Company Name: Walt Disney Co. Recon.
Public Availability Date: December 28, 2004
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 13, 2004
DELIVERED BY HAND
Hon. William H. Donaldson
Chairman
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Request for ReconsiderationShareholder Proposal Submitted by American
Federation of State, County and Municipal Employees for Inclusion in the 2005
Proxy Statement of The Walt Disney Company
Dear Chairman Donaldson:
On behalf of our client, The Walt Disney Company (the "Company"), we
respectfully request that the Securities and Exchange Commission (the
"Commission") reconsider the position of the staff of the Division of
Corporation Finance (the "Staff") set forth in its December 8, 2004 letter to us
and concur that it would not recommend action against the Company as a result of
the Company's determination to omit the shareholder proposal and supporting
statement (the "Proposal") sponsored by AFSCME and co-sponsored by the New York
State Common Retirement Fund, the California Public Employees' Retirement System
and the Illinois State Board of Investment (together with AFSCME, the
"Sponsors") from the Company's 2005 proxy materials (the "2005 Proxy
Materials").1
The effect of the Staff's decision in its December 8, 2004 letter is an end run
around the Commission's rule-making process. In particular, the Staff's decision
would permit a shareholder group (in this case, a shareholder group that
concedes it owns even less Company stock than the Commission's proposed Rule
14a-11 would require) to propose that the Company become subject to a
shareholder access procedure even though it is not now known what the provisions
of proposed Rule 14a-11 will be, if it is adopted. As a policy matter, the
Commission should not permit the established public rule-making process and
published releases to be evaded and to impose the Staff's opinion on one company
with respect to such a vital corporate governance matter about which the
Commission itself is still deliberating and has yet to reach a conclusion.
The Staff's decision is also a wholly unwarranted departure from recent
Commission precedent. On two separate occasions earlier this year, the Staff has
concurred with requests to exclude shareholder access proposals that differed
from proposed Rule 14a-11. See Qwest Communications International Inc. (March
22, 2004) (permitting exclusion of shareholder access proposal under Rule
14a-8(i)(8) because proposal's ownership threshold of "at least" five percent
differed from ownership threshold of "more than" five percent in proposed Rule
14a-11); Verizon Communications Inc. (January 28, 2004) (permitting exclusion of
shareholder access proposal under Rule 14a-8(i)(8) because proposal differed
from eligibility standard in proposed Rule 14a-11). Like the proposals in these
two rulings, the Proposal also differs from proposed Rule 14a-11 and there is no
valid justification for the Staff to apply one standard to Qwest Communications
International and Verizon Communications but a different standard to The Walt
Disney Company. Indeed, the Proposal is deficient with respect to both the "at
least two years" holding period requirement and the "more than 1%" ownership
requirement, both of which are an integral part of proposed Rule 14a-11 as set
forth in Exchange Act Release No. 34-48626 (October 14, 2003) (the "Release"),
and is therefore excludable under Rule 14a-8(i)(8), as provided by note 74 of
the Release.
For these reasons and the reasons in the Request Letter and Company Response
Letter, we continue to believe, and respectfully ask that the Commission concur,
that the Proposal can be excluded from the 2005 Proxy Materials under Rule
14a-8(i)(8) because the Proposal would have the effect of impermissibly creating
a shareholder nomination procedure that is different from the proposed Rule
14a-11 procedure. If the Commission has any questions, or if the Commission is
unable to concur with the Company's conclusions without additional information
or discussions, please do not hesitate to contact the undersigned at (212)
403-1200.
Very truly yours,
/s/
Martin Lipton
cc: Hon. Paul S. Atkins, Commissioner
Hon. Roel C. Campos, Commissioner
Hon. Cynthia A. Glassman, Commissioner
Hon. Harvey J. Goldschmid, Commissioner
Alan L. Beller, Esq., Director of Corporation Finance
Giovanni P. Prezioso, Esq., General Counsel
Robyn Manos, Esq., Special Counsel
-----FOOTNOTES-----
1 Enclosed are copies of the Proposal, our October 15, 2004 request letter (the
"Request Letter"), our November 23, 2004 letter (the "Company Response Letter")
and the Sponsors' November 4, 2004 letter. In accordance with Rule 14a-8(j),
copies of this letter and the enclosures are being delivered on this date to the
Sponsors, informing them of the Company's request for reconsideration.
[INQUIRY LETTER]
December 14, 2004
DELIVERED BY HAND
Hon. William H. Donaldson
Chairman
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Request for ReconsiderationShareholder Proposal Submitted by American
Federation of State, County and Municipal Employees for Inclusion in the 2005
Proxy Statement of The Walt Disney Company
Dear Chairman Donaldson:
On behalf of our client. The Walt Disney Company (the "Company"), and
supplementing our letter dated yesterday in which we state that the effect of
the Staff's December 8 letter is an end run around the Commission's rule-making
process, we enclose a copy of a press release issued yesterday by the Sponsors
of the shareholder access proposal, in which they claim: "The SEC decision ...
clarifies that shareholders will be able to vote on proxy access resolutions at
2005 annual meetings..." and "[w]e are gratified that ... the SEC has seen the
wisdom for allowing access to the proxy." 1 Clearly they believe they have
accomplished an end run.
Very truly yours,
/s/
Martin Lipton
cc: Hon. Paul S. Atkins, Commissioner
Hon. Roel C. Campos, Commissioner
Hon. Cynthia A. Glassman, Commissioner
Hon. Harvey J. Goldschmid, Commissioner
Alan L. Beller, Esq., Director of Corporation Finance
Giovanni P. Prezioso, Esq., General Counsel
Robyn Manos, Esq., Special Counsel
-----FOOTNOTES-----
1 In accordance with Rule 14a-8(j), copies of this letter and the enclosure are
being delivered on this date to the Sponsors.
[INQUIRY LETTER]
December 20, 2004
DELIVERED BY HAND
Hon. William H. Donaldson Chairman
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Request for ReconsiderationShareholder Proposal Submitted by American
Federation of State, County and Municipal Employees for Inclusion in the 2005
Proxy Statement of The Walt Disney Company
Dear Chairman Donaldson:
The 2005 Proxy Statement of The Walt Disney Company is scheduled for printing on
December 30 of this year. Accordingly, we would very much appreciate a decision
prior to that date on our request for reversal of the Staff denial of
concurrence in our opinion that the above proposal may be omitted from the
Disney Proxy Statement. For your convenience, we have attached copies of our
letters of December 13 and 14 requesting such reversal.
Very truly yours,
/s/
Martin Lipton
cc: Hon. Paul S. Atkins, Commissioner
Hon. Roel C. Campos, Commissioner
Hon. Cynthia A. Glassman, Commissioner
Hon. Harvey J. Goldschmid, Commissioner
Alan L. Beller, Esq., Director of Corporation Finance
Giovanni P. Prezioso, Esq., General Counsel
Robyn Manos, Esq., Special Counsel
[INQUIRY LETTER]
December 23, 2004
VIA HAND DELIVERY
Hon. William H. Donaldson
Chairman
Securities and Exchange Commission
450 Fifth St., N.W.
Washington, DC 20549
Dear Chairman Donaldson:
We write in response to the request of The Walt Disney Company ("Disney") for
reconsideration by the Commission of the December 8, 2004 decision of the Staff
of the Division of Corporation Finance (the "Staff Decision"). The Staff
Decision advised Disney that the Staff did not agree that Disney could rely on
Rule 14a-8(i)(8) to omit from its 2005 proxy materials a non-binding shareholder
proposal (the "Proposal") asking that Disney become subject to the shareholder
right of access described in the Commission's proposed Rule 14a-11 (the
"Proposed Rule"). We believe in this case reversal by the Commission is not
warranted.
The Proposal was submitted by the AFSCME Employees Pension Plan (the "Plan"),
the California Public Employees Retirement System ("CalPERS"), the Illinois
State Board of Investment ("Illinois"), and the New York State Common Retirement
Fund (collectively, the "Proponents"). The Plan, CalPERS, and Illinois are
submitting this response in order to minimize delay, as Disney has asked the
Commission to rule within two weeks of submitting its appeal, a time period that
includes the Christmas holidays. The New York State Common Retirement Fund also
concurs with the arguments contained herein.
Disney urges the Commission to reverse the Staff Decision and hold that the
Proposal is excludable under Rule 14a-8(i)(8) (the "Election Exclusion"), which
permits omission of a proposal that "relates to an election for membership on
the company's board of directors or analogous governing body."
In recent years, the Staff has taken the position that proposals seeking
establishment of a shareholder access regime could be omitted under the Election
Exclusion. Historically, in the 1977 Exchange Act Release No. 13901, and in the
1980 SEC Staff Report on Corporate Accountability, proxy access rulemaking was
contemplated but never completed. Currently, the Staff of the Division of
Corporate Finance has reasonably considered how to treat precatory proxy access
proposals for 2005 annual meetings as part of their current proposed rulemaking.
The release in which the Commission proposed the Proposed Rule1 (the "Proposing
Release") signaled that the current interpretation of the 14a-8(i)(8) would be
modified.2 Specifically, the Proposing Release states that "a proposal that the
company become subject to the procedure in proposed Exchange Act Rule 14a-11"
will not be excludable under the Election Exclusion.
Disney contends that the Proposal is not a "direct access" proposal because the
Proponents do not own more than 1% of Disney's outstanding shares. Under the
Proposed Rule, approval of a proposal by holders of a majority of a company's
shares voting would not automatically trigger shareholder access unless the
proponent or group satisfied this ownership requirement. But the Proposing
Release recognizes that a direct access proposal may be sponsored by a
shareholder or group whose holdings do not meet the 1% threshold. In other
words, the Proposing Release contemplates that direct access proposals may be
either binding, if submitted by holders of more than 1% of shares, or
non-binding, if submitted by proponents whose ownership does not satisfy that
test. In either case, the Proposal is not excludable under Rule 14a-8(i)(8) if
the shareholder access right put forward in the Proposal tracks the Proposed
Rule.
The Staff's decisions in Verizon and Qwest do not compel exclusion. The
proposals submitted to those companies made no reference to the Proposed Rule,
and sought establishment of a different proxy access regime. Here, the Proposal
explicitly asks Disney to adopt the access right described in the Proposed Rule,
and describes generally the contours of that right.
Finally, Disney's plea to allow the Commission's rulemaking process to run its
course is misplaced. Because the Proposal does not purport to trigger access
automatically under the Proposed Rule if approved by Disney's shareholders, the
outcome of the rulemaking is not determinative. The Proposal asks Disney's
shareholders simply to express their opinion about the desirability of
establishing at Disney the access right described in the Proposed Rule.
In light of the long delay since the Commission proposed the Proposed Rule, it
makes sense to allow shareholders to urge individual companies to adopt
shareholderfriendly innovations in the proxy process using the shareholder
proposal rule. Indeed, Apria Healthcare Group and Hanover Compressor have
adopted variations on a shareholder access regime over the past 20 months.
Permitting company-by-company consideration would subject shareholder access to
a market test, with a proposal passing only if holders of a majority of shares
voting believe that the benefits of access outweigh the costs to the company at
issue. By the nature of this precatory proposal, even with a majority
shareholder vote, it would still remain the prerogative of the Disney Board to
implement it.
If you have any questions, or if we can be helpful to the Commission in any way,
please do not hesitate to contact Richard Ferlauto at (703) 407-0693.
Very truly yours,
/s/
Charles Jurgonis
Plan Secretary
AFSCME Employees Pension Plan
/s/
Edward Smith
Chairman
Illinois State Board of Investment
/s/
Sean Harrigan
President
California Public Employees' Retirement System Board
cc: Martin Lipton, Esq.
fax # 212-403-2000
-----FOOTNOTES-----
1 Exchange Act Release No. 48626 (Oct. 14, 2003).
2 The Plan has argued both to the Staff and the Commission that this
interpretation, which itself was a reversal from prior policy, does not find
support in the history of the Election Exclusion or considerations of sound
public policy. See, e.g., Citigroup, Inc., 2003 SEC No-Act. LEXIS 160 (avail.
Jan. 31, 2003) (response to request for no-action relief); 2003 SEC No-Act.
LEXIS 534 (avail. Apr. 14, 2003) (appeal of Staff's decision).
[STAFF REPLY LETTER]
December 28, 2004
Mr. Martin Lipton
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, N.Y. 10019-6150
Re: The Walt Disney Company Reconsideration request dated December 13, 2004
Dear Mr. Lipton:
This is in response to your letter dated December 13, 2004 concerning the
shareholder proposal submitted to Disney by the AFSCME Employees Pension Plan,
the New York State Common Retirement Fund, the California Public Employees'
Retirement System, and the Illinois State Board of Investment. On December 8,
2004, we issued our response expressing our informal view that Disney could not
exclude the proposal from its proxy materials for its upcoming annual meeting.
Your letters of December 13, 2004, December 14, 2004, and December 20, 2004 seek
a reconsideration of our position. We also have received a letter from the
AFSCME Employees Pension Plan, the California Public Employees' Retirement
System, and the Illinois State Board of Investment, dated December 23, 2004,
responding to your letters.
The Division has reconsidered its position, and there appears to be some basis
for your view that Disney may exclude the proposal under rule 14a-8(i)(8).
Accordingly, we will not recommend enforcement action to the Commission if
Disney omits the proposal from its proxy materials in reliance on rule
14a-8(i)(8).
Sincerely,
/s/
Alan L. Beller
Director
cc: AFSCME Employees Pension Plan
New York State Common Retirement Fund
California Public Employees' Retirement System
Illinois State Board of Investment
c/o Richard Ferlauto
AFSCME Employees Pension Plan
1625 L Street, NW
Washington, D.C. 20036
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