SEC Staff Does About Face on Disney Proxy Issue

December 29, 2004 ( - US Securities and Exchange Commission (SEC) staff members reversed course on a decision made several weeks ago to allow Walt Disney Co. to withhold an annual-meeting resolution letting shareholders propose board candidates.

Even though Disney challenged the original decision to the commission, the SEC staff reversed itself before the full commission had a chance to consider Disney’s reconsideration request, according to the Wall Street Journal. .

On Wednesday the director of the SEC’s division of corporation finance, Alan Beller, sent a letter to New York attorney Martin Lipton who represented Disney in the matter,   saying it has “reconsidered its position, and there appears to be some basis for your view that Disney may exclude the proposal,”   the Journal reported.

An SEC spokesman declined to be more specific to the Journal about why the staff had reversed course but said staff “has reconsidered its earlier position and, on the basis of the specific proposal and the arguments made, granted the request” by Disney not to take enforcement action against the company if it excluded the proposal.

Last month, the SEC staff had given its blessing to a nonbinding resolution, submitted for Disney’s 2005 annual meeting that would have opened a new avenue for investors to pressure company boards (See  SEC Staff Approves Pensions’ Disney Proxy Proposal ).

The proposed Disney resolution was submitted by the American Federation of State, County and Municipal Employees, the California Public Employees’ Retirement System, the New York State Common Retirement Fund and the Illinois State Board of Investment. If it had been allowed to stand, the SEC’s position would have broken new ground in the debate over investor access to corporate proxies.

Disney in 2004 faced a shareholder revolt that saw 45% of the shares voted at its annual meeting withholding support from the re-election of Chief Executive Michael Eisner to the company board. Eisner was stripped by the Disney board of the chairman’s title he had long held.