should demonstrate enforcement of its code by developing independent
monitoring programs with local non-governmental groups and policies for a
sustainable living wage system for contract employees, which would add
little to production costs.
"Disney's implementation of independent monitoring would enhance the
effectiveness of its current compliance program. The Gap Inc. has
participated in an independent monitoring process in El Salvador with
respected religious and human rights institutions for the last three years.
Other companies like Liz Claiborne, Mattel and Nike have announced plans to
develop independent monitoring programs in conjunction with local non-
governmental organizations. Nike's CEO Philip H. Knight said "Independent
monitoring is a critical element of an overall system of improving labor
practices.' (New York Times, May 13, 1998)
"Resolved: Shareholders request the Board of Directors to report on its
Code of Conduct compliance mechanisms for vendors, subcontractors and
buying agents in the countries where it sources. A summary of the results
should be reported to shareholders by September 1998. The report should
include:
"1. Summary of current company practices enforcing the company's Code of
Conduct for its manufacturers and licensees.
"2. Establishment of independent monitoring programs in conjunction with
local respected religious and human rights groups.
"3. Policies to implement ongoing wage adjustments, ensuring adequate
purchasing power and a sustainable living wage.
"4. Establishment of incentives to encourage suppliers to raise standards
rather than terminate contracts.
"5. Public disclosure of contract supplier reviews on a regular basis."
21
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL FOR THE FOLLOWING REASONS.
The proposed resolution is substantially the same as proposals considered at
the Company's 1997 and 1998 annual meetings, which were submitted by some of
the same proponents. Excluding "broker non-votes," the 1997 resolution was
supported by approximately 9.1% of the proxies submitted, while the 1998
resolution received the support of approximately 8.0% of the proxies
submitted.
During 1998, the Company continued to expand and develop its international
labor standards compliance program under the auspices of the International
Labor Standards Group, which includes senior executives from the Company's
corporate and business operations. Key activities during the year included:
. regional meetings between the Company's licensing and monitoring
executives and more than 5,000 licensees and manufacturers in Asia, Latin
America, Europe and the United States to review the Codes and the
Company's monitoring activities, and to develop action plans where
appropriate to ensure compliance with the Company's standards;
. individual meetings with the Company's top 200 licensees to work directly
with each of them to develop specific programs for increased licensee
involvement in the monitoring process;
. continued distribution of the Company's Code of Conduct for Licensees and
Code of Conduct for Manufacturers (translated into more than 50
languages) to all of the Company's licensees and to each manufacturer
engaged in the production of Disney-branded merchandise; and
. further expansion of the Company's own monitoring program, including more
than 6,600 manufacturer audits around the world (including follow-up
reaudits where necessary) during calendar 1998, conducted by independent
professional firms as well as the Company's internal auditors.
The full text of the Codes of Conduct may be obtained by interested
stockholders from the Corporate Secretary of the Company.
These ongoing efforts--combining a focus on education, monitoring and
cooperation with licensees and manufacturers to ensure compliance with the
Company's standards--reflect the Company's continuing commitment to
strengthening the labor practices of its domestic and international licensees
and manufacturers. In this respect, the Company believes its activities are
substantially consistent with the objectives of the proposed resolution.
However, the Company disagrees with the present resolution in two principal
respects.
First, the Company continues to believe that its current approach to
monitoring, which relies on both internal auditors and independent
professional monitoring firms, is best suited to ensure consistency in
compliance with its standards on a global basis. While the Company agrees that
there may be a role for local nongovernmental organizations in special
circumstances, there is neither an existing network of organizations to carry
out such monitoring on a global basis nor a consensus on monitoring standards
or methods.
Second, the Company does not believe that the proponents' call for the
implementation of "ongoing wage adjustments, ensuring adequate purchasing
power and a sustainable living wage" is feasible or realistic. The Company's
Codes of Conduct address this issue in the same manner as the Workplace Code
of Conduct developed by the White House Apparel Industry Partnership,
requiring licensees and manufacturers to recognize that wages are essential to
meeting employees' basic needs and to comply, at a minimum, with all
applicable wage and hour laws and regulations. The Codes further state the
Company's expectation that, where local industry standards are higher than
applicable legal requirements, manufacturers will meet the higher standards.
This, too, is consistent with the Workplace Code of Conduct. The Company
expects all facilities engaged in the manufacture of Disney-branded
merchandise to comply with local compensation laws and meet local industry
standards, where higher, but does not believe it can realistically go beyond
these requirements by attempting to determine and impose additional levels of
compensation at each of the more than 18,000 facilities that are engaged from
time to time in the manufacture of Disney-branded (as well as non-Disney)
merchandise.
22
<PAGE>
With respect to the resolution's call for regular public disclosure of
contract supplier reviews, the Company continues to believe that greater
progress will be made in the improvement of international labor practices
through a combination of education, cooperative efforts to improve standards
and monitoring than through a system of public reporting. The Company
recognizes its responsibility, however, to keep interested shareholders
informed on the status of its ongoing efforts, and will continue to do so.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS PRESENTED UNLESS
YOU SPECIFY OTHERWISE.
PROPOSAL 3--FUTURE ADOPTION OF A SHAREHOLDER RIGHTS PLAN
Mr. Francis G. Forsyth Jr. has submitted the following resolution:
"Resolved, that the shareholders of the Walt Disney Company request the
Board of Directors to refrain from adopting any future shareholders rights
plan, rights agreement, or other device commonly known as a "poison pill'
without the prior approval of the stockholders at an Annual or Special
meeting,
"Statement of Support:
"A poison pill is an anti-takeover device, which effectively prevents a
change in control of a Company without the approval of the Board of
Directors. It forces potential acquirers to negotiate acquisitions with
management, instead of making an offer directly to the stockholders.
"The stockholders, who own the Company, should have the right to decide
what is a fair price for their holdings. The directors and managers, who
serve as our agents, should not usurp that right.
"In addition, by forcing potential acquirers to negotiate with the Board,
poison pills have a tendency to entrench management, to insulate it from
accountability, and to make management less responsive to the views of
stockholders. Stockholders should have the right to decide whether the risk
of such consequences may be warranted by special circumstances that might
make it appropriate to adopt a poison pill.
"In this regard a proposal submitted for the 1998 annual meeting of the
Walt Disney Company with respect to the shareholder rights plan received
43% of the votes cast."
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL FOR THE FOLLOWING REASONS.
The Board of Directors adopted the Company's current shareholder rights plan
in 1989 to protect the Company's stockholders against abusive takeover tactics
and to ensure that each stockholder would be treated fairly in any transaction
involving an acquisition of control of the Company. The purpose of the plan
was to strengthen the Board's ability, in a manner consistent with its
fiduciary duties, to protect and maximize the value of stockholders'
investment in the Company in the event of an unsolicited attempt to acquire
control of the Company.
By its terms, the Company's current plan expires on June 30, 1999. The Board
of Directors has decided to allow the current plan to expire as scheduled
without replacement. In reaching this decision, the Board took into account
the changes over the past decade in the legal and marketplace environment with
respect to corporate takeovers, as well as the substantial growth in the
Company's size and market capitalization. The decision to proceed without the
protections afforded by a rights plan also reflected the Board's broader
initiatives in recent years in the field of corporate governance, including
the adoption of the Corporate Governance Guidelines in 1996, the 1997 decision
to "declassify" the Board of Directors in order to provide for the annual
election of all directors by 2001 and the 1998 addition of two new independent
directors to the Board.
The Board has no current intention or expectation of reinstating a rights
plan of any kind. If circumstances, unforeseen at present, arise in the future
that might make the adoption of a new plan advisable, the Board would
necessarily take into account a variety of factors to ensure maximization of
stockholder value in the event of an
23
<PAGE>
unsolicited attempt to acquire control of the Company. These factors would
include legal requirements and marketplace practices, as well as whether a new
plan should be submitted to stockholders in advance or, like many current
plans, provide for stockholder action in connection with the operation or
termination of the plan. The Board of Directors does not believe, however,
that it is appropriate or desirable for the Company and its stockholders to
take a definitive position on this issue at a time when there is simply no
pending or anticipated controversy with respect to the adoption of a new
rights plan.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS PRESENTED UNLESS
YOU SPECIFY OTHERWISE.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the annual meeting other than the
items referred to above. If any other matter is properly brought before the
meeting for action by stockholders, proxies in the enclosed form returned to
the Company will be voted in accordance with the recommendation of the Board
of Directors or, in the absence of such a recommendation, in accordance with
the judgment of the proxy holder.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING. Stockholders interested
in presenting a proposal for consideration at the Company's annual meeting of
stockholders in 2000 may do so by following the procedures prescribed in Rule
14a-8 under the Securities Exchange Act of 1934 and the Company's by-laws. To
be eligible for inclusion, stockholder proposals must be received by the
Company's Corporate Secretary no later than September 7, 1999.
PROXY SOLICITATION COSTS. The proxies being solicited hereby are being
solicited by the Company. The cost of soliciting proxies in the enclosed form
will be borne by the Company. The Company has retained Georgeson & Co., 100
Wall Street, New York, New York 10005, to aid in the solicitation. For these
services, the Company will pay Georgeson & Co. a fee of $15,000 and reimburse
it for certain out-of-pocket disbursements and expenses. Officers and regular
employees of the Company may, but without compensation other than their
regular compensation, solicit proxies by further mailing or personal
conversations, or by telephone, telex, facsimile or electronic means. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial
owners of stock.
By order of the Board of Directors,
Marsha L. Reed
Corporate Secretary
January 4, 1999
24
<PAGE>
[RECYCLED LOGO]
<PAGE>
[LOGO OF THE WALT DISNEY COMPANY]
PROXY FORM PROXY FORM
Disney
Annual Meeting of Stockholders - To Be Held February 23, 1999
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
The undersigned hereby appoint(s) SANFORD M. LITVACK, THOMAS O. STAGGS, and
DAVID K. THOMPSON, and each of them, attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all shares of common stock
of The Walt Disney Company that the undersigned would be entitled to cast if
personally present at the 1999 Annual Meeting of Stockholders of the Company,
and at any postponement or adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE UNDERSIGNED. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR
LISTED ON THE REVERSE SIDE, FOR PROPOSAL NUMBER 2, AGAINST PROPOSALS NUMBER 3
THROUGH 5, AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR
ADJOURNMENT THEREOF.
Please date, sign exactly as your name appears on the form and mail the proxy
promptly. When signing as an attorney, executor, administrator, trustee or
guardian, please give your full title as such. If shares are held jointly, both
owners must sign.
Continued and to be voted and signed on reverse.
<PAGE>
--------------------------------------------
IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET,
PLEASE READ THE INSTRUCTIONS BELOW
--------------------------------------------
The Walt Disney Company encourages you to
take advantage of new and convenient ways to
vote your shares on matters to be covered at
the 1999 Annual Meeting of Stockholders.
Please take the opportunity to use one of the
three voting methods outlined below to cast
your ballot. We've made it easier than ever.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to vote your
proxy 24 hours a day, 7 days a week. Have
your proxy card in hand when you call. You
will be prompted to enter your 12-digit
Control Number, which is located below, and
then follow the simple instructions the Vote
Voice provides you.
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to vote your proxy 24 hours
a day, 7 days a week. Have your proxy card in
hand when you access the web site. You will
be prompted to enter your 12-digit Control
Number, which is located below, to obtain
your records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage-paid envelope we've
provided or return it to The Walt Disney
Company, c/o ADP, 51 Mercedes Way, Edgewood,
NY 11717.
If you vote by phone or vote using the
Internet, please do not mail your proxy.
THANK YOU FOR VOTING.
CONTROL NUMBER:
THE BOARD RECOMMENDS A VOTE FOR ITEMS 1 AND 2 AND AGAINST ITEMS 3, 4 AND 5
- --------------------------------------------------------------------------------
THE WALT DISNEY COMPANY
PLEASE MARK ALL CHOICES LIKE THIS [X]
For multiple accounts only - Mark this box to
discontinue annual report mailing for this account [_]
<TABLE>
<S> <C> <C> <C>
ELECTION OF DIRECTORS:
For Withheld For All
(1) (01) Judith L. Estrin, (02) Sanford M. Litvack, (03) Sidney Poitier, All All Except:
(04) Robert A.M. Stern, (05) Andrea Van de Kamp [_] [_] [_]
To withhold authority to vote, mark "For All Except" and write the
nominee's number on the line below. ___________________________________
(2) To ratify the appointment of
PricewaterhouseCoopers LLP as the Company's For Against Abstain
independent accountants for 1999. [_] [_] [_]
(3) To approve the stockholder proposal with respect to year 2000 For Against Abstain
[_] [_] [_]
(4) To approve the stockholder proposal with respect to For Against Abstain
contract supplier standards [_] [_] [_]
(5) To approve the stockholder proposal with respect to For Against Abstain
future adoption of a shareholder rights plan [_] [_] [_]
- ----------------------------------------------------- ---------------------------------------------------
- ----------------------------------------------------- ---------------------------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
</TABLE>
