Company Name: Walt Disney Co.
Public Availability Date: 11-06-1992
[INQUIRY LETTER 1]
GIBSON, DUNN & CRUTCHER
1050 Connecticut Avenue, NW
WASHINGTON, D.C. 20036-5306
TELEPHONE(202) 955-8500 September 29, 1992 BY HAND Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: The Walt Disney Company/Omission of Shareholder Proposal on Reinstitution of
a Dividend Reinvestment Plan Ladies and Gentlemen: On behalf of The Walt Disney Company (the "Company"), I enclose pursuant to Rule
14a-8(d) under the Securities Exchange Act a proposal (the "Proposal") submitted
by Mr. Ron Macomber (the "Proponent") on September 15, 1992 for inclusion in the
Company's proxy materials for its 1993 Annual Meeting. For the reasons set forth
below, the Company intends to omit the Proposal from its proxy materials and
requests that the Staff advise the Company that it will not recommend
enforcement action to the Securities and Exchange Commission if the Proposal is
so omitted. A copy of the Proposal and related correspondence with the Proponent
is attached to this letter as Exhibit A. The Company expects to file definitive
proxy materials with the Commission no earlier than December 18, 1992. The Proposal would require the Company to reinstitute its Dividend Reinvestment
Plan ("D.R.I.P."). The Company believes that the Proposal may be omitted from
the Proxy materials pursuant to Rule 14a-8(c)(7), which allows omission of a
proposal that "deals with a matter relating to the conduct of the ordinary
business operations of the registrant", pursuant to Rule 14a-8(c)(1), which
permits omission of proposals that are not a proper subject for shareholder vote
under the law of the state in which the corporation is domiciled, and pursuant
to Rule 14a-8(c)(3) because the proposal and supporting statement would violate
the federal proxy rules, including Rule 14a-9. The Proposal concerns one of the ways in which the Company may encourage
investment in its securities and thereby, directly or indirectly, raise capital.
As is always the case when programs involving sales of the Company's stock are
considered, complex legal and financial issues are involved in the institution
of a D.R.I.P. and the specification of its terms which are quintessentially
appropriate for careful Board deliberation rather than shareholder action. See
e.g. Sam Zuckerman, Banks Raising Millions in Equity By Giving Discounts to
Arbitragers, AMER. BANKER, Sept. 17, 1992, at 1, 16; In the Matter of Shearson
Lehman Brothers, Inc., S.E.C. Rel. No. 34-31196, Admin. Proc. File No. 3-7853
(Sept. 17, 1992). Because of such considerations, the Staff has found on
numerous occasions that the decision to institute or reinstitute a D.R.I.P. is a
matter relating to the ordinary business of the corporation and that shareholder
proposals calling for such a plan may therefore be omitted under Rule
14a-8(c)(7). Wal-Mart Stores, Inc., March 27, 1992 (institution of plan);
Schlumberger Limited, December 11, 1991 (institution of plan); Mosinee Paper
Corporation, November 6, 1991; B & H Bulk Carriers, Ltd., March 25, 1991
(reinstitution of D.R.I.P.); Thomas Nelson, Inc., March 28, 1990 (institution of
D.R.I.P.). The Company believes that the Proposal is not substantially different
from the proposals cited above. Accordingly, the Company intends to omit the
Proposal from its Proxy materials under Rule 14a-8(c)(7) as relating to an
ordinary business operation. In addition, the Company intends to omit the Proposal pursuant to Rule
14a-8(c)(1), as not being a proper subject for shareholder action, because the
Proposal would require the Company to take action in an area committed to the
discretion of the board by the law of Delaware. Under the laws of the State of
Delaware, the management of the business and affairs of the corporation is
committed to the board of directors, not to the shareholders. Del. Gen. Corp.
Law §141(a). In exercising this authority, the board is subject to common law
duties of due care and loyalty to the corporation, including the responsibility
to exercise an informed business judgment with respect to decisions taken on the
corporation's behalf. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984); Revlon,
Inc. v. MacAndrews & Forbes Holdings, Inc.,
506 A.2d 173 (Del. 1986); Unocal
Corp. v. Mesa Petroleum Co.,
493 A.2d 946 (Del. 1985); Smith v. Van Gorkom,
488 A.2d 858 (Del. 1985). The Proposal would require the Company to take action in
an area that is within the board's management purview over the business affairs
of the corporation, and would not only contravene authority committed to the
board under Delaware law, but would prevent the board from exercising the
informed business judgment in an area thus committed to the board's care by the
law of Delaware. See Smith v. van Gorkom, supra, 488 A.2d at 872. An opinion of
counsel in support of the Company's intention to omit on this ground is attached
as Exhibit B, and provisions of the Company's Certificate of Incorporation and
By-laws cited therein are attached as Exhibit C. Finally, the Company intends to omit the Proposal because it contains statements
that are false and misleading and hence would violate the federal proxy rules,
including Rule 14a-9. The section of the supporting statement that is entitled
"Cost Payment" states without any foundation in fact that reinstitution of the
dividend reinvestment plan will lead to increased investment in the Company's
stock to a degree sufficient to permit higher salaries and more jobs. In fact,
the D.R.I.P. was terminated by the Company in large part because of insufficient
participation by investors. The "Cost Payment" statement, further, makes
unsupported and pejorative characterizations of the Company's executive
compensation structure and misleadingly implies that money to run the D.R.I.P.
could be taken from the "exorbitant" bonus of the CEO. Such unsubstantiated
potshots are irrelevant to the merits of the proposal, impugn the integrity of
management and are misleading. See Long Island Lighting Company, available
February 8, 1983. Pursuant to Rule 14a-8(d) we enclose six additional copies of this letter and
the enclosures. A copy of this letter is concurrently being forwarded to the
Proponent, notifying him of the Company's intention to omit the Proposal from
its proxy materials. If you have any questions with regard to this matter, please contact the
undersigned or Ronald O. Mueller of our firm at (202) 955-8500. Additionally,
please acknowledge receipt of this filing by stamping the extra enclosed copy
and returning it to our messenger, who has been instructed to wait. Very truly yours, Josiah O. Hatch, III Enclosures WL922680.048
[INQUIRY LETTER 2]
Ron Macomber
308 BROADMOOR DR.
S. SIOUX CITY, NE. 68776 September 11, 1992 THE WALT DISNEY COMPANY
500 SOUTH BUENA VISTA STREET
BURBANK, CALIFORNIA 91521 DEAR MS. DORIS A. SMITH RE: SHAREHOLDER'S MEETING PROPOSAL I AM MAKING THE FOLLOWING PROPOSAL FOR THE NEXT ANNUAL SHAREHOLDER'S MEETING: THE DIVIDEND REINVESTIMENT PLAN WILL BE REINSTATED ALONG WITH THE TOOL OF
VOLUNTARY CASH CONTRIBUTIONS. INCLUDE, IF LEGAL, STIPULATION TO ALLOW COMPANY TO CLOSE ANY REINVESTMENT
ACCOUNT WITH FEWER THAN 400 SHARES UNLESS SHARES OR VOLUNTARY CASH IS ADDED TO
IT AT LEAST TWICE (2) A YEAR. JUSTIFICATION:
MANY SMALL INVESTORS -- ESPECIALLY THOSE SMALL IN AGE AND SMALL IN RESOURCES --
DO MUCH TO SUPPORT OUR COMPANY. INDEED, WITHOUT THE SMALL PEOPLE; WE WOULD NOT
BE THE THRIVING COMPANY WE ARE TODAY. WITHOUT THESE SMALL PEOPLE, PARENTS WOULD
NOT BE SPENDING THE MANY SINGLE DOLLARS THAT ADD UP TO THE MILLIONS OF DOLLARS
OF PROFIT. AS MUCH OF THE BUSINESS WORLD IS FINDING; EDUCATION IS VITAL TO THE
INTEREST OF BUSINESS IN HIRING AN ADEQUATE WORKFORCE. TO WHICH THEY ARE NOW
DEDICATING RESOURCES TO AID SCHOOLS IN THEIR COMMON GOALS. SC TO, INVESTMENT
EDUCATION OF THE SMALL INVESTORS THRU THIS PLAN WILL LEAD TO SOME OF THE "BIG
BOY" INVESTORS IN FUTURE YEARS. AND LEAD TO A GREATER NUMBER OF SMALL SATISFIED
CUSTOMER/INVESTORS USING THEIR OWN PRODUCTS. TO THIS END WE SHOULD DO MORE TO
PROMOTE OWNERSHIP OF OUR COMPANY. COST PAYMENT:
HOW ABOUT A SMALL AMOUNT OF WHAT I FEEL IS THE EXORBITANT BONUS WE PAY TO OUR
CEO. THE FEW HUNDRED THOUSANDS IT TAKES TO RUN THIS PROGRAM WOULD BE SMALL
POTATOES COMPARED TO THE MILLIONS WE PAY IN EMPLOYEE BONUSES. THE PAYBACK FOR
THOSE EMPLOYEES OF OUR COMPANY WILL COME FROM INCREASED PRIDE OF SMALL OWNERS
AND THEIR SUBSEQUENT INCREASE IN SPENDING FOR OUR PROFITS. THIS ALLOWS FOR
HIGHER SALARIES AND MORE JOBS. AS TOM PETERS WOULD SAY -- THIS IS A WIN - WIN PROGRAM WHEN ENTHUSIASTICALLY
CARRIED OUT. SINCERELY, RON MACOMBER, CUSTODIAN FOR COURTNEY MACOMBER
INIT INVESTMENT CLUB, V.PRES. - INVESTMENTS
[INQUIRY LETTER 3]
RICHARDS, LAYTON & FINGER
ONE RODNEY SQUARE P.O. BOX 551
WILMINGTON, DELAWARE 19899
TELEPHONE(302) 658-6541 September 23, 1992 The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521 Re: Stockholder Proposal of Ron Macomber Ladies and Gentlemen: We have acted as special Delaware counsel to The Walt Disney Company, a Delaware
corporation (the "Company"), in connection with a proposal (the "Proposal") by
Ron Macomber, as custodian for Courtney Macomber, a stockholder of the Company,
which he has requested be included in the proxy statement of the Company for its
1993 annual meeting of stockholders. In this connection, you have requested our
opinion as to certain matters under the General Corporation Law of the State of
Delaware (the "General Corporation Law"). For the purpose of rendering our opinion as expressed herein, we have been
furnished and have reviewed the following documents: (i) the Restated Certificate of Incorporation of the Company as filed with the
Secretary of State of the State of Delaware (the "Secretary of State") on May
20, 1992 (the "Restated Certificate of Incorporation"); (ii) the By-laws of the Company as amended through April 27, 1992 (the
"By-laws"); and (iii) the Proposal and its supporting statement. With respect to the foregoing documents, we have assumed: (i) the authenticity
of all documents submitted to us as originals; (ii) the conformity to authentic
originals of all documents submitted to us as copies or forms; (iii) the
genuineness of all signatures and the legal capacity of natural persons; and
(iv) that the foregoing documents, in the forms thereof submitted to us for our
review, have not been and will not be altered or amended in any respect material
to our opinion as expressed herein. We have not reviewed any document other than
the documents listed above for purposes of rendering this opinion, and we assume
that there exists no provision of any such other document that bears upon or is
inconsistent with our opinion as expressed herein. In addition, we have
conducted no independent factual investigation of our own but rather have relied
solely upon the foregoing documents, the statements and information set forth
therein and the additional matters recited or assumed herein, all of which we
assume to be true, complete and accurate in all material respects. The Proposal reads as follows: The Dividend Reinvestment Plan will be reinstated along with the tool of
voluntary cash contributions. Include, if legal, stipulation to allow company to
close any reinvestment account with fewer than 400 shares unless shares or
voluntary cash is added to it at least twice (2) a year. The Proposal would require the Board of Directors of the Company (the "Board")
to reinstate the Dividend Reinvestment Plan of the Company (the "Plan") which we
understand was recently terminated by the Board based on a determination that
the benefits of the Plan were outweighed by the high administrative costs
associated with it. For the reasons set forth below, the Proposal is not, in our
opinion, a proper subject for action by the stockholders of the Company under
the General Corporation Law. INQ03 Section 141(a) of the General Corporation Law
of the State of Delaware (the "General Corporation Law"), 8 Del.C. §141(a),
provides in pertinent part that: The business and affairs of every corporation organized under this chapter shall
be managed by or under the direction of the board of directors, except as may be
otherwise provided in this chapter or in its certificate of incorporation. Article Fifth of the Restated Certificate explicitly recognizes the principles
set forth in Section 141, providing: The business and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors . Similarly, Article III, Section 4 of the By-laws of the Company provides: The business of the Corporation shall be managed by or under the direction of
the Board of Directors which may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by statute or by the Certificate
of Incorporation or these Bylaws directed or required to be exercised or done by
the stockholders. The distinctions set forth in the General Corporation Law between the role of
the stockholders and the role of the board of directors is well established. As
the Delaware Supreme Court has stated, "a cardinal precept of the General
Corporation Law of the State of Delaware is the directors, rather than
shareholders, manage the business and affairs of the corporation." Aronson v.
Lewis, 473 A.2d 805, 811 (Del. 1984). This principle has long been recognized in
Delaware. Thus, in Abercrombie v. Davies, 123 A.2d 893, 898 (Del. Ch. 1956),
rev'd on other grounds, 130 A.2d 338 (Del. 1957), the Court of Chancery stated
that "there can be no doubt that in certain areas the directors rather than the
stockholders or others are granted the power by the state to deal with questions
of management policy." Similarly, in Maldonado v. Flynn, 413 A.2d 1251, 1255
(Del. Ch. 1980), rev'd on other grounds sub nom. Zapata Corp. v. Maldonado,
430 A.2d 779 (Del. 1981), the Court of Chancery stated: the board of directors of a corporation, as the repository of the power of
corporate governance, is empowered to make the business decisions of the
corporation. The directors, not the stockholders, are the managers of the
business affairs of the corporation. Id.; 8 Del.C. §141(a). See also Adams v. Clearance Corp., 121 A.2d 302 (Del.
1956); Mayer v. Adams, 141 A.2d 458 (Del. 1958); Lehrman v. Cohen,
222 A.2d 800
(Del. 1966); Paramount Communications, Inc. v. Time Inc., C.A. No. 10866, slip
op. at 77-78, Allen C. (Del. Ch. July 14, 1989), aff'd,
571 A.2d 1140 (Del.
1989). As the authorities discussed above make clear, the question whether the Company
should reinstate the Plan is a matter which, under the General Corporation Law,
is left to the Board in the exercise of its powers and duties to manage the
business and affairs of the Company. In contravention of the authority expressly
granted by the General Corporation Law and the Restated Certificate and the
By-laws to the Board with respect to the management of the business and affairs
of the Company, the Proposal would preclude the Board from exercising its
informed business judgment with respect to the costs and benefits of the Plan.
Indeed, we are advised that the Board has already exercised its judgment with
respect to such matters, concluding that the benefits of the Plan are outweighed
by the high administrative costs attendant to the Plan. The Proposal would
mandate re-implementation of the Plan notwithstanding that the Board has
exercised its business judgment and determined that the Plan is not in the best
interests of the Company. Accordingly, the Proposal would require an abdication
by the Board of its duties and responsibilities to make such a determination on
behalf of the Company. Since the Proposal would thus limit the directors in the
exercise of their managerial authority in a manner inconsistent with the General
Corporation Law, the Restated Certificate and the By-laws, it is not, in our
opinion, a proper subject for action by the stockholders of the Company. Based upon and subject to the foregoing, and subject to the limitations stated
hereinbelow, it is our opinion that the Proposal is not a proper subject for
action by the stockholders of the Company. The foregoing opinion is limited to the General Corporation Law. We have not
considered and express no opinion on any other laws or the laws of any other
state or jurisdiction, including federal laws regulating securities or any other
federal laws, or the rules and regulations of stock exchanges or of any other
regulatory body. This opinion is rendered solely for your benefit in connection with the matters
addressed herein. We understand that you intend to furnish a copy of this
opinion to the Securities and Exchange Commission in connection with the matters
addressed herein, and we consent to your doing so. Except as stated in this
paragraph, this opinion may not be furnished or quoted to, or relied upon by,
any other person or entity for any purpose without our prior written consent. Very truly yours, Richards, Layton & Finger CSB/src
[STAFF REPLY LETTER]
November 6, 1992 RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE RE: The Walt Disney Company (the "Company")
Incoming letter dated September 29, 1992 The proposal relates to the Company reinstating its dividend reinvestment plan. There appears to be some basis for your position that the proposal may be
omitted pursuant to Rule 14a-8(c)(7) since it deals with a matter relating to
the conduct of the Company's ordinary business operations (i.e., creation and
operation of a DRIP). Accordingly, the Division will not recommend enforcement
action to the Commission if the Company omits the proposal from its proxy
materials. In reaching a position the staff has not found it necessary to
address the alternative bases for omission upon which the Company relies. Sincerely, William H. Carter
Special Counsel
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