- The Washington Times - Friday, February 27, 2004

RALEIGH, N.C. (AP) — Troubles continued to mount for Michael Eisner yesterday as North Carolina’s public pension funds instructed their investment managers to withhold votes on their shares for Mr. Eisner as chairman of the Walt Disney Co.

The state’s public pension funds hold roughly 2.1 million shares of Disney stock.

“Disney and its chief executive officer have in many instances, over the last 10 years, been the poster child of bad corporate governance,” state Treasurer Richard Moore said in an interview.

Mr. Moore also told the state’s index fund managers not to vote for the three members of Disney’s audit board committee who are up for election.

North Carolina joined several other states, including California, New York, Connecticut, Massachusetts and New Jersey, in deciding to withhold their votes — the equivalent of a “no” vote — against Mr. Eisner.

Mr. Eisner is sure to be re-elected because he is running unopposed and many large mutual funds and other institutional shareholders are likely to vote for him.

But a large protest vote at Wednesday’s annual meeting of Disney shareholders in Philadelphia would be unsettling for Disney and for Mr. Eisner, whom critics blame for a long slump in company profits.

“I think it’s going to do more than send a signal,” Mr. Moore said. “This is a real shot across the bow.”

His instruction letters are a departure for North Carolina’s public pension funds, the ninth-largest in the country at $61 billion. The shares are primarily held in index funds, and the state largely has followed the advice of the fund’s outside managers with proxy questions.

Mr. Moore said the state’s public pension funds hold $56.5 million in Disney shares, mostly through index funds. The funds have largely stayed away from Disney in their other investments in recent years because of its sagging share price, a spokeswoman for Mr. Moore said.

“The failure of the company to generate long-term value for shareholders combined with their past inattention to good corporate governance practices has forced us to take this step,” Mr. Moore said.

He cited Mr. Eisner’s dual roles as chairman and chief executive officer, the company’s large severance package with former Disney President Michael Ovitz and its past use of outside auditor PricewaterhouseCoopers for consulting work among Disney’s poor decisions.

Shares of Disney closed at $26.53, down 20 cents, yesterday on the New York Stock Exchange.

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