DEF 14A 1 ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

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   Definitive Proxy Statement            

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   Soliciting Material Pursuant to §240.14a-12            

 

The Walt Disney Company


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LOGO

January 28, 2011

Dear Fellow Shareholder,

I am pleased to invite you to our 2011 Annual Meeting of shareholders, which will be held on Wednesday, March 23, 2011, at 10 a.m. at the Rose Wagner Performing Arts Center in Salt Lake City, Utah.

At the meeting, we will be electing 13 members of our Board of Directors. We will also be considering ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants, adoption of a new stock incentive plan, an advisory vote on executive compensation, an advisory vote on the frequency of votes on executive compensation and up to one shareholder proposal.

You may vote your shares using the Internet or the telephone by following the instructions on page 77 of the proxy statement. Of course, you may also vote by returning a proxy card or voting instruction form if you received a paper copy of this proxy statement.

If you wish to attend the meeting in person, you will need to request an admission ticket in advance. You can request a ticket by following the instructions set forth on page 78 of the proxy statement. If you cannot attend the meeting, you can still listen to the meeting, which will be webcast and available on our Investor Relations website.

Thank you very much for your continued interest in The Walt Disney Company.

Sincerely,

LOGO

Robert A. Iger

President and Chief Executive Officer


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The Walt Disney Company Notice of 2011 Annual Meeting and Proxy Statement

500 South Buena Vista Street

Burbank, California 91521

January 28, 2011

 

Notice of Meeting

The 2011 Annual Meeting of shareholders of The Walt Disney Company will be held at the Rose Wagner Performing Arts Center, 138 West Broadway, Salt Lake City, Utah on Wednesday, March 23, 2011, beginning at 10:00 a.m. The items of business are:

 

1. Election of the 13 nominees named in the proxy statement as Directors, each for a term of one year.

 

2. Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accountants for fiscal 2011.

 

3. Adoption of the Company’s 2011 Stock Incentive Plan.

 

4. Consideration of an advisory vote on executive compensation.

 

5. Consideration of an advisory vote on the frequency of votes on executive compensation.

 

6. Consideration of one shareholder proposal, if presented at the meeting.

Shareholders of record of Disney common stock (NYSE: DIS) at the close of business on January 24, 2011, are entitled to vote at the meeting and any postponements or adjournments of the meeting. A list of these shareholders is available at the offices of the Company in Burbank, California.

LOGO

Alan N. Braverman

Senior Executive Vice President, General Counsel

and Secretary

Important Notice Regarding the Availability of

Proxy Materials for the Shareholder

Meeting to be Held on March 23, 2011

The proxy statement and annual report to shareholders and the means to vote by Internet are available at www.ProxyVote.com.

Your Vote is Important

Please vote as promptly as possible

by using the Internet or telephone or

by signing, dating and returning the Proxy Card

mailed to those who receive paper copies of this proxy statement

If you plan to attend the meeting, you must request an admission ticket in advance following the instructions set forth on page 78 of this proxy statement. Tickets will be issued to registered and beneficial owners and to one guest accompanying each registered or beneficial owner.

Requests for admission tickets will be processed in the order in which they are received and must be requested no later than March 18, 2011. Please note that seating is limited and requests for tickets will be accepted on a first-come, first-served basis. On the day of the meeting, each shareholder will be required to present a valid picture identification such as a driver’s license or passport with their admission ticket. Seating will begin at 9:00 a.m. and the meeting will begin at 10:00 a.m. Cameras (including cell phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the meeting.


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The Walt Disney Company Notice of 2011 Annual Meeting and Proxy Statement

 

    Table of Contents

 

  1       Introduction
  1       Corporate Governance and Board Matters
  1       Corporate Governance Guidelines and Code of Ethics
  1       Chairman of the Board
  2       Committees
  4       The Board’s Role in Risk Oversight
  4       Director Independence
  5       Director Selection Process
  8       Board Compensation
  12       Certain Relationships and Related Person Transactions
  13       Shareholder Communications
  14       Executive Compensation
  14       Compensation Committee Report
  14       Compensation Discussion and Analysis
  33       Compensation Tables
  54       Audit-Related Matters
  54       Audit Committee Report
  55       Policy for Approval of Audit and Permitted Non-audit Services
  55       Auditor Fees and Services
  56       Items to Be Voted On
  56       Election of Directors
  63       Ratification of Appointment of Independent Registered Public Accountants
  63       Approval of the 2011 Incentive Plan
  73       Advisory Vote on Executive Compensation
  74       Advisory Vote on Frequency of Votes on Executive Compensation
  74       Shareholder Proposal
  77       Other Matters
  77       Information About Voting and the Meeting
  77       Shares Outstanding
  77       Voting
  78       Attendance at the Meeting
  79       Other Information
  79       Stock Ownership
  80       Section 16(a) Beneficial Ownership Reporting Compliance
  80       Electronic Availability of Proxy Statement and Annual Report
  80       Reduce Duplicate Mailings
  81       Proxy Solicitation Costs
   Annex
  A-1       2011 Stock Incentive Plan


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The Walt Disney Company Notice of 2011 Annual Meeting and Proxy Statement

500 South Buena Vista Street

Burbank, California 91521

January 28, 2011

 

Introduction

This proxy statement contains information relating to the annual meeting of shareholders of The Walt Disney Company to be held on Wednesday, March 23, 2011, beginning at 10:00 a.m. local time, at the Rose Wagner Performing Arts Center, 138 West Broadway, Salt Lake City, Utah. On or about January 28, 2011, we began mailing a notice containing instructions on how to access this proxy statement and our annual report online and we began mailing a full set of the proxy materials to shareholders who had previously requested delivery of the materials in paper copy. For information on how to vote your shares, see the instructions included on the proxy card or instruction form and under “Information About Voting and the Meeting” on page 77.

Corporate Governance and Board Matters

There are currently 13 members of the Board of Directors:

 

Susan E. Arnold

John E. Bryson

John S. Chen

Judith L. Estrin

Robert A. Iger

Steven P. Jobs

Fred H. Langhammer

 

Aylwin B. Lewis

Monica C. Lozano

Robert W. Matschullat

John E. Pepper, Jr.

Sheryl K. Sandberg

Orin C. Smith

The Board met eight times during fiscal 2010. Each Director other than Mr. Jobs attended at least 75% of all of the meetings of the Board and Committees on which he or she served. As was the case last year, Mr. Jobs’ ability to attend Board meetings was influenced by health considerations. All but one of our Directors attended the Company’s 2010 annual shareholders meeting. Under the Company’s Corporate Governance Guidelines, each Director is expected to dedicate sufficient time, energy and attention to ensure the diligent performance of his or her duties, including by attending annual and special meetings of the shareholders of the Company, the Board and Committees of which he or she is a member.

Corporate Governance Guidelines and Code of Ethics

The Board of Directors has adopted Corporate Governance Guidelines, which set forth a flexible framework within which the Board, assisted by its Committees, directs the affairs of the Company. The Guidelines address, among other things, the composition and functions of the Board of Directors, director independence, stock ownership by and compensation of Directors, management succession and review, Board Committees and selection of new Directors.

The Company has Standards of Business Conduct, which are applicable to all employees of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer. The Board has a separate Code of Business Conduct and Ethics for Directors, which contains provisions specifically applicable to Directors.

The Corporate Governance Guidelines, the Standards of Business Conduct and the Code of Business Conduct and Ethics for Directors are available on the Company’s Investor Relations website under the “Corporate Governance” heading at www.disney.com/investors and in print to any shareholder who requests them from the Company’s Secretary. If the Company amends or waives the Code of Business Conduct and Ethics for Directors, or the Standards of Business Conduct with respect to the chief executive officer, principal financial officer or principal accounting officer, it will post the amendment or waiver at the same location on its website.

Chairman of the Board

John Pepper became non-executive Chairman of the Board effective January 1, 2007. The Chairman of the Board organizes Board activities to enable the Board to effectively provide guidance to and oversight and accountability of management.


 

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To fulfill that role, the Chairman, among other things: creates and maintains an effective working relationship with the Chief Executive Officer and other members of management and with the other members of the Board; provides the Chief Executive Officer ongoing direction as to Board needs, interests and opinions; and assures that the Board agenda is appropriately directed to the matters of greatest importance to the Company. In carrying out his responsibilities, the Chairman preserves the distinction between management and oversight, maintaining the responsibility of management to develop corporate strategy and the responsibility of the Board to review and express its views on corporate strategy. The functions of the Chairman include:

 

 

Presiding over all meetings of the Board of Directors and shareholders, including regular executive sessions of non-management Directors of the Board;

 

 

Establishing the annual agenda of the Board and agendas of each meeting in consultation with the chief executive officer;

 

 

Advising Committee chairs, in consultation with the chief executive officer, on meeting schedules, agenda and information needs for the Board committees;

 

 

Defining the subject matter, quality, quantity and timeliness of the flow of information between management and the Board and overseeing the distribution of that information;

 

 

Coordinating periodic review of management’s strategic plan for the Company;

 

 

Leading the Board review of the succession plan for the chief executive officer and other key members of senior management;

 

 

Coordinating the annual performance review of the chief executive officer and other key senior managers;

 

 

Consulting with Committee Chairs about the retention of advisors and experts;

 

 

Acting as the principal liaison between the independent directors and the chief executive officer on sensitive issues;

 

 

Working with the Governance and Nominating Committee to develop and maintain the agreed-on definitions of the role of the Board and the organization, processes and governance guidelines necessary to carry it out;

 

 

After consulting with other Board members and the chief executive officer, making recommendations to the Governance and Nominating Committee as to the membership of various Board Committees and Committee Chairs;

 

 

Working with management on effective communication with shareholders, including being available for consultation and direct communication upon the reasonable request of major shareholders;

 

 

Encouraging active participation by each member of the Board; and

 

 

Performing such other duties and services as the Board may require.

The Company’s Corporate Governance Guidelines specify that the Chairman of the Board will be an independent Director. The Board believes that this structure is appropriate in light of the current mix of Board members and the functioning of the Board at this time. If the Board determines that a different structure would better serve the best interests of the shareholders, the Board will disclose in the Company’s proxy statement the reasons for a different arrangement and appoint an independent director as lead director with duties and responsibilities detailed in the Corporate Governance Guidelines.

Committees

The Board of Directors has four standing committees: Audit, Governance and Nominating, Compensation and Executive. Information regarding these committees is provided below. The charters of the Audit, Governance and Nominating and Compensation Committees are available on the Company’s Investor Relations website under the “Corporate Governance” heading at www.disney.com/investors and in print to any shareholder who requests them from the Company’s Secretary.


 

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The members of the Audit Committee are:

Monica C. Lozano

Robert W. Matschullat

John E. Pepper, Jr.

Orin C. Smith (Chair)

The functions of the Audit Committee are described below under the heading “Audit Committee Report.” The Audit Committee met nine times during fiscal 2010. All of the members of the Audit Committee are independent within the meaning of SEC regulations, the listing standards of the New York Stock Exchange and the Company’s Corporate Governance Guidelines. The Board has determined that Mr. Smith, the chair of the Committee, and Mr. Matschullat and Mr. Pepper are qualified as audit committee financial experts within the meaning of SEC regulations, and that they have accounting and related financial management expertise within the meaning of the listing standards of the New York Stock Exchange, and that Ms. Lozano is financially literate within the meaning of the listing standards of the New York Stock Exchange.

The members of the Governance and Nominating Committee are:

Judith L. Estrin

Aylwin B. Lewis (Chair)

Robert W. Matschullat

John E. Pepper, Jr.

Sheryl K. Sandberg

The Governance and Nominating Committee is responsible for developing and implementing policies and practices relating to corporate governance, including reviewing and monitoring implementation of the Company’s Corporate Governance Guidelines. In addition, the Committee assists the Board in developing criteria for open Board positions, reviews background information on potential candidates and makes recommendations to the Board regarding such candidates. The Committee also reviews and approves transactions between the Company and Directors, officers, 5% stockholders and their affiliates under the Company’s Related Person Transaction Approval Policy, supervises the Board’s annual

review of Director independence and the Board’s annual self-evaluation, makes recommendations to the Board with respect to compensation of non-executive members of the Board of Directors (starting in fiscal 2011), makes recommendations to the Board with respect to Committee assignments and oversees the Board’s director education practices. The Committee met five times during fiscal 2010. All of the members of the Governance and Nominating Committee are independent within the meaning of the listing standards of the New York Stock Exchange and the Company’s Corporate Governance Guidelines.

The members of the Compensation Committee are:

Susan E. Arnold

John S. Chen

Fred H. Langhammer (Chair)

Aylwin B. Lewis

John E. Pepper, Jr.

The Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to the compensation of the Company’s chief executive officer, evaluating the performance of the chief executive officer and, either as a committee or together with the other independent members of the Board, determining and approving the compensation level for the chief executive officer. The Committee is also responsible for making recommendations to the Board regarding the compensation of other executive officers and certain compensation plans, and the Board has also delegated to the Committee the responsibility for approving these arrangements. Additional information on the roles and responsibilities of the Compensation Committee is provided under the heading “Compensation Discussion and Analysis,” below. In fiscal 2010, the Compensation Committee met ten times and acted once by unanimous written consent. All of the members of the Committee are independent within the meaning of the listing standards of the New York Stock Exchange and the Company’s Corporate Governance Guidelines.


 

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The members of the Executive Committee are:

Robert A. Iger

John E. Pepper, Jr. (Chair)

The Executive Committee serves primarily as a means for taking action requiring Board approval between regularly scheduled meetings of the Board. The Executive Committee is authorized to act for the full Board on matters other than those specifically reserved by Delaware law to the Board. In practice, the Committee’s actions are generally limited to matters such as the authorization of transactions including corporate credit facilities and borrowings. In fiscal 2010, the Executive Committee held no meetings.

The Board’s Role in Risk Oversight

As noted in the Company’s Corporate Governance Guidelines the Board, acting directly or through Committees, is responsible for “assessing major risk factors relating to the Company and its performance” and “reviewing measures to address and mitigate such risks.” In discharging this responsibility, the Board, either directly or through its committees, assesses both the risks that inhere in the key economic and market assumptions that underpin the Company’s business plans and growth strategies and significant operational risks related to the conduct of the Company’s day-to-day operations.

Risks that relate to the market and economic assumptions that underpin each business unit’s growth plans are specifically addressed in connection with the Board’s annual review of the Company’s five-year plan. The Board also has the opportunity to address such risks at each Board meeting in connection with its regular review of significant business and financial developments. The Board reviews risks arising out of specific significant transactions when these transactions are presented to the Board for review or approval.

Significant operational risks that relate to on-going business operations are the

subject of regularly scheduled reports to either the full Board or one of its Committees. The Board has established a process to determine on an annual basis whether these reports appropriately cover the significant risks that the Company may then be facing.

Each of the Board’s committee’s addresses risks that fall within the committee’s areas of responsibility. For example, the Audit Committee reviews annually the audit plan of management audit, the international labor standards compliance program, the Company’s information technology risks and mitigation strategies, the tax function, treasury operations (including insurance) and the ethical standards program. In addition, the Audit Committee receives regular reports from: corporate controllership and the outside auditor on financial reporting matters; management audit about significant findings; and the general counsel regarding legal and regulatory risks. The Audit Committee reserves time at each meeting for private sessions with the chief financial officer, general counsel, head of management audit and outside auditors. The Compensation Committee addresses risks arising out of the Company’s executive compensation programs as described at page 23, below.

The Chairman of the Board promotes effective communication and consideration of matters presenting significant risks to the Company through his role in setting the Board’s agenda, advising committee chairs and communicating between independent directors and the chief executive officer, though the Board believes that in appropriate circumstances an independent lead director could also fulfill this role.

Director Independence

The provisions of the Company’s Corporate Governance Guidelines regarding Director independence meet and in some areas exceed the listing standards of the New York Stock Exchange. These provisions are included in the Company’s Corporate Governance Guidelines, which are available on the Company’s Investor


 

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Relations website under the “Corporate Governance” heading at www.disney.com/investors.

Pursuant to the Guidelines, the Board undertook its annual review of Director independence in December 2010. During this review, the Board considered transactions and relationships between each Director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. The Board also considered whether there were any transactions or relationships between Directors or any member of their immediate family (or any entity of which a Director or an immediate family member is an executive officer, general partner or significant equity holder) and members of the Company’s senior management or their affiliates. As provided in the Guidelines, the purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the Director is independent.

As a result of this review, the Board affirmatively determined that all of the Directors nominated for election at the annual meeting are independent of the Company and its management under the standards set forth in the Corporate Governance Guidelines, with the exception of Robert Iger, John Bryson and Steven Jobs. Mr. Iger is considered an inside Director because of his employment as a senior executive of the Company. The Board determined that Mr. Bryson is not an independent Director as a result of past relationships between the Company, Lifetime Entertainment Television and Mr. Bryson’s wife. Until the end of fiscal year 2009, Lifetime was a joint venture that was 50% owned by the Company. Late in fiscal year 2009, Lifetime was merged into A&E Television Networks, a joint venture that is 42% owned by the Company. Ms. Bryson was an executive officer of Lifetime until 2008 and a consultant to Lifetime through April 2009. In addition, Lifetime acquired programming from and sold advertising time to Company subsidiaries while Ms. Bryson was affiliated with Lifetime in an aggregate amount that exceeded 2% of Lifetime’s total revenues during the applicable fiscal years.

Although the relationship between the Company, Lifetime and Ms. Bryson may not mandate disqualification from independence under the Company’s Guidelines, the Board determined that the relationship was sufficient to deem Mr. Bryson non-independent at this time. Mr. Jobs is considered a non-independent outside director because, during fiscal 2006, the Company acquired Pixar, of which Mr. Jobs was chairman and chief executive officer and the beneficial owner of 50.6% of the issued and outstanding equity.

In determining the independence of each Director, the Board considered the following relationships, which it determined were immaterial to the Directors’ independence. The Board considered that the Company and its subsidiaries in the ordinary course of business have, during the last three years, sold products and services to and/or purchased products and services from companies at which some of our Directors or their immediate family members were officers or employees during fiscal 2010. In each case, the amount paid to or received from these companies in each of the last three years did not approach the 2% of total revenue threshold in the Guidelines. The Board also considered employment relationships with immediate family members of Directors that involved compensation of less than the threshold of $120,000 in the Company’s Guidelines. The Board determined that none of the relationships it considered impaired the independence of the Directors.

Director Selection Process

Working closely with the full Board, the Governance and Nominating Committee develops criteria for open Board positions, taking into account such factors as it deems appropriate, which may include: the current composition of the Board; the range of talents, experiences and skills that would best complement those already represented on the Board; the balance of management and independent Directors; and the need for financial or other specialized expertise. Applying these criteria, the Committee considers candidates for Board membership suggested by its members and other Board members, as


 

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well as management and shareholders. The Committee retains a third-party executive search firm to identify and review candidates upon request of the Committee from time to time.

Once the Committee has identified a prospective nominee—including prospective nominees recommended by shareholders—it makes an initial determination as to whether to conduct a full evaluation. In making this determination, the Committee takes into account the information provided to the Committee with the recommendation of the candidate, as well as the Committee’s own knowledge and information obtained through inquiries to third parties to the extent the Committee deems appropriate. The preliminary determination is based primarily on the need for additional Board members and the likelihood that the prospective nominee can satisfy the criteria that the Committee has established. If the Committee determines, in consultation with the Chairman of the Board and other Directors as appropriate, that additional consideration is warranted, it may request the third-party search firm to gather additional information about the prospective nominee’s background and experience and to report its findings to the Committee. The Committee then evaluates the prospective nominee against the specific criteria that it has established for the position, as well as the standards and qualifications set out in the Company’s Corporate Governance Guidelines, including:

 

 

the ability of the prospective nominee to represent the interests of the shareholders of the Company;

 

 

the prospective nominee’s standards of integrity, commitment and independence of thought and judgment;

 

 

the prospective nominee’s ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties, including the prospective nominee’s service on other public company boards, as specifically set out in the Company’s Corporate Governance Guidelines;

 

 

the extent to which the prospective nominee contributes to the range of

   

talent, skill and expertise appropriate for the Board;

 

 

the extent to which the prospective nominee helps the Board reflect the diversity of the Company’s shareholders, employees, customers and guests and the communities in which it operates; and

 

 

the willingness of the prospective nominee to meet the minimum equity interest holding guideline set out in the Company’s Corporate Governance Guidelines.

If the Committee decides, on the basis of its preliminary review, to proceed with further consideration, members of the Committee, as well as other members of the Board as appropriate, interview the nominee. After completing this evaluation and interview, the Committee makes a recommendation to the full Board, which makes the final determination whether to nominate or appoint the new Director after considering the Committee’s report.

In selecting nominees for Director, the Board seeks to achieve a mix of members who together bring experience and personal backgrounds relevant to the Company’s strategic priorities and the scope and complexity of the Company’s business. In light of the Company’s current priorities, the Board seeks experience relevant to managing the creation of high-quality branded entertainment products and services, addressing the impact of rapidly changing technology and expanding business outside of the United States. The Board also seeks experience in large, diversified enterprises and demonstrated ability to manage complex issues that involve a balance of risk and reward and seeks directors who have expertise in specific areas such as consumer and cultural trends, business innovation, growth strategies and financial oversight. The background information on current nominees beginning on page 57 sets out how each of the current nominees contributes to the mix of experience and qualifications the Board seeks.

In making its recommendations with respect to the nomination for re-election of existing Directors at the annual shareholders meeting, the Committee assesses


 

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the composition of the Board at the time and considers the extent to which the Board continues to reflect the criteria set forth above.

A shareholder who wishes to recommend a prospective nominee for the Board should notify the Company’s Secretary or any member of the Governance and Nominating Committee in writing with

whatever supporting material the shareholder considers appropriate. The Governance and Nominating Committee will also consider whether to nominate any person nominated by a shareholder pursuant to the provisions of the Company’s Bylaws relating to shareholder nominations as described in “Shareholder Communications” below.


 

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The Walt Disney Company Notice of 2011 Annual Meeting and Proxy Statement

 

Board Compensation

Under the Company’s Corporate Governance Guidelines, non-employee Director compensation is determined annually by the Board of Directors acting upon the recommendation of the Compensation Committee. Directors who are also employees of the Company receive no additional compensation for service as a Director. During Fiscal 2010, annual compensation for non-employee Directors was as follows:

 

Annual Board retainer    $ 80,000   

Annual committee retainer1

   $ 10,000   

Annual committee chair retainer2

   $ 15,000   

Annual deferred stock unit grant

   $ 84,000   

Annual retainer for Board Chairman3

   $ 500,000   

Annual stock option grant4

   $ 56,000   

 

1

Per committee. 

2

This is in addition to the annual committee retainer the Director receives for serving on the committee.

3

In lieu of all other Director compensation except the annual stock option grant. Paid in shares of Company common stock.

4

Grant was made on March 1 for a number of options with a fair value on the date of grant equal to the amount shown.

Effective October 1, 2010, the Board eliminated the annual stock option grant, increased the annual deferred stock unit

grant by $56,000 and provided for a $56,000 annual deferred stock grant to the Board Chairman.

At Mr. Jobs’ request, the Board has excluded Mr. Jobs from receiving compensation as a Director.

The Company does not provide retirement benefits to any non-employee Directors who served during fiscal 2010.

Unless the Board exempts a Director, each Director is required to retain at all times stock representing no less than 50% of the after-tax value of exercised options and shares received upon distribution of deferred stock units until he or she leaves the Board. Effective October 1, 2010, the Company’s Corporate Governance Guidelines also encourage Directors to own, or acquire within three years of first becoming a Director, shares of common stock of the Company (including stock units received as Director compensation) having a market value of at least three times the amount of the annual Board retainer for the Director.

The following table identifies the compensation earned during fiscal 2010 by each person who is currently a non-employee Director. Information regarding the amounts in each column follows the table.


 

DIRECTOR COMPENSATION FOR FISCAL 2010  
     

Fees

Earned

or Paid

in

Cash

     Stock
Awards
     Option
Awards
     All Other
Compensation
     Total  
Susan E. Arnold    $ 90,000       $ 82,949       $ 56,006       $ 7,476       $ 236,431   
John E. Bryson      80,000         82,949         56,006         311         219,266   
John S. Chen      90,000         82,949         56,006         816         229,771   
Judith L. Estrin      90,000         82,949         56,006         7,461         236,416   
Steven P. Jobs                                        
Fred H. Langhammer      105,000         82,949         56,006         5,829         249,784   
Aylwin B. Lewis      115,000         82,949         56,006         54         254,009   
Monica C. Lozano      90,000         82,949         56,006         17,956         246,911   
Robert W. Matschullat      100,000         82,949         56,006         11,270         250,225   
John E. Pepper, Jr. (Chairman)              493,747         56,006         11,853         561,606   
Sheryl K. Sandberg      50,250         45,449                         95,699   
Orin C. Smith      105,000         82,949         56,006         74         244,029   

 

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Fees Earned or Paid in Cash.    The annual Board retainer and annual committee and committee-chair retainers are payable in cash at the end of each quarter. The Company’s Amended and Restated 1997 Non-Employee Directors Stock and Deferred Compensation Plan allows non-employee Directors to elect each year to receive all or part of their retainers in Disney stock or to defer all or part of this compensation until after their service as a Director ends. Directors who elect to receive stock instead of cash but who do not defer their compensation are credited each quarter with a dollar amount equal to fees earned that quarter and receive shares after the end of each calendar year based on the average of the fair market value of shares of the Company’s common stock at the end of each quarter. Directors who elect to defer their compensation may also elect to receive cash or stock. Directors who elect to receive deferred compensation in cash receive a credit each quarter, and the balance in their deferred cash account earns interest at an annual rate equal to the Moody’s Average Corporate (Industrial) Bond Yield, adjusted quarterly. For fiscal 2010, the average interest rate was 5.62%. Interest earned on deferred amounts is included in the “All Other Compensation” column. Directors who elect to receive deferred compensation in stock receive stock units each

quarter and shares of stock are distributed with respect to these units after their service as a Director ends.

This column sets forth amounts payable in cash on a current basis, whether paid currently or deferred by the Director to be paid in cash or shares after their service ends. None of the Directors elected to receive stock on a current basis for fiscal 2010. This column does not include fees paid for service as Chairman of the Board, as those fees are required to be paid in the form of shares of stock distributed to the Chairman after the end of the calendar year in which they were earned and are therefore included in the “Stock Awards” column.

The following table identifies for each Director the dollar amount included in the “Fees Earned or Paid in Cash” column received in cash, the dollar amount deferred to be paid in cash, and the number and dollar value of stock units received as deferred compensation. The number of units awarded is equal to the dollar amount of fees accruing each quarter divided by the average over the last ten trading days of the quarter of the average of the high and low trading price for shares of Company common stock on each day in the ten-day period.


 

FORM OF RECEIPT OF DIRECTOR FEES FOR FISCAL 2010  
            Deferred Fees  
    

Fees

Paid
Currently

in Cash

    

To be

Paid in
Cash

     To be Paid in
Stock
 
            Number
of Units
     Value of
Units
 
Susan E. Arnold            $ 45,000         1,341       $ 45,000   
John E. Bryson                      2,385         80,000   
John S. Chen    $ 45,000                 1,341         45,000   
Judith L. Estrin      90,000                           
Steven P. Jobs                                
Fred H. Langhammer      78,750                 815         26,250   
Aylwin B. Lewis      57,500                 1,714         57,500   
Monica C. Lozano      45,000                 1,341         45,000   
Robert W. Matschullat                      2,981         100,000   
John E. Pepper, Jr.                                
Sheryl K. Sandberg      25,125                 742         25,125   
Orin C. Smith      105,000                           

 

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Stock Awards.    This column sets forth the grant date fair market value of awards for service in fiscal 2010 with respect to:

 

 

the annual deferred stock unit grant; and

 

 

for the Chairman of the Board, shares awarded with respect to the annual retainer.

The grant date fair market value is equal to the market value of the Company’s common stock on the date of the award times the number of shares underlying the units.

The number of shares awarded to each Director was calculated by dividing the amount payable with respect to a quarter by the average over the last ten trading days of the quarter of the average of the high and low trading price on each day. The following table identifies the number of stock units awarded to each Director during fiscal 2010.

 

DIRECTOR STOCK UNIT AWARDS FOR FISCAL 2010  
      Stock
Units
Awarded
 
Susan E. Arnold      2,504   
John E. Bryson      2,504   
John S. Chen      2,504   
Judith L. Estrin      2,504   
Steven P. Jobs        
Fred H. Langhammer      2,504   
Aylwin B. Lewis      2,504   
Monica C. Lozano      2,504   
Robert W. Matschullat      2,504   
John E. Pepper, Jr.      14,904   
Sheryl K. Sandberg      1,386   
Orin C. Smith      2,504   

One fourth of the annual deferred stock unit grant and annual retainer is awarded at the end of each quarter. Shares with respect to annual deferred stock unit grants are distributed to the Director on the second anniversary of the award date, whether or not the Director is still a Director on the date of distribution. Shares with respect to the annual retainer for the Chairman of the Board are distributed after the end of the calendar year in which they are earned.

At the end of any quarter in which dividends are distributed to shareholders, Directors receive additional stock units with a value (based on the average of the high and low trading prices of Disney stock averaged over the last ten trading days of the quarter) equal to the amount of dividends they would have received on all stock units held by them at the end of the prior quarter. Shares with respect to these additional units are distributed when the underlying units are distributed. Units awarded in respect of dividends are included in the fair value of the stock units when the units are initially awarded and therefore are not included in the tables above, but they are included in the total units held at the end of the fiscal year in the following table.

The following table sets forth all stock units held by each Director as of the end of fiscal 2010. All stock units are fully vested when granted, but shares are distributed with respect to the units only later, as described above. Stock units in this table are included in the share ownership table on page 79 except to the extent they may have been distributed as shares and sold prior to January 24, 2011.

 

DIRECTOR STOCK UNIT HOLDINGS AT
THE END OF FISCAL 2010
 
      Stock
Units
 

Susan E. Arnold

     12,190   

John E. Bryson

     35,242   

John S. Chen

     16,319   

Judith L. Estrin

     6,305   

Steven P. Jobs

       

Fred H. Langhammer

     19,918   

Aylwin B. Lewis

     17,708   

Monica C. Lozano

     26,903   

Robert W. Matschullat

     33,370   

John E. Pepper, Jr.

     38,922   

Sheryl K. Sandberg

     2,128   

Orin C. Smith

     6,305   

Option Awards.    This column sets forth the grant date fair value with respect to options awarded to Directors in fiscal 2010. The fair value of the options on the date of their award is calculated using the


 

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binomial model. The assumptions used in estimating the fair value of options are set forth in footnote 13 to the Company’s Audited Financial Statements for fiscal year 2010.

Each Director identified in the table above received an option for 6,143 shares on March 1, 2010, except for Mr. Jobs, who does not receive director compensation, and Ms. Sandberg, who was not a Director on March 1, 2010. The exercise price of the options granted in fiscal 2010 is $31.47 (the average of the high and low prices reported on the New York Stock Exchange on the date of grant; the closing price on that date was $31.54). The options vest in equal installments over four years and have a ten-year term. If a Director ends his or her service by reason of mandatory retirement pursuant to the Board’s retirement or tenure policy or permanent disability, the options continue to vest in accordance with their original schedule. If service ends by reason of death, the options vest immediately. In any of the foregoing cases, the options remain exercisable for five years following termination or until the original expiration date of the option, whichever is sooner. In all other cases, options cease to vest upon termination and all vested options must be exercised within three months of termination.

The following table sets forth the aggregate number of stock options outstanding for each Director at the end of fiscal 2010.

 

DIRECTOR OPTION HOLDINGS AT

THE END OF FISCAL 2010

 
      Number of
Shares
Underlying
Options
Held
 
Susan E. Arnold      22,503   
John E. Bryson      64,503   
John S. Chen      46,503   
Judith L. Estrin      64,503   
Steven P. Jobs        
Fred H. Langhammer      40,503   
Aylwin B. Lewis      46,503   
Monica C. Lozano      64,503   
Robert W. Matschullat      52,503   
John E. Pepper, Jr.      34,503   
Sheryl K. Sandberg        
Orin C. Smith      34,503   

All Other Compensation.    To encourage Directors to experience the Company’s products, services and entertainment offerings personally, the Board has adopted a policy, that, subject to availability, entitles each non-employee Director (and his or her spouse, children and grandchildren) to use Company products, attend Company entertainment offerings and visit Company properties (including staying at resorts, visiting theme parks and participating in cruises) at the Company’s expense, up to a maximum of $15,000 in fair market value per calendar year plus reimbursement of associated tax liabilities. In addition, the Company reimburses Directors for the travel expenses of or provides transportation on Company aircraft for immediate family members of Directors if the family members are specifically invited to attend events for appropriate business purposes and allows family members (including domestic partners) to accompany Directors traveling on company aircraft for business purposes on a space-available basis. The value of these benefits is not included in the table as permitted by SEC rules because the aggregate incremental


 

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cost to the Company of providing the benefits did not exceed $10,000 for any Director. The reimbursement of associated tax liabilities is included in the table above, which was less than $10,000 for each Director other than Mr. Matschullat and Mr. Pepper, for whom the reimbursement was $11,270 and $11,853, respectively. The column also includes interest earned on deferred cash compensation, which was less than $10,000 for each Director except for Ms. Lozano, for whom interest earned totaled $17,491.

Certain Relationships and Related Person Transactions

The Board of Directors has adopted a written policy for review of transactions involving more than $120,000 in any fiscal year in which the Company is a participant and in which any Director, executive officer, holder of more than 5% of our outstanding shares or any immediate family member of any of these persons has a direct or indirect material interest. Directors, 5% shareholders and executive officers are required to inform the Company of any such transaction promptly after they become aware of it, and the Company collects information from Directors and executive officers about their affiliations and affiliations of their family members so the Company can search its records for any such transactions. Transactions are presented to the Governance and Nominating Committee of the Board (or to the Chairman of the Committee if the Committee delegates this responsibility) for approval before they are entered into or, if this is not possible, for ratification after the transaction has been entered into. The Committee approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company, including whether the transaction impairs independence of a Director. The policy does not require review of the following transactions:

 

 

Employment of executive officers approved by the Compensation Committee;

 

 

Compensation of Directors approved by the Board;

 

Transactions in which all shareholders receive benefits proportional to their shareholdings;

 

 

Ordinary banking transactions identified in the policy;

 

 

Any transaction contemplated by the Company’s Certificate of Incorporation, Bylaws or Board action where the interest of the Director, executive officer, 5% shareholder or family member is disclosed to the Board prior to such action;

 

 

Commercial transactions in the ordinary course of business with entities affiliated with Directors, executive officers, 5% shareholders or their family members if the aggregate amount involved during a fiscal year is less than the greater of (a) $1,000,000 and (b) 2% of the Company’s or other entity’s gross revenues and the related person’s interest in the transaction is based solely on his or her position with the entity;

 

 

Charitable contributions to entities where a Director is an executive officer of the entity if the amount is less than the lesser of $200,000 and 2% of the entity’s annual contributions; and

 

 

Transactions with entities where the Director, executive officer, 5% shareholder or immediate family member’s sole interest is as a non-executive officer employee of, volunteer with, or director or trustee of the entity.

During fiscal year 2010, Fidelity Management Trust Company (FMTC) served as trustee of the Company’s 401(k) plan and the Company paid FMTC approximately $294,315 in fees for this and ancillary services. Additionally, entities affiliated with FMTC benefit from fees incurred by plan participants on balances invested in mutual funds through the plan. FMTC and its affiliated entities are subsidiaries of FMR LLC, which was the beneficial owner of more than 5% of the Company’s outstanding shares during fiscal year 2010. This relationship has been in place since before FMR LLC was the beneficial owner of more than 5% of the Company’s outstanding shares, and the ongoing relationship was reviewed and approved


 

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by the Governance and Nominating Committee under the Related Person Transaction Approval Policy in December 2010.

Shareholder Communications

Generally.    Shareholders may communicate with the Company through its Shareholder Services Department by writing to 500 South Buena Vista Street, MC 9722, Burbank, California 91521, by calling Shareholder Services at (818) 553-7200, or by sending an e-mail to investor.relations@disneyonline.com. Additional information about contacting the Company is available on the Company’s investor relations website (www.disney.com/investors) under “My Shareholder Account.”

Shareholders and other persons interested in communicating directly with the Chairman of the Board or with the non- management Directors as a group may do so by writing to the Chairman of the Board, The Walt Disney Company, 500 South Buena Vista Street, Burbank, California 91521-1030. Under a process approved by the Governance and Nominating Committee of the Board for handling letters received by the Company and addressed to non-management members of the Board, the office of the Secretary of the Company reviews all such correspondence and forwards to Board members a summary and/or copies of any such correspondence that, in the opinion of the Secretary, deals with the functions of the Board or Committees thereof or that he otherwise determines requires their attention. Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board and request copies of any such correspondence. Concerns relat-

ing to accounting, internal controls or auditing matters are immediately brought to the attention of the Company’s internal audit department and handled in accordance with procedures established by the Audit Committee with respect to such matters.

Shareholder Proposals for Inclusion in 2012 Proxy Statement.    To be eligible for inclusion in the proxy statement for our 2012 annual meeting, shareholder proposals must be received by the Company’s Secretary no later than the close of business on September 30, 2011. Proposals should be sent to the Secretary, The Walt Disney Company, 500 South Buena Vista Street, Burbank, California 91521-1030 and follow the procedures required by SEC Rule 14a-8.

Shareholder Director Nominations and Other Shareholder Proposals for Presentation at the 2012 Annual Meeting.    Under our bylaws, written notice of shareholder nominations to the Board of Directors and any other business proposed by a shareholder that is not to be included in the proxy statement must be delivered to the Company’s Secretary not less than 90 nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. Accordingly, any shareholder who wishes to have a nomination or other business considered at the 2012 annual meeting must deliver a written notice (containing the information specified in our bylaws regarding the shareholder and the proposed action) to the Company’s Secretary between November 23, 2011 and December 23, 2011. SEC rules permit management to vote proxies in its discretion with respect to such matters if we advise shareholders how management intends to vote.


 

 

 

 

 

 

 

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The Walt Disney Company Notice of 2011 Annual Meeting and Proxy Statement

 

Executive Compensation

Compensation Committee Report

The Compensation Committee has:

 

  (1) reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management; and

 

  (2) based on the review and discussion referred to in paragraph (1) above, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement relating to the 2011 annual meeting of shareholders.

Members of the Compensation Committee

Susan E. Arnold

John S. Chen

Fred H. Langhammer (Chair)

Aylwin B. Lewis

John E. Pepper, Jr.

Compensation Discussion and Analysis

Overview

Disney’s executive compensation program is designed to align the interests of senior management with shareholders by tying a significant portion of their compensation to the Company’s performance as measured by a variety of factors during the fiscal year in question, including financial returns, stock price performance and efforts to position the Company for long-term success.

Under the program, the portion of compensation guaranteed to the Company’s named executives at the beginning of any

fiscal year represents only a fraction of the total potential compensation. In the case of Mr. Iger, only about 10% of the value of his target annual compensation this fiscal year (excluding benefits and perquisites) was assured at the beginning of the year in the form of his base salary. The value of the remaining 90% of Mr. Iger’s target annual compensation, including performance-based bonus, stock awards and options, is linked directly to the Company’s performance. Although the percentages differ modestly for the other named executive officers and benefits and perquisites received during the year can increase the percentage of fixed compensation somewhat, more than 80% of all annual compensation awarded to the other two named executive officers who have held their same position throughout recent years was tied to the Company’s performance.

In making decisions on performance-based compensation in fiscal 2010, the Compensation Committee considered the Company’s financial performance in the face of ongoing challenges of a recovering US and global economy and the importance of the Company continuing to invest in opportunities for future growth. In the face of these conditions, the Committee viewed the Company’s 14% growth in earnings per share, excluding the impact of items that affected comparability between the years,1 and a 5% growth in revenues as exceptional performance for the year. This performance for the year was reflected in the Company’s total shareholder return, which increased 23.9%, compared to the total shareholder return for the S&P 500, which increased 14.1%.

Taking into account these circumstances, and driven primarily by the application of the financial performance measures described on page 29 in determining performance-based bonuses, total annual cash compensation increased for the


 

 

1

Earnings per share for the current year included restructuring and impairment charges, gains on the sales of investments in two television services in Europe, a gain on the sale of the Power Rangers property, and an accounting gain related to the acquisition of The Disney Store Japan, which collectively had a net adverse impact of $0.04. Earnings per share for the prior year included restructuring and impairment charges, a non-cash gain in connection with the merger of Lifetime Entertainment Services (Lifetime) and A&E Television Networks (A&E) and a gain on the sale of investments in two pay television services in Latin America, which collectively had a net adverse impact of $0.06.

 

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named executive officers this year compared to last year. We provide information on all six named executive officers in the Summary Compensation Table on page 33, but for comparability purposes, in discussing aggregate compensation for the previous three years, we only consider the information provided below for the three officers who held their current positions for all three years. For these three officers, total annual cash compensation (as set forth in the table below) was in the aggregate, 35.2% higher than in fiscal 2009, primarily due to an increase in performance-based bonuses. The grant date fair value of equity awards to these three officers increased by an aggregate

of 18%, driven primarily by the Committee’s determination to reward Mr. Iger for excellent management of the Company in a difficult economic environment and to reward Mr. Mayer for the critical role he played in completion of the acquisition of Marvel. In addition, Mr. Braverman received a special equity award pursuant to his employment agreement as a result of his assuming responsibility over governmental affairs at the beginning of the calendar year.

Overall, total annual compensation for these three named executive officers, including the grant date fair value of equity awards, increased by 27.7% in fiscal 2010.


 

The following table sets forth the compensation received for the last three fiscal years by the three named executive officers who held their current positions in each of fiscal 2008, 2009 and 2010. It provides, for each of these years: (a) cash compensation comprised of salary, benefits and perquisites and the annual performance-based bonus; (b) the grant-date fair value of regular annual equity awards during the fiscal year; (c) total annual compensation comprised of fixed compensation, performance-based bonus and the grant-date fair value of regular annual equity awards; and (d) grant-date fair value of any special equity awards received during the fiscal year. The amounts in the table differ from those in the Summary Compensation Table on page 33 in that this table does not include named executive officers who did not hold the same position throughout fiscal 2010 that they held in prior years and in that it does not include the change in pension value included in the Summary Compensation Table. This table is not a substitute for the Summary Compensation Table and is intended to provide additional information that the Company believes is useful in analyzing compensation decisions made with respect to the three fiscal years covered.

 

Annual Compensation and Other Equity Awards  
    

Year

    Annual Compensation        
    Cash Compensation           

Annual

Equity

Awards

   

Total

Annual
Compensation

   

Special

Equity

Awards

 
    Fixed
Compensation
   

Performance-
Based

Bonus

    Total            Percent
Change
        
Robert A. Iger     2010      $ 2,798,433      $ 13,460,000      $ 16,258,433       

 

 

>

 

>

  

 

  

   

 

 

 

35.0%

 

-28.0%

 

  

 

  

 

   $ 11,759,051      $ 28,017,484          
    2009        2,780,063        9,260,000        12,040,063             9,538,408        21,578,471          
    2008        2,773,090        13,945,493        16,718,583             9,335,949        26,054,532      $ 25,018,048   
Alan N. Braverman     2010      $ 1,190,049      $ 3,030,000      $ 4,220,049       

 

 

>

 

>

  

 

  

   

 

 

 

32.3%

 

-22.2%

 

  

 

  

 

   $ 2,351,856      $ 6,571,905      $ 1,556,000   
    2009        1,154,919        2,035,000        3,189,919             2,331,653        5,521,572        3,035,500   
    2008        1,100,534        3,000,000        4,100,534             1,867,193        5,967,727          
Kevin A. Mayer     2010      $ 736,987      $ 1,590,000      $ 2,326,987       

 

 

>

 

>

  

 

  

   

 

 

 

42.5%

 

-3.4%

 

  

 

  

 

   $ 1,817,356      $ 4,144,343          
    2009        733,158        900,000        1,633,158             1,600,370        3,233,528          
    2008        665,398        1,025,000        1,690,398             980,278        2,670,676          
Total for three officers     2010      $ 4,725,469      $ 18,080,000      $ 22,805,469       

 

 

>

 

>

  

 

  

   

 

 

 

35.2%

 

-25.1%

 

  

 

  

 

   $ 15,928,263      $ 38,733,732      $ 1,556,000   
    2009        4,668,140        12,195,000        16,863,140             13,470,431        30,333,571        3,035,500   
      2008        4,539,022        17,970,493        22,509,515             12,183,420        34,692,935        25,018,048   

 

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Compensation Objectives and Program Design

The Company’s executive compensation program seeks to promote the creation of long-term shareholder value by:

 

 

tying a substantial portion of executives’ total compensation to financial performance measures that align with long-term shareholder value and leadership actions that are expected to position the Company for long-term success; and

 

 

attracting and retaining high-caliber executives in a competitive market for talent.

We use five different types of compensation in pursuing these objectives:

 

 

a base salary;

 

 

a variable, annual, performance-based bonus;

 

 

periodic grants of long-term, equity-based compensation such as stock options, restricted stock units and performance-based restricted stock units;

 

 

retirement plans and agreements and arrangements regarding compensation upon termination of employment; and

 

 

benefits and perquisites.

This section discusses how we have designed our compensation program to address these objectives.

 

 

“Roles and Responsibilities” addresses the process used to make compensation decisions for executive officers.

 

 

“Compensation Mix” addresses how we balance fixed and performance-based compensation to achieve our objectives.

 

 

“Performance-Based Compensation” addresses the specific design elements of the Company’s performance-based bonus and equity compensation programs that are designed to align compensation with the creation of long-term shareholder value.

 

 

“Fixed Compensation” addresses base salary, benefits and perquisites and retirement plans.

 

“Competitive Considerations” addresses how we evaluate the competitive market for talent and use that evaluation in designing compensation packages.

 

 

“Other considerations” addresses the use of employment agreements and tax deductibility of executive compensation.

Specific compensation decisions relating to fiscal 2010 are discussed in the section titled “Fiscal 2010 Decisions.”

Roles and Responsibilities

The Compensation Committee determines the compensation, including related terms of employment agreements for those who have them, for each of the named executive officers.

The Committee also conducts reviews of the Company’s general executive compensation policies and strategies and oversees and evaluates the Company’s overall compensation structure and programs. The Committee’s responsibilities include:

 

 

reviewing and approving corporate goals and objectives relevant to compensation of the chief executive officer and other executive officers, and evaluating performance in light of those goals and objectives;

 

 

determining compensation for executive officers and other senior officers;

 

 

evaluating and approving all grants of equity-based compensation to executive officers and other senior officers;

 

 

recommending to the Board compensation policies for non-employee directors (through fiscal 2010; this responsibility was transferred to the Governance and Nominating Committee starting fiscal 2011); and

 

 

reviewing performance-based and equity-based incentive plans for the chief executive officer and other executive officers and reviewing any other benefit programs presented to the Committee by the chief executive officer.


 

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In carrying out these responsibilities, the Committee: reviews the Company’s general executive compensation policies; determines salaries and bonuses for and equity awards to the named executive officers and such other officers as it determines appropriate; reviews benefit programs for the named executive officers; reviews and approves (or recommends approval to the Board where it deems appropriate) all incentive, performance-based and equity-based plans and any other benefit plans submitted to it by the chief executive officer; and reviews and approves all employment contracts with named executive officers and such other officers as it deems appropriate.

The Compensation Committee determines the compensation of the chief executive officer without management input, but is assisted in this determination by its independent compensation consultant (described below) and reviews its determination with the Board of Directors (without members of management present) prior to its final determination.

In making determinations regarding compensation for other named executive officers, the Committee considers the recommendations of the chief executive officer and the input received from its independent compensation consultant. The chief executive officer recommends compensation, including the compensation provisions of employment agreements for those who have them, for named executive officers other than himself and all other officers whose compensation is determined by the Compensation Committee. In making this recommendation, the chief executive officer evaluates the performance of the executives, considers the executive’s responsibilities and compensation in relation to other officers of the Company, and considers publicly available information regarding the competitive market for talent and information provided to him by the Company and information provided to the Committee by the Committee’s independent consultant. As with the chief executive officer’s compensation, the Committee advises the full Board of its deliberations prior to making a final determination of annual

bonus and equity incentive awards for named executive officers and considers whatever input is provided by the full Board in making its final determination.

Management also provides data, analysis and recommendations for the Committee’s consideration regarding the Company’s executive compensation programs and policies, preparing materials for the information of and review by the Compensation Committee. Management also administers those programs and policies consistent with the direction of the Committee. Management provides an ongoing review of the effectiveness of the compensation programs, including competitiveness and alignment with the Company’s objectives, and recommends changes, if necessary to promote achievement of all program objectives.

The Committee meets regularly outside of the presence of management to discuss compensation decisions and matters relating to the design of compensation programs.

The Committee has retained the firm of Pay Governance LLC as its compensation consultant to assist in the continual development and evaluation of compensation policies and the Committee’s determinations of compensation awards. The Committee’s consultant attends Compensation Committee meetings, meets with the Committee without management present and provides third-party data, advice and expertise on proposed executive compensation and executive compensation plan designs. At the direction of the Committee, the consultant reviews briefing materials prepared by management and outside advisers to management and advises the Committee on the matters included in the materials, including the consistency of proposals with the Committee’s compensation philosophy and comparisons to programs at other companies. At the request of the Committee, the consultant also prepares its own analysis of compensation matters, including positioning of programs in the competitive market and the design of plans consistent with Committee’s compensation philosophy. The Committee considers these analyses as one factor in


 

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making decisions with respect to compensation matters along with information and analyses it receives from management and its own judgment and experience. In particular, with respect to positioning of programs in the competitive market, the Committee considers the analyses in the context of the factors discussed under “Competitive Considerations,” below.

In October 2008, the Compensation Committee adopted a policy requiring its consultant to be independent of Company management. The policy provides that a consultant will be considered independent if: the firm does not receive from the Company fees for services or products provided to the Company in any fiscal year that exceed 1% of the firm’s annual gross revenues; the individual that advises the Committee does not participate directly or by collaboration with others in the firm in the provision of any services or products to the Company without the approval of the chair of the Compensation Committee unless the related fees are, in the aggregate, less than $100,000; the consultant does not provide any products or services to any executive officer of the Company; and the Committee pre-approves any specific engagement of the firm if the estimated cost of the engagement exceeds $500,000. The Committee performs an annual assessment of the consultant’s independence to determine whether the consultant is independent. The Committee completed this assessment in December 2010 and confirmed that its consultant is independent under the policy.

All of the Services provided by Pay Governance LLC during fiscal 2010 were to the Committee to provide advice or recommendations on the amount or form of executive and director compensation, and Pay Governance LLC did not provide any additional services to the Company during fiscal year 2010. Prior to February 1, 2010, the Committee’s independent consultant was Towers Watson, and Towers Watson (and its predecessor firms, Towers Perrin and Watson Wyatt) provided additional services to the Company. Prior to February 1, 2010, Towers Watson and its

predecessor firms received fees of $164,227 to provide advice or recommendations on the amount or form of executive and director compensation and fees of $185,230 for additional services to the Company. Towers Watson also provided services to the Company after February 1, 2010, and received fees for such services of $1,183,516 for services provided from February 1, 2010 through the end of the Company’s fiscal year. Management of the Company made the decision to engage Towers Watson and its predecessors for the additional services, and the Compensation Committee was aware of the relationship with Towers Perrin as a result of its review of the independence of Towers Perrin prior to its merger with Watson Wyatt, though the Committee was not asked to specifically approve the engagement.

Compensation Mix

The Committee believes that a substantial portion of the total compensation of senior executives should be variable and tied to performance in order to align compensation with measures that correlate with creation of long-term shareholder value. This should offer an opportunity for gain in the event of successful performance, matched with the prospect of reduced compensation in the absence of success. The Committee also believes that compensation for more senior executive officers, including the named executive officers, should be more heavily weighted toward variable elements of compensation than is the case for less senior officers because the performance of these officers is more likely to have a strong and direct impact in achieving strategic and financial goals that are most likely to affect shareholder value.

At the same time, the Committee believes that the Company must attract and retain high-caliber executives, and therefore must offer a mixture of fixed and at-risk compensation, and that the levels and mix of these types of compensation must be attractive in light of the competitive market for senior executive talent.


 

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The following charts show the percentage of total annual compensation (constituting cash compensation and benefits plus the grant-date fair value of regular annual equity awards) awarded to Mr. Iger and to the other two named executive officers who have served in their current positions during the last three years that is performance-based (performance-based bonus and equity awards) versus fixed (salary and all other compensation) based on amounts shown in the Annual Compensation and Other Equity Awards table, above:

 

LOGO

 

LOGO

 

The amounts shown for equity compensation above reflect the grant-date fair value of equity awards, but the actual value of these awards will depend directly on the performance of the Company’s stock price over the period during which restricted units vest and options can be exercised and, with respect to performance-based stock units, whether the performance tests for vesting of these units are met. The value realized by an executive for options and performance-based restricted stock unit awards could be as little as zero, which would occur with respect to options if the Company’s stock price were less than the exercise price of options and would occur with respect to performance-based restricted stock units if none of the performance tests were met (including tests to assure deductibility under Section 162(m) of the Internal Revenue Code).

Performance-based Compensation

The Company ties compensation to the achievement of performance that aligns with long-term shareholder value through:

 

 

an annual performance-based bonus determined using performance measures designed to correlate closely with the creation of long-term shareholder value; and

 

 

equity-based compensation whose realizable value varies directly with the

   

market price of the Company’s common stock and a portion of which (for senior executives) is subject to performance tests based on the Company’s stock price and earnings per share in addition to a test to assure deductibility under Section 162(m).

Annual Performance-based Bonus.    The Company’s annual performance-based bonus compensates individuals based on the achievement of specific annual financial and other objectives that the Committee believes correlate closely with growth of long-term shareholder value. The process for determining the amount of this bonus for named executive officers involves four basic steps:

 

(1) Setting a target bonus.    Early in the fiscal year, the Committee approves a target bonus amount for each named executive officer based on a percentage of the named executive officer’s fiscal year end salary. The target bonus takes into account all factors that the Committee deems relevant, including minimums set in the employment agreement where applicable, the recommendation of the chief executive officer (except with respect to his own bonus), the nature and responsibility of
  the position and competitive market conditions.

 

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(2) Setting Company financial performance ranges.    Early each fiscal year, the Compensation Committee receives recommended financial performance measures and ranges from senior management, reviews them with senior management and the Committee’s compensation consultant, and then sets performance measures and ranges and reports their determination to the full Board.

 

(3) Setting other performance objectives.    The Committee believes that the bulk of the bonus should be based on objective measures of financial performance, but believes that more subjective elements are also important in recognizing achievement and motivating officers. Therefore, at the same time it sets Company-wide financial performance ranges, the Committee also approves other performance objectives for the Company. These objectives are based on the recommendations of the chief executive officer and the Committee’s discussion with him regarding corporate objectives. These objectives allow the Committee to play a more proactive role in identifying performance objectives beyond purely financial measures.

 

(4) Measuring performance and preliminary bonus determination.    After the end of the fiscal year, the Committee reviews the Company’s actual performance against each of the financial performance ranges established at the outset of the year. In determining the extent to which the financial performance ranges are met for a given period, the Committee exercises its judgment whether to reflect or exclude the impact of changes in accounting principles and extraordinary, unusual or infrequently occurring events.

 

     To make its preliminary bonus determination, the Committee multiplies an amount equal to 70% of the target bonus by a factor reflecting actual performance compared to the financial performance ranges set at the beginning of the year. The factor ranges from a minimum of zero to a maximum of 200% for each executive officer.
     The Committee then multiplies the remaining 30% of the target bonus amount by a factor to reflect the Committee’s assessment of performance against the other performance objectives set at the outset of the year as well as the named executive officer’s overall contribution to the Company’s success. This factor may range from 0% to a maximum that, when combined with the award based on financial performance factors, will, except in special circumstances such as unusual challenges or extraordinary successes, result in a bonus that does not exceed 200% of the target bonus. In arriving at this factor, the Committee considers the recommendation of the chief executive officer in cases other than his own bonus, and the Committee may consider the nature and impact of events that resulted in adjustments to the financial performance targets as described above.

All bonus awards for named executive officers are also subject to a test specifically designed to assure that the awards are eligible for deductibility under Section 162(m), which is in addition to the performance measures described above.

The Committee has the discretion, in appropriate circumstances, to award a bonus less than the amount determined by the steps set out above, including discretion to award no bonus at all.

Equity-based Compensation.    The Company’s long-term incentive program provides for the award of restricted stock units and stock options to participating employees including the named executive officers. The program is designed to provide incentives to create and maintain shareholder value over a multi-year period by making annual awards whose value depends on and is directly related to sustained changes in the market price of the Company’s shares. For the named executive officers, each annual award is typically in the form of a mix of stock options and restricted stock units as follows:

 

 

stock options with an exercise price not less than the market price on the date of grant (40% of the grant-date fair value of the award);


 

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restricted stock units whose vesting is conditioned on the satisfaction of performance conditions in addition to a test to ensure that the compensation is deductible pursuant to Internal Revenue Code Section 162(m) (30% of the grant-date fair value of the award); and

 

 

restricted stock units whose vesting is not subject to performance conditions other than the test to ensure that the compensation is deductible pursuant to Internal Revenue Code Section 162(m) (30% of the grant-date fair value of the award).

Participants receive value from stock options only if and to the extent the market price of the Company’s common stock when a participant exercises an award exceeds the market price on the date of grant. Participants realize value on restricted stock units subject to performance tests only if and to the extent that the tests described below are met. The value participants receive on restricted stock units (whether or not subject to performance tests) varies directly with the market price of the Company’s common stock at the time the units vest.

The Committee has weighted the awards slightly more toward restricted stock units because these awards reflect both increases and decreases in stock price from the grant-date market price and thus tie compensation more closely to changes in shareholder value at all levels compared to options, whose intrinsic value changes with shareholder value only when the market price of shares is above the exercise price. In addition, the weighting toward restricted stock units allows the Committee to deliver equivalent value with use of fewer authorized shares. The Committee may in the future adjust this mix of award types or approve different award types, such as restricted stock, as part of the overall long-term incentive award. Awards made in connection with a new, extended or expanded employment relationship may involve a different mix of restricted stock units and options depending on the Compensation Committee’s assessment of the total compensation package being offered.

Stock options are generally scheduled to vest over four years after the awards are made and generally remain exercisable for seven years (for awards made in 2005 through 2009) or ten years (for all other awards) after the date of the award. Restricted stock units without performance tests (other than the test to ensure that the compensation is deductible pursuant to Internal Revenue Code Section 162(m)) awarded in fiscal 2010 vest 25% per year beginning on the first anniversary of the award date. Restricted stock units with performance tests awarded after 2009 vest three years after award. Restricted stock units with performance tests awarded before 2010 vested 50% in two years and 50% in four years; units that did not vest after two years because performance tests were not then met could vest after four years if the performance tests were met at that time. Options and restricted stock units awarded after December 2009 (and awarded at least one year before retirement), subject to the attainment of any applicable performance conditions, continue to vest for three years after retirement (and options remain exercisable until the earlier of three years after retirement and the original expiration date) if the participant was age 60 or greater and had at least ten years of service at the date of retirement, except that this does not apply for certain employees outside the United States.

The Committee adjusts performance tests for restricted stock units from time to time in response to changes in the competitive environment and to ensure that the program meets the objective of providing clear incentives tied to the creation of long-term shareholder value. Units subject to a performance test awarded in 2010 will be eligible for vesting three years after the award date. The number of units that vest is based on a target number of units and depends on the level of performance, with the number of units vesting ranging from 0% of the target to 150% of the target. Units will vest on the vesting date (assuming continued employment or extension of vesting as described in the preceding paragraph and satisfaction of the Section 162(m) test applicable to awards to executive officers) if (a) the


 

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Company’s three-year total shareholder return (TSR in the table below) equals or exceeds the total three-year shareholder return of 25% of the companies in the S&P500 (based on market prices for the last 20 trading days of the period ending one month prior to the third anniversary of the award) or (b) the Company’s growth in earnings per share from continuing oper-

ations (EPS in the table below) for the 12 quarters reported on or before one month prior to the third anniversary equals or exceeds the growth in earnings per share from continuing operations of 50% of the companies in the S&P500 over the same period. The number of units that vest will be determined according to the following schedule:


 

First Performance Test   Second Performance Test (if applicable)   Percent of Target
Units Vesting*

TSR below 25th percentile

  EPS below 50th percentile   0%
  EPS 50th percentile or higher   50%

TSR equal to 25th percentile to 50th percentile

  EPS below 50th percentile   50% to 100%
  EPS 50th percentile or higher   75% to 100%

TSR equal to 50th percentile to 75th percentile

  Not applicable   100% to 150%

TSR 75th percentile and above

  Not applicable   150%

 

* The percent of units vesting varies within ranges in a linear manner from the low end of the range to the high end of the range based on the Company’s TSR percentile.

 

EPS for the Company will be adjusted as the Committee deems appropriate in its sole discretion (i) to exclude the effect of extraordinary, unusual and/or nonrecurring items and (ii) to reflect such other factors as the Committee deems appropriate to fairly reflect earnings per share growth. Adjustments to the diluted EPS from continuing operations of S&P 500 companies will not normally be made.

Units that were awarded prior to 2010 had performance tests and other vesting provisions as described in our proxy statements for the years in which the awards were issued.

The Committee may impose different vesting conditions on awards of restricted stock units other than the annual award. Restricted stock units awarded upon commencement of employment or execution of a new employment agreement are generally subject to the Section 162(m) test and are generally not subject to any additional performance test, although restricted stock units awarded to Mr. Iger in connection with the execution of his employment agreement in 2005, all of which have now vested, were subject to a total shareholder return test based on total shareholder return from the date the agreement was originally entered into through the applicable vesting dates.

 

Equity awards are made by the Compensation Committee only on dates the Compensation Committee meets. Compensation Committee meetings are normally scheduled well in advance and are not scheduled with an eye to announcements of material information regarding the Company. The Committee may make an award with an effective date in the future contingent on commencement of employment, execution of a new employment agreement or some other subsequent event.

The Committee will not grant stock options with exercise prices below the fair market value of the Company’s stock on the date of grant. The Company defines fair market value as the average of the high and low stock prices on the date of grant, which may be higher or lower than the closing price on that day. The Committee believes that the average of high and low prices is a better representation of the fair market value on the date of grant and tends to be less volatile than the closing price. The Committee will not reduce the exercise price of stock options (except in connection with adjustments to reflect recapitalizations, stock or extraordinary dividends, stock splits, mergers, spin-offs and similar events permitted by the relevant plan) without shareholder approval.


 

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Risk Management Considerations.    The Committee believes that the Company’s performance-based bonus and equity programs create incentives to create long-term shareholder value. Several elements of the program are designed to promote the creation of long-term value and thereby discourage behavior that leads to excessive risk:

 

 

The financial metrics used to determine the amount of an executive’s bonus are measures the Committee believes drive long-term shareholder value. These measures are operating income, return on invested capital, after-tax free cash flow and earnings per share. The Committee attempts to set ranges for these measures that encourage success without encouraging excessive risk taking to achieve short-term results. In addition, the overall bonus is not expected to exceed two times the target amount, no matter how much financial performance exceeds the ranges established at the beginning of the year.

 

 

The measures used to determine whether performance-based stock units vest are based on one to four years of performance for awards granted before 2010, with all subsequent awards based on three years of performance. The Committee believes that the longer performance periods encourage executives to attain sustained performance over several periods, rather than performance in a single period.

 

 

Stock options become exercisable over a four-year period and remain exercisable for up to ten years (seven years for options issued from 2005 to 2009) from the date of grant, encouraging executives to look to long-term appreciation in equity values.

 

 

Named executive officers are required to acquire over time and hold as long as they are executive officers of the Company shares (including restricted stock units) having a value of at least three times their base salary amounts, or five times in the case of the chief executive officer. To the extent these levels have not been reached, these officers are required to retain ownership of shares representing at least 75% of the after-tax gain (100% in the case of the chief

   

executive officer) realized on exercise of options for a minimum 12 months.

 

 

If the Company is required to restate its financial results due to material noncompliance with financial reporting requirements under the securities laws as a result of misconduct by an executive officer, applicable law permits the Company to recover incentive compensation from that executive officer (including profits realized from the sale of Company securities). In such a situation, the Board of Directors would exercise its business judgment to determine what action it believes is appropriate. Action may include recovery or cancellation of any bonus or incentive payments made to an executive on the basis of having met or exceeded performance targets during a period of fraudulent activity or a material misstatement of financial results if the Board determines that such recovery or cancellation is appropriate due to intentional misconduct by the executive officer that resulted in performance targets being achieved that would not have been achieved absent such misconduct.

Each of these elements of the compensation program other than the share retention requirements apply to all of the senior executives of the Company, and all but the share retention requirements and performance tests for equity awards apply to all participants in the program.

With the assistance of its independent consultant, the Committee has reviewed the Company’s policies and practices for its employees and determined that the risks arising from those policies and practices are not reasonably likely to have a material adverse effect on the Company.

Fixed Compensation

Two elements of compensation for executive officers are not performance-based: base salary and benefits and perquisites, including pension benefits. These elements are discussed below.

Base Salary.    Base salary provides fixed compensation to an individual that reflects his or her job responsibilities, experience, value to the Company, and demonstrated performance.


 

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Salaries or minimum salaries for Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs, are determined in their employment agreements. These salaries or minimum salaries and the amount of any increase over minimums are determined by the Compensation Committee based on its subjective evaluation of a variety of factors, including:

 

 

the nature and responsibility of the position;

 

 

the impact, contribution, expertise and experience of the individual executive;

 

 

competitive market information regarding salaries to the extent available and relevant;

 

 

the importance of retaining the individual along with the competitiveness of the market for the individual executive’s talent and services; and

 

 

the recommendations of the president and chief executive officer (except in the case of his own compensation).

Where not specified by contract, salaries are generally reviewed annually.

Benefits and Perquisites.    Employment agreements with Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs provide that each is entitled to participate in employee benefits and perquisites generally made available to senior executives of the Company. Thus named executive officers receive benefits the Company provides to its salaried employees, including health care coverage, life and disability insurance protection, reimbursement of certain educational expenses and access to favorably priced group insurance coverage. The Company provides these benefits to help alleviate the financial costs and loss of income arising from illness, disability or death, to encourage ongoing education in job-related areas and to allow employees to take advantage of reduced insurance rates available for group policies.

In addition to the benefits provided to salaried employees generally, executive officers receive benefits and perquisites that are substantially the same as those

offered to other officers of the Company at or above the level of vice president, including: the option of receiving an automobile supplied by the Company (including insurance, maintenance and fuel) or a monthly payment in lieu of the automobile benefit; relocation assistance; eligibility for reimbursement of up to $450 for health club membership or exercise equipment and reimbursement of up to $1,500 for an annual physical exam; complimentary access to the Company’s theme parks and some resort facilities and discounts on Company merchandise and resort facilities; and personal use of tickets acquired by the Company for business entertainment when they become available because no business use has been arranged. In addition to the benefits and perquisites provided to other employees at or above the vice president level, executive officers may be eligible to receive basic financial planning services, enhanced excess liability coverage, increased relocation assistance, and an increased automobile benefit. Of the named executive officers only Mr. Iger, Mr. Braverman and Mr. Staggs remain entitled to the Family Income Assurance Plan, as that program is being phased out and is available only to those whose current employment agreements provide the right to this benefit. The Company pays the cost of security services and equipment for the president and chief executive officer in an amount that the Board believes is reasonable in light of his security needs and, in the interest of security, requires the chief executive officer to use corporate aircraft for personal travel. Other senior executive officers are also permitted at times to use corporate aircraft for personal travel at the discretion of the chief executive officer.

Retirement Plans.    The Company maintains defined benefit and defined contribution retirement programs for its salaried employees in which the Company’s named executive officers participate. These programs aim to recruit and retain talent by helping provide financial security into retirement and rewarding and motivating tenure.

In addition to the Company’s tax-qualified defined benefit plans, the Company main-


 

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tains non-qualified defined benefit plans in which the named executive officers participate. All tax-qualified defined benefit plans have a maximum compensation limit and a maximum annual benefit, which limit the benefit to participants whose compensation exceeds these limits. In order to provide retirement benefits commensurate with salary levels, the non-qualified plans provide benefits to key salaried employees, including the named executive officers, using the same formula for calculating benefits as is used under the tax-qualified plans but on compensation in excess of the compensation limitations and maximum benefit accruals for tax-qualified plans. Additional information regarding the terms of retirement programs for named executive officers is included in “Compensation Tables — Pension Benefits” beginning on page 44.

Competitive Considerations

In designing the Company’s compensation program, the Committee seeks to offer compensation that responds to the competitive market for executive talent in such a way that the Company can attract executives of the highest caliber. We consider the competitive landscape in determining the mix of compensation elements, the level of compensation and other specific terms of compensation packages, and we seek to promote attraction and retention of executives by offering the opportunity for compensation that is competitively desirable in the event of successful performance.

The Company is a complex organization that operates and recruits talent across diverse industries and markets and necessarily must make each compensation decision in the context of the particular situation, including the characteristics of the business or businesses in which the individual operates and the individual’s specific roles, responsibilities, qualifications and experience. The Company takes into account information about the competitive market for executive talent, but because of the complex mix of businesses in which the Company is engaged,

the Company believes that strict benchmarking against selected groups of companies does not provide a meaningful basis for establishing compensation. Therefore, the Committee does not attempt to maintain a specific target percentile with respect to a specific list of benchmark companies in determining compensation for named executive officers. Rather, the Committee reviews information regarding competitive conditions from a variety of sources in making compensation decisions. These sources include broad public company indexes such as Fortune 100 companies, the four U.S. public companies that are major, complex, diversified and publicly-held entertainment companies (CBS Corp., News Corp., Time Warner and Viacom), and a group of companies proposed by management, which the Committee believes are relevant to its determinations in a number of respects, including size, complexity, diversity and global presence. The Committee periodically revises this group, which, at the beginning of fiscal 2010, consisted of the following 29 companies:

 

•Accenture

 

•IBM

•Amazon.com

 

•Johnson & Johnson

•Apple

 

•Kimberly-Clark

•AT&T

 

•Microsoft

•CBS

 

•News Corp.

•Cisco Systems

 

•Oracle

•Colgate Palmolive

 

•Pepsico

•Comcast

 

•Procter & Gamble

•Dell

 

•SAP

•DirectTV

 

•Texas Instruments

•Emerson Electric

 

•Time Warner Cable

•EMC

 

•Time Warner

•Google

 

•Verizon Communications

•Hewlett-Packard

 

•Viacom

•Intel

 

By the end of the fiscal year, this list was revised to add Coca Cola (because it is deemed to be a comparably-sized business whose consumer-oriented focus was determined to be similar to that of the Company) and to delete Emerson Electric and SAP (because their revenues are significantly below the median revenue of the group and their consumer focus is indirect).


 

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Other Considerations

Employment Agreements.    The Committee enters into employment agreements with senior officers when it determines that an employment agreement is desirable for the Company to obtain a measure of assurance as to the executive’s continued employment in light of prevailing market competition for the particular position held by the executive officer, or where the Committee determines that an employment agreement is necessary and appropriate to attract an executive in light of market conditions, the prior experience of the executive or practices at the Company with respect to other similarly situated employees. With respect to the named executive officers, the Company has entered into employment agreements with Mr. Iger (for a term through January 31, 2013), Mr. Rasulo (for a term through January 31, 2015), Mr. Braverman (for a term through September 30, 2013), Mr. Mayer (for a term through September 30, 2012), Ms. Parker (for a term through August 31, 2012) and Mr. Staggs (for a term through March 31, 2013).

Employment agreements with executive officers provide executive officers with certain benefits upon termination of their employment in various circumstances, as described under “Compensation Tables — Payments and Rights on Termination,” beginning on page 46. The termination provisions define the rights of the executives and the Company in various termination scenarios and serve a variety of purposes including providing benefits to the executive and his or her family in the event of the death or disability of the executive, defining when an executive can be terminated with cause and receive no further compensation, and clearly defining rights in the event of a termination in other circumstances.

The agreements specifically define benefits that are provided in the event of termination following a change in control, which are intended to motivate executive officers to remain with the Company despite the uncertainty and dislocation that arises in the context of change in control situations and to ensure that opportunities for change in control are evaluated in light of

shareholders’ long-term interests rather than any loss of prospective compensation the executive may suffer as a result of the change in control.

The termination provisions are also designed to align executives’ interests with long-term shareholder growth by providing that, in those circumstances in which bonus payments are made and equity awards vest after termination, the payments and awards are (except in the case of vesting of restricted stock units following termination due to death or disability) subject to the same performance measures (other than the test to assure deductibility under Section 162(m)) as apply if there is no termination.

Other material terms of the employment agreements with Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs are described under “Fixed Compensation” above and “Fiscal 2010 Decisions” below.

Tax deductibility.    Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any fiscal year to the corporation’s chief executive officer and up to three other executive officers whose compensation must be included in this proxy statement because they are the most highly compensated executive officers. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met. The Committee has structured awards to executive officers under the Company’s annual performance-based bonus program and equity awards program to qualify for this exemption. However, the Committee believes that shareholder interests are best served if the Committee’s discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expenses. Therefore, the Committee has approved salaries for executive officers that were not fully deductible because of Section 162(m) at the time of approval and retains the right to authorize payments or take other actions that can result in the payment of compensation that is not deductible for income tax purposes.


 

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Fiscal 2010 Decisions

The following is a discussion of specific decisions made by the Compensation Committee in fiscal year 2010 or with respect to fiscal year 2010 compensation for the named executive officers.

Employment Agreements

During the fiscal year, the Compensation Committee approved the terms of a new employment agreement for Mr. Rasulo in connection with his becoming Senior Executive Vice President and Chief Financial Officer, and approved an amendment to Mr. Staggs’ employment agreement in connection with his becoming Chairman, Walt Disney Parks and Resorts Worldwide. The material terms for Mr. Rasulo’s and Mr. Staggs’ employment agreements are described under “Other Considerations — Employment Agreements” and “Fixed Compensation” above and “Compensation Tables — Payments and Rights on Termination,” beginning on page 46. On Mr. Iger’s recommendation, the Committee determined that the terms of Mr. Rasulo’s new employment agreement should be substantially similar to the terms of Mr. Staggs’ employment agreement when he served as Senior Executive Vice President and Chief Financial Officer, except that:

 

 

the amount of reimbursement for excise taxes on compensation received on termination following a change in control in Mr. Rasulo’s agreement is limited to $2,000,000, which was the amount in his prior employment agreement, rather than the $4,000,000 in Mr. Staggs’ agreement; and

 

 

consistent with the Committee’s determination in fiscal 2009 to phase out the Family Income Assistance Plan, Mr. Rasulo’s agreement provides that he is not entitled to this benefit.

The amendment to Mr. Staggs’ employment agreement retained the substantive terms of his employment agreement, but made the following changes to conform the agreement to his new position: changed his duties to those of Chairman, Walt Disney Parks and Resorts Worldwide;

assigned the employment relationship to Walt Disney Parks and Resorts Worldwide; and provided that Mr. Staggs’ bonus opportunity for fiscal 2011 and thereafter and equity awards and perquisites after the date of the amendment would be comparable to those offered the most senior officers of subsidiaries of The Walt Disney Company rather than those offered to executive officers of The Walt Disney Company.

Consistent with past practice, the Committee has reviewed the practice of providing compensation for certain executives who are subject to excise taxes on compensation received on termination following a change in control. During fiscal 2009, the Committee determined that it would establish a cap on this reimbursement in connection with any renegotiation of material terms of, or renewal or replacement of, employment agreements with any executive officer. In light of additional feedback from the Company’s shareholder base and considering evolving market practices, the Compensation Committee, subsequent to the end of fiscal 2010, adopted a policy that it will not, without shareholder approval, include reimbursement for excise taxes payable by an executive upon termination following a change in control in any future agreements with executive officers or in any material amendments or extensions of existing agreements.

Base Salary

Employment agreements with Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs provide for a base salary as follows:

 

 

Mr. Iger’s employment agreement provides for Mr. Iger to receive an annual salary of at least $2,000,000.

 

 

Mr. Rasulo’s employment agreement provides for an annual salary of $1,400,000 for the first year of the agreement, effective January 1, 2010, and provides for the Company to set an annual salary for subsequent years in its sole discretion as long as the amount is at least $1,400,000.


 

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Mr. Braverman’s employment agreement provides for an annual salary of $1,100,000 for the first year of the agreement, effective October 1, 2008, and provides for the Company to set an annual salary for subsequent years in its sole discretion as long as the amount is at least $1,100,000. Based on Mr. Iger’s recommendation, Mr. Braverman’s performance during the preceding year and the fact that Mr. Braverman did not receive an increase in salary in 2009, the Committee in fiscal 2010 approved an increase in Mr. Braverman’s salary to $1,150,000 effective February 1, 2010.

 

 

Mr. Mayer’s employment agreement provides for an annual salary of $700,000 for the first year of the agreement, effective October 1, 2008, and provides for the Company to set an annual salary of no less than that amount for subsequent years in its sole discretion. Based on Mr. Iger’s recommendation, Mr. Mayer’s performance during the preceding year and the fact that Mr. Mayer did not receive an increase in salary in 2009, the Committee in fiscal 2010 approved an increase in Mr. Mayer’s salary to $725,000 effective February 1, 2010.

 

 

Ms. Parker’s employment agreement provides for an annual salary of $550,000 for the first year of the agreement, effective September 1, 2009 and provides for the Company to set an annual salary for subsequent years in its sole discretion as long as the amount is at least $550,000. Based on Mr. Iger’s recommendation and Ms. Parker’s performance during the preceding year, the Committee in fiscal 2010 approved an increase in Ms. Parker’s salary to $625,000 effective September 1, 2010.

 

 

Mr. Staggs’s employment agreement provides for an annual salary of $1,250,000 from April 1, 2008 through March 31, 2009, $1,325,000 through March 31, 2010, $1,400,000 through March 31, 2011, $1,450,000 through March 31, 2012 and $1,500,000 through March 31, 2013. In light of the adverse economic environment facing the Company’s businesses and efforts to reduce costs in response to these conditions, Mr. Staggs volunteered to defer the increase in his base salary scheduled

   

in his employment agreement for April 1, 2009 until February 2010. As scheduled, his salary increased to $1,400,000 effective April 1, 2010.

Annual Performance Bonuses for Named Executive Officers

The Committee approved one change in the performance bonus program design during fiscal 2010. The program had previously provided that the maximum performance factor applied to the 70% portion of the annual award based on financial performance would be 200% for the President and Chief Executive Officer, the Senior Executive Vice President and Chief Financial Officer and the Senior Executive Vice President and General Counsel and 150% for other executive officers. Based on its experience in applying the terms of the program, the Committee determined that the maximum factor should be consistent among all executive officers, and therefore standardized the maximum financial performance factor at 200% for all named executive officers.

The Committee approved the following target bonuses for the named executive officers for fiscal 2010:

 

Named Executive Officer    Target Bonus

Robert A. Iger

   $10,000,000

James A. Rasulo

   200% of fiscal year-end salary

Alan N. Braverman

   200% of fiscal year-end salary

Kevin A. Mayer

   125% of fiscal year-end salary

M. Jayne Parker

   100% of fiscal year-end salary

Thomas O. Staggs

   200% of fiscal year-end salary

For each named executive officer, the targets were equal to the minimum amount set forth in their respective employment agreements.

In January 2010, the Committee also selected four financial performance measures to be used in making the determination with respect to the 70% portion of the target bonus based on financial performance measures. The Committee selected operating income, return on invested capital, after-tax free cash flow and earnings per share and established the performance ranges and weightings


 

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shown in the table on the following page. The performance measures and relative weightings were the same as were used in fiscal 2009. The Committee selected the performance ranges based on recommendations of the chief executive officer and after reviewing the Company’s annual operating plan for fiscal 2010 and the long-term strategic plan. The Committee determined that performance below the threshold level of each range represented performance at a level that, in light of planned business operations and expected conditions for the year, represented marginal performance and that the maximum of each range represented exceptional performance in light of these conditions and expectations. In light of continuing economic uncertainty, the Committee established ranges that were narrower than those established for fiscal 2009 but broader than in years prior to 2009.

 

At the same time, the Committee also approved other Company-wide performance factors to be used in making the determination with respect to the 30% portion of the target bonus for each of the named executive officers. The Committee approved the following factors based on the recommendation of Mr. Iger and the strategic objectives of the Company:

 

 

Foster quality, creativity and innovation to differentiate our content, products and experiences

 

 

Prudently invest for growth with a focus on consumer-facing, brand and share building initiatives across global markets

 

 

Invest in our people including an emphasis on diversity, leadership and succession planning

 

 

Successfully integrate the Marvel businesses and franchises.


 

The bonuses awarded to the named executive officers were determined as follows:

 

 

Performance for the fiscal year on the four financial performance measures was compared to the performance range for each of the measures established by the Committee at the beginning of the fiscal year. A performance factor was calculated for each of the four financial performance measures, with the performance factor equal to zero if the bottom of the performance range was not achieved and the factor increasing from 35% to 200% from the bottom of the performance range to the top of performance range. The resulting performance factor for each financial performance measure was multiplied by the weight shown below to arrive at a weighted multiple, and the four weighted multiples were added to arrive at an aggregate financial performance multiple, as shown below.

 

     Performance
Range
  Adjusted
Actual Fiscal
Year 2010
Performance
               
Performance Measure  

(dollars in millions except per

share amounts)

   

Resulting
Performance

Factor

    Weight     Weighted
Multiple
 
Operating income   $4,063-$8,803     $7,556        139%        .250        34.7%   
Return on invested capital*   4.6%-9.6%     8.5%        147%        .250        36.8%   
After-tax free cash flow**   $1,191-$5,658     $4,059        140%        .214        30.1%   
Earnings per share   $1.07-$2.31     $2.06        153%        .286        43.6%   
Aggregate Financial Performance Goal Multiple***        145.1%   

 

* “Return on invested capital” is aggregate segment operating income less corporate and unallocated shared expenses and income tax expense, divided by average net assets (including gross goodwill) invested in operations, all on an equity basis (i.e., including Euro Disney and Hong Kong Disneyland on a basis that reflects our actual ownership percentage rather than on a consolidated basis).
** “After-tax free cash flow” is cash provided by operations less investments in parks, resorts and other properties, all on an equity basis (i.e., including Euro Disney and Hong Kong Disneyland on a basis that reflects our actual ownership percentage rather than on a consolidated basis).
*** Total may not equal the sum of the column due to rounding.

 

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In comparing actual performance for fiscal year 2010 to the performance ranges, the Committee adjusted the ranges to reflect the acquisition of Marvel and excluded the impacts of the following items in determining the adjusted actual performance: restructuring and impairment charges; gains on the sale of businesses; and a gain recorded in connection with the acquisition of Disney Store Japan. The amounts included in the table above reflect these adjustments.

 

 

The Committee then evaluated each officer’s performance against the other performance objectives established in January 2010 as set forth above. With respect to performance by each executive officer, the Committee determined (in the case of Mr. Iger) and concurred with Mr. Iger’s conclusions (with respect to the other executive officers) that:

 

   

Mr. Iger led the Company’s emergence from the extraordinary difficult economic environment of the prior year, delivering robust financial growth during this fiscal year while continuing to positio n the Company for growth over the long-term. Results for the year were driven substantially by execution on one of Mr. Iger’s strategic priorities – the creation of quality creative product – through creative successes including record ratings for Disney Channel, ESPN and ABC Family and the release of two films – Alice in Wonderland and Toy Story 3 – that achieved over $1 billion in worldwide box office. Mr. Iger continued to stress innovation by implementing a new approach to managing the Company’s presence on social networks. Mr. Iger took substantial steps to continue development of management leadership through implementation of new, and management of recent changes in, senior executive positions.

 

   

Mr. Rasulo successfully transitioned into his new role as Chief Financial Officer, quickly assuming the new role, earning respect internally and externally and bringing a fresh perspective to the position. His accomplishments included leading an overall efficiency review, implementing changes in corporate structure and

   

instigating efforts to enhance career planning at the corporate level with increased emphasis on cross-segment and cross-function review in filling open positions. He also led significant aspects of the integration of Marvel.

 

   

Mr. Braverman continued to provide outstanding leadership of the legal function and assumed new responsibilities for government relations. His accomplishments included: actions that led to the realization of savings in the legal function and reducing costs from budgeted levels; selecting new leadership for US-based government relations activities and for China-based government relations; and developing a long- term global policy strategy and recruiting leadership for that function. In addition, Mr. Braverman played a significant role in the integration of Marvel and successfully implemented the Company’s diversity initiative in filling openings in the legal department.

 

   

Mr. Mayer brought an innovative approach to the corporate strategy and development function, identifying acquisitions such as Playdom that bring important capabilities and quality content to the Company. He successfully pursued cost mitigation efforts and completed significant transactions during the year without use of outside advisors. Mr. Mayer also contributed extraordinary efforts in leading the transaction for the successful sale of Miramax during the fiscal year.

 

   

Ms. Parker rapidly made a substantial contribution in her new role as Chief Human Resources Officer bringing a strategic mind-set and collaborative style that resulted in immediate improvements to the efficiency of the human resources function across the enterprise. Her accomplishments during the year included: the first enterprise-wide employee survey; leadership of an enterprise-wide redesign of the talent planning and succession process; streamlining of the recruiting process across the Company; and establishment of a Company-wide diversity roadmap.


 

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Mr. Staggs assumed the responsibilities in his new role as Chairman, Walt Disney Parks and Resorts Worldwide extremely well, gaining the respect of his new team, quickly learning the business and providing strong leadership. He effectively

   

managed the business through the ongoing economic recovery and is lead ing implementation of investments in upgrading and expansion of park and resort facilities in Florida, California, Hawaii and China and in new cruise ships.


 

In light of the factors described above and (except in the case of Mr. Iger), Mr. Iger’s recommendations, the Committee established the individual performance factors set forth below for each of the named executive officers. In particular, the factor established for Mr. Mayer reflected his extraordinary effort in connection with the sale of the Miramax film business, for which the majority of the work was completed during the fiscal year.

 

 

The Committee then calculated final fiscal year 2010 bonuses for the named executive officers as follows, rounding to the nearest $10,000:

 

BONUS CALCULATION FOR FISCAL 2010  
         
     Target
Bonus
    Company Performance
Amount
    Individual Performance
Amount
   

Calculated
Bonus
Amount

(Rounded)

 
    70% of
Target
    Multiple     Subtotal     30% of
Target
    Multiple     Subtotal    
Robert A. Iger   $ 10,000,000      $ 7,000,000        145.1%      $ 10,158,279      $ 3,000,000        110%      $ 3,300,000      $ 13,460,000   
James A. Rasulo     2,800,000        1,960,000        145.1%        2,844,318        840,000        102%        856,800        3,700,000   
Alan N. Braverman     2,300,000        1,610,000        145.1%        2,336,404        690,000        100%        690,000        3,030,000   
Kevin A. Mayer     906,250        634,375        145.1%        920,594        271,875        245%        666,094        1,590,000   
M. Jayne Parker     625,000        437,500        145.1%        634,892        187,500        113%        211,875        850,000   
Thomas O. Staggs     2,800,000        1,960,000        145.1%        2,844,318        840,000        102%        856,800        3,700,000   
                                                                 

 

Long-Term Incentive Compensation

The Committee made regular annual equity awards to the named executive officers in January 2010. Consistent with the equity award policies described under “Performance-Based Compensation — Equity-Based Compensation” above, the Committee awarded restricted stock units and options, with 30% of the grant-date fair value of the award in the form of restricted stock units subject to performance vesting conditions in addition to the Section 162(m) test, 30% in the form of restricted stock units subject only to the Section 162(m) test and 40% in the form of options. Awards made to Mr. Staggs were not subject to the Section 162(m) test. The number of options and units awarded was determined by valuing stock unit awards at an amount equal to the dollar amount of the award allocated to stock units by the market price on the date of grant without taking into account any valuation adjustments related to achievement of performance tests. On this basis, the value of the award to Mr. Iger was $11,000,000. The value of the awards to Mr. Rasulo,

Mr. Braverman and Mr. Staggs were equal to $4,200,000, $2,200,000 and $4,200,000, respectively, which were equal to the minimum provided in their respective employment agreements. The values of the award to Mr. Mayer and Ms. Parker, neither of whom have contractually agreed minimums, were $1,700,000 and $1,200,000, respectively. In addition, Mr. Braverman assumed responsibility for governmental affairs at the beginning of the calendar year and he therefore received an award of 50,000 restricted stock units in January 2010, as provided by the terms of his employment agreement, which required the award of these units upon his assuming a significant increase in his responsibilities. The number of restricted stock units and options is reflected in the Fiscal 2010 Grants of Plan Based Awards table on page 36 below.

In determining the annual grants of restricted stock units and options for each executive officer, the Committee considered the minimums required by employment agreements, where applicable, and the Company’s overall long-term incentive guidelines for all executives, which


 

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attempt to balance, in the context of the competitive market for executive talent, the benefits of incentive compensation tied to performance of the Company’s stock with the dilutive effect of equity compensation awards. The Committee also considered Mr. Iger’s recommendations, except in the case of Mr. Iger’s own agreement and award. In determining the size of the equity award for Mr. Iger, the Committee chose a value in excess of the minimum required by his contract to reward Mr. Iger’s excellent management of the Company in a difficult economic environment.

Benefits and Perquisites

The Committee did not make any changes in the Company’s policies with respect to benefits and perquisites during fiscal year 2010.

Deductibility of Compensation

Awards to executive officers under the Management Incentive Bonus Program and the long-term incentive program include a test specifically designed to ensure that the awards are fully deductible under Section 162(m). As required by Sec-

tion 162(m), the criterion established must not be certain of being achieved at the time it is set. The regulations under Section 162(m) specifically indicate that a test based on profitability is not assured of being attained. Accordingly, our bonus program and equity award program both use a test based on adjusted net income, which means net income adjusted, as appropriate, to exclude the following items or variances: change in accounting principles; acquisitions; dispositions of a business; asset impairments; restructuring charges; extraordinary, unusual or infrequent items; and extraordinary litigation costs and insurance recoveries. For the one-year period ending at the end of fiscal 2010, the adjusted net income target was $2.03 billion, and the Company achieved adjusted net income of $4.04 billion. Net income was adjusted by reducing it for the amount of gains on the sale of businesses ($75 million) and the amount of a gain recorded in connection with the acquisition of The Disney Store Japan ($21 million) and by increasing it to reflect restructuring and impairment charges ($169 million). Therefore, bonuses earned in fiscal 2010 and restricted stock units vesting in fiscal 2010 are deductible under Section 162(m).


 

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Compensation Tables

The following table provides information concerning total compensation earned in fiscal 2008, fiscal 2009 and fiscal 2010 by the chief executive officer, the chief financial officer and the three other persons serving as executive officers at the end of fiscal 2010 who were the most highly compensated executive officers of the Company in fiscal 2010. In addition, we have included information for fiscal 2010 with respect to Thomas O. Staggs, who was Senior Executive Vice President and Chief Financial Officer through December 31, 2009, after which he became Chairman, Walt Disney Parks and Resorts, Worldwide. These six officers are referred to as the named executive officers in this proxy statement. Information regarding the amounts in each column follows the table.

 

SUMMARY COMPENSATION TABLE  
Name and Principal Position   Year     Salary1     Stock
Awards
    Option
Awards
    Non-Equity
Incentive Plan
Compensation
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
    All Other
Compensation
    Total  
Robert A. Iger     2010      $ 2,000,000      $ 7,359,060 2    $ 4,399,991      $ 13,460,000      $ 1,600,480 4    $ 798,433      $ 29,617,964   
President and Chief Executive Officer     2009        2,038,462        5,940,006        3,598,402        9,260,000        2,343,143 4      741,601        23,921,614   
    2008        2,000,000        5,904,000        28,449,997 3      13,945,493        156,761        773,090        51,229,341   
James A. Rasulo     2010        1,350,769        2,809,839 2      1,680,005        3,700,000        963,953 4      30,556        10,535,122   
Senior Executive Vice President and Chief Financial Officer                
Alan N. Braverman     2010        1,133,654        3,027,854 2,5      880,002        3,030,000        640,105 4      56,395        8,768,010   
Senior Executive Vice President, General Counsel and Secretary     2009        1,120,769        4,487,539 5      879,614        2,035,000        815,439 4      34,150        9,372,511   
    2008        1,032,885        1,180,800        686,393        3,000,000        277,071        67,649        6,244,798   
Kevin A. Mayer     2010        716,827        1,137,357 2      679,999        1,590,000        249,821 4      20,160        4,394,164   
Executive Vice President, Corporate Strategy and, Business Development     2009        713,269        996,633        603,737        900,000        257,100 4      19,889        3,490,628   
    2008        646,442        619,920        360,358        1,025,000        52,824        18,956        2,723,500   
M. Jayne Parker     2010        556,634        802,861 2      480,005        850,000        300,774 4      27,501        3,017,775   
Executive Vice President and Chief Human Resources Officer                
Thomas O. Staggs6     2010        1,338,558        2,809,839 2      1,680,005        3,700,000        632,529 4      48,539        10,209,470   
Chairman, Walt Disney Parks and Resorts, Worldwide     2009        1,274,038        2,623,517        1,589,294        2,450,000        717,797 4      43,786        8,698,432   
    2008        1,187,019        9,151,200 7      1,029,586        4,100,000        47,617        78,097        15,593,519   
                                                                 

 

1

The amounts reflect compensation for 53 weeks in fiscal year 2009 compared to 52 weeks in fiscal 2010 and fiscal 2008 due to the timing of fiscal period end.

2

Stock awards for fiscal 2010 include awards subject to performance conditions that were valued based on the probability that performance targets will be achieved. Assuming the highest level of performance conditions are achieved, the grant date stock award values for fiscal 2010 would be $8,250,068, $3,150,044, $3,206,060, $1,275,064, $900,068 and $3,150,044 for Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs, respectively.

3

The amount recorded for fiscal 2008 includes $25,018,048, relating to an award of options to purchase 3,000,000 shares at an exercise price of $29.51 per share and scheduled to vest through 2013, which was awarded to Mr. Iger in fiscal 2008 as an inducement to enter into an extended employment agreement.

4

As described more fully under “Change in Pension Value and Nonqualified Deferred Compensation Earnings” below, the change in this amount from fiscal 2008 to fiscal 2009, and from fiscal 2009 to fiscal 2010, is driven largely by changes in the discount rate applied to calculate the present value of future pension payments.

5

The amount recorded for fiscal 2010 includes $1,556,000 relating to an award of 50,000 restricted stock units scheduled to vest through 2014 awarded to Mr. Braverman in fiscal 2010 as provided in an employment agreement entered into in fiscal 2009 and upon Mr. Braverman’s assumption of new duties in fiscal 2010. The amount recorded for fiscal 2009 includes $3,035,500 relating to an award of 100,000 restricted stock units scheduled to vest through 2012 awarded to Mr. Braverman in fiscal 2009 as an inducement to enter into the employment agreement.

6

Mr. Staggs is included in the table because he was Senior Executive Vice President and Chief Financial Officer during the fiscal year.

7

The amount recorded for fiscal 2008 includes $7,380,000 relating to an award of 250,000 restricted stock units scheduled to vest in 2013 awarded to Mr. Staggs in fiscal 2008 as an inducement to enter into a new employment agreement.

 

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Salary.    This column sets forth salary earned during each fiscal year, none of which was deferred.

Stock Awards.    This column sets forth the grant date fair value of grants during each fiscal year of restricted stock units awarded as part of the Company’s long-term incentive compensation program. The grant date fair value of all restricted stock unit awards is equal to the number of units awarded times the average of the high and low trading price of the Company’s common stock on the grant date subject to valuation adjustments for restricted stock units that have performance vesting conditions other than the test to assure deductibility under Section 162(m). The valuation adjustments are determined using a Monte Carlo simulation that determines the probability that the performance targets will be achieved. The grant date fair value of restricted stock units awarded during fiscal 2010 is also included in the Grants of Plan Based Awards table on page 36.

Option Awards.    This column sets forth the grant date fair value of grants during each fiscal year of options awarded to the named executive officers. The grant-date fair values of options were calculated using the binomial model. The assumptions used in estimating the fair value of options are set forth in footnote 13 to the Company’s Audited Financial Statements for fiscal year 2010. The grant date fair value of options awarded during fiscal 2010 is also included in the Grants of Plan Based Awards table on page 36.

Non-Equity Incentive Plan Compensation.    This column sets forth the amount of compensation earned by the named executive officers under the Company’s Management Incentive Bonus program during each fiscal year. A description of the Company’s annual performance-based bonus program is included in the discussion of “Performance Based Compensation” in the “Compensation Objectives and Program Design” section, and the determination of performance-based bonuses for fiscal 2010 is described in the discussion of “Annual Performance Bonus for Named Executive Officers” in the “Fiscal 2010 Decisions” section, of the Compensation

Discussion and Analysis, beginning on page 14.

Change in Pension Value and Nonqualified Deferred Compensation Earnings.    This column reflects the aggregate change in the actuarial present value of each named executive officer’s accumulated benefit under all defined benefit plans, including supplemental plans, during each fiscal year reported. The amounts recorded in this column vary with a number of factors, including the discount rate applied to determine the value of future payment streams. As a result of a reduction in prevailing interest rates in the credit markets during late 2008 and 2009, the discount rate used pursuant to pension accounting rules to calculate the present value of future payments decreased from 7.00% for fiscal 2008 to 5.75% for fiscal 2009, driving the substantial increases in the present value of future payments reported for fiscal 2009. The discount rate continued to decrease to 5.25% for fiscal 2010 contributing to a further increase in the present value of future payments. The increase in pension value resulting from the change in the discount rate does not result in any increase in the benefits payable to participants under the plan. None of the named executive officers had earnings on deferred compensation other than Mr. Iger, whose earnings on deferred compensation, which are disclosed below under “Deferred Compensation,” were not above market rates and therefore are not included in this column.

All Other Compensation.    This column sets forth compensation that is not included in other columns, including:

 

 

the incremental cost to the Company of perquisites and other personal benefits;

 

 

the amount of Company contributions to employee savings plans; and

 

 

the dollar value of insurance premiums paid by the Company with respect to excess liability insurance for the named executive officers.

In accordance with SEC interpretations of its rules, the table includes the incremental cost of some items that are provided to executives for business purposes but which may not be considered integrally related to the executive’s duties.


 

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The following table identifies the incremental cost of each perquisite or personal benefit that exceeded the greater of $25,000 or 10% of the total amount of perquisites and personal benefits for a named executive officer in fiscal 2010.

 

FISCAL 2010 PERQUISITES AND PERSONAL BENEFITS  
      Personal Air
Travel
     Security      Other      Total  
Robert A. Iger    $ 192,284       $ 562,034       $ 38,390       $ 792,708   
James A. Rasulo                      24,859         24,859   
Alan N. Braverman                      50,670         50,670   
Kevin A. Mayer                      14,997         14,997   
M. Jayne Parker                      22,212         22,212   
Thomas O. Staggs                      42,727         42,727   
                                     

 

The incremental cost of the items specified above was determined as follows:

 

 

Personal air travel:     the actual catering costs, landing and ramp fees, fuel costs and lodging costs incurred by flight crew plus a per hour charge based on the average hourly maintenance costs for the aircraft during the year for flights that were purely personal in nature, and a pro rata portion of catering costs where personal guests accompanied executives on flights that were business in nature. Where a personal flight coincided with repositioning of aircraft following a business flight, only incremental costs of the flight compared to an immediate repositioning of the aircraft are included.

 

 

Security:     actual costs incurred by the Company for providing security equipment and services.

 

The column labeled “Other” in the table above includes the incremental cost to the Company of the vehicle benefit, personal air travel where the cost to the Company for personal air travel is less than $25,000, reimbursement of up to $450 for health club membership or exercise equipment, reimbursement of up to $1,500 for an annual physical exam and reimbursement of expenses for financial consulting. Executives also are entitled to the other benefits described in the Compensation Discussion and Analysis under the discussion of “Fixed Compensation” in the “Compensation Objectives and Program Design” section, which either involved no incremental cost to the Company or are offered through programs that are available to substantially all of the Company’s salaried employees.


 

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Grants of Plan Based Awards

The following table provides information concerning the range of awards available to named executive officers under the Company’s management incentive bonus program for fiscal 2010 and information concerning option and restricted stock unit awards made to named executive officers during fiscal 2010. Additional information regarding the amounts in each column follows the table.

 

FISCAL 2010 GRANTS OF PLAN BASED AWARDS

 
          Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards
    Estimated Future Payouts
Under Equity
Incentive Plan Awards
   

All Other
Stock
Awards:

Number of
Shares of
Stock or
Units

   

All Other

Option
Awards:
Number of
Securities
Underlying
Options

    Exercise
or Base
Price of
Option
Awards
    Grant
Date
Closing
Price of
Shares
Underlying
Options
   

Grant

Date Fair

Value of

Stock and

Option

Awards

 
     Grant
Date
    Threshold     Target     Maximum     Threshold     Target     Maximum            
Robert A. Iger     1/13/10                      465,578      $ 31.12      $ 31.29      $ 4,399,991   
    1/13/10              106,042        212,084        265,105                7,359,060 1 
    $ 3,500,000      $ 10,000,000      $ 20,000,000                   
James A. Rasulo     1/13/10                      177,767        31.12        31.29        1,680,005   
    1/13/10              40,489        80,978        101,223               2,809,839 1 
    $ 980,000      $ 2,800,000      $ 5,600,000                   
Alan N. Braverman     1/13/10                50,000 2                1,556,000   
    1/13/10                      93,116        31.12        31.29        880,002   
    1/13/10              21,209        42,418        53,023                1,471,854 1 
    $ 805,000      $ 2,300,000      $ 4,600,000                   
Kevin A. Mayer     1/13/10                      71,953        31.12        31.29        679,999   
    1/13/10              16,389        32,778        40,973                1,137,357 1 
    $ 317,188      $ 906,250      $ 1,812,500                   
M. Jayne Parker     1/13/10                      50,791        31.12        31.29        480,005   
    1/13/10              11,569        23,138        28,923                802,861 1 
    $ 218,750      $ 625,000      $ 1,250,000                   
Thomas O. Staggs     1/13/10                    40,489              1,260,018   
    1/13/10                      177,767        31.12        31.29        1,680,005   
    1/13/10              0        40,489        60,734                1,549,822 1 
    $ 980,000      $ 2,800,000      $ 5,600,000                   
                                                                                                 
1

Stock awards for fiscal 2010 include awards subject to performance conditions that were valued based on the probability that performance targets will be achieved. Assuming the highest level of performance conditions are achieved, the grant date stock award values for fiscal 2010 would be $8,250,068, $3,150,044, $1,650,060, $1,275,064, $900,068 and $1,890,027 for Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs, respectively.

2

Restricted stock units scheduled to vest through 2014 pursuant to the terms of Mr. Braverman’s 2008 employment agreement upon assumption of new duties under the agreement.

 

Grant date.    The Compensation Committee awarded the annual grant of stock options and restricted stock units for fiscal 2010 on January 13, 2010. The Compensation Committee approved awards under the Management Incentive Bonus Program on December 16, 2010.

Estimated Future Payouts Under Non-equity Incentive Plan Awards.    As described in the Compensation Discussion and Analysis, the Compensation Committee sets target bonuses at the beginning of the fiscal year under the Company’s Management Incentive Bonus Program and the Amended and Restated 2002 Executive

Performance Plan, and bonuses for named executive officers will, except in special circumstances such as unusual challenges or extraordinary successes, range from 35% to 200% of the target amount based on financial performance factors and other performance factors for the fiscal year, but the bonus may be zero if performance factors (including the Section 162(m) test) fall below threshold amounts or less than the calculated amounts if the Committee otherwise decides to reduce the bonus. As addressed in the discussion of Fiscal 2010 Decisions in the Compensation Discussion and Analysis, the employment agreements of Mr. Iger, Mr. Rasulo, Mr. Braverman,


 

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Mr. Mayer, Ms. Parker and Mr. Staggs set a minimum target bonus. This column shows the range of bonus amounts for each named executive officer from the threshold to the maximum based on the target set at the beginning of the fiscal year. The actual amounts awarded for fiscal 2010 are set forth in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation column.

Estimated Future Payouts Under Equity Incentive Plan Awards.    This column sets forth the number of restricted stock units awarded to the named executive officers during fiscal 2010 that are subject to performance tests as described below and/or to the test to assure eligibility for deduction under Section 162(m). These include:

 

 

units awarded to each of the named executive officers as part of the annual grant in January 2010, 50% of which are subject to the performance tests described in the Compensation Discussion and Analysis under the heading “Performance-based Compensation — Equity-based Compensation” and all of which (other than those awarded to Mr. Staggs) are subject to the test to assure eligibility under Section 162(m); and

 

 

units awarded to Mr. Braverman in January 2010 in connection with his assuming additional responsibilities as provided for in his employment agreement entered into October 1, 2008 (which are subject to the test to assure eligibility under Section 162(m)).

Vesting dates for all restricted stock units held as of the end of fiscal year 2010 are described under “Outstanding Equity Awards,” below.

In each of the cases described above (assuming the Section 162(m) test is met, where applicable):

 

 

If the total shareholder return test is below the 25th percentile and the earnings per share test is below the 50th percentile, the named executive officer will be entitled to receive on the applicable vesting date

   

a number of shares equal to that set forth in the “threshold” column, plus any shares received as dividend equivalents prior to vesting, comprised of only those shares that are subject only to the Section 162(m) test. In this circumstance, none of the shares that are subject to additional performance tests will vest.

 

 

If the total shareholder return equals or exceeds the 25th percentile or earnings per share equals or exceeds the 50th percentile, the named executive officer will receive a number of shares equal to (a) those shares that are subject to only the Section 162(m) test; plus (b) the percentage of shares that are subject to additional performance tests as set forth in the table set forth on page 22 ( plus, in each case, any shares received as dividend equivalents prior to vesting). For example, the total number of shares vesting would equal the number in the “target” column if, on the measurement date, the total shareholder return test is met at the 50th percentile, and at the number in the “maximum” column if the total shareholder return equals or exceeds the 75th percentile.

(When dividends are distributed to stockholders, dividend equivalents are credited in an amount equal to the dollar amount of dividends on the number of units held on the dividend record date divided by the fair market value of the Company’s shares of common stock on the dividend distribution date.) If the Section 162(m) test is not met on any measurement date, the executive would receive no shares on the applicable vesting date.

All Other Stock Awards: Number of Shares of Stock or Units.    This column sets forth the number of restricted stock units awarded to the named executive officers during fiscal 2010 that are not subject to any performance tests (including the test to assure eligibility for deduction under Section 162(m)).

All Other Option Awards: Number of Securities Underlying Options.    This column sets forth options awarded to the named executive officers as part of the annual grant in January 2010. Vesting dates for


 

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these options are described under “Outstanding Equity Awards,” below. The options are scheduled to expire ten years after the date of grant.

Exercise or Base Price of Option Awards; Grant Date Closing Price of Shares Underlying Options.    These columns set forth the exercise price for each option grant and the closing price of the Company’s common stock on the date of grant. The exercise price is equal to the average of the high and low trading price on the grant date, which may be higher or lower than the closing price on the grant date.

Grant Date Fair Value of Stock and Option Awards.    This column sets forth the grant

date fair value of stock and option awards calculated in accordance with applicable accounting requirements. The grant date fair value of all restricted stock unit awards and options is determined as described on page 34, above.

Outstanding Equity Awards

The following table provides information concerning unexercised options and unvested restricted stock unit awards held by the named executive officers of the Company as of October 2, 2010. Information regarding the amounts in the columns follows the table.


 

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OUTSTANDING EQUITY AWARDS AT END OF FISCAL 2010  
          Option Awards     Stock Awards  
                                              Equity Incentive Plan
Awards
 
    Grant
Date
    Number of Securities
Underlying
Unexercised Options
    Option
Exercise
Price
    Option
Expiration
Date
   

Number of
Shares or
Units of
Stock That

Have

Not Vested

   

Market
Value of
Shares or
Units of
Stock That
Have

Not Vested

    Number
of
Unearned
Units
That
Have Not
Vested
    Market
Value of
Unearned
Units
That
Have Not
Vested
 
       Exercisable     Unexercisable              
Robert A. Iger     06/27/05        274,241             $ 25.81        06/27/12                               
    10/02/05                                                  107,479 (A)      3,583,346   
    01/09/06        411,000               24.87        01/09/13                               
    01/10/07        283,333        94,445 (B)      34.27        01/10/14                      100,154 (C)      3,339,143   
    01/09/08        210,526        210,527 (D)      29.90        01/09/15                               
    01/30/08                                                  102,828 (E)      3,428,286   
    01/31/08        1,000,000        2,000,000 (F)      29.51        01/31/15                               
    01/14/09        120,000        360,000 (G)      20.81        01/14/16                      252,999 (H)      8,434,983   
    01/13/10               465,578 (I)      31.12        01/13/20                      265,105 (J)      8,838,601   
James A. Rasulo     02/05/01        100,000             $ 30.23        02/05/11                               
    01/22/04        150,000               24.64        01/22/14                               
    01/03/05        80,000               28.04        01/03/12                               
    06/27/05        20,000               25.81        06/27/12                               
    01/09/06        110,000               24.87        01/09/13                               
    01/10/07        74,250        24,750 (B)      34.27        01/10/14        13,124 (K)      437,543        13,124 (K)      437,543   
    01/09/08        52,632        52,632 (D)      29.90        01/09/15        12,997 (L)      433,334                 
    01/30/08                                                  12,853 (M)      428,519   
    01/14/09        28,000        84,000 (G)      20.81        01/14/16        25,355 (N)      845,332        33,680 (N)      1,122,887   
    01/13/10               177,767 (I)      31.12        01/13/20                      101,223 (J)      3,374,758   
Alan N. Braverman     02/05/01        80,000             $ 30.23        02/05/11                               
    01/28/02        197,500               22.20        01/28/12                               
    01/24/03        84,000               17.14        01/24/13                               
    03/19/03        60,000               16.70        03/19/13                               
    01/22/04        150,000               24.64        01/22/14                               
    01/03/05        60,000               28.04        01/03/12                               
    01/09/06        87,000               24.87        01/09/13                               
    01/10/07        69,000        23,000 (B)      34.27        01/10/14        6,565 (O)      218, 876        24,391 (C)      813,197   
    01/09/08        42,106        42,106 (D)      29.90        01/09/15                               
    01/30/08                                                  20,566 (E)      685,670   
    10/02/08                                                  102,828 (P)      3,428,284   
    01/14/09        29,334        88,001 (G)      20.81        01/14/16                      61,846 (H)      2,061,937   
    01/13/10                                                  50,000 (Q)      1,667,000   
    01/13/10               93,116 (I)      31.12        01/13/20                      53,023 (J)      1,767,770   
Kevin A. Mayer     06/27/05        30,000             $ 25.81        06/27/12                               
    01/09/06        40,000               24.87        01/09/13                               
    01/10/07        33,000        11,000 (B)      34.27        01/10/14                      11,665 (C)      388,897   
    01/09/08        22,105        22,106 (D)      29.90        01/09/15                               
    01/30/08                                                  10,796 (E)      359,939   
    01/14/09        20,133        60,401 (G)      20.81        01/14/16                      42,449 (H)      1,415,274   
    01/13/10               71,953 (I)      31.12        01/13/20                      40,973 (J)      1,366,023   
M. Jayne Parker     02/05/01        2,882             $ 30.23        02/05/11                               
    01/28/02        8,000               22.20        01/28/12                               
    01/22/04        7,200               24.64        01/22/14                               
    01/03/05        4,800               28.04        01/03/12                               
    01/09/06        6,400               24.87        01/09/13                               
    01/10/07        4,500        1,500 (B)      34.27        01/10/14        1,447 (R)      48,228                 
    01/09/08        3,790        3,790 (D)      29.90        01/09/15        894 (L)      29,800                 
    01/30/08                                                  884 (M)      29,473   
    01/14/09        4,286        12,857 (G)      20.81        01/14/16        2,673 (N)      89,112        3,550 (N)      118,351   
    01/13/10               50,791 (I)      31.12        01/13/20                      28,923 (J)      964,276   
Thomas O. Staggs     06/27/05        125,367             $ 25.81        06/27/12                               
    01/09/06        154,000               24.87        01/09/13                               
    01/10/07        90,000        30,000 (B)      34.27        01/10/14        12,348 (O)      411,686        31,814 (C)      1,060,683   
    01/09/08        63,158        63,158 (D)      29.90        01/09/15                               
    01/30/08                                                  30,848 (E)      1,028,472   
    01/30/08                                                  257,070 (S)      8,570,709   
    01/14/09        53,000        159,000 (G)      20.81        01/14/16                      111,743 (H)      3,725,496   
    01/13/10               177,767 (I)      31.12        01/13/20        40,489 (T)      1,349,903        60,734 (T)      2,024,855   
                                                                         

 

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Number of Securities Underlying Unexercised Options: Exercisable and Unexercisable.    These columns report, for each officer and for each grant made to the officer, the number of shares of common stock that can be acquired upon exercise of outstanding options. The vesting schedule for each grant with unexercisable options is shown under “Vesting Schedule,” below with options identified by the letter following the number of shares underlying options that are unexercisable. Vesting of options held by named executive officers may be accelerated in the circumstances described under “Payments and Rights on Termination,” below.

Number; Market Value of Shares or Units of Stock That Have Not Vested.    These columns report the number and market value, respectively, of shares underlying each grant of restricted stock units to each officer that is not subject to performance vesting conditions nor the test to assure eligibility for deduction pursuant to Section 162(m). The number of shares includes dividend equivalent units that have accrued for dividends payable through October 2, 2010. The market value is equal to the number of shares underlying the units times the closing market price of the Company’s common stock on Friday, October 1, 2010, the last trading day of the Company’s fiscal year. The vesting schedule for each grant is shown below, with grants identified by the letter following the number of shares underlying the grant. Vesting of restricted stock units held by named executive officers may be accelerated in the circumstances described under “Payments and Rights on Termination,” below.

Number; Market Value of Unearned Units That Have Not Vested.    These columns report the maximum number and market value, respectively, of shares underlying each grant of restricted stock units to each officer that is subject to performance vesting conditions and/or the test to assure eligibility for deduction pursuant to Section 162(m). The number of shares includes dividend equivalent units that have accrued for dividends payable through October 2, 2010 and includes units awarded to compensate for the dilu-

tive effect of the Company’s spin-off of the ABC Radio business. The market value is equal to the number of shares underlying the units times the closing market price of the Company’s common stock on Friday, October 1, 2010, the last trading day of the Company’s fiscal year. The vesting schedule and performance tests and/or the test to assure eligibility under Section 162(m) are shown “Vesting Schedule,” below.

Vesting Schedule.    The options reported above that are not yet exercisable and restricted stock units that have not yet vested are scheduled to become exercisable and vest as set forth below.

 

  (A) Restricted stock units granted October 2, 2005 subject to performance tests: The remaining units vested on November 30, 2010 upon determination that the test to assure eligibility under Section 162(m) was satisfied.

 

  (B) Options granted January 10, 2007: The remaining unexercisable options became exercisable on January 10, 2011.

 

  (C) Restricted stock units granted January 10, 2007 subject to performance tests: The remaining units vested on January 10, 2011.

 

  (D) Options granted January 9, 2008: One half of the remaining unexercisable options became exercisable on January 9, 2011 and the remaining unexercisable options are scheduled to become exercisable on January 9, 2012.

 

  (E) Restricted stock units granted January 30, 2008 subject to performance tests: The remaining units are scheduled to vest on January 30, 2012, subject to determination that the test to assure eligibility under Section 162(m) was satisfied, except that vesting of half of the units is also subject to satisfaction of a total shareholder return or earnings per share test as described in prior proxy statements.

 

  (F)

Options granted January 31, 2008 in connection with the extension of Mr. Iger’s employment agreement:


 

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500,000 of the options become exercisable on each of January 31, 2011and January 31, 2012 and options with respect to 1,000,000 shares become exercisable on January 31, 2013.

 

  (G) Options granted January 14, 2009: One third of the remaining options became exercisable on January 14, 2011. One half of the then remaining unexercisable options are scheduled to become exercisable on each of January 14, 2012 and 2013.

 

  (H) Restricted stock units granted January 14, 2009 subject to performance tests: Approximately 43% of the units vested on January 14, 2011. One quarter of the then remaining units are scheduled to vest on each of January 14, 2012 and 2013, in each case subject to determination that the test to assure eligibility under Section 162(m) was satisfied. One half of the then remaining units are scheduled to vest on January 14, 2013, subject to determination that the test to assure eligibility under Section 162(m) was satisfied and also subject to satisfaction of a total shareholder return or earnings per share test described in prior proxy statements.

 

  (I) Options granted January 13, 2010: One-fourth of the remaining unexercisable options became exercisable on January 13, 2011 and one-third of the then remaining unexercisable options are scheduled to become exercisable on each of January 13, 2012, 2013 and 2014.

 

  (J) Restricted stock units granted January 13, 2010 subject to performance tests: 10% of the units vested January 13, 2011 and 10% of the units vest on each of January 13, 2012, 2013 and 2014, in each case subject to determination that the test to assure eligibility under Section 162(m) was satisfied. The remaining units vest January 13, 2013 subject to determination that the test to assure eligibility under Section 162(m) was satisfied and also subject to satisfaction of the total shareholder
 

return and earnings per share test described under “Compensation Discussion and Analysis — Compensation Objectives and Program Design — Performance-based Compensation — Equity-based Compensation,” above, with the number of units vesting depending on the level at which the tests were satisfied. The amount shown is the maximum number of units that could vest.

 

  (K) Restricted stock units granted January 10, 2007, half of which were subject to performance tests: The remaining units vested on January 10, 2011.

 

  (L) Restricted stock units granted January 9, 2008: The remaining units are scheduled to vest on January 30, 2012.

 

  (M) Restricted stock units granted January 30, 2008, subject to performance tests: The remaining units are scheduled to vest on January 30, 2012, subject to satisfaction of total shareholder return or earnings per share test described in prior proxy statements.

 

  (N) Restricted stock units granted January 14, 2009, half of which were subject to performance tests: Approximately 43% of the units vested on January 14, 2011. One quarter of the then remaining units are scheduled to vest on each of January 14, 2012 and 2013. One half of the remaining units are scheduled to vest on January 14, 2013, subject to satisfaction of total shareholder return or earnings per share test described in prior proxy statements.

 

  (O) Restricted stock units granted January 10, 2007: The remaining units vested on January 10, 2011.

 

  (P)

Restricted units awarded to Mr. Braverman on October 2, 2008 in connection with the execution of his new employment agreement. One half of these units vested upon the certification by the Compensation Committee on November 30, 2010 that the test to assure eligi-


 

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bility under Section 162(m) was satisfied with respect to these units. The remaining units are scheduled to vest on October 2, 2012, subject to the test to assure eligibility under Section 162(m).

 

  (Q) Restricted stock units awarded to Mr. Braverman on January 13, 2010 pursuant to his employment agreement in connection with his assumption of new responsibilities. One half of these units vest on each of January 13, 2012 and 2014, subject to the test to assure eligibility under Section 162(m).

 

  (R) Restricted stock units granted January 10, 2007: The remaining units vested on January 10, 2011.

 

  (S) Restricted stock units granted to Mr. Staggs January 30, 2008 in connection with the execution of a new employment agreement and subject to performance tests: All of the units are scheduled to vest on
 

March 31, 2013, subject to determination that the test to assure eligibility under Section 162(m) is satisfied.

 

  (T) Restricted stock units granted January 13, 2010, 40% of which are subject to performance tests: 10% of the units vested January 13, 2011 and 10% of the units vest on each of January 13, 2012, 2013 and 2014. The remaining units vest January 13, 2013 subject to satisfaction of the total shareholder return and earnings per share test described under “Compensation Discussion and Analysis — Compensation Objectives and Program Design — Performance-based Compensation — Equity-based Compensation,” above, with the number of units vesting depending on the level at which the tests were satisfied. The amount shown is the maximum number of units that could vest.

 

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Option Exercises and Stock Unit Vesting During Fiscal 2010

The following table provides information concerning exercises of options and vesting of restricted stock units held by the named executive officers during fiscal 2010. Information regarding the amounts in the columns follows the table.

 

FISCAL 2010 OPTION EXERCISE AND STOCK VESTED  
     Option Awards      Stock Awards  
      Number of
Shares
Acquired on
Exercise
    

Value
Realized

on

Exercise

     Number of
Shares
Acquired on
Vesting
     Value
Realized on
Vesting
 
Robert A. Iger      1,750,000       $ 21,181,908         515,142       $ 15,876,417   
James A. Rasulo      150,000         1,754,610         89,089         2,792,882   
Alan N. Braverman      40,000         191,000         73,671         2,286,447   
Kevin A. Mayer      90,000         828,750         35,945         1,112,777   
M. Jayne Parker      11,118         52,977         4,595         143,276   
Thomas O. Staggs      935,000         7,934,067         162,600         5,035,393   

 

The value realized on exercise of options is equal to the amount per share at which the executive sold shares acquired on exercise (all of which occurred on the date of exercise) minus the exercise price of the options times the number of shares acquired on exercise of the options. The value realized on vesting of stock awards

is equal to the closing market price of the Company’s common stock on the date of vesting times the number of shares acquired upon vesting. The number of shares and value realized on vesting includes shares that were withheld at the time of vesting to satisfy tax withholding requirements.


 

Equity Compensation Plans

The following table summarizes information, as of October 2, 2010, relating to equity compensation plans of the Company pursuant to which grants of options, restricted stock, restricted stock units or other rights to acquire shares may be granted from time to time.

 

EQUITY COMPENSATION PLANS  
Plan category    Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights
(a)
    Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
    Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding securities
reflected in column (a))
(c)
 
Equity compensation
    plans approved by
    security holders1
     152,261,767 2      $27.73 3      106,701,826 4 

Equity compensation
    plans not approved by

    security holders

                     
Total      152,261,767 2      $27.73 3      106,701,826 4 
                          

 

1

These plans are the Company’s Amended and Restated 2005 Stock Incentive Plan, 1995 Stock Option Plan for Non-Employee Directors, Amended and Restated 1995 Stock Incentive Plans, The Walt Disney Company/Pixar 1995 Stock Plan, and The Walt Disney Company/Pixar 2004 Equity Incentive Plan (Disney/Pixar Plans were assumed by the Company in connection with the acquisition of Pixar).

2

Includes an aggregate of 32,504,206 restricted stock units and performance-based restricted stock units. Also includes options to purchase an aggregate of 19,919,739 shares, at a weighted average exercise price of $24.57, and 475,578 restricted stock units, in each case granted under plans assumed by the Company in connection with the acquisition of Pixar, which plans were approved by the shareholders of Pixar prior to the Company’s acquisition.

3

Weighted average exercise price of outstanding options; excludes restricted stock units and performance-based restricted stock units.

4

Includes 389,800 securities available for future issuance under plans assumed by the Company in connection with the acquisition of Pixar, which plans were approved by the shareholders of Pixar prior to the Company’s acquisition.

 

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Pension Benefits

The Company maintains a tax-qualified, noncontributory retirement plan, called the Disney Salaried Retirement Plan, for salaried employees who have completed one year of service. Benefits are based on a percentage of total average monthly compensation plus a portion of average monthly compensation that exceeds $2,500 multiplied by years of credited service. Average monthly compensation is equal to base salary and excludes other compensation such as bonuses and equity compensation and is calculated based on the highest five consecutive years of compensation during the ten year period prior to termination or retirement, whichever is earlier. In addition, each participant receives a flat dollar amount derived from a table based solely on years and hours of service. Retirement benefits are non-forfeitable after five years of vesting service, or at age 65 after one year of service. After five years of vesting service, actuarially reduced benefits are paid to participants who retire before age 65 but on or after age 55.

In calendar year 2010, the maximum compensation limit under a tax-qualified plan was $245,000, and the maximum annual benefit that may be accrued under a tax-qualified defined benefit plan was $195,000. To provide additional retirement benefits for key salaried employees, the Company maintains a supplemental nonqualified, unfunded plan, the Amended and Restated Key Plan, which provides retirement benefits in excess of the compensation limitations and maximum benefit accruals under tax-qualified plans. This plan recognizes deferred amounts of base salary for years prior to 2006 for purposes of determining applicable retirement benefits, and benefits are otherwise calculated on the same basis as under the tax-qualified plan.

Company employees (including two of the named executive officers) who transferred to the Company from ABC, Inc. after the Company’s acquisition of ABC are also entitled to benefits under the ABC, Inc. Retirement Plan. Benefits under that plan are based on a percentage of average

compensation and years of credited service while employed by ABC, Inc., less an actuarially determined Social Security offset, while a participant under the plan. Average compensation is based on the highest five consecutive years of compensation during the last ten-year period of active plan participation, and compensation includes salary and bonus, but excludes equity compensation, fringe benefits and expense allowances. Like the Company’s Amended and Restated Key Plan, the Benefits Equalization Plan of ABC, Inc., is a non-qualified, non-funded plan that provides eligible participants retirement benefits in excess of the compensation limits and maximum benefit accruals that apply to tax-qualified plans. In addition, a term of the 1995 purchase agreement between ABC, Inc. and the Company provides that employees transferring employment to coverage under a Disney pension plan will receive an additional benefit under Disney plans equal to (a) the amount the employee would receive under the Disney pension plans if all of his or her ABC service were counted under the Disney pension less (b) the combined benefits he or she receives under the ABC plan (for service prior to the transfer) and the Disney plan (for service after the transfer).

Both Mr. Iger and Mr. Braverman transferred from ABC, and each receives a pension benefit to bring his total benefit up to the amount he would have received if all his years of service had been credited under the Disney plans. (The effect of these benefits is reflected in the present value of benefits under the Disney plans in the table below).

Both Mr. Iger and Mr. Braverman are currently eligible for early retirement. The early retirement reduction for the Disney Salaried Retirement Plan and the Restated and Amended Key Plan is 50% at age 55, decreasing to 0% at age 65. The early retirement reduction for the ABC, Inc., Retirement Plan, and the Benefit Equalization Plan of ABC, Inc. is 28% at age 55, decreasing to 0% at age 62 (the Social Security offset reduction at age 55 is 42%, decreasing to 0% at age 62).


 

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The following table sets forth the present value to each of the named executive officers of the pension benefits to which he or she is entitled under each of the plans described above. The present values assume each officer retires at age 65 for purposes of the Disney Salaried Retirement Plan and the Amended and Restated Key Plan and age 62 for purposes of the ABC, Inc. Retirement Plan, and the Benefit Equalization Plan of ABC, Inc. Age 65 is the normal retirement age under each of

the plans and is also the age at which unreduced benefits are payable under the Disney plans; the earliest age at which unreduced benefits are payable under the ABC plans is age 62. The values also assume straight life-annuity payment for an unmarried participant. Participants may elect other actuarially reduced forms of payment, such as joint and survivor benefits and payment of benefits for a period certain irrespective of the death of the participant.


 

FISCAL YEAR END 2010 PENSION BENEFITS  
Name    Plan Name    

Number of
Years of
Credited
Service at

Fiscal Year End

 

Present Value of
Accumulated
Benefit at

Fiscal Year End

     Payments
During Last
Fiscal Year
 
Robert A. Iger      Disney Salaried Retirement Plan      11   $ 560,549           
     Disney Amended and Restated Key Plan      11     4,231,950           
     ABC, Inc. Retirement Plan      25     805,085           
     Benefit and Equalization Plan of ABC, Inc.      25     6,356,147           
               
     Total        $ 11,953,731           
James A. Rasulo      Disney Salaried Retirement Plan      25     767,960           
     Disney Amended and Restated Key Plan      25     3,087,036           
               
     Total        $ 3,854,996           
Alan N. Braverman      Disney Salaried Retirement Plan      8   $ 571,489           
     Disney Amended and Restated Key Plan      8     1,485,600           
     ABC, Inc. Retirement Plan      9     258,727           
     Benefit and Equalization Plan of ABC, Inc.      9     1,442,467           
               
     Total        $ 3,758,282           
Kevin A. Mayer      Disney Salaried Retirement Plan      13   $ 289,576           
     Disney Amended and Restated Key Plan      13     518,747           
               
     Total        $ 808,323           
M. Jayne Parker      Disney Salaried Retirement Plan      22   $ 545,475           
     Disney Amended and Restated Key Plan      22     260,754           
               
     Total        $ 806,229           
Thomas O. Staggs      Disney Salaried Retirement Plan      21   $ 505,446           
     Disney Amended and Restated Key Plan      21     2,080,300           
               
       Total          $ 2,585,746           

 

The present values were calculated using the 5.25% discount rate assumptions set forth in footnote 11 to the Company’s Audited Financial Statements for fiscal year 2010 and using actuarial factors including RP2000 white collar combined mortality table projected 10 years for males and females. The present values shown in the table are not available as lump sum payment under the plans.

 

Deferred Compensation

The Company does not now defer current compensation of any named executive officer on a basis that is not tax qualified, but from 2000 to 2005, $500,000 per year of Mr. Iger’s annual salary was deferred. Mr. Iger’s employment agreement provides that the deferred compensation will be paid, together with interest at the applicable federal rate for mid-term treasuries, reset annually, no later than 30 days after Mr. Iger is no longer subject to the provisions of Section 162(m) of the Internal


 

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Revenue Code (or at such later date as is necessary to avoid the imposition of an additional tax on Mr. Iger under Section 409A of the Internal Revenue Code). The interest rate is adjusted annually in March and the weighted average interest rate for fiscal 2010 was 2.38%. The following table sets forth the earnings on the deferred amount in fiscal 2010 and the aggregate balance including accumulated earnings as of October 2, 2010. There were no additions during the fiscal year to the deferred amount by either the Company or Mr. Iger other than these earnings and no withdrawals during the fiscal year. Because the earnings during this year and previous years were not above market or preferential, these amounts are not included in the Summary Compensation Table.

 

FISCAL 2010 NONQUALIFIED DEFERRED
COMPENSATION
 

Aggregate

Earnings

in Last

Fiscal Year

  

Aggregate

Balance at

Last Fiscal

Year End

 
$86,641      $3,730,826   
          

Payments and Rights on Termination

Our named executive officers may receive compensation in connection with the termination of their employment. This compensation is payable pursuant to (a) the terms of compensation plans applicable by their terms to all participating employees and (b) the terms of employment agreements of Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs. The availability, nature and amount of this compensation differ depending on whether employment terminates because of:

 

 

death or disability;

 

 

the Company’s termination of the executive pursuant to the Company’s termination right or the executive’s decision to terminate because of action the Company takes or fails to take;

 

 

the Company’s termination of the employee for cause; or

 

 

expiration of an employment agreement, retirement or other voluntary termination.

The compensation that each of our named executive officers may receive under each of these termination circumstances is described below, including quantification of the amount each executive would have become entitled to assuming a termination at the end of fiscal 2010 under the circumstances described.

Any actual compensation received by our named executive officers in the circumstances described below may be different than we describe because many factors affect the amount of any compensation received. These factors include: the date of the executive’s termination of employment; the executive’s base salary at the time of termination; the Company’s stock price at the time of termination; and the executive’s age and service with the Company at the time of termination. In addition, although the Company has entered into individual agreements with each of our named executive officers, in connection with a particular termination of employment the Company and the named executive officer may mutually agree on severance terms that vary from those provided in pre-existing agreements.

In each of the circumstances described below, our executive officers are entitled to earned, unpaid salary through the date of termination and accrued benefits that are unconditionally accrued as of the date of termination pursuant to policies applicable to all employees. In Mr. Iger’s case, this includes the deferred salary and interest earned on it as described under “Deferred Compensation,” above. This earned compensation is not described or quantified below because the amount of compensation to which the officer is entitled does not change because of the termination, but we do describe and quantify benefits that continue beyond the date of termination that are in addition to those provided for in the applicable benefit plans. The executive’s accrued benefits include the pension benefits described under “Pension Benefits,” above, which become payable to all participants who have reached retirement age. Because they have reached retirement age under the plans, Mr. Iger and Mr. Braverman each would have been entitled to these early retirement benefits if their employment had terminated at the end of fiscal


 

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year 2010. Because the pension benefits available to Mr. Iger and Mr. Braverman upon termination are not different from those described above under “Pension Benefits” except in ways that are equally applicable to all salaried employees, the nature and amount of pension benefits are not described or quantified below.

Death and Disability

The employment agreements of Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs each provide that if he or she dies or his or her employment terminates because of disability during the term of the agreement, he or she (or his or her estate) will receive a bonus for any fiscal year that had been completed at the time of his death or termination of employment due to disability but for which the bonus had not yet been paid. The amount of the bonus will be determined by the Compensation Committee using the same criteria used for determining a bonus as if the executive remained employed.

In addition, Mr. Iger, Mr. Staggs and Mr. Braverman are currently eligible for participation in the Company’s Family Income Assurance Plan, which is being phased out as described in the Compensation Discussion and Analysis, above. The plan provides that, in the event of the death of a participating key executive while employed by the Company, the eligible spouse, same sex domestic partner or dependent child is entitled to receive an amount equal to 100% of the executive’s salary in effect at the date of death for the first year after such date of death, 75% thereof during the second year, and 50% thereof during the third year.

In addition to the compensation and rights in the employment agreements described above, pursuant to the terms of the Amended and Restated 1995 Stock Incentive Plan and the Amended and Restated 2005 Stock Incentive Plan (which we refer to as the 1995 and 2005 Plans, respectively), all options awarded to a participant (including the named executive officers) become exercisable upon the death of the participant and remain exercisable for 18 months, and all

restricted stock units awarded to the participant under the plans will, to the extent the units had not previously been forfeited, vest and become payable upon the death or disability of the participant. Upon termination due to disability, the exercisability of options will not accelerate but the participant will have one year following termination (or 18 months in the case of participants who are eligible for immediate retirement benefits) rather than three months following termination to exercise options that were at the time of termination, or within three months would become, exercisable.

Options awarded after December 2009 (and awarded at least one year before termination) will continue to vest for three years after termination of employment by reason of disability and will remain exercisable until the earlier of three years after such termination and the original expiration date if the participant is age 60 or greater and has at least ten years of service at the time of termination due to disability except that this does not apply for certain employees outside the United States. As none of the awards to named executive officers covered by this provision had been awarded more than a year prior to the end of fiscal year 2010, it did not have any effect on the quantification of benefits described below.

In addition, Mr. Iger’s employment agreement provides that, upon his death, the restricted stock units (plus any dividend equivalent units that had accrued with respect to those units) awarded to Mr. Iger in connection with the signing of his 2005 employment agreement that had not previously vested will immediately vest. The agreement provides that upon Mr. Iger’s termination due to disability, these units will be distributed on the dates they would have vested in the absence of such termination, but without regard to whether the performance tests were satisfied as of those dates. All remaining units under this award vested October 2, 2010, subject to certification by the Compensation Committee that the test to assure eligibility under Section 162(m) was satisfied, which certification was made on November 30, 2010, and accordingly the affect of their acceleration in not included in the table below.


 

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The following table provides the value of benefits each of our executive officers would have received under compensation plans and their employment agreements or compensation arrangements in effect on the date of this proxy statement if their employment had terminated at the close of business on the last day of fiscal 2010 as a result of death or disability. The value of option acceleration is equal to the difference between the $33.34 closing market price of shares of the Company’s common stock on October 1, 2010 (the last trading day in fiscal 2010) and the

weighted average exercise price of options with an exercise price less than the market price times the number of such options that would accelerate as a result of termination. The value of restricted stock unit acceleration is equal to the $33.34 market price of shares of the Company’s common stock on October 2, 2010 and the number of units that would accelerate as a result of (or, in the case of Mr. Iger’s disability, continue to vest despite) termination.


 

DEATH AND DISABILITY  
      Cash
Payment
    Option
Acceleration
(only upon
death)
     Restricted
Stock Unit
Acceleration
 
Robert A. Iger    $ 17,960,000 1    $ 13,939,649       $ 22,273,292   
James A. Rasulo      3,700,000 1      1,628,480         6,404,964   
Alan N. Braverman      5,587,500 1      1,454,425         8,575,038   
Kevin A. Mayer      1,590,000 1      992,715         3,256,927   
M. Jayne Parker      850,000 1      286,923         1,086,385   
Thomas O. Staggs      6,850,000 1      2,604,492         17,496,853   

 

1

This amount is equal to the bonus awarded to the executives with respect to fiscal 2010 and set forth in the Summary Compensation Table under the column labeled “Non-Equity Incentive Plan Compensation” plus, in the cases of Mr. Iger, Mr. Braverman and Mr. Staggs, amounts payable under the Family Income Assurance Plan.

 

Termination Pursuant to Company Termination Right or by Executive for Good Reason

The employment agreements of Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs each provide that if his or her employment is terminated by the Company pursuant to the Company’s termination right (as described below) or by the named executive officer with good reason (as described below), he will receive, in addition to salary and benefits through the date his employment is terminated, a bonus for any fiscal year that had been completed at the time of his termination of employment but for which the bonus had not yet been paid. The amount of the bonus will be determined by the Compensation Committee using the same criteria used for determining a bonus if the executive remained employed.

In addition, the employment agreements of Mr. Iger, Mr. Rasulo, Mr. Braverman,

Mr. Mayer, Ms. Parker and Mr. Staggs each provide that the named executive officer will receive the following compensation and rights conditioned on his or her executing a mutual release of liability and agreeing to provide the Company with certain consulting services for a period of six months after his or her termination (or, if less, for the remaining term of his or her employment agreement) pursuant to a form of consulting agreement attached to the employment agreement.

 

 

A lump sum payment to be made six months and one day after termination equal to the base salary the named executive officer would have earned had he remained employed during the term of his consulting agreement.

 

 

If the consulting agreement was not terminated as a result of the named executive officer’s material breach of the consulting agreement, a further lump sum payment to be made six months


 

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and one day after termination of his employment equal to the base salary the named executive officer would have earned had he or she remained employed after the termination of his or her consulting agreement and until the original scheduled expiration date of his or her employment agreement.

 

 

A bonus for the year in which he or she is terminated equal to a pro-rata amount of a target bonus amount determined in accordance with his or her employment agreement.

 

 

All options that had vested as of the termination date or were scheduled to vest prior to the original scheduled expiration date of his or her employment agreement (or within three months thereafter) will remain or become exercisable as though the named executive officer were employed until the original scheduled expiration date of his or her employment agreement and will remain exercisable until the earlier of (a) the scheduled expiration date of the options and (b) three months (or in the case of Mr. Iger and Mr. Braverman, 18 months, as provided in the Company’s equity compensation plans) after the original scheduled expiration date of his or her employment agreement. In addition, all options issued to Mr. Iger prior to 2005 (all of which are currently exercisable) will remain exercisable for the period specified in the applicable option agreements.

 

 

All restricted stock units that were scheduled to vest prior to the original scheduled expiration date of his or her employment agreement will (subject to satisfaction of applicable performance conditions) vest as though the named executive officer were employed until the original scheduled expiration date of his or her employment agreement, except that any test to assure deductibility of compensation under Section 162(m) will be waived for any units scheduled to vest after the fiscal year in which the termination of employment occurs unless application of the test is necessary to preserve deductibility.

Under the employment agreements, the Company has the right to terminate the

named executive officer’s employment subject to the foregoing compensation in its sole, absolute and unfettered discretion for any reason or no reason whatsoever. A termination for cause does not constitute an exercise of this right and would be subject to the compensation provisions described below under “Termination for Cause.”

Termination by the executive for good reason means a termination by the named executive officer following notice given to the Company within three months of his having actual notice of the occurrence of any of the following events (except that the Company will have 30 days after receipt of the notice to cure the conduct specified in the notice): (i) a reduction in the named executive officer’s base salary, annual target bonus opportunity or (where applicable) annual target long-term incentive award opportunity; (ii) the removal of the officer from his position (including in the case of Mr. Iger, the failure to elect or reelect him as a member of the Board or his removal from the position of president other than in connection with the appointment of another person who is acceptable to him to serve as president); (iii) a material reduction in his duties and responsibilities (other than, in the case of Mr. Iger, in connection with the appointment of another person to serve as president); (iv) the assignment to him of duties that are materially inconsistent with his position or duties or that materially impair his ability to function in his office; (v) relocation of his principal office to a location that is more than 50 miles outside of the greater Los Angeles area and, in the case of Mr. Iger, that is also more than 50 miles from Manhattan; or (vi) a material breach of any material provision of the agreement by the Company.

Termination for good reason also includes any occurrence after a change in control (as defined in the 1995 and 2005 Plans) that would constitute a triggering event. The 1995 and 2005 Plans each provide that if, within 12 months following a change in control as defined in the plans, a “triggering event” occurs, any outstanding stock options, restricted stock units, performance-based restricted stock units or other plan awards will generally


 

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become fully vested and, in certain cases, paid to the plan participant. A triggering event is defined to include: (a) a termination of employment by the Company other than for death, disability or “cause;” or (b) a termination of employment by the participant following a reduction in position, pay or other “constructive termination.” Under the plans, cause has the meaning in the executive’s employment agreement, if applicable, as defined below under “Termination for Cause” or, if there is no employment agreement or the executive would have greater rights under the following definition, cause means conviction for or pleading to a felony under state or Federal law, willful gross misconduct or material breach of an agreement with the Company with respect to confidentiality, noncompetition, nonsolicitation or a similar restrictive covenant. Under the terms of the plans, payments under awards that become subject to the excess parachute tax rules may be reduced under certain circumstances.

If any of the compensation or rights described above is paid after a change in control such that the compensation or rights could be subject to excise tax as an “excess parachute payment” under federal income tax rules, the Company has agreed to pay Mr. Iger, Mr. Rasulo, Mr. Braverman and Mr. Staggs an additional amount to compensate for the incremental tax costs as a result of the excise tax, up to a maximum of $2 million in the case of Mr. Rasulo and Mr. Braverman and $4 million in the case of Mr. Staggs. This obligation to provide additional compensation will not apply if the aggregate amounts payable to the named executive officer that are treated as “parachute payments” for purposes of the applicable federal tax provisions would not exceed the maximum amount that can be paid to the named executive officer without incurring such excise tax by at least 10%, in which case the named executive officer’s compensation would be reduced to the maximum amount that would not result in the named executive officer incurring the excise tax.

The employment agreements of Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer,

Ms. Parker and Mr. Staggs provide that they are not required to seek other employment to obtain compensation to offset the amounts payable by the Company as described above, and compensation resulting from subsequent employment will not be offset against amounts described above.

Restricted stock units that were awarded in lieu of cash as a portion of a bonus award vest upon termination for any reason other than a termination for cause as defined in an executive’s employment agreement.

Options and restricted stock units awarded after December 2009 (and awarded at least one year before termination) will continue to vest for three years after termination of employment for any reason other than death, cause (as defined in the 1995 and 2005 Plans, as applicable) or, in the case of restricted stock units, disability (and options will remain exercisable until the earlier of three years after such termination and the original expiration date) if the participant is age 60 or greater and has at least ten years of service at the time of retirement except that this does not apply for certain employees outside the United States. Where, as is the case with named executive officers, vesting and, in the case of stock options, exercise is extended by the terms of the holder’s employment agreement to the original scheduled expiration date of the holder’s employment agreement, this provision for continued vesting and exercise is applied as of the original scheduled expiration date of the holder’s employment agreement.

The following table quantifies benefits each of our executive officers would have received if their employment had been terminated at the end of fiscal 2010 by the Company pursuant to its termination right or by the executive with good reason.

The table quantifies the benefits of continued vesting and exercisability of options in the case of a termination in the absence of a change in control by setting forth the difference between the $33.34 closing market price of shares of the Company’s common stock on October 1, 2010 and the


 

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weighted average exercise price of options with an exercise price less than the market price times the number of options that would become exercisable despite the termination, although, as described above, options do not become immediately exercisable absent a change in control. The actual value of the options realized by an executive when they become exercisable may therefore be more or less than that shown below depending on movements in the stock price pending actual vesting of the options. The table quantifies the benefits of continued vesting of restricted stock units in the absence of a change in control by setting forth an amount equal to the $33.34 closing market price of shares of the Company’s common stock on October 1, 2010 times the target number of units that are scheduled to vest prior to the scheduled termination date of the applicable employment agreement, although, as described above, restricted stock units do not immediately vest absent a change in control. The value of restricted stock units realized by an executive may again be more or less than that shown below depending on movements in the stock price pending actual

vesting of the restricted stock units and depending on the number of units that will vest, which depends on the extent to which performance tests are satisified.

The value of compensation for additional taxation is the amount estimated to be payable to compensate the executive for the excise tax payable (and the additional taxes payable due to such additional payment) by reason of the compensation received as a result of a change in control. The calculation of whether, and to what extent, any such compensation would have been payable to each of the executive officers was based on the assumption that the termination occurredas of the close of business on the last day of fiscal 2010 and applying the regulations under Section 280G of the Internal Revenue Code, including, as applicable (including in respect of the annual bonuses payable to each such officer), the special rules applicable to amounts the payment of which is contingent solely on the continued performance of services for a specified period and in respect of which at least a portion of the services were performed before the termination.


 

TERMINATION PURSUANT TO COMPANY TERMINATION RIGHT OR BY EXECUTIVE FOR GOOD REASON  
     

Cash

Payment

   

Option

Valuation

    

Restricted
Stock Unit

Valuation

     Compensation
for Additional
Taxation
 
Robert A. Iger           

    No change in control

   $ 18,126,667 1    $ 13,939,649       $ 22,273,292           

    Change in control

     18,126,667 1      13,939,649         22,273,292           

James A. Rasulo

          
    No change in control      9,766,667 1      1,628,480         6,404,964           
    Change in control      9,766,667 1      1,628,480         6,404,964           

Alan N. Braverman

          

    No change in control

     6,450,000 1      1,454,425         8,575,038           

    Change in control

     6,450,000 1      1,454,425         8,575,038           

Kevin A. Mayer

          

    No change in control

     3,040,000 1      660,573         1,830,986           

    Change in control

     3,040,000 1      992,715         3,256,927           

M. Jayne Parker

          

    No change in control

     2,047,917 1      176,842         418,940           

    Change in control

     2,047,917 1      286,923         1,086,385           

Thomas O. Staggs

          

    No change in control

     7,200,000 1      2,505,831         17,159,377           

    Change in control

     7,200,000 1      2,604,492         17,496,853           
                                    

 

1

This amount is equal to the bonus awarded to the executives with respect to fiscal 2010 and set forth in the Summary Compensation Table under the column labeled “Non-Equity Incentive Plan Compensation” plus the lump sum payments based on salary through the end of the employment term as described above.

 

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Termination for Cause

The employment agreements of Mr. Iger, Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs each provide that if his or her employment is terminated by the Company for cause he or she will only be entitled to compensation earned and benefits vested through the date of termination, including any rights he or she may have under his indemnification agreement with the Company or the equity plans of the Company.

“Termination for Cause” is defined in Mr. Iger’s employment agreement as termination by the Company due to (i) conviction of a felony or the entering of a plea of nolo contendere to a felony charge; (ii) gross neglect, willful malfeasance or willful gross misconduct in connection with his employment which has had a material adverse effect on the business of the Company and its subsidiaries, unless he reasonably believed in good faith that such act or non-act was in, or not opposed to, the best interests of the Company; (iii) his substantial and continual refusal to perform his duties, responsibilities or obligations under the agreement that continues after receipt of written notice identifying the duties, responsibilities or obligations not being performed; (iv) a violation that is not timely cured of the Company’s code of conduct or any Company policy that is generally applicable to all employees or all officers of the Company that he knows or reason

ably should know could reasonably be expected to result in a material adverse effect on the Company; (v) any failure (that is not timely cured) to cooperate, if requested by the Board, with any investigation or inquiry into his or the Company’s business practices, whether internal or external; or (vi) any material breach that is not timely cured of covenants relating to non-competition during the term of employment and protection of the Company’s confidential information.

“Termination for Cause” is defined in Mr. Rasulo’s, Mr. Braverman’s, Mr. Mayer’s, Ms. Parker’s and Mr. Stagg’s employment agreement as termination by the Company due to gross negligence, gross misconduct, willful nonfeasance or

willful material breach of the agreement by the executive unless, if the Company determines that the conduct or cause is curable, such conduct or cause is timely cured by the executive.

Expiration of Employment Term; Retirement

Under his employment agreement, if Mr. Iger’s employment ends at or within 30 days following the expiration of the stated term of his employment agreement (i.e., January 31, 2013), he will be entitled to the following compensation and rights, in addition to compensation earned through that date:

 

 

A separation payment equal to the sum of his then current base salary and average bonus payable to him for the last three completed fiscal years for which the bonus has been determined at the time of the termination. In determining the average bonus, the bonus for any year for which no bonus is received shall be zero. Payment of the separation payment is subject to Mr. Iger executing a mutual release of liability in substantially the form attached to his employment agreement. If Mr. Iger’s employment agreement were scheduled to expire at the end of fiscal 2010 and he terminated within 30 days thereafter, this payment would be equal to $14,292,060.

 

 

Mr. Iger and his eligible dependants will be entitled to continue participating in all medical, dental and hospitalization benefit plans until the earlier of 12 months following the date of termination and the date Mr. Iger receives equivalent coverage and benefits from a subsequent employer. If this continuation of benefits conflicts with any law or regulation or has adverse tax consequences for Mr. Iger, the Company or other program participants, Mr. Iger will receive the economic equivalent of the continuation of benefits including compensation for the tax costs of receiving the economic equivalent rather than the benefits. If Mr. Iger’s employment agreement were scheduled to expire at the end of fiscal 2010 and he terminated within 30 days thereafter, this value of continued benefits would be $19,884 based on the Company’s estimated cost of providing these benefits.


 

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Mr. Iger is not required to seek other employment to obtain compensation to offset the amounts payable by the Company as described above, and compensation resulting from subsequent employment will not be offset against amounts described above except that continuation of medical benefits may be terminated if Mr. Iger receives equivalent coverage and benefits as described above.

Under the terms of restricted stock units awarded to Mr. Braverman and Mr. Staggs in lieu of a portion of their annual bonus award, these restricted stock units will vest immediately upon termination of their employment for any reason other than cause. If Mr. Braverman or Mr. Staggs’s employment had terminated at the end of fiscal 2010 for any reason other than cause, the value of this acceleration, based on the market price of shares of the Company’s common stock on October 2, 2010 times the number of units that would accelerate as a result of termination, would be $218,876 and $411,686 for Mr. Braverman and Mr. Staggs, respectively.

 

Mr. Rasulo, Mr. Braverman, Mr. Mayer, Ms. Parker and Mr. Staggs are entitled to earned, unpaid salary and unconditionally vested accrued benefits if their employment terminates at the expiration of their employment agreement (where applicable) or they otherwise retire, but they are not contractually entitled to any additional compensation in this circumstance.

Options and restricted stock units awarded after December 2009 (and awarded at least one year before retirement) will continue to vest for three years after retirement (and options will remain exercisable until the earlier of three years after retirement and the original expirationdate) if the participant is age 60 or greater and has at least ten years of service at the time of retirement except when, in the judgment of management, this would create issues under applicable local laws. As none of the awards to named executive officers covered by this provision had been awarded more than a year prior to the end of fiscal year 2010, it did not have any effect on the quantification of benefits described above.


 

 

 

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Audit-Related Matters

Audit Committee Report

The charter of the Audit Committee of the Board specifies that the purpose of the Committee is to assist the Board in its oversight of:

 

 

the integrity of the Company’s financial statements;

 

 

the adequacy of the Company’s system of internal controls;

 

 

the Company’s compliance with legal and regulatory requirements;

 

 

the qualifications and independence of the Company’s independent registered public accountants; and

 

 

the performance of the Company’s independent registered public accountants and of the Company’s internal audit function.

In carrying out these responsibilities, the Audit Committee, among other things:

 

 

monitors preparation of quarterly and annual financial reports by the Company’s management;

 

 

supervises the relationship between the Company and its independent registered public accountants, including: having direct responsibility for their appointment, compensation and retention; reviewing the scope of their audit services; approving audit and non-audit services; and confirming the independence of the independent registered public accountants; and

 

 

oversees management’s implementation and maintenance of effective systems of internal and disclosure controls, including review of the Company’s policies relating to legal and regulatory compliance, ethics and conflicts of interests and review of the Company’s internal auditing program.

The Committee met nine times during fiscal 2010. The Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks. The Committee’s meetings include,

whenever appropriate, executive sessions in which the Committee meets separately with the Company’s independent registered public accountants, the Company’s internal auditors, the Company’s chief financial officer and the Company’s general counsel.

As part of its oversight of the Company’s financial statements, the Committee reviews and discusses with both management and the Company’s independent registered public accountants all annual and quarterly financial statements prior to their issuance. During fiscal 2010, management advised the Committee that each set of financial statements reviewed had been prepared in accordance with generally accepted accounting principles, and management reviewed significant accounting and disclosure issues with the Committee. These reviews included discussion with the independent registered public accountants of matters required to be discussed pursuant to Public Company Accounting Oversight Board AU 380 (Communication With Audit Committees), including the quality of the Company’s accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Committee also discussed with PricewaterhouseCoopers LLP matters relating to its independence, including a review of audit and non-audit fees and the written disclosures and letter from PricewaterhouseCoopers LLP to the Committee pursuant to applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants’ communications with the Audit Committee concerning independence.

In addition, the Committee reviewed key initiatives and programs aimed at maintaining the effectiveness of the Company’s internal and disclosure control structure. As part of this process, the Committee continued to monitor the scope and adequacy of the Company’s internal auditing program, reviewing internal audit department staffing levels and steps taken to maintain the effectiveness of internal procedures and controls.

 


 

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Taking all of these reviews and discussions into account, the undersigned Committee members recommended to the Board that the Board approve the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2010, for filing with the Securities and Exchange Commission.

Members of the Audit Committee

Monica C. Lozano

Robert W. Matschullat

John E. Pepper, Jr.

Orin C. Smith (Chair)

Policy for Approval of Audit and Permitted Non-audit Services

All audit, audit-related and tax services were pre-approved by the Audit Committee, which concluded that the provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s Outside Auditor Independence Policy provides for pre-approval of specifically described audit, audit-related and tax services by the Committee on an annual basis, but individual engagements anticipated to exceed pre-established thresholds must be separately approved. The policy also requires specific approval by the Committee if total fees for audit-related and tax services would exceed total fees for audit services in any fiscal year. The policy

authorizes the Committee to delegate to one or more of its members pre-approval authority with respect to permitted services, and the Committee has delegated to the Chairman of the Committee the authority to pre-approve services in certain circumstances.

Auditor Fees and Services

The following table presents fees for professional services rendered by PricewaterhouseCoopers LLP for the audit of the Company’s annual financial statements and internal control over financial reporting for fiscal 2010 and fiscal 2009, together with fees for audit-related services and tax services rendered by PricewaterhouseCoopers LLP during fiscal 2010 and fiscal 2009. Audit-related services consisted principally of audits of employee benefit plans and other entities related to the Company and financial due diligence reviews. Tax services consisted principally of tax compliance (primarily international returns), planning and advisory services, sales and use tax recovery assistance, tax due diligence assistance, and tax examination assistance.

 

      Fiscal 2010      Fiscal 2009  
      (in millions)  
Audit fees    $ 17.2       $ 18.9   
Audit-related fees      2.6         2.3   
Tax fees      3.6         2.3   
All other fees                

 

 


 

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Items to Be Voted On

Election of Directors

The current term of office of all of the Company’s Directors expires at the 2011 annual meeting. The Board proposes that all of the currently serving Directors be re-elected for a term of one year and until their successors are duly elected and qualified. Each of the nominees has consented to serve if elected. If any of them becomes unavailable to serve as a Director before the annual meeting, the Board may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board.

Directors are elected by a majority of votes cast unless the election is contested, in which case Directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a Director exceeds the number of votes cast “against” the Director. If an incumbent Director in an uncontested election does not receive a majority of votes cast for his or her election, the Director is required to submit a letter of resignation to the Board of Directors for consideration by the Governance and Nominating Committee. The Governance

and Nominating Committee is required to promptly assess the appropriateness of such nominee continuing to serve as a Director and recommend to the Board the action to be taken with respect to the tendered resignation. The Board is required to determine whether to accept or reject the resignation, or what other action should be taken, within 90 days of the date of the certification of election results.

Brokers holding shares beneficially owned by their clients do not have the ability to cast votes with respect to the election of Directors unless they have received instructions from the beneficial owner of the shares. It is therefore important that you provide instructions to your broker if your shares are held by a broker so that your vote with respect to Directors is counted.

The Board recommends a vote “FOR” each of the persons nominated by the Board.


 

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LOGO

Susan E. Arnold, 56, is retired and was President—Global Business Units of Procter & Gamble from 2007 to 2009. Prior to that, she was Vice Chair of P&G Beauty and Health from 2006, Vice Chair of P&G Beauty from 2004 and President Global Personal Beauty Care and Global Feminine Care from 2002. She has been a director of McDonalds Corporation since 2008. Ms. Arnold has been a Director of the Company since 2007.

Ms. Arnold contributes to the mix of experience and qualifications the Board seeks to maintain primarily through her experience as an executive of Procter & Gamble and her other public company board experience. At Procter & Gamble, Ms. Arnold was a senior executive responsible for major consumer brands in a large, complex retailing and global brand management company. As a result of this experience, Ms. Arnold brings to our Board in-depth knowledge of brand management and marketing, environmental sustainability, product development, international consumer markets, finance and executive management, including executive compensation and management leadership.

 

LOGO

John E. Bryson, 67, serves as Senior Advisor to Kohlberg Kravis Roberts & Co. (KKR) and is Retired Chairman of the Board and Chief Executive Officer, Edison International. Mr. Bryson was Chairman and Chief Executive Officer of Edison International (an electric power generator and distributor), the parent company of Southern California Edison and Edison Mission Group from 1990 to 2008. He has been a director of The Boeing Company since 1995, is a non-executive chairman of the board of BrightSource Energy, Inc. and of the board of overseers of Keck School of Medicine of the University of Southern California, and is a trustee of the California

Institute of Technology, a director of the W.M. Keck Foundation and the California Endowment, and was a director of Western Asset Income Fund from 1986 to 2006. Mr. Bryson has been a Director of the Company since 2000.

Mr. Bryson contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his years of experience in senior management at Edison International culminating as chairman and chief executive officer, through his other public company board experience and through his involvement in governmental and non-governmental organizations engaged in environmental and other matters. At Edison, Mr. Bryson served in senior legal, finance and operating positions before becoming chairman and chief executive officer and thus had responsibilities for the entire range of this large public utility’s business. Mr. Bryson’s experience on governmental and non-governmental organizations included service as President of the California Public Utilities Commission and as Chairman of the California State Water Resources Control Board and as founder and attorney for the Natural Resources Defense Council and service on the boards of the Council on Foreign Relations, the Public Policy Institute of California, and the California Institute of Technology. As a result of this experience, Mr. Bryson brings to our Board practical knowledge in all aspects of managing and providing leadership to complex business organizations and expertise in environmental issues.


 

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LOGO

John S. Chen, 55, is Chairman and Chief Executive Officer of Sybase Inc., a software developer and a wholly-owned subsidiary of SAP AG. Prior to SAP’s acquisition of Sybase in July 2010, Mr. Chen had been Chairman of the Board, Chief Executive Officer and President of Sybase, Inc., since November 1998. From February 1998 through November 1998, he served as co-Chief Executive Officer. Mr. Chen joined Sybase in August 1997 as Chief Operating Officer and served in that capacity until February 1998. From March 1995 to July 1997, Mr. Chen was President of the Open Enterprise Computing Division, Siemens Nixdorf, a computer and electronics company, and Chief Executive Officer and Chairman of Siemens Pyramid, a subsidiary of Siemens Nixdorf. He has been a director of Wells Fargo & Company since 2006. Mr. Chen has been a Director of the Company since 2004.

Mr. Chen contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience as a leader of a variety of technology businesses, his experience doing business in Asia and his other public company board experience. In his roles at Sybase and Siemens Nixdorf, Mr. Chen was responsible for overseeing and managing executive teams and a sizeable work force engaged in high technology development, production and marketing. Mr. Chen also interacted regularly with businesses and governments in Asia in connection with these businesses. As a result of this experience, Mr. Chen brings to our Board an understanding of the rapidly changing technological landscape and intense familiarity with all issues involved in managing technology businesses and particularly with businesses and governmental practices in Asia.

 

LOGO

Judith L. Estrin, 56, is Chief Executive Officer of JLABS, LLC, (formerly Packet Design Management Company, LLC), a privately held company focused on furthering innovation in business, government and non-profit organizations. Ms. Estrin served as Chief Technology Officer and Senior Vice President of Cisco Systems Inc., a developer of networking products, from 1998 until April 2000, and as President and Chief Executive Officer of Precept Software, Inc., a developer of networking software of which she was co-founder, from 1995 until its acquisition by Cisco in 1998. She was also a director of FedEx Corporation, an international provider of transportation and delivery services, from 1989 to September 2010. Ms. Estrin has been a Director of the Company since 1998.

Ms. Estrin contributes to the mix of experience and qualifications the Board seeks to maintain primarily through her experience in both large and developing technology businesses, her other public company board experience and her ongoing work in the field of innovation. In addition to serving as Chief Technology Officer at Cisco, Ms. Estrin co-founded seven technology businesses and is author of a book on innovation. She continues to promote innovation in business and academia through her work at JLabs and her service on academic advisory boards. As a result of this experience, Ms. Estrin brings to our Board an understanding of the process of technological innovation, its application in a wide variety of settings, and practice in the oversight of complex public businesses.


 

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LOGO

Robert A. Iger, 59, has served as President and Chief Executive Officer of the Company since October 2005, having previously served as President and Chief Operating Officer since January 2000 and as President of Walt Disney International and Chairman of the ABC Group from 1999 to January 2000. From 1974 to 1998, Mr. Iger held a series of increasingly responsible positions at ABC, Inc. and its predecessor Capital Cities/ABC, Inc., culminating in service as President of the ABC Network Television Group from 1993 to 1994 and President and Chief Operating Officer of ABC, Inc. from 1994 to 1999. He is a member of the Board of Directors of Lincoln Center for the Performing Arts in New York City. Mr. Iger has been a Director of the Company since 2000. The Company has agreed in Mr. Iger’s employment agreement to nominate him for re-election as a member of the Board at the expiration of each term of office during the term of the agreement, and he has agreed to continue to serve on the Board if elected.

Mr. Iger contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his position as chief executive officer of the Company and his long experience with the business of the Company. As president and chief executive officer and as a result of the experience he gained in over 35 years at ABC and Disney, Mr. Iger has an intimate knowledge of all aspects of the Company’s business and close working relationships with all of the Company’s senior executives.

 

LOGO

Steven P. Jobs, 55, has served as Chief Executive Officer of Apple Inc., a designer, manufacturer and marketer of a range of personal computers, mobile communication and media devices and portable digital music and video players, since February 1997 and is a member of its Board of Directors. Prior to the Company’s acquisition of Pixar, Mr. Jobs also served as Chairman of the Board of Pixar from March 1991 and as Chief Executive Officer of Pixar from

February 1986. Mr. Jobs has been a Director of the Company since the Company’s acquisition of Pixar in May 2006.

Mr. Jobs contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience as chief executive officer of Apple and his experience with Apple and NeXT, Inc. beginning in 1976 and with Pixar from its creation in 1986 through the Company’s acquisition of Pixar in 2006. In these positions, Mr. Jobs was responsible for overseeing all aspects of Apple and Pixar’s businesses.

 

LOGO

Fred H. Langhammer, 67, is Chairman, Global Affairs, of The Estée Lauder Companies Inc., a manufacturer and marketer of cosmetics products. Prior to being named Chairman, Global Affairs, Mr. Langhammer was Chief Executive Officer of The Estée Lauder Companies Inc. from 2000 to 2004, President from 1995 to 2004 and Chief Operating Officer from 1985 through 1999. Mr. Langhammer joined The Estée Lauder Companies in 1975 as President of its operations in Japan. In 1982, he was appointed Managing Director of its operations in Germany. He has been a director of Central European Media Enterprises, Ltd., since December 2009 and was also a director of The Shinsei Bank Limited from 2005 to 2009 and a director of AIG from 2006 to 2008. Mr. Langhammer has been a Director of the Company since 2005.

Mr. Langhammer contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience at Estee Lauder, a complex worldwide branded consumer products business, and his experience with business outside the United States. In addition to serving in Estee Lauder’s Japan and German operations and on the Board of Shinsei Bank, a Japan based commercial bank, Mr. Langhammer served as general manager of the Japan operations of a British trading company. He also serves as Co-Chairman of the American Institute for Contemporary German Studies at Johns Hopkins University and he is a senior fellow of the


 

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Foreign Policy Association and a member of the Trilateral Commission. As a result of this experience, Mr. Langhammer brings to our Board an understanding of growth strategies in worldwide branded businesses, specific knowledge of Asian and European markets, and extensive familiarity with all aspects of managing and providing leadership to a complex business organization.

 

LOGO

Aylwin B. Lewis, 56, has served as President and Chief Executive Officer of Potbelly Sandwich Works since June 2008. Prior to that, Mr. Lewis was President and Chief Executive Officer of Sears Holdings Corporation, a nationwide retailer, from September 2005 to February 2008. Prior to being named Chief Executive Officer of Sears, Mr. Lewis was President of Sears Holdings and Chief Executive Officer of KMart and Sears Retail following Sears’ acquisition of KMart Holding Corporation in March 2005. Prior to that acquisition, Mr. Lewis had been President and Chief Executive Officer of KMart since October 2004. Prior to that, Mr. Lewis was Chief Multibranding and Operating Officer of YUM! Brands, Inc., a franchisor and licensor

of quick service restaurants including KFC, Long John Silvers, Pizza Hut, Taco Bell and A&W, from 2003 until October 2004, Chief Operating Officer of YUM! Brands from 2000 until 2003 and Chief Operating Officer of Pizza Hut from 1996. Mr. Lewis served on the Board of Directors of Sears Holding Corp. from 2005 through 2008 and on the Board of Directors of Kmart from 2004 through 2008. Mr. Lewis has been a Director of the Company since 2004.

Mr. Lewis contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience in various positions at, Yum! Brands, Kmart, Sears and Potbelly Sandwich Works. At Yum! Brands, Mr. Lewis was responsible for marketing and branding of consumer facing products and services in the quick serve food industry, and at Kmart and Sears he was responsible for all aspects of complex, worldwide busi-

nesses offering consumer products. At Potbelly Sandwich Works, Mr. Lewis’s responsibilities include developing and implementing the company’s growth strategy. As a result of this experience, Mr. Lewis brings to our Board knowledge of consumer branding strategy and tactics, management and leadership of complex worldwide retail and service businesses, and insights into promoting growth strategies for new consumer-facing businesses.

 

LOGO

Monica C. Lozano, 54, is Chief Executive Officer of Impermedia, LLC, and Publisher and Chief Executive Officer of La Opinión, the largest Spanish-language newspaper in the United States. In addition, Ms. Lozano is a member of the Board of Regents of the University of California and a trustee of the University of Southern California. She has been a director of Bank of America Corporation since 2005 and is a director of the Weingart Foundation. Ms. Lozano has been a Director of the Company since 2000.

Ms. Lozano contributes to the mix of experience and qualifications the Board seeks to maintain primarily through her experience managing Impremedia’s media businesses, her other public company board experience and her service on a variety of non-profit boards and advisory groups. In addition to the board service described above, Ms. Lozano is a member of the President’s Economic Recovery Advisory Board and the Council on Foreign Relations, and has served on the boards of Sumitomo Bank, First Interstate Bank of California, Tenet Healthcare Corp., the National Council of La Raza (where she served as chair of the board), the California Health Care Corp., and the Public Policy Institute of California, among others. Through this experience, Ms. Lozano brings to our Board a wide-ranging knowledge of cultural and consumer trends, particularly in the Hispanic community, and an understanding of corporate governance practices and practice in overseeing the management of complex public businesses.


 

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LOGO

Robert W. Matschullat, 63, a private equity investor, served from 1995 until 2000 as Vice Chairman of the board of directors and Chief Financial Officer of The Seagram Company Ltd., a global company with entertainment and beverage operations. Prior to joining Seagram, Mr. Matschullat was head of worldwide investment banking for Morgan Stanley & Co. Incorporated, a securities and investment firm, and was on the Morgan Stanley Group board of directors. He is a director of The Clorox Company, where he was Interim Chairman of the Board and Interim Chief Executive Officer from March to October 2006, and a director of Visa Inc. He was a director of McKesson Corporation from 2002 to 2007. Mr. Matschullat has been a Director of the Company since 2002.

Mr. Matschullat contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience at Seagram and Morgan Stanley, his expertise in financial management and his other public company board experience. At Seagram, Mr. Matschullat was responsible for the financial function of the firm as well as serving on Seagram’s board of directors. At Morgan Stanley, he was engaged in an active investment banking practice, as well as serving as a senior executive and on the board of directors of the firm. As a result of this experience, Mr. Matschullat brings to our Board expertise in a wide range of financial and accounting matters, practical knowledge of executive management of complex, worldwide businesses, and knowledge of board level oversight as both a director and interim leader of a worldwide consumer products business.

 

LOGO

John E. Pepper, Jr., 72, has served as Chairman of the Board of the Company since January 1, 2007 and is Co-Chairman of the National Underground Railroad Freedom Center. Previously, he served as Chief Executive Officer of the National

Underground Railroad Freedom Center from December 2005 to May 2007 and as Vice President of Finance and Administration at Yale University from January 2004 to December 2005. Prior to that, he served as Chairman of the Executive Committee of the Board of Directors of The Procter & Gamble Company until December 2003. Since 1963, he had served in various positions at Procter & Gamble, including Chairman of the Board from 2000 to 2002, Chief Executive Officer and Chairman from 1995 to 1999, President from 1986 to 1995 and director from 1984 to 2003. Mr. Pepper served on the board of Boston Scientific Corp. from 2003 to May 2010 and is a member of the Executive Committee of the Cincinnati Youth Collaborative. Mr. Pepper has been a Director of the Company since 2006.

Mr. Pepper contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience at Procter & Gamble, at Yale and his other public company board experience. At Procter & Gamble, Mr. Pepper had a 40 year career including positions as executive for product lines and for international operations, and culminating in service as Chief Executive Officer and Chairman of the Board and, separately, as non-executive Chairman of the Board. Following his retirement from Procter & Gamble, Mr. Pepper provided his expertise in finance and administration to Yale University and the National Underground Railroad Freedom Center. In addition to the Board experience described above, Mr. Pepper served on the Board of Directors of Xerox and Motorola. As a result of this experience, Mr. Pepper brings to our Board facility in managing all aspects of a large, complex and diversified company involved in selling branded products worldwide, as well as understanding of financial and administrative matters in a variety of contacts. His experience as both an executive and non-executive chairman makes him exceptionally qualified to provide independent leadership to our Board of Directors and a constructive working relationship with senior management of the Company.


 

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LOGO

Sheryl Sandberg, 41, has served as the Chief Operating Officer of Facebook, Inc., an online social networking company, since March 2008. From 2001 to March 2008, Ms. Sandberg was the Vice President of Global Online Sales and Operations for Google Inc., an Internet search engine company. Ms. Sandberg also is a former Chief of Staff of the United States Treasury Department and previously served as a management consultant with McKinsey & Company and as an economist with The World Bank. Ms. Sandberg has been a director of Starbucks Corp. since 2009 and serves on a number of nonprofit boards including Women for Women International, and V-Day. She served as a director of eHealth, Inc. from 2006 to 2008. She has been a Director of the Company since March 2010.

Ms. Sandberg contributes to the mix of experience and qualifications the Board seeks to maintain primarily through her experience at Google, Facebook, McKinsey & Company and in government service. At Facebook, Ms. Sandberg is responsible for all of Facebook’s operational functions, and at Google she was responsible for the development and marketing of Google’s online advertising products and services. At McKinsey, she advised businesses on growth strategies. In addition to her service in a senior position at the United States Treasury, Ms. Sandberg served at the World Bank. As a result of this experience, Ms. Sandberg brings to our Board expertise in the online world, considerable knowledge of international finance and business and a deep understanding of consumer behavior.

 

 

LOGO

Orin C. Smith, 68, is retired and was President and Chief Executive Officer of Starbucks Corporation from 2000 to 2005. He joined Starbucks as Vice President and Chief Financial Officer in 1990, became President and Chief Operating Officer in 1994, and became a director of Starbucks in 1996. Prior to joining Starbucks, Mr. Smith spent a total of 14 years with Deloitte & Touche. Mr. Smith has been a director of Nike, Inc. since 2004 and of Washington Mutual, Inc. since 2005. He also serves on the Board of Directors of Conservation International and the University of Washington Foundation Board and is Chairman of the Starbucks Foundation Board. Mr. Smith has been a Director of the Company since 2006.

Mr. Smith contributes to the mix of experience and qualifications the Board seeks to maintain primarily through his experience at Starbucks, Deloitte & Touche, his other public company board experience and his service on not for profit boards. At Starbucks, Mr. Smith was first responsible for the financial function and then, as president, chief operating officer, chief executive officer and a member of the board of directors, for all aspects of managing and leading Starbuck’s business offering branded products and services worldwide. Through his service on the board of Conservation International, Mr. Smith has experience with a range of environmental and sustainability issues. As a result of this experience, Mr. Smith brings to our Board practical knowledge of management and leadership of complex worldwide consumer products businesses, expertise in financial matters and insights into international labor standards, environmental, sustainability and other corporate responsibility issues.


 

 

 

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Ratification of Appointment of Independent Registered Public Accountants

The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP as the Company’s independent registered public accountants for the fiscal year ending October 1, 2011. Services provided to the Company and its subsidiaries by PricewaterhouseCoopers LLP in fiscal 2010 are described under “Audit-Related Matters — Auditor Fees and Services,” above.

We are asking our shareholders to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accountants. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of PricewaterhouseCoopers LLP to our shareholders for ratification as a matter of good corporate practice.

Representatives of PricewaterhouseCoopers LLP will be present at the annual meeting to respond to appropriate questions and to make such statements as they may desire.

The affirmative vote of the holders of a majority of shares represented in person or by proxy and entitled to vote on this item will be required for approval. Abstentions will be counted as represented and entitled to vote and will therefore have the effect of a negative vote.

The Board recommends that shareholders vote “FOR” ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accountants for fiscal 2011.

In the event shareholders do not ratify the appointment, the appointment will be reconsidered by the Audit Committee and the Board. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.

 

 

Approval of the 2011 Stock Incentive Plan

The Board of Directors recommends that shareholders approve the Company’s 2011 Stock Incentive Plan (which we refer to as the 2011 Plan). The 2011 Plan would govern grants of stock-based awards to employees and non-employee directors and is intended to replace the Amended and Restated 1995 Stock Incentive Plan (which we refer to as the 1995 Plan) and the Amended and Restated 2005 Stock Incentive Plan (which we refer to as the 2005 Plan), each of which expires during 2011. The 2011 Plan provides that shares that remain available for issuance pursuant to the 1995 Plan and the 2005 Plan and shares that become available under those plans as a result of forfeitures may be issued under the 2011 Plan. As of January 26, 2011, 70.5 million shares were available under the 1995 Plan and the 2005 Plan. In addition, the 2011 Plan includes authorization for the issuance of an additional 64.0 million shares of Disney common stock thereunder.

The terms of the 2011 Plan are substantially similar to the terms of the 2005 Plan as currently in effect. The material terms of the 2011 Plan are described under “Summary of the 2011 Plan,” below, and a copy of the 2011 Plan is attached as Annex A to this proxy statement. The substantive changes from the 2005 Plan are as follows:

 

 

The 2011 Plan (in Section 6.3) provides for acceleration of vesting of options upon termination of employment due to disability, which makes treatment of these awards on disability consistent with the treatment of restricted stock units.

 

 

The 2011 Plan (in Section 6.5) allows awards to continue to vest when an employee is transferred to an entity in which the Company holds an investment even if the entity does not meet the formal definition of Affiliate.

 

 

The definition of “Fair Market Value” has been changed to give the Compensation Committee additional flexibility to determine an appropriate measure of fair market value.


 

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Language has been changed (in Section 6.6) to facilitate cashless exercise of options and the payment of taxes by an exercising holder.

The term of the 2011 Plan is 10 years.

Based upon the recommendation of the Board’s Compensation Committee, the Board of Directors has unanimously approved the 2011 Plan, subject to shareholder approval at the annual meeting. The 2011 Plan is designed to support the Company’s long-term business objectives in a manner consistent with our executive compensation philosophy.

The increase in authorized shares represented by the 2011 Plan is intended to secure adequate shares to fund expected awards under the Company’s long-term incentive program through at least the next annual award in January 2012. The Board believes that this number represents a reasonable amount of potential equity dilution and allows the Company to continue awarding equity incentives, which are an important component of our overall compensation program.

The affirmative vote of the holders of a majority of shares represented in person or by proxy and entitled to vote on this item will be required for approval of the amendments to the 2011 Plan. Abstentions will be counted as represented and entitled to vote and will therefore have the effect of a negative vote. Broker non-votes (as described under “Information About Voting and the Meeting — Voting”) will not be considered entitled to vote on this item and therefore will not be counted in determining the number of shares necessary for approval.

Additional information regarding the purpose of the 2011 Plan, shares available under plans, and the terms of the 2011 and existing plans is set out below.

Purpose of the 2011 Plan

The 2011 Plan will govern grants of stock-based awards to employees and non-employee directors. It is designed to support the Company’s long-term business objectives in a manner consistent with our executive compensation philosophy. The Board believes that by allowing the Company to continue to offer its employees long-term, performance-based compensation through the 2011 Plan, the Company will promote the following key objectives:

 

 

aligning the interest of employees with those of the shareholders;

 

 

reinforcing key Company goals and objectives that help drive shareholder value; and

 

 

attracting, motivating and retaining experienced and highly qualified employees who contribute to the Company’s financial success.

Shares Available Under Plans

Shares available under the 2011 Plan will include shares that remain available, or become available due to forfeitures of awards currently outstanding, under the 1995 and 2005 Plans plus an additional 64.0 million shares authorized by the 2011 Plan. As of January 26, 2011, and prior to the adoption of the 2011 Plan,

70.5 million shares remain available for issuance of future awards pursuant to the 1995 Plan and the 2005 Plan. In addition, 0.4 million shares remain available for future awards pursuant to the Walt Disney Company/Pixar 2004 Equity Incentive Plan (which we refer to as the Disney/Pixar Plan). The shares that are available for issuance under the 2011 Plan from the 1995 and 2005 Plan, and shares that are available for issuance under the Disney/Pixar Plan, may increase to the extent outstanding awards are cancelled due to forfeiture of awards or expiration of awards without exercise. The Company maintains other plans under which there are outstanding awards, but no future awards may be made from those plans.


 

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The following table sets forth the number of shares authorized for future issuance (including shares authorized for issuance pursuant to restricted stock, restricted stock unit and stock awards) as of January 26, 2011 and after including the additional shares authorized by the 2011 Plan, along with the equity dilution represented by the shares available for future awards as a percentage of the common shares outstanding.

 

SHARE AUTHORIZATION (shares in millions)
      Total Shares Available   

Equity Dilution:

Percent of Basic Common Shares
Outstanding

Shares authorized for future awards as of January 26, 20111    71.0    3.74%
Requested increase to shares available in the 2011 Plan    64.0    3.37%
Shares authorized for future awards after approval of the 2011 Plan1    135.0    7.11%

 

1

Includes shares authorized under the Amended and Restated 2005 Stock Incentive Plan, Amended and Restated 1995 Stock Incentive Plan, and the Walt Disney Company/Pixar 2004 Equity Incentive Plan.

On January 26, 2011, the equity overhang, or the percentage of outstanding shares (plus shares that could be issued pursuant to plans) represented by all stock incentives granted and those available for future grant under all plans, was 9.8%.1 The equity overhang from all stock incentives granted and available would be approximately 12.5% assuming approval of the 2011 Plan. Equity overhang following the original approval of the 2005 Plan in February 2005 and subsequent amendments was as follows:

 

Action and Date    Overhang After Action  
Adoption in February 2005      12.9
Amendment in March 2007      12.1
Amendment in March 2008      12.7
Amendment in March 2009      13.6
Amendment in March 2010      12.7
          

 

In light of the Company’s ongoing share buyback program, under which the Company repurchased 21.2 million shares during Fiscal 2010 (net of shares issued in

connection with the acquisition of Marvel), the Company believes its overhang level is reasonable and will continue to be so after approval of the 2011 Plan.


 

 

1

Equity overhang was calculated as all shares issuable upon exercise of outstanding options and vesting of outstanding restricted stock units plus shares available for future grant divided by (a) basic common shares outstanding + (b) shares in the numerator.

 

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The following table sets forth information regarding outstanding options and restricted stock units as of January 26, 2011.

 

OUTSTANDING AWARDS BY EXERCISE PRICE (shares in millions)

Range of

Exercise Prices

  

Outstanding

Options

  

Weighted

Average

Exercise

Price

   Weighted Average
Remaining Years
of Contractual Life
  

Unvested

Restricted

Stock
Units

$0 - $15.99    1.7    $12.42    2.1    n/a
$16 - $20.99    16.1    19.99    4.5    n/a
$21 - $25.99    13.4    24.16    2.4    n/a
$26 - $30.99    32.4    28.98    3.9    n/a
$31 - $35.99    27.4    32.89    5.5    n/a
$36 - $45.99   

10.5

  

39.62

  

10.0

   n/a
Total    101.5    $28.81    4.8    34.3