More investor pressure on Disney as Connecticut warns of Eisner-era “imperial CEO”

Letter to shareholders from $26bn Connecticut fund

The $26bn (€19.8bn) Connecticut Retirement Plans and Trust Funds (CRPTF) has become the latest major institutional investor to go public with concerns over governance at Disney – with a warning about a return to a Michael Eisner-style “imperial CEO” at the entertainment giant.

The fund, overseen by Connecticut Treasurer Denise Nappier, has written to fellow investors in the company urging them to support its resolution tabled for Disney’s annual meeting next month.

The CRPTF, which has a $30m stake in the company, is calling for an independent external director to serve as non-executive chairman.

It says its proposal “seeks to redress the imbalances that could lead the company to return to the [former CEO] Eisner Era with an imperial CEO and unaccountable pay” and lackluster performance. Eisner headed Disney from 1984 until 2005.

The latest missive follows a similar letter earlier this week to shareholders from the California State Teachers Retirement System (CalSTRS) and PGGM Investments of the Netherlands.The Connecticut letter says it’s “déjà vu all over again” – given that pressure from institutional investors in 2004 had led to Disney separating the CEO/Chairman roles a year later.

But by recombining the roles in 2011 with current CEO Robert Iger, the CRPTF says the board “chose not to honor its commitment to shareholders” and failed to engage with them in a meaningful way. Indeed the fund says shareholder input was “intentionally avoided”.

The fund argues that the strong performance of the company under independent chairs George Mitchell and John Pepper refutes any claims over damaged performance or weakened accountability. The company counters that, saying the CRPTF proposal is “vague and unworkable”.

But the fund notes that both ISS and Glass Lewis, the leading proxy advisors, have recommended a vote for its proposal.

“The company needs to move forward and utilize corporate governance best practice to mitigate risk, enhance performance and advance shareholder value,” the Connecticut fund concludes.