87 Davies | dwpv.com Spotlight: The Walt Disney Company under Scrutiny Of the issuers facing heightened scrutiny surrounding executive compensation in light of the effects of COVID-19, The Walt Disney Company, which is listed on the New York Stock Exchange (NYSE), has been among the most heavily scrutinized for its approach to executive compensation. Prior to the pandemic, Disney had already faced controversy relating to its executive compensation arrangements. Both institutional shareholders and proxy advisory firms have for many years expressed dissatisfaction with the pay package of former CEO and current executive chair, Bob Iger. According to its public disclosure, Disney engaged shareholders in its executive compensation decision-making process in fiscal 2019, consulting with approximately 74% of its largest 50 shareholders. As a result of this outreach and in an effort to assuage investor concerns, Disney reportedly reduced Mr. Iger’s compensation for fiscal 2019 on three separate occasions.106 Nevertheless, in early March 2020, Disney’s say-on-pay vote was approved by only a slim majority – 53%, down from 57% in 2019. Proxy advisory firms Institutional Shareholder Services Inc. (ISS) and Glass, Lewis & Co. (Glass Lewis) recommended that shareholders vote against the compensation resolution owing to their concerns with the size of both Mr. Iger’s and the current CEO Bob Chapek’s pay packages in comparison with those of their peers, as well as the lack of rigour in performance metrics. These factors, they concluded, resulted in outsized rewards for median performance or even significant underperformance.107 The spread and effects of COVID-19 compounded the adverse optics of Disney’s executive compensation practices. In response to the pandemic, Disney announced on March 30, 2020 that certain named executive officers, including Messrs. Iger and Chapek, had agreed to temporary reductions in their base salaries, with Mr. Iger forgoing nearly 100% of his base salary through the end of 2020 and Mr. Chapek forgoing 50%. However, Disney stated that all provisions under the executives’ employment agreements would continue to be based on their full base salary.108 According to CGLytics, Mr. Iger’s temporary salary reduction amounts to US$2.25 million, which represents only 3.3% of his total realized 2019 compensation of US$47.5 million.109 These reductions were perceived to be little more than token gestures, particularly in the context of Disney’s announcement that it would furlough (U.S. terminology for “lay off”) more than 100,000 workers owing to the pandemic. Since then, there have been continued widespread calls for Disney to recalibrate its executive pay structures.110 CHAPTER 06 Executive Decisions: Compensation Trends In and Outside of Times of Crisis
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