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Pension funds act to open Disney board


BURBANK, Calif. - The California Public Employees' Retirement System and three other pension funds, seeking to boost the independence of the Walt Disney Co.'s board, filed a proposal yesterday to give shareholders the right to nominate directors at the second-largest U.S. media company.

CalPERS, the New York State Common Retirement Fund, the American Federation of State, County and Municipal Employees Pension Funds and the Illinois State Board of Investment said they want to name up to two board candidates at the company. They want shareholders to vote on the matter at Disney's annual meeting next year.

The funds own more than 18 million Disney shares and have pressed management and the board to overhaul the company's governance, improve some of its businesses and boost the value of Disney shares.

CalPERS, the largest U.S. public pension fund, has sought the ouster of Disney Chief Executive Officer Michael D. Eisner, who said last month that he will step down in 2006.

"This is just sending a stronger message to the board that there is more work to be done," said C. Warren Neel, director of the Corporate Governance Center at the University of Tennessee. "They are trying to break the back of the norm, which is that board candidates come through the nominating committee."

The Securities and Exchange Commission has proposed a rule that would enable shareholders, under certain circumstances, to nominate directors. The agency's commissioners are split on the initiative, which would enable large shareholders to challenge sitting directors.

The resolution by the funds would be nonbinding. Disney can include it in its proxy ballot or challenge it at the SEC.

"As with all shareholder proposals we receive each year, we will review this proposal and respond accordingly," Disney spokesman John Spelich said in a statement sent by e-mail.

After shareholders withheld 45 percent of their votes from Eisner's re-election as chairman, the board removed him from the position in April. On Sept. 10, Eisner said he would step down as CEO when his contract ends.

"The first step in restoring investor confidence was for Michael Eisner to step down, the second step was to search for a successor as the CEO, but the third step - getting independent directors to serve next year and in the years ahead - is the most important step of them all," CalPERS President Sean Harrigan said in a statement. "We have agreed to co-sponsor this resolution to use in the event the Disney Board doesn't satisfy our concerns about independent directors."

The pension funds also sent a copy of the proposal to the SEC.

"We think that what's good for Disney is good for corporate America," said Bill Atwood, executive director of the Illinois State Board of Investment.

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