Got Proxy?

First published February 10, 2004

By C. W. Oberleitner

As the date for the Walt Disney Company's annual shareholders meeting draws ever nearer, C. W. Oberleitner looks into complaints that he's heard from several Disney shareholders about why they haven't received their proxys yet.

On January 27, The Walt Disney Company (WDC) filed, in accordance with the Securities Exchange Act of 1934, a Notice of Annual Meeting of Shareholders and related Proxy Statement, with the Securities and Exchange Commission. That same day Roy E. Disney, former WDC board member and Walt’s nephew, sent out a call to all WDC shareholders to vote "NO" on returning Michael Eisner, George Mitchell, Judith Estrin, and John Bryson to the WDC board of directors.

In order to comply with Roy Disney’s request WDC shareholders must complete ballots attached to their Proxy Statements and return them to the Company. Or, if they prefer they may vote by telephone and in some cases over the Internet. All of which is explained in the Proxy Statement. Presuming, of course, that WDC shareholders have received their Proxy Statements.

A Funny Thing Happened

Last Tuesday, purely by chance, I had a brief encounter with a former Team Disney Burbank (TDB) executive. As luck would have it I happened to have my PowerBook open and was using a WiFi (wireless networking) connection to check out that day’s stories posted here at JimHillMedia.

During the course of our conversation I asked the former Disney Company exec if she was familiar with our site. She told me, she new of our site and others like it but that she was never able to view them while at work. She then went on to tell me that the WDC’s IT department blocks out all such websites.

Our conversation then shifted to the coming board meeting. I asked if she was familiar with Roy Disney’s efforts to call for a NO vote on returning Eisner and several other members to the board. "Very aware." She said. "And I plan on voting NO just as soon as I receive my proxy statement."

Most companies enclose proxy statements with shareholders’ copies of the annual report. The WDC’s 2003 annual report was now available to the media and presumably had already been sent to shareholders. Knowing these things I asked if she had not received her copy of the 2003 annual report.

"Oh, I got the report." She said and before I could say another word she went on to say. "The funny thing is that unlike past years there was no Proxy Statement with it."

Her remarks struck me as odd, however, she was only one shareholder and the WDC has issued over two billion shares of stock. Nevertheless, I couldn’t get her comments out of my mind so I began checking around. I contacted a friend and former WDC employee and asked if he owned any stock and if so had he received an annual report, proxy statement and ballot.

My friend responded that as of yet he hadn’t checked to see if he had received his annual report but oddly enough just that same day he had been speaking about this very issue with another friend of his, who still works for the WDC. My friend’s friend, the fellow still at the WDC, had remarked that very morning that he had received his copy of the annual report but that he had not received a proxy statement.

One such unexpected story about the WDC is interesting. Two virtually identical stories from two completely independent sources on the same day is stretching the bounds of coincidence. So, I began to look for similar stories.

I dug through inboxes, and prowled around various investment and Disney discussion boards. What I found was a great deal of interest in the vote NO on returning Eisner and selected board members issue and even more confusion on how to go about doing that.

Most of the questions I found originated with WDC shareholders, or people who thought they were WDC shareholders—more about that in a minute. They were mostly questions like, "Where’s my proxy?" "How can I obtain a proxy or get a ballot?" or "How do I vote?" And, there weren’t just a few of these questions. There were dozens.

Clearly, before I could proceed any further I needed to learn more about proxy statements and the laws and rules that govern them. After three mind numbing hours spent reading thousands of points, counter points, questions, opinions, staff rulings and recommendations at the Securities and Exchange Commission’s website (sec.gov) I learned the following:

U.S. corporations are expected to hold at least one shareholders meeting a year. Both the shareholders and the SEC must be notified in writing of the meeting and any business requiring a vote, such as electing board members or other officers, to be conducted during the meeting. A clear explanation of the business that is to take place during the meeting must be made available in the form of a Proxy Statement and said statement must inform shareholders how, when and where they can vote prior to or during that particular meeting. All of this information, the Annual Report, Proxy Statement and voting instructions must be made publicly available either by calling the company and asking for it, or publishing it, for example, on the Internet.

Regarding their March 3, 2004 annual shareholders meeting the WDC has complied with all SEC filing requirements. On January 27, of this year the WDC filed their notice(s) with the SEC. Copies of the WDC annual report and proxy statement are available both at SEC.GOV and Disney.com to shareholders and the public alike.

Confusion Reigns Supreme

The following day, February 4, I contacted Disney Investor Relations. The phone number and mailing address for which are easily obtainable from Disney.com.

I told the young woman who answered the phone that I had a copy of the Disney annual report, which was true. I had downloaded it the night before. Next I said that I had not received a proxy statement. I then asked her if the proxy statements had been mailed out?"

Without first asking me a single qualifying question her reply was as follows: "No not yet. We hope to have them in the mail by the end of the Week."

I proceeded to question her. "But the annual reports have already been sent out?"

Her response, "That’s right."

The SEC’s website makes reference to the common practice of bundling annual reports, proxy statements and ballots. In fact, like the two WDC shareholders whose confusion over not receiving such a package began this little odyssey, I own a few shares of a software company and this is how I get my shareholder materials every year. This young woman, however, seemed to believe that the WDC annual report and proxy statements were being mailed out as two separate items.

I resumed my search for WDC shareholders. I found several. More than that, though, I found a lot of people who really don’t understand exactly how their equities are held.

For example there’s the fellow who thinks he’s going to be able to vote NO because he owns WDC stock, when in fact what he owns are shares in a mutual fund that probably includes some WDC stocks. In which case he probably cannot vote the individual shares owned by the fund. In all likelihood he only gets to vote on the management of the fund.

Recent guidelines published by the SEC permit most fund shareholders to tell fund managers how they want individual corporate holdings voted. If you belong to a mutual fund that holds WDC stock and you want your voice heard in the coming WDC proxy, you should check with your fund to see if it is possible to make your preferences known to your fund’s managers.

I found still other WDC shareholders who own stock but don’t actually hold the certificates. Such equities are often held in "brokerage" accounts by what is known as a "street name."

For example, in my case, in addition to those few software company shares I hold certificates for I also own stock in a computer company. In the case of this investment, however, I never receive an annual report or a proxy statement. That’s because these shares are held in my brokerage account.

I tell the company managing my account what stocks I want to buy and at what price. They buy my stock, along with any other buy orders for the same stock from other account holders, in the name of the brokerage but credit our accounts with the number of shares ordered.

I can request that the brokerage furnish me with the investor materials for the various stocks in my account. Or, I can tell them how to vote on my behalf.

Even after fretting out much of the investor confusion, though, I was still left with a number of people who said that they had received a WDC annual report without a proxy statement. And, that based on past experience they expected a proxy statement and ballot with their annual report.

On Friday February 6, I called WDC Investor Relations once again. Just as I had two days earlier I told the young woman—not the same person—who answered the phone that I had an annual report but no proxy statement. Once again I asked if the proxy statements had been mailed out?

Just as the first Disney Investor Relations representative had done, this one did not ask any questions about my status as an investor. After placing me on hold for a brief period she simply reported back, "They are going to be mailed out later today."

I began to have a Carrie Bradshaw moment. Remember both of these people on two separate occasions were told that I had received an annual report but no proxy statement and answered affirmatively when asked specifically if and when proxy statements would be mailed out.

Could Disney be attempting to influence the coming vote by shrinking the amount of time shareholders have to read and return their ballots prior to the meeting?

Confused Investors Not Alone

John W. Spelich is responsible for WDC Corporate Communications. That same morning I contacted his office and after identifying myself as a writer for JimHillMedia I asked his assistant if she would convey the following question to him on my behalf:

"Disney Investor Relations informs me the proxy statements for this year’s WDC annual shareholders meeting won’t be mailed until later today. Is there any particular reason for this delay?"

A few seconds later Mr. Spelich himself came on the line and seemed genuinely surprised by my question and asked me to repeat it. I repeated the question and told him about my two calls to Disney Investor Relations.

Mr. Spelich asked me why I was doing all this and I told him about the questions I had come across from various WDC shareholders who had copies of the company’s annual report but did not have proxy statements, even though they had expected them. He asked me to hold.

In a little less than three minutes Mr. Spelich was back on the line. He told me that he had just been on the other line speaking with the unidentified head of the department responsible for distributing the annual reports. He assured me the company had been, for more than a week now, mailing out a combined package that included the annual report, proxy statement and ballot. In fact, he told me, the ballot with the shareholders name and address was used as a mailing label.

"You have to understand one thing," Mr. Spelich said, "there are millions of these packages to be sent out." He told me that it takes weeks to accomplish this. "The Post Office just doesn’t let you dump 2.4 million pieces of mail into the system in one day."

Unlike the folks at WDC Investor Relations Mr. Spelich does ask qualifying questions. He wanted to know if the shareholders I spoke of were WDC employees. Many Disney employees are invested with the company through employee purchase plans, stock options, and 401k plans. Each of these could have an effect on how or when the employee received an annual report and whether a proxy accompanied the report. This was also the first year employees who purchased stock through the company plan received a copy of the annual report.

He then went on to ask about the shareholder circumstances I had uncovered. "Do any of the people you’ve spoken with hold shares in a brokerage account?" He asked.

Then he asked, "Have you spoken with any share holders not connected with the company who actually have their stock certificates?"

It pains me to admit that a lot of the people I’ve spoken with are more than a little confused as to how they actually own their shares. And then of course there’s the problem of determining if folks here in Southern California have ever worked for the WDC or its many subsidiaries.

I promise Mr. Spelich I will track down shareholders, far from the WDC, both in terms of employment history and geography.

Mr. Spelich repeats that shareholders who actually hold their shares should have or very soon will have received a package with the annual report, proxy statement and ballot. And, that if I find anyone who owns and holds shares and whose package does not contain all three items he wants me to have them call Disney Investor Relations right away. "They will get one out to them immediately."

The Search Goes On

With Jim’s help we were able to find two families that own shares in the WDC and who hold the actual certificates. The first family lives in Connecticut and the second in South Carolina. None of these folks work for or have worked for the WDC or any of its subsidiaries. Both families report that as of this past Saturday’s post they have not received an annual report, proxy statement or ballot from the WDC.

The Connecticut shareholders tell Jim that in the past they have received their documents at least one month in advance of the shareholders meeting. As Mr. Spelich would say, however, you can’t dump 2.4 million pieces of mail into the Post Office in one day.

You can download a copy of the WDC annual report and proxy statement at Disney.com.

You can learn more about how to determine how your shares are held and how to properly vote them at SaveDisney.com.

If you’re having any problems getting information or voting I’d like to hear from you as well.

C’ya real soon!