The Walt Disney Co. agreed yesterday to settle allegations from federal regulators that it failed to disclose benefits received by some directors and their relatives.
Disney was not fined in the agreement with the Securities and Exchange Commission but did agree to refrain from future violations of securities laws. The media giant neither admitted nor denied wrongdoing in the settlement.
The SEC said that between 1999 and 2001, Disney failed to disclose the transactions benefiting directors and their families, which it was legally required to do in its proxy statements distributed to shareholders and annual reports filed with the SEC.
According to the agency, the company failed to disclose that:
It employed three children of directors, who received annual compensation of between $60,000 and more than $150,000.
The spouse of a director was employed by a subsidiary that is half-owned by Disney and received compensation of more than $1 million a year.
It made regular payments to a company owned by a Disney director that provided air transportation to that director for Disney business purposes.
It provided office space, secretarial services, a leased car and a driver to a Disney director, services estimated to be worth more than $200,000 a year.
"Shareholders have a significant interest in information regarding relationships between the company and its directors," said Linda C. Thomsen, the SEC's deputy enforcement director. "Failure to comply with the SEC's disclosure rules in this area impedes shareholders' ability to evaluate the objectivity and independence of directors."
Disney's corporate governance and the role of its board have been the focus of controversy. Earlier this month, two former board members, including the son of the company's co-founder, ended their year-long campaign to oust chief executive Michael D. Eisner and force other changes at the Los Angeles-based company.
Stanley P. Gold and Roy E. Disney, son of Roy O. Disney and nephew of Walt, said they would not run a challenge slate of directors at next year's board meeting. The two said in a letter to board members that they have accomplished the goals set a year ago when they resigned from the board and called for the company to fire Eisner, whom they blame for the company's lackluster performance.
Gold and Roy Disney led a shareholder revolt that resulted in an unprecedented 45 percent vote against Eisner's reelection to the board last March. In response to that vote, the board stripped Eisner of his board chairman responsibilities and split the roles of chairman and chief executive.