DEF 14A 1 a2240291zdef14a.htm DEF 14A

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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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The Walt Disney Company

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January 17, 2020

Letter from our Chairman and Chief Executive Officer   Letter from our Lead Director

Dear Fellow Shareholder,

 

Dear Fellow Shareholder,

I am pleased to invite you to our 2020 Annual Meeting of shareholders, which will be held on Wednesday, March 11, 2020, at 10:00 a.m. at the Duke Energy Center for the Performing Arts in Raleigh, North Carolina.

At the meeting, we will be electing nine members of our Board of Directors. We will also be considering ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants, an advisory vote to approve executive compensation, an amendment to our stock incentive plan and one shareholder proposal.

You may vote your shares using the Internet or the telephone by following the instructions on page 73 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 obtain an admission ticket in advance. You can obtain a ticket by following the instructions on page 74 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,

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Robert A. Iger

Chairman and Chief Executive Officer


 

As independent Lead Director, I encourage you to read our proxy statement, annual report and other proxy materials. I am proud of the Company's commitment to thoughtful governance, as well as the highly qualified, diverse group of Directors who make up our Board. Our Directors bring their wealth and breadth of experience to bear as they conduct the Board's governance and oversight functions.

Over the past year that oversight has involved the Company's key strategic initiatives, including the acquisition of Twenty-First Century Fox, Inc. and integration of its operations, and the expansion of the Company's direct-to-consumer business with the launch of Disney+ and assumption of operating control of Hulu.

In addition, over the past year we have continued, and benefited from, our ongoing dialogue with shareholders. I have had the opportunity to speak with a number of you and learn more about your insights on important topics such as succession planning, compensation, corporate social responsibility and our lobbying disclosure policy. The Board values this input and considers it as part of our governance process. In the proxy, you will see discussion of changes we have made as a direct result of shareholder feedback. We look forward to continuing our dialogue with shareholders in fiscal 2020.

Sincerely,

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Susan E. Arnold

Lead Director


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GRAPHIC   The Walt Disney Company
  Notice of 2020 Annual Meeting

The 2020 Annual Meeting of shareholders of The Walt Disney Company will be held:

    Wednesday, March 11, 2020
    10:00 a.m. Local Time
    Duke Energy Center for the Performing Arts
    2 East South Street
    Raleigh, North Carolina 27601

The items of business are:

    1.
    Election of the nine 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 2020.
    3.
    Consideration of an advisory vote to approve executive compensation.
    4.
    Approval of an amendment to the Company's Amended and Restated 2011 Stock Incentive Plan.
    5.
    Consideration of a shareholder proposal.

Shareholders of record of Disney common stock (NYSE: DIS) at the close of business on January 13, 2020, 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.

January 17, 2020
Burbank, California

 
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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 11, 2020

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

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.


TABLE OF CONTENTS


  Proxy Summary   1

 

Corporate Governance and Board Matters

 

8
 

Governing Documents

  8
 

The Board of Directors

  8
 

Board Leadership

  8
 

Committees

  10
 

The Board's Role in Risk Oversight

  11
 

Management Succession Planning

  12
 

Director Selection Process

  12
 

Director Independence

  13
 

Certain Relationships and Related Person Transactions

  14
 

Shareholder Communications

  14

 

Director Compensation

 

16

 

Executive Compensation

 

19
 

Compensation Discussion and Analysis

  19
 

Executive Compensation Program Structure

  20
 

2019 Compensation Decisions

  28
 

Compensation Committee Report

  36
 

Compensation Tables

  37

 

Audit-Related Matters

 

55
 

Audit Committee Report

  55
 

Policy for Approval of Audit and Permitted Non-audit Services

  56
 

Auditor Fees and Services

  56

  Items to Be Voted On   57
 

Election of Directors

  57
 

Ratification of Appointment of Independent Registered Public Accountants

  63
 

Advisory Vote on Executive Compensation

  63
 

Approval of an Amended and Restated 2011 Stock Incentive Plan

  64
 

Shareholder Proposal

  71
 

Other Matters

  72

 

Information About Voting and the Meeting

 

73
 

Shares Outstanding

  73
 

Voting

  73
 

Attendance at the Meeting

  74

 

Other Information

 

75
 

Stock Ownership

  75
 

Section 16(a) Reports

  76
 

Electronic Availability of Proxy Statement and Annual Report

  76
 

Mailings to Multiple Shareholders at the Same Address

  76
 

Proxy Solicitation Costs

  77

 

Annex A — Reconciliation of Non-GAAP Measures

 

A-1

 

Annex B — Amended and Restated 2011 Stock Incentive Plan

 

B-1

The Walt Disney Company (500 South Buena Vista Street, Burbank, California 91521) is providing you with this proxy statement relating to its 2020 Annual Meeting of shareholders. We began mailing a notice on January 17, 2020 containing instructions on how to access this proxy statement and our annual report online, and we also began mailing a full set of the proxy materials to shareholders who had previously requested delivery of the materials in paper copy. References to "the Company", "Disney" or "our" in this Proxy Statement refer to The Walt Disney Company and, as applicable, its consolidated subsidiaries.

   

The Walt Disney Company Notice of 2020 Annual Meeting and Proxy Statement


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GRAPHIC   Proxy Summary

Proposals to be Voted On

The following proposals will be voted on at the Annual Meeting of shareholders.

 
   
  For More Information
  Board Recommendation
Proposal 1: Election of nine directors   Pages 57 to 62   GRAPHIC For Each Nominee
Susan E. Arnold   Robert A. Iger        
Mary T. Barra   Maria Elena Lagomasino        
Safra A. Catz   Mark G. Parker        
Francis A. deSouza   Derica W. Rice        
Michael B.G. Froman            
Proposal 2:       Page 63   GRAPHIC For
Ratification of appointment of independent registered public accountants        
Proposal 3:       Page 63   GRAPHIC For
Advisory resolution on executive compensation        
Proposal 4:       Pages 64 to 70   GRAPHIC For
Approval of an amendment to the Company's Amended and Restated 2011 Stock Incentive Plan        
Proposal 5:       Pages 71 to 72   GRAPHIC Against
Shareholder proposal requesting an annual report disclosing information regarding the Company's lobbying policies and activities        

You may cast your vote in any of the following ways:

  GRAPHIC   GRAPHIC   GRAPHIC   GRAPHIC   GRAPHIC

 

Internet

 

Scan

 

Phone

 

Mail

 

In Person
  Visit www.ProxyVote.com/Disney. You will need the 16-digit number included in your proxy card, voter instruction form or notice.   You can scan this QR code to vote with your mobile phone. You will need the 16-digit number included in your proxy card, voter instruction form or notice.   Call 1-800-690-6903 or the number on your voter instruction form. You will need the 16-digit number included in your proxy card, voter instruction form or notice.   Send your completed and signed proxy card or voter instruction form to the address on your proxy card or voter instruction form.   See below regarding Attendance at the Meeting.

Attendance at the Meeting

If you plan to attend the meeting, you must be a shareholder on the record date and obtain an admission ticket in advance following the instructions set forth on page 74 of this proxy statement. Tickets will be available to registered and beneficial owners and up to one guest accompanying each registered or beneficial owner if permitted.

Requests for admission tickets will be processed in the order in which they are received and must be requested no later than 11:59 p.m. Eastern Time on March 10, 2020. 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 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 promptly at 10:00 a.m. Large bags, backpacks, suitcases, briefcases, cameras, cell phones, recording devices and other electronic devices will not be permitted at the meeting. You will be required to enter through a security checkpoint before being granted access to the meeting.

   

Proxy Summary


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GRAPHIC   Proxy Summary

This summary highlights certain information in this proxy statement. As it is only a summary, please review the complete proxy statement and 2019 annual report before you vote.

Fiscal 2019 Strategic Overview and Performance

This was a year of extraordinary accomplishment for the Company.

The Company substantially advanced its transformative long-term strategic goals during fiscal 2019, including as follows:

    effected a fundamental change in the Company's organization to aggressively pursue its direct-to-consumer strategy by reorganizing its business into four segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to-Consumer & International;

    completed the acquisition of Twenty-First Century Fox, Inc., which was subsequently renamed TFCF Corporation (TFCF), expanding our portfolio of intellectual property and expanding our content library to even better position us to execute successfully our direct-to-consumer strategy;

    further enhanced our direct-to-consumer strategy by obtaining a majority stake in Hulu and securing a path to 100% ownership;

    successfully integrated TFCF while pursuing, and now forecasting to meaningfully exceed, the $2 billion cost synergies to which the Company initially committed in the TFCF acquisition; and

    impressively coordinated efforts across all of the Company's separate businesses to provide content and marketing in support of the single most important strategic initiative of the Company for fiscal 2019 – Disney+, which through those efforts, had an enormously successful launch in November 2019.

Given that the closing date for the TFCF acquisition was uncertain and operational interaction was precluded before closing, the ranges developed by the Committee at the beginning of the fiscal year to assess annual financial performance for bonus purposes were necessarily based on legacy Disney performance.

Financial results were measured against these ranges. Even in the face of the challenges associated with effecting strategically important transformational change, the legacy Disney businesses had very strong financial

performance in fiscal 2019 against those measures. To cite just one example contributing to performance, the Company released an unprecedented five major theatrical films in fiscal 2019 that grossed over $1 billion each in worldwide box office.

While mindful of the early performance of TFCF and Hulu, Inc. (Hulu), in considering the other performance factors for the named executive officers, the Committee, among other accomplishments, viewed favorably and believed it was appropriate to reward the following with respect to the TFCF acquisition:

    management's actions to achieve successful integration while meaningfully exceeding the Company's initial cost synergy commitment;

    the actions taken to acquire operational control and a path to ownership of Hulu;

    the immediate use of TFCF's assets to impact our direct-to-consumer initiatives (including, for example, the inclusion of National Geographic and The Simpsons content on Disney+ and FX content on Hulu); and

    the progress made in creating a strong creative collaboration across the legacy Disney and TFCF teams.

On a reported basis, including the impact of consolidating the TFCF and Hulu businesses for two quarters, revenue increased 17% to $69,570 million from $59,434 million in the prior year. Diluted Earning Per Share (EPS) from continuing operations for the year decreased 25% to $6.27 from $8.36 in the prior year. During fiscal 2019, the Company issued 307 million shares of common stock to acquire TFCF, contributing to this reduction in EPS. Net income from continuing operations attributable to Disney decreased 17% to $10,441 million from $12,598 million in the prior year. Income from continuing operations before income taxes decreased 5% to $13,944 million from $14,729 million. Income from continuing operations before income taxes is the comparable GAAP measure to total segment operating income, which also decreased 5% to $14,868 million from $15,689 million.

The Walt Disney Company Notice of 2020 Annual Meeting and Proxy Statement      1

GRAPHIC

    For a reconciliation of income from continuing operations before income taxes to segment operating income, see Annex A.

For a more detailed discussion of our fiscal 2019 performance, see our fiscal 2019 Annual Report on Form 10-K.

The Company's long-term record of strong performance is reflected in a ten-year total shareholder return (TSR) that outperformed the S&P 500 by 196 percentage points.

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2      Proxy Summary

Board of Directors

The Board of Directors of The Walt Disney Company (the "Board") is currently comprised of nine talented directors with diverse skillsets and professional backgrounds, as reflected in their biographies beginning on page 57.

    Board Diversity

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For more information regarding our directors, see the section of this proxy titled Items to Be Voted On – Election of Directors.

    Board Refreshment

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As part of its overall commitment to thoughtful refreshment, the Board is involved with succession planning for both key management roles and director positions. The Board considers the selection, retention and succession planning for the Chief Executive Officer of the Company to be its most important priority. The Board reserves time at every regularly scheduled Board meeting to meet in executive session without the Chief Executive Officer present, during which it discusses management succession as appropriate. Working

closely with the full Board, the Governance and Nominating Committee develops criteria for open Board positions, taking into account the needs of the Board and Company at the time.

The current term of office of all of the Company's directors expires at the 2020 Annual Meeting. For more information regarding these matters and our corporate governance, see the section of this proxy titled Corporate Governance and Board Matters.

The Walt Disney Company Notice of 2020 Annual Meeting and Proxy Statement      3

Fiscal 2019 Shareholder Engagement

During fiscal 2019, members of management and the Board continued their strong level of engagement with shareholders. In light of investor feedback, the Compensation Committee discussed with Mr. Iger, and he agreed to, adjustments in Mr. Iger's contractual compensation on three separate occasions during and following fiscal 2019. Generally, these adjustments increased the rigor of Mr. Iger's one time performance award, reduced annual compensation opportunity and eliminated a stay bonus.

Our Board and management have continued to engage with shareholders to understand areas of concern for executive compensation and to discuss those concerns as part of its ongoing evaluation of compensation and governance matters. A more detailed discussion of our

shareholder engagement and the changes made to Mr. Iger's compensation as a result thereof can be found in the section of this proxy titled Compensation Discussion and Analysis – Introduction – Shareholder Engagement.

As a result of investor feedback, the Company also significantly expanded its lobbying disclosure policy. The Company's enhanced policy, titled "Political Giving and Participation in the Formulation of Public Policy in the United States" can be found at https://www.thewaltdisneycompany.com/about/#policies and is discussed in more detail in the section of this proxy titled Items to Be Voted On – Shareholder Proposal – Board Recommendation.

Compensation Structure and Philosophy

The Compensation Committee firmly believes in pay for performance. Again in fiscal 2019, over 90% of Mr. Iger's target annual total direct compensation depended on the Company's financial results and the performance of Disney stock, creating close alignment between his incentives and shareholder value creation.

Base salary is the only fixed element of Mr. Iger's annual compensation. Substantially all other annual compensation breaks into the following performance-based categories:

    A performance-based annual cash bonus opportunity that is:

    o
    70% dependent on achievement of performance against four financial measures (segment operating income, EPS, after-tax free cash flow and return on invested capital, each as adjusted), all of which the Compensation Committee

      believes drive long-term shareholder value creation; and

      o
      30% dependent on the Compensation Committee's assessment of individual contributions toward achievement of qualitative goals tied to the Company's strategic priorities. More detail regarding our strategic priorities can be found in the section of this proxy titled Compensation Discussion and Analysis – 2019 Compensation Decisions.

    An annual equity award, which for the Chief Executive Officer, is comprised of 50% options and 50% performance-based units; the realized option value depends on the performance of Disney stock, and the realized performance-unit value depends on three-year achievement of relative TSR and EPS performance, as adjusted.

Fiscal 2019 Chief Executive Officer Compensation

Over the course of his tenure as Chief Executive Officer, Mr. Iger has delivered spectacular financial performance and created significant shareholder value, driven by key strategic initiatives, transformative acquisitions and exceptional execution.

Since fiscal 2005, Disney has achieved exceptional financial performance highlighted by:

4      Proxy Summary

    11% compounded annual growth in net income from continuing operations attributable to Disney:

    Net Income from Continuing Operations Attributable to Disney

    GRAPHIC

For a reconciliation of net income from continuing operations attributable to Disney to net income from continuing operations attributable to Disney excluding the non-recurring impact of tax reform and gains from real estate sales in fiscal 2018 and a non-cash gain recognized in connection with the acquisition of a controlling interest in Hulu (Hulu gain), offset by purchase price accounting and debt extinguishment charge in fiscal 2019, see Annex A.

    13% compounded annual growth in EPS:


    EPS from Continuing Operations (Reported)

    GRAPHIC

      

For a reconciliation of EPS to EPS excluding the non-recurring impact of tax reform and gains from real estate sales for fiscal 2018 and Hulu gain, offset by purchase price accounting and debt extinguishment charge in fiscal 2019, see Annex A.

The Walt Disney Company Notice of 2020 Annual Meeting and Proxy Statement      5

    Total shareholder return of 559%:

    Total Shareholder Return

    GRAPHIC

This marked significant outperformance relative to the S&P 500, whose total returns increased 223% over this period:

    Total Shareholder Return

    GRAPHIC

Compensation Committee Decisions Regarding Mr. Iger's Pay

Notwithstanding this track record of consistent strong performance, in response to shareholder feedback regarding the rigor of the performance criteria for Mr. Iger's one-time performance-based equity award and the total amount of Mr. Iger's annual compensation, the Compensation Committee discussed with Mr. Iger, and Mr. Iger agreed on three separate occasions, to reduce for fiscal 2019 the compensation he would have otherwise been entitled to under his employment contract as follows:

November 2018:

    increased the rigor of Mr. Iger's performance-based award in connection with his employment extension
    limited Mr. Iger's annual performance share unit awards to 100% of target number of units if the Company's TSR over the relevant performance period is negative

March 2019:

    eliminated an annual base salary increase of $500,000 that would have gone into effect upon the closing of the TFCF acquisition and thus maintained Mr. Iger's annual salary at $3.0 million – Base salary remains only 9% of Mr. Iger's total annual compensation.
6      Proxy Summary

    decreased by $5 million the annual target long-term incentive award opportunity that would have been made available to Mr. Iger under his employment agreement for periods following the closing of the TFCF acquisition
    decreased by $8 million the annual target bonus opportunity that would have been made available to Mr. Iger under his employment agreement for periods following the closing of the TFCF acquisition

December 2019:

    eliminated a $5 million completion bonus Mr. Iger would have been entitled to for having fulfilled his commitment to complete the July 2, 2019 term of his employment pursuant to the amendment to his employment agreement dated March 22, 2017

Against the background of these changes, the Compensation Committee awarded the following compensation in fiscal 2019:

Salary:    $3 million

Long-Term Incentive (Equity) Award:    Mr. Iger's annual equity grant was set at target, or a grant date value of $17.3 million, which was awarded

50% in stock options and 50% in performance-based restricted stock units. In addition, pursuant to the terms of his employment agreement, Mr. Iger received performance-based restricted stock units and stock options in connection with the close of the TFCF acquisition on March 20, 2019, with a grant date value of $2.4 million.

Non-Equity Incentive Plan Compensation (Bonus):    Mr. Iger's performance-based cash bonus of $21.75 million (compared to $18.0 million for fiscal 2018) reflects what the Committee believes was a year of extraordinary accomplishment as a result of the leadership Mr. Iger provided in closing and integrating the TFCF acquisition and effecting the Company's pursuit of its transformative direct-to-consumer strategy.

These amounts do not represent all of Mr. Iger's fiscal 2019 compensation; for a full description of Mr. Iger's fiscal 2019 compensation, see the Summary Compensation Table. Additional details on our compensation program and fiscal 2019 compensation can be found in the section of this proxy statement titled Executive Compensation.

Amended and Restated 2011 Plan

Equity incentives are an important part of designing attractive compensation for our employees and recruits, allowing us to attract and retain highly qualified team members upon whom, in large measure, the future growth and success of the Company depend. The Amended and Restated Stock Incentive Plan (the "2011 Plan") is scheduled to expire December 2020. In order to

continue the practice of granting equity incentive awards, the Board of Directors is seeking shareholder approval of the amendment and restatement of the 2011 Plan to extend the term of the plan, increase authorized shares under the plan and make additional adjustments discussed in the section of this proxy statement titled Items to Be Voted On — 2011 Plan.

Shareholder Proposal

In this year's proxy statement you will find one shareholder proposal. The proposal requests the Company to provide additional disclosure regarding its political activities, including information regarding its lobbying activities. After the proposal was submitted, the Company significantly expanded its lobbying disclosure, which can be found at https://www.thewaltdisneycompany.com/about/#policies.

Following the expansion of our disclosure, the Company has been recognized as one of the leaders for political disclosure among S&P 500 companies. In 2019, the Center for Political Accountability Zicklin Index of

Corporate Political Disclosure and Accountability, which benchmarks the political disclosure and accountability policies and practices of leading U.S. public companies, recognized the quality of our disclosure and ranked the Company among the First Tier of S&P 500 companies. We don't believe devoting even further resources to this disclosure would benefit shareholders. The Board recommends that you vote against this proposal.

You can read our detailed position on this proposal in the section of this proxy statement titled Items to Be Voted On – Shareholder Proposal – Board Recommendation.

The Walt Disney Company Notice of 2020 Annual Meeting and Proxy Statement      7

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GRAPHIC   Corporate Governance and Board Matters

Governing Documents

The Board 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 Director independence, stock ownership by and compensation of Directors, management succession and review, Board leadership, 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.

Each committee of the Board is governed by a charter adopted by the Board.

The Corporate Governance Guidelines, the Standards of Business Conduct, the Code of Business Conduct and Ethics for Directors and each of the Committee charters 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 principal executive officer, principal financial officer or principal accounting officer, it will post the amendment or waiver at the same location on its website.

The Board of Directors

The current members of the Board are:

Susan E. Arnold   Robert A. Iger

Mary T. Barra

 

Maria Elena Lagomasino

Safra A. Catz

 

Mark G. Parker

Francis A. deSouza

 

Derica W. Rice

Michael B.G. Froman

 

 

The Board met seven times during fiscal 2019. Each current Director attended at least 75% of the meetings of the Board and committees on which such

Director served that occurred while such Director served on the Board or the committees. All continuing directors holding office at the time attended the Company's 2019 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 such Director's duties, including by attending meetings of the shareholders of the Company, and meetings of the Board and committees of which such Director is a member.

Board Leadership

The Company's Corporate Governance Guidelines specify that the Chairman of the Board shall in the normal course be an independent Director, unless the Board determines that, in light of the circumstances then present when any such decision is made, a different structure would better serve the best interests of the

shareholders. The Guidelines also provide that the Board will disclose in each 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.

8

Table of Contents

Corporate Governance and Board Matters
 
 

Mr. Iger has served as Chairman since March of 2012, when he assumed that position upon the retirement of John Pepper who had previously served as Chairman. In making Mr. Iger Chairman, the Board determined that doing so would promote a number of important objectives: it would add a substantial strategic perspective to the Chairman position and put in place an effective plan for the future transition of leadership while at the same time providing important continuity to Board leadership. In making these judgments, the Board took into account its evaluation of Mr. Iger's performance as Chief Executive Officer and President, his very positive relationships with the other members of the Board and the strategic vision and perspective he would bring to the position of Chairman. The Board was uniformly of the view that Mr. Iger would provide excellent leadership of the Board in the performance of its duties and that naming him as Chairman would serve the best interests of shareholders.

Mr. Iger's employment agreement provides that he will serve as Chief Executive Officer and Chairman through the end of its term. Each year, the independent members of the Board determine whether to elect Mr. Iger Chairman in accordance with the employment agreement. In doing so, the Board considers whether Mr. Iger's continuing to serve as both Chairman and Chief Executive Officer would be in the best interests of shareholders. Based on the demonstrated success of this structure to date, both in terms of the functioning of the Board and the growth of the Company, and the continued benefits of retaining Mr. Iger's strategic perspective in the position of Chairman, the Board has concluded that Mr. Iger's continuing service as Chairman remains in the best interests of shareholders and that, absent an unexpected change in circumstances, he should continue to serve in the role through the term of his agreement.

At the time Mr. Iger became Chairman, the Board elected an independent Lead Director. The duties of the

independent Lead Director were expanded in connection with the appointment of Mr. Iger as Chairman, and were further expanded in 2013 based on feedback from investors regarding Lead Director duties. Susan Arnold was elected independent Lead Director in March 2018. The duties of the Lead Director are as follows:

    preside at all meetings of the Board of Directors at which the Chairman is not present, including executive sessions of non-management or independent Directors;
    call meetings of the independent or non-management Directors;
    serve as liaison between the Chairman and the independent and non-management Directors;
    advise as to the scope, quality, quantity and timeliness of information sent to the Board of Directors;
    in collaboration with the Chief Executive Officer and Chairman, and with input from other members of the Board, develop and have final authority to approve meeting agendas for the Board of Directors, including assurance that there is sufficient time for discussion of all agenda items;
    organize and lead the Board's annual evaluation of the Chief Executive Officer;
    be responsible for leading the Board's annual self-assessment;
    be available for consultation and direct communication upon the reasonable request of major shareholders;
    advise Committee Chairs with respect to agendas and information needs relating to Committee meetings;
    provide advice with respect to the selection of Committee Chairs; and
    perform such other duties as the Board may from time to time delegate to assist the Board in the fulfillment of its responsibilities.

Continues on next page ►

The Walt Disney Company Notice of 2020 Annual Meeting and Proxy Statement      9

Table of Contents

 
 
 

Committees

The Board has four standing committees: Audit, Governance and Nominating, Compensation and Executive. Information regarding these committees is provided below.

Audit Committee  

Safra A. Catz (Chair)
Francis A. deSouza
Michael B.G. Froman
  The functions of the Audit Committee are described below under the heading "Audit Committee Report." The Audit Committee met eight times during fiscal 2019. 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 each of Ms. Catz and Mr. deSouza is qualified as an audit committee financial expert 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 Mr. Froman is financially literate within the meaning of the listing standards of the New York Stock Exchange.

 

Governance and Nominating Committee  


Susan E. Arnold (Chair)
Maria Elena Lagomasino
Derica W. Rice
  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% shareholders 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, makes recommendations to the Board with respect to Committee assignments, oversees the Board's director education practices and reviews the Company's political contributions activity and policy. The Committee met five times during fiscal 2019. 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.
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Compensation Committee  


Mary T. Barra
Maria Elena Lagomasino (Chair)
Mark G. Parker

                                                      
  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 2019, the Compensation Committee met eleven times. All of the members of the 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.

 

Executive Committee  


Susan E. Arnold (Chair)
Robert A. Iger
  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 rarely takes action and in fiscal 2019, 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 committees, assesses both (a) risks that relate to the key economic and market assumptions that inform the Company's business plans (including significant transactions) and growth strategies, and (b) significant operational risks related to the conduct of the Company's day-to-day operations.

Risks relating to the market and economic assumptions that inform the Company's business plans and growth strategies are specifically addressed with respect to each business unit in connection with the Board's 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 acting through the Audit Committee reviews as appropriate whether these reports cover the significant risks that the Company may then be facing.

Each of the Board's committees addresses risks that fall within the committee's areas of responsibility. For example, the Audit Committee periodically reviews the audit plan of the internal audit department, the international labor standards compliance program, the tax function, treasury operations, insurance, and the

Company's standards of business conduct compliance program. In addition, the Audit Committee receives regular reports from: corporate controllership and the outside auditor on financial reporting matters; the internal audit department about significant findings; and the General Counsel regarding legal and regulatory risks.

The Board and Audit Committee receive reports on information technology risks, including cybersecurity and data security risks. Day to day management of data security is currently the responsibility of a senior executive position reporting directly to our Chief Financial Officer. Day to day management of our data privacy policies is currently overseen by a senior executive who reports directly to our General Counsel. The Audit Committee reviews cybersecurity and data security risks and mitigation strategies with the Chief Information Officer at least annually.

The Audit Committee reserves time at each meeting for private sessions with the Chief Financial Officer, General Counsel, head of the internal audit department and outside auditors. The Compensation Committee addresses risks arising out of the Company's executive compensation programs as described at page 24, below. The operational risks periodically reviewed by committees are also reviewed by the entire Board when a committee or the Board determines this is appropriate.

The independent Lead Director promotes effective communication and consideration of matters presenting significant risks to the Company through her role in developing the Board's meeting agendas, advising committee chairs, chairing meetings of the independent Directors and facilitating communications between independent Directors and the Chief Executive Officer.

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Management Succession Planning

The Board considers the selection, retention and succession planning for the chief executive officer of the Company to be its most important priority. The Board reserves time at every regularly scheduled Board meeting to meet in executive session without the Chief Executive Officer present during which it discusses management succession as appropriate. The Board also discusses management succession with the Chief Executive Officer present at least once each year, and more often as circumstances warrant. These discussions include evaluation of potential internal candidates for succession and focus on particular individuals as

appropriate. In the course of these discussions, the Board identifies potential candidates and advises the Chief Executive Officer of the exposure these candidates should receive to maximize the ability of the Board to evaluate the candidates' qualifications. The Board also evaluates the experience the candidates should gain to develop their ability to succeed if they become Chief Executive Officer. The Board is confident that effective leadership of the Company would be assured and a highly qualified successor to Mr. Iger can be selected whenever one would need to be named.

Director Selection Process

Working closely with the full Board, the Governance and Nominating Committee develops criteria for open Board positions. In developing these criteria, the Committee takes into account a variety of factors, which may include: the current composition of the Board and expected retirements from 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 Committee members, other Board members, 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;
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    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 branded franchises, the creation of high-quality branded entertainment products and services, addressing the impact of rapidly

changing technology and the management of a multi-national business. 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, financial oversight and international business and governmental issues. 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 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.

Director Independence

The provisions of the Company's Corporate Governance Guidelines regarding Director independence meet and in some respects 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 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 2019. During this review, the Board considered transactions and relationships between the Company and its subsidiaries and affiliates on the one hand and, on the other hand, Directors, immediate family members of Directors, or entities of which a Director or an immediate family member is an executive officer, general partner or significant equity holder. The Board also considered whether there were any transactions or relationships between any of these persons or entities and any 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 serving in fiscal 2019 or nominated for election at the 2020 Annual Meeting are independent of the Company and its management under the standards set forth in the Corporate Governance Guidelines, with the exception of Mr. Iger. Mr. Iger is considered an inside Director because of his employment as a senior executive of the Company.

In determining the independence of each Director, the Board considered and deemed immaterial to the Directors' independence transactions involving the sale of products and services in the ordinary course of business between the Company, on the one hand, and, on the other, companies or organizations at which some of our Directors or their immediate family members were officers or employees during fiscal 2019. In each case, the amount paid to or received from these companies or

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organizations in each of the last three years was below the 2% of total revenue threshold in the Guidelines. The

Board determined that none of the relationships it considered impaired the independence of the Directors.

Certain Relationships and Related Person Transactions

The Board 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 Chair 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 specifically contemplated by the Company's Certificate of Incorporation or Bylaws, or any action approved by the Board 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 million 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.

Each of the investment management firms, Vanguard Group, Inc. and Blackrock, Inc., through their affiliates, held more than 5% of the Company's shares during fiscal 2019. Funds managed by affiliates of Vanguard and Blackrock are included as investment options in defined contribution plans offered to Company employees. In addition, Blackrock manages investment portfolios for the Company's pension funds and provides a risk analytics platform related to management of investments in the pension funds. Vanguard and Blackrock received fees of approximately $1 million and $9.3 million, respectively, in fiscal 2019 based on the amounts invested in funds managed by them, and Blackrock received fees of approximately $300,000 for the risk analytics platform. The ongoing relationships were reviewed and approved by the Governance and Nominating Committee under the Related Person Transaction Approval Policy in December 2019.

Shareholder Communications

Generally. Shareholders may communicate with the Company through its Transfer Agent, Computershare Trust Company, N.A. ("Computershare"), by writing to Disney Shareholder Services, c/o Computershare, P.O. Box 505052, Louisville, KY 40233-5052, by calling Disney Shareholder Services at 1-855-553-4763 or by

sending an e-mail to disneyshareholder@computershare.com. Additional information about contacting the Company is available on the Disney Shareholder Services website (www.disneyshareholder.com) under the "Contact Us" tab.

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Shareholders and other persons interested in communicating directly with the independent Lead Director or with the non-management Directors as a group may do so by writing to the independent Lead Director, 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 the Secretary otherwise determines requires their attention. The Governance and Nominating Committee reviews summaries of all correspondence from identified shareholders at the regular meetings of the Committee. 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 relating 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 2021 Proxy Statement. To be eligible for inclusion in the proxy statement for our 2021 Annual Meeting, shareholder proposals must be received by the Company's Secretary no later than the close of business on September 19, 2020. 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 for Inclusion in 2021 Proxy Statement. Under our Bylaws, written notice of shareholder nominations to the Board of Directors that are to be included in the proxy statement pursuant to the proxy access provisions in Article II, Section 11 of our Bylaws must be delivered to the Company's Secretary not later than 120 nor earlier than 150 days prior to the first anniversary of the preceding year's annual meeting. Accordingly any eligible shareholder who wishes to have a nomination considered at the 2021 Annual Meeting and included in the Company's proxy statement must deliver a written notice (containing the information specified in our Bylaws regarding the shareholder and the proposed nominee) to the Company's Secretary between October 12, 2020 and November 11, 2020.

Shareholder Director Nomination and Other Shareholder Proposals for Presentation at the 2021 Annual Meeting Not Included in 2021 Proxy Statement. Under our Bylaws, written notice of shareholder nominations to the Board of Directors or 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 later than 90 nor earlier 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 2021 Annual Meeting but not included in the Company's proxy statement 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 11, 2020 and December 11, 2020. 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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GRAPHIC   Director
  Compensation

The elements of annual Director compensation for fiscal 2019 were as follows.

Annual Board retainer   $115,000  
   
Annual committee retainer (except Executive Committee)1   $10,000  
Annual Governance and Nominating Committee chair retainer2   $15,000  
   
Annual Compensation Committee chair retainer2   $20,000  
Annual Audit Committee chair retainer2   $25,000  
   
Annual deferred stock unit grant   $190,000  
Annual retainer for independent Lead Director3   $50,000  
   
1
Per committee.
2
This is in addition to the annual committee retainer the Director receives for serving on the committee.
3
This is in addition to the annual Board retainer, committee fees and the annual deferred stock unit grant.

To encourage Directors to experience the Company's products, services and entertainment offerings personally, each non-employee Director may receive Company products and services up to a maximum of $15,000 in fair market value per calendar year plus reimbursement of associated tax liabilities. Directors' spouses, children and grandchildren may also participate in this benefit within each Director's $15,000 limit.

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. Family members (including domestic partners) may accompany Directors traveling on Company aircraft for business purposes on a space-available basis.

Directors participate in the Company's employee gift matching program on the same terms as senior executives. Under this program, the Company matches contributions of up to $50,000 per calendar year per Director to charitable and educational institutions meeting the Company's criteria.

Directors who are also employees of the Company receive no additional compensation for service as a Director.

Under the Company's Corporate Governance Guidelines, non-employee Director compensation is determined annually by the Board of Directors acting on the recommendation of the Governance and Nominating Committee. In formulating its recommendation, the Governance and Nominating Committee receives input from the third-party compensation consultant retained by the Compensation Committee regarding market practices for Director compensation.

Director Compensation for Fiscal 2019

The following table sets forth compensation earned during fiscal 2019 by each person who served as a non-employee Director during the year.


  Fees
Earned
or Paid
in Cash




Stock
Awards


All Other
Compensation


Total

Susan E. Arnold

  $190,000   $189,803   $13,417   $393,220  
         

Mary T. Barra

  125,000   189,803   59,899   374,702  

Safra A. Catz

  139,236   189,803   66,983   396,022  
         

John S. Chen

  65,000   83,229   66,983   215,212  

Francis A. deSouza

  125,000   189,803   16,983   331,786  
         

Michael B.G. Froman

  123,424   189,803   59,000   372,227  

Maria Elena Lagomasino

  146,389   189,803   10,338   346,530  
         

Fred H. Langhammer

  54,167   83,229   103,394   240,790  

Aylwin B. Lewis

  50,375   83,229   30,595   164,199  
         

Mark G. Parker

  125,028   189,803   1,143   315,974  

Derica W. Rice

  71,181   107,105     178,286  
         

Fees Earned or Paid in Cash.    "Fees Earned or Paid in Cash" includes the annual Board retainer and annual committee and committee-chair retainers, whether paid currently or deferred by the Director to be paid in

cash or shares after service ends. Directors are permitted to elect each year to receive all or part of their retainers in Disney stock and, whether paid in cash or stock, to defer all or part of their retainers until after service as a Director ends. 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 amounts deferred prior to calendar 2018. For amounts deferred after calendar year 2017, the interest rate is equal to 120% of the Applicable Long-Term Federal Interest Rate as determined from time to time by the United States Internal Revenue Service. For fiscal 2019, the average interest rate was 4.17%.

The following table sets forth the form of fees received by each Director who elected to receive compensation in a form other than currently paid cash. The number of

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stock 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. Stock units distributed currently were accumulated throughout the year and distributed as shares following December 31, 2019.

      Cash

Stock Units

 

 

                                   

 

    Paid
Currently


Deferred
      Value
Distributed
Currently





Value
Deferred


Number
Of Units


 

 

Mary T. Barra

              $ 125,000   1,033  
                   

 

Safra A. Catz

                  $139,236       1,141    

 

Francis A. deSouza

    $62,500         62,500     517    
                   

 

Michael B.G. Froman

                  123,424       1,019    

 

Maria Elena Lagomasino

              146,389   1,202    
                   

 

Mark G. Parker

                      125,028   1,033    

 

Derica W. Rice

              71,181   537    
                   

Stock Awards.    "Stock Awards" sets forth the market value of the deferred stock unit grants to Directors and the amount reported 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. Units are awarded at the end of each quarter and the number of units is determined by dividing the amount payable with respect to the quarter 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 the Company common stock on each day in the ten-day period. Each Director other than Mr. Chen, Mr. Langhammer, Mr. Lewis and Mr. Rice was awarded 1,571 units in fiscal 2019. Mr. Chen, Mr. Langhammer and Mr. Lewis were each awarded 759 units, and Mr. Rice was awarded 816 units in fiscal 2019; each of these directors served for only a portion of fiscal 2019.

Unless a Director elects to defer receipt of shares until after his or her service as a Director ends, shares with respect to annual deferred stock unit grants are normally 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.

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 the Company common 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 table below.

Prior to fiscal 2011, each Director serving on March 1 of any year received an option on that date to acquire shares of Company stock. The exercise price of the options was equal to the average of the high and low prices reported on the New York Stock Exchange on the date of grant.

The following table sets forth all stock units and options held by each Director serving during fiscal 2019 as of the end of fiscal 2019. 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 stock ownership table on page 75 except to the extent they may have been distributed as shares and sold prior to January 13, 2020.

 

Stock
Units







Number of
Shares
Underlying
Options
Held





Susan E. Arnold

  20,224    
     

Mary T. Barra

    5,826      

Safra A. Catz

  3,616    
     

John S. Chen

    2,544      

Francis A. deSouza

  3,131    
     

Michael B.G. Froman

    2,438      

Maria Elena Lagomasino

  11,438    
     

Fred H. Langhammer

    2,535      

Aylwin B. Lewis

  2,535   6,143  
     

Mark G. Parker

    10,503      

Derica W. Rice

  1,358    
     

The Company's Corporate Governance Guidelines 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 five times the amount of the annual Board retainer for the Director. Unless the Board exempts a Director, each Director is also required to retain stock representing no less than 50% of the after-tax value of exercised options and shares received upon distribution of deferred stock units until such Director meets the stock holding guideline described above.

Based on the holdings of units and shares on January 13, 2020, each currently serving Director complied with the minimum holding requirement on that date except Ms. Barra, Ms. Catz, Mr. deSouza, Mr. Froman and Mr. Rice, who are each within the three-year period following the date on which he or she first became a Director.

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All Other Compensation.    "All Other Compensation" includes:

    Reimbursement of tax liabilities associated with the product familiarization benefits. The value of the product familiarization benefits themselves and travel benefits are not included in the table as permitted by SEC rules because the aggregate incremental cost to the Company of providing these benefits did not exceed $10,000 for any Director. The reimbursement of associated tax liabilities was less than $10,000 for each Director other than Ms. Catz, Mr. Chen, Mr. deSouza and Ms. Lagomasino for whom the reimbursement was $16,983, $16,983, $16,983 and $10,338, respectively.
    Interest earned on deferred cash compensation, which was less than $10,000 for each Director.

    The matching charitable contribution of the Company, which was $50,000 for Ms. Barra, Ms. Catz and Mr. Chen, $59,000 for Mr. Froman, $100,000 for Mr. Langhammer, and $25,000 for Mr. Lewis. Matched amounts exceed $50,000 in a fiscal year if contributions for separate calendar years are made in the same fiscal year or if there were delays in processing earlier year matches.
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GRAPHIC   Executive
  Compensation

Compensation Discussion and Analysis

Introduction

This introduction highlights key considerations that guided compensation decisions this fiscal year. Please review the complete proxy statement, including the complete Compensation Discussion and Analysis section, and 2019 annual report before you vote.

Fiscal 2019 Performance Highlights

During fiscal 2019, our senior leadership team drove extraordinary accomplishments that position our Company well for the future. In fiscal 2019, the Company substantially advanced its transformative long-term strategic goals, including as follows:

    effected a fundamental change in the Company's organization to pursue aggressively its direct-to-consumer strategy by reorganizing its business into four segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to-Consumer & International;
    completed the acquisition of TFCF, expanding our portfolio of intellectual property and expanding our content library to even better position us to successfully execute our direct-to-consumer strategy;
    further enhanced our direct-to-consumer strategy by obtaining a majority stake in Hulu and securing a path to 100% ownership;
    successfully integrated TFCF while pursuing, and now forecasting to exceed, the $2 billion cost synergies to which the Company initially committed in the TFCF acquisition; and
    impressively coordinated efforts across all of the Company's separate businesses to provide content and marketing in support of the single most important strategic initiative of the Company for fiscal 2019 — Disney+ — which, through those efforts, had an enormously successful launch in November 2019.

Fiscal 2019 Performance Evaluation Considerations

Even in the face of the challenge associated with effecting such strategically important transformational change, the legacy Disney businesses had very strong

financial performance in fiscal 2019 against the measures developed by the Compensation Committee. To cite just one example contributing to performance, the Company released an unprecedented five major theatrical films in fiscal 2019 that grossed over $1 billion each in worldwide box office. Given that the closing date for the TFCF acquisition was uncertain and operational interaction was precluded before closing, the ranges developed by the Committee at the beginning of the fiscal year to assess annual financial performance for bonus purposes were necessarily based on legacy Disney performance. Financial results were measured against these ranges.

Shareholder Engagement

In making decisions about how to appropriately reward such performance in an exceptional and transformative year, the Compensation Committee has taken into account what was learned through its substantial engagement with shareholders. The Board and management are involved in this direct engagement with the Company's investors on a regular basis. To further enable the Board and the Compensation Committee to consider direct shareholder feedback, the Compensation Committee is updated on these conversations with investors.

During fiscal 2019, members of management and the Board, including the Compensation Committee, spoke with 11 of our top 20 shareholders, including 6 of the top 10, and contacted approximately 74% of our largest 50 investors, seeking input on compensation and governance matters. Through that feedback, we learned of the concerns about certain aspects of Mr. Iger's employment agreement, including concerns from some shareholders regarding the amount of Mr. Iger's total compensation and the rigor of the performance criteria for Mr. Iger's one-time performance-based equity award.

In an effort to appropriately balance the pay for performance design of our compensation program with this shareholder feedback, the Compensation Committee

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discussed with Mr. Iger, and Mr. Iger agreed on three separate occasions, to reduce for fiscal 2019 the compensation he would have otherwise been entitled to under his employment contract. Generally, these adjustments increased the rigor of Mr. Iger's one time performance award, reduced annual compensation opportunity and eliminated a stay bonus as follows:

    November 2018:

    increased the rigor of Mr. Iger's performance-based award in connection with his employment extension
    limited Mr. Iger's annual performance share unit awards to 100% of target number of units should the Company's TSR over the relevant performance period be negative

    March 2019 (shortly before the Company's 2019 annual meeting):

    eliminated an annual base salary increase of $500,000 that would have gone into effect upon the closing of the TFCF acquisition and thus maintained Mr. Iger's annual salary at $3.0 million — base salary remains only 9% of Mr. Iger's total annual compensation.
    decreased by $5 million the annual target long-term incentive award opportunity that would have been made available to Mr. Iger under his employment agreement for periods following the closing of the TFCF acquisition
    decreased by $8 million the annual target bonus opportunity that would have been made available to Mr. Iger under his employment agreement for periods following the closing of the TFCF acquisition

    December 2019:

    eliminated a $5 million completion bonus Mr. Iger would have been entitled to for having fulfilled his commitment to complete the July 2, 2019 term of his employment pursuant to the amendment to his employment agreement dated March 22, 2017

Our Board and management have continued to engage with shareholders to understand areas of concern for executive compensation and to discuss those concerns as part of its ongoing evaluation of compensation and governance matters.

Against this background, the sections that follow discuss our pay for performance program and the results it yielded this fiscal year.

Executive Compensation Program Structure

Objectives and Methods

We design our executive compensation program to drive the creation of long-term shareholder value. We do this by tying compensation to the achievement of performance goals that promote the creation of shareholder value and by designing compensation to attract and retain high-caliber executives in a competitive market for talent.

We have adopted the following approach to achieve these objectives:

     Pay for Performance     Provide a strong relationship of pay to performance through:

a performance-based bonus tied to the achievement of financial performance factors and an assessment of each executive's individual performance against other performance factors

equity awards that deliver value based on stock price performance and, in the case of performance-based stock units, whose vesting depends on meeting performance targets

 
    Competitive
Compensation Levels
      Provide compensation opportunities that take into account compensation levels and practices of our peers, but without targeting any specific percentile of relative compensation    
    Compensation Mix     Provide a mix of variable and fixed compensation that:

is heavily weighted toward variable performance-based compensation for senior executives

uses short-term (annual performance-based bonus) and longer-term performance measures (equity awards) to appropriately balance incentives for both short-term and long-term performance

 
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Compensation Program Elements

Fiscal 2019 Total Direct Compensation

The following table sets forth the elements of total direct compensation in fiscal 2019 and the objectives and key features of each element:

Compensation
Type



 
Pay Element


 
Objectives and Key Features


FIXED     Salary   Objectives

The Compensation Committee sets salaries to reflect job responsibilities and to provide competitive fixed pay to balance performance-based risks.

Key Features

Minimum salaries set in employment agreement

Committee discretion to adjust annually based on changes in experience, nature and responsibility of the position, competitive considerations, and Chief Executive Officer recommendation (except his own salary)

   
 
  CASH COMPENSATION   Performance-
based Bonus
 

Objectives

The Committee structures the bonus program to incentivize performance at the high end of ranges for financial performance measures that it establishes each year to drive meaningful growth over the prior year. The Committee believes that incentivizing performance in this fashion will lead to long-term, sustainable gains in shareholder value.

Key Features

Target bonus for each NEO normally set by the Committee early in the fiscal year in light of employment agreement provisions, competitive considerations, Chief Executive Officer recommendation (except his own target), and other factors the Committee deems appropriate; bonus opportunity normally limited to 200% of target bonus

Payout on 70% of target determined by performance against financial performance ranges developed by the Committee early in the fiscal year

Payout on 30% of target determined by the Committee's assessment of individual performance based both on other performance objectives developed early in the fiscal year and on Chief Executive Officer recommendation (except his own payout)

Annual payments to executive officers have been subject to a performance test under Section 162(m) of the Internal Revenue Code to the extent necessary and available to obtain deductibility of the payments

   
 
VARIABLE   EQUITY COMPENSATION   Equity
Awards
Generally
 

Objectives

The Committee structures equity awards to directly reward long-term gains in shareholder value. Equity awards carry vesting terms that extend up to four years and include performance units whose value depends on company performance relative to the S&P 500. These awards provide incentives to create and sustain long-term growth in shareholder value.

Key Features

Combined value of options, performance units and time-based units determined by the Committee in light of employment agreement provisions, competitive market conditions, evaluation of executive's performance and Chief Executive Officer recommendation (except for his own award)

Allocation of annual awards for Chief Executive Officer (based on award value):

50% performance-based restricted stock units

50% stock options

Allocation of annual awards for other NEOs (based on award value):

30% performance-based restricted stock units

30% time-vesting restricted stock units

40% stock options

   
 
    Stock Option
Awards
 

Key Features

Exercise price equal to average of the high and low trading prices on day of award

Option re-pricing without shareholder approval is prohibited

10-year term

Vest 25% per year

   
 

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Compensation
Type



 
Pay Element


 
Objectives and Key Features


    Annual
Performance-
Based
Restricted
Stock Units
  Key Features

Performance-based units reward executives only if specified financial performance measures are met

Subject to performance tests, units vest three years after grant date

Half of award vests based on Total Shareholder Return relative to S&P 500 and half of award vests based on adjusted EPS growth relative to S&P 500, each as described on pages 41 to 42

Annual units awarded to executive officers are subject to Section 162(m) test to the extent necessary and available to obtain deductibility of the payments

The above describes fiscal 2019 awards; for awards granted in fiscal 2020, half of awards will vest based on return on invested capital over three years in lieu of the relative EPS test described above; the other half of awards granted in fiscal 2020 will continue to vest based on Total Shareholder return relative to the S&P 500

   
 
VARIABLE   EQUITY COMPENSATION   Annual
Time-Based
Restricted
Stock Units
  Key Features

25% vest each year following grant date

All annual units awarded to executive officers are subject to Section 162(m) test to the extent necessary and available to obtain deductibility of the payments

   

Compensation at Risk

The Compensation Committee believes that most of the compensation for named executive officers should be at risk and tied to a combination of long-term and short-term Company performance. 91% of the target compensation for the Chief Executive Officer, and approximately 82% of the target compensation for other named executive officers, varied with either short-term or long-term Company performance.

In establishing a mix of fixed to variable compensation, the composition of various equity awards, target bonus levels, grant date equity award values and performance ranges, the Committee seeks to maintain its goal of making compensation overwhelmingly tied to performance, while also affording compensation opportunities that, in success, would be competitive with alternatives available to the executive. In particular, the Committee expects that performance at the high end of ranges will result in overall compensation that is sufficiently attractive relative to compensation available at successful competitors and that performance at the low end of ranges will result in overall compensation that is less than that available from competitors with more successful performance.

In determining the mix between options and restricted stock units, the Committee also considers the number of shares required for each of these types of awards to deliver the appropriate value to executives.

The following chart shows the percentage of the target total direct annual compensation for Mr. Iger that varied with performance versus fixed in fiscal 2019. Total direct annual compensation represents base salary and performance-based bonus plus the grant date fair value

of regular annual equity awards. Performance compensation represents performance-based bonus and equity awards while fixed compensation represents Mr. Iger's salary.

2019 Target Total Direct Annual Compensation Mix for Chief Executive Officer

91% of Chief Executive Officer annual target compensation is considered performance-based

CHART

For the other named executive officers, 82% of average target annual compensation is considered performance-based.

Employment Agreements

The Company enters into employment agreements with our senior executives when the Compensation Committee determines that it is appropriate to attract or retain an executive or where an employment agreement is consistent with our practices with respect to other similarly situated executives.

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Material terms of the employment agreements with the NEOs are reflected under "Fiscal 2019 Total Direct Compensation," above, and "Benefits and Perquisites," "2019 Compensation Decisions" and "Compensation Tables — Potential Payments and Rights on Termination or Change in Control," below.

Benefits and Perquisites

The Company provides employees with benefits and perquisites based on competitive market conditions. All salaried employees, including the named executive officers, receive the following benefits:

    health care coverage;
    life and disability insurance protection;
    reimbursement of certain educational expenses;
    access to favorably priced group insurance coverage; and
    Company matching of gifts of up to $25,000 per employee each calendar year to qualified charitable organizations.

Officers at the vice president level and above, including named executive officers, receive the following benefits:

    complimentary access to the Company's theme parks and some resort facilities;
    discounts on Company merchandise and resort facilities;
    for officers at the vice president level and higher before October 1, 2012, a fixed monthly payment to offset the costs of owning and maintaining an automobile;
    relocation assistance;
    eligibility for annual reimbursement of up to $1,000 for wellness-related purposes such as fitness, nutrition and physical exams; and
    personal use of tickets acquired by the Company for business entertainment when they become available because no business use has been arranged.

Named executive officers (and some other senior executives) are also entitled to the following additional benefits and perquisites: basic financial planning services, enhanced excess liability coverage, increased relocation assistance, an increased automobile benefit, and a Company matching gift amount of $50,000.

The Company pays the cost of security services and equipment for the Chief Executive Officer in an amount that the Board of Directors 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 all personal travel. Other senior executive officers may also have security expenses reimbursed and

are permitted at times to use corporate aircraft for personal travel, in each case at the discretion of the Chief Executive Officer.

For fiscal 2019, the Company paid a filing fee and related legal fees incurred in connection with a filing by Mr. Iger under the Hart-Scott-Rodino Antitrust Improvements Act (HSR). The filing was required because the dollar value of shares held by Mr. Iger exceeded thresholds established under HSR, due to stock price appreciation and the acquisition of shares under the equity compensation program. The Committee considers it appropriate to pay these expenses because they arose as a result of the operation of the Company's equity compensation program.

Retirement Plans

Named executive officers participate in defined benefit programs available to all of our salaried employees hired prior to January 1, 2012 and defined contribution retirement programs available to all of our salaried employees.

Tax-qualified defined benefit and defined contribution plans limit the benefit to participants whose compensation or benefits would exceed maximums imposed by applicable tax laws. To provide retirement benefits commensurate with compensation levels, the Company offers non-qualified plans to key salaried employees, including the named executive officers, using substantially the same formula for calculating benefits as is used under the tax-qualified defined benefit plans on compensation in excess of the compensation limitations and maximum benefit accruals. The Company also offers deferral of income in addition to that permitted under tax qualified defined contribution plans.

Additional information regarding the terms of retirement and deferred compensation programs for the named executive officers is included in "Compensation Tables — Pension Benefits" and "Compensation Tables — Fiscal 2019 Nonqualified Deferred Compensation Table."

Changes for Fiscal 2020

After consideration of changes in the Company's business and shareholder feedback, the Compensation Committee determined that for annual performance-based restricted stock units granted in fiscal 2020, half of the awards will vest based on three year average return on invested capital in lieu of the relative EPS standard used in fiscal 2019. The other half of annual performance-based restricted stock units granted in fiscal 2020 will continue to vest based on total shareholder return relative to the S&P 500.

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Risk Management Considerations

The Compensation Committee believes that the following features of performance-based bonus and equity programs appropriately incentivize the creation of long-term shareholder value while discouraging behavior that could lead to excessive risk:

    Financial Performance Measures.  The financial metrics used to determine the amount of an executive's bonus are measures the Committee believes drive long-term shareholder value. The ranges set for these measures are intended to reward success without encouraging excessive risk-taking.
    Limit on Bonus.  The overall bonus opportunity 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 fiscal year.
    Equity Vesting Periods.  Performance-based stock units generally vest in three years. Time-based stock units and options vest annually over four years and options remain exercisable for 10 years. These periods are designed to reward sustained performance over several periods, rather than performance in a single period.
    Equity Retention Guidelines.  Named executive officers are required to acquire within five years of becoming an executive officer, 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. If these levels have not been reached, these officers are required to retain ownership of shares representing at least 75% of the net after-tax gain (100% in the case of the Chief Executive Officer) realized on exercise of options for a minimum of 12 months. Based on holdings of units and shares on January 3, 2020, each named executive officer exceeded the minimum holding requirement on that date.
    No Hedging or Pledging.  The Company's insider trading compliance program prohibits members of the Board of Directors, named executive officers and all other employees subject to the Company's insider trading compliance program from entering into any transaction designed to hedge, or having the effect of hedging, the economic risk of owning the Company's securities and prohibits these persons from pledging Company securities.
    Clawback Policy.  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. Under the Amended and Restated 2011 Stock Incentive Plan for which the Company seeks approval at this meeting, equity clawbacks pursuant to the plan would be expanded to permit clawback where there is reputational or financial harm to the Company, even in the absence of a restatement.

At the Compensation Committee's request, management conducted its annual assessment of the risk profile of our compensation programs in December 2019. The assessment included an inventory of the compensation programs at each of the Company's segments and an evaluation of whether any program contained elements that created risks that could have a material adverse impact on the Company. Management provided the results of this assessment to Pay Governance LLC, which evaluated the findings and reviewed them with the Committee. As a result of this review, the Committee determined that the risks arising from the Company's policies and practices are not reasonably likely to have a material adverse effect on the Company.

Other Considerations

Timing of Equity Awards

Equity awards are made on dates the Compensation Committee meets. 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

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commencement of employment, execution of a new employment agreement or some other subsequent event, or may act by unanimous written consent on the date of such an event when the proposed issuances have been reviewed by the Committee prior to the date of the event.

Extended Vesting of Equity Awards

Options and restricted stock units continue to vest beyond retirement (and options remain exercisable) if (1) they were awarded at least one year prior to the date of an employee's retirement and (2) the employee was age 60 or older and had at least ten years of service on the date such employee retired. In these circumstances:

    Options continue to vest following retirement according to the original vesting schedule. They remain exercisable for up to five years following retirement. Options do not, however, remain exercisable beyond the original expiration date of the option.
    Restricted stock units continue to vest following retirement according to the original vesting schedule, but vesting remains subject to any applicable performance conditions (except, in some cases, the test to ensure that the compensation is deductible pursuant to Section 162(m)).

The extended vesting and exercisability is not available to certain employees outside the United States.

Options and restricted stock units awarded to executive officers with employment agreements also continue to vest (and options remain exercisable) beyond termination of employment if the executive's employment is terminated by the Company without cause or by the executive with good reason. In this case, options and restricted stock units continue to vest (and options remain exercisable) as though the executive remained employed through the end of the stated term of the employment agreement. If the executive would be age 60 or older and have at least ten years of service as of the end of the stated term of the employment agreement, the options and restricted stock units awarded at least one year prior to the end of the stated term of the agreement would continue to vest (and options remain exercisable) beyond the stated term of the employment agreement as described above.

Deductibility of Compensation

For taxable years commencing after 2017, Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for

compensation over $1 million paid to any person whose compensation was required to be included in the Company proxy statement for any fiscal year after 2016 because such person was either the Company's Chief Executive Officer or Chief Financial Officer or was one the Company's three other most highly compensated executive officers for such fiscal year. Accordingly, to the extent that compensation in excess of $1 million is payable to any such person in any fiscal year after fiscal 2018, such excess amount is likely to be non-deductible by the Company for federal income tax purposes. However, Section 162(m) exempts qualifying performance-based compensation paid after fiscal 2018 pursuant to a binding written agreement in effect on November 2, 2017. Thus, performance-based awards that were outstanding on that date or awarded thereafter pursuant to a binding written agreement can be exempt from the deduction limit if applicable requirements are met. Ms. McCarthy and Ms. Parker's employment contracts have been in place without amendment from prior to November 2, 2017.

Awards to executive officers under the annual performance-based bonus program and the long-term incentive program that were (i) granted prior to November 2, 2017 or (ii) may continue to qualify for the exemption because they are granted pursuant to a binding written agreement in effect on such date, have been or will be made payable or vest subject to achievement of a performance test based on adjusted net income in order to qualify for the exemption from Section 162(m), to the extent available. If this test is satisfied, the additional performance tests described in this Compensation Discussion and Analysis are applied to determine the actual payout of such bonuses and awards, which in order to remain deductible may not be more than the maximum level funded based on achievement of the Section 162(m) test. Adjusted net income 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 fiscal 2019, the adjusted net income target was $6.3 billion, and the Company achieved adjusted net income of $10.9 billion. Net income was adjusted to account for the TFCF and Hulu transactions, Hulu gain, restructuring and impairment charges, transaction purchase accounting, discontinued operations and the tax impacts and bond tender related to the TFCF acquisition.

Therefore, the Section 162(m) test was satisfied with respect to bonuses earned in fiscal 2019 and restricted stock units vesting based on fiscal 2019 results.

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Compensation Process

The following table outlines the process for determining annual compensation awards for named executive officers:

    Salaries
  Performance-Based Bonus
 
   

Annually, normally at the end of the calendar year, the Chief Executive Officer recommends salaries for NEOs other than himself for the following calendar year

Compensation Committee reviews proposed salary changes with input from its consultant

Committee determines annual salaries for all NEOs

Committee reviews determinations with the other non-management directors

     

Committee participates in regular Board review of operating plans and results and review of annual operating plan at the beginning of the fiscal year

Management recommends financial and other performance measures, weightings and ranges

Early in the fiscal year, the Committee reviews proposed performance measures and ranges with input from its consultant and develops performance measures and ranges that it believes establish appropriate stretch goals

   
    Equity Awards
 

Chief Executive Officer recommends bonus targets for NEOs other than himself

   
   

In first fiscal quarter, the Chief Executive Officer recommends grant date fair value of awards for NEOs other than himself

Committee reviews proposed awards with input from its consultant (described on page 26) and reviews with other non-management directors

Committee determines the dollar values of awards

Exercise price and number of options and restricted stock units are determined by formula based on market price of common shares on the date of award

     

Early in the fiscal year, the Committee reviews bonus measure ranges with input from its consultant and in light of the targets established by employment agreements and competitive conditions and determines bonus target opportunity as a percentage of fiscal year-end salary for each NEO

After the end of the fiscal year, management presents financial results to the Committee

Chief Executive Officer recommends other performance factor multipliers for NEOs other than himself

Committee reviews the results and determines whether to make any adjustments to financial results and determines other performance factor multipliers and establishes bonus

Committee reviews determinations with the other non-management directors and, in the case of the Chief Executive Officer, seeks their concurrence in the Committee's determination

   

The following table outlines the process for determining terms of employment agreements and compensation plans in which the named executive officers participate:

    Employment Agreements
  Compensation Plans
 
    Chief Executive Officer

Committee arrives at proposed terms of agreement with input from its consultant

Committee recommends terms of agreement to other non-management directors following negotiation with the Chief Executive Officer

Committee participates with other non-management directors in determining terms of agreement for the Chief Executive Officer

Other NEOs

Chief Executive Officer recommends terms of agreements

Committee reviews proposed terms of agreements with input from its consultant

Committee determines material terms of agreements, subject to consultation with the Board where the Committee deems appropriate

     

Committee requests management and its consultant to review compensation plans

Management and its consultant recommend changes to compensation plans in response to requests or on their own initiative

Committee reviews proposed changes to compensation plans with input from its consultant

Committee determines changes to compensation plans or recommends to the Board if Board action is required

Committee participates with Board in determining changes when Board action is required

   

 

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Management Input

In addition to the Chief Executive Officer recommendations described above, management regularly:

    provides data, analysis and recommendations to the Compensation Committee regarding the Company's executive compensation programs and policies;
    administers those programs and policies as directed by the Committee;
    provides an ongoing review of the effectiveness of the compensation programs, including competitiveness and alignment with the Company's objectives; and
    recommends changes to compensation programs if needed to help achieve program objectives.

The Committee meets regularly in executive session without management present to discuss compensation decisions and matters relating to the design and operation of the executive compensation program.

Compensation Consultant

The Compensation Committee retained two firms as compensation consultant during fiscal 2019. Frederic W. Cook & Co., Inc. served as the compensation consultant until March 2019, after which Pay Governance LLC was retained as the compensation consultant. The consultant assists the Committee's development and evaluation of compensation policies and practices and the Committee's determinations of compensation awards by:

    attending Committee meetings;
    meeting with the Committee without management present;
    providing third-party data, advice and expertise on proposed executive compensation awards and plan designs;
    reviewing briefing materials prepared by management and outside advisers and advising the Committee on the matters included in these materials, including the consistency of proposals with the Committee's compensation philosophy and comparisons to programs at other companies; and
    preparing its own analysis of compensation matters, including positioning of programs in the competitive market and the design of plans consistent with the Committee's compensation philosophy.

The Committee considers input from the consultant as one factor in making decisions on compensation matters, along with information and analyses it receives from management and its own judgment and experience.

The Compensation Committee has adopted a policy requiring its consultant to be independent of Company management. The Committee performs an annual

assessment of the consultant's independence to determine whether the consultant is independent. The Committee assessed Pay Governance LLC's independence in December 2019 and confirmed that the firm's work has not raised any conflict of interest and the firm is independent under the policy.

Peer Groups

    Summary of Peer Groups

The following table summarizes the three distinct peer groups we use for three distinct purposes described in more detail below:

    Peer Group
Purpose
Fiscal 2019
Composition


 
  Media Industry Peers   Evaluating compensation levels for the named executive officers   Disney and five other major media companies    
       
    General Industry Peers   Evaluating general compensation structure, policies and practices   21 similarly-sized global companies with a consumer orientation and/or strong brand recognition    
  Performance Peers   Evaluating relative economic performance of the Company   Standard & Poor's (S&P) 500    
       

    Media Industry Peers

The Compensation Committee believes that there is a limited pool of talent with the set of creative and organizational skills needed to run a global creative organization like the Company. The Committee also understands that executives with the background needed to manage a company such as ours have career options with compensation opportunities that normally exceed those available in most other industries, and that compensation levels within the peer group are driven by the dynamics of compensation in the entertainment industry and not the ownership structure of a particular company. Accordingly, the market for executive talent to lead the Company, and the group against which to compare our executive compensation, is best represented by the companies in our media industry peer group. At the beginning of fiscal 2019, companies included in the media industry peer group consisted of CBS, Comcast, Time Warner, 21st Century Fox and Viacom. Time Warner and 21st Century Fox were removed during the year due to acquisitions.

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    General Industry Peers

The Committee believes that the features of the Company's overall compensation structure, policies and practices should normally be consistent for all executives. Because the four distinct segments of operations span multiple industries (Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to-Consumer & International), the Committee believes that a consistent approach across the breadth of the Company's operations with respect to features of our overall executive compensation structure is best achieved by reference to a group of general industry peers that is broader than the media industry peers.

The peer group used for establishing compensation structure, policies and practices consists of companies that have:

    A consumer orientation and/or strong brand recognition;
    A global presence and operations;
    Annual revenue no less than 40% and no more than two and a half times our annual revenue; and
    As a general matter, a market capitalization in the range of approximately one-quarter to four times our market capitalization;
    Plus companies that do not meet the revenue or market cap test, but that are included in the peer groups used by one or more of the media industry peers.
The companies that met these criteria and were included at the beginning of fiscal 2019 in our "General Industry Peers" group were:

Accenture

Alphabet

Amazon.com

AT&T

CBS

Charter Communications

Cisco Systems

Coca-Cola

Comcast

Facebook

IBM

 

Intel

Johnson & Johnson

Microsoft

Oracle

PepsiCo

Procter & Gamble

Time Warner

21st Century Fox

Verizon Communications

Viacom

Time Warner and 21st Century Fox were removed during fiscal 2019 due to acquisitions.

    Performance Peers

The overall financial performance of the Company is driven by the sum of the individual performances of the Company's four segments, each of which competes in different sectors of the overall market. The Committee believes that, given the span of the Company's businesses, the best measure of relative performance is how the Company's diverse businesses have fared in the face of the economic trends that impact companies in the overall market and that the best benchmark for measuring such success is the Company's relative performance compared to that of the companies comprising the S&P 500. Accordingly, the Committee — like the other media companies and many other businesses — has selected the S&P 500 to set the context for evaluating the Company's performance and to measure relative performance for performance-based restricted stock unit awards.

    Changes for Fiscal 2020

Advised by its independent compensation consultants, the Compensation Committee reviewed the criteria for selecting members of the Company's peer groups during fiscal 2019 and, given both consolidation within the media industry and the Company's reorganization of business segments to recognize the importance of our direct-to-consumer strategy, made changes to the peer group for fiscal 2020. For fiscal 2020, the Committee expanded the Company's media industry peer groups to include more technology focused companies entering the media industry, adding Alphabet, Amazon.com, Apple, AT&T, Discovery, Facebook and Netflix to our media industry peers, and retaining current peers, CBS, Comcast and Viacom. As noted above, Time Warner and 21st Century Fox were removed in 2019 due to acquisitions. During fiscal 2020, CBS and Viacom merged into ViacomCBS. Consistent with our practice, our additional media industry peers will be included in our general industry peer group as well. The Committee also removed companies that no longer align with the Company's core business from the general industry peer group. These removals included Accenture, Coca-Cola, Johnson & Johnson, PepsiCo and Procter & Gamble.

2019 Compensation Decisions

This section discusses the specific decisions made by the Compensation Committee in fiscal 2019 or with respect to fiscal 2019 compensation. These decisions were made taking into consideration the results of the most recent shareholder advisory votes on executive compensation.

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Employment Agreements

For Mr. Iger's compensation, this section details three distinct rounds of adjustments to reduce compensation or increase the rigor of performance criteria following the December 2017 amendment to Mr. Iger's employment agreement. This section also discusses an amendment to Mr. Braverman's employment agreement.

December 2017 Amendment to Mr. Iger's Employment Agreement

As discussed in the proxy statements for the Company's 2018 and 2019 annual meetings, in December 2017, in connection with the Company's signing of a merger agreement relating to the TFCF acquisition, the Board and Mr. Iger agreed to extend to December 31, 2021 the period during which Mr. Iger would remain employed with the Company and serve as Chairman and Chief Executive Officer if the TFCF acquisition were completed. This employment extension was entered into following the Board's conclusion that Mr. Iger was the best person to lead Disney through the acquisition and integration of TFCF. Pursuant to the terms of the agreement, in connection with this extension, Mr. Iger's base salary increased to $3.0 million effective January 1, 2018 and would increase to $3.5 million, his target annual incentive would increase to $20 million and his annual target long-term incentive award would increase to $25 million (with the potential payout on performance units increased to 200% of target) when the TFCF acquisition was completed. Mr. Iger also received an award of 245,098 restricted stock units that vest over four years regardless of whether the transaction was completed. These terms were subsequently amended to reflect changes following the investor engagement as previously described under Compensation Discussion and Analysis — Introduction — Shareholder Engagement above.

At the time of his employment agreement extension, Mr. Iger also received an award of 687,898 performance-based units that would vest on December 31, 2021 if (1) the TFCF acquisition were completed and (2) subject to satisfaction of a performance-vesting requirement based on total shareholder return of the Company's common stock relative to the total shareholder returns of the S&P 500.

November 2018 Amendment to Mr. Iger's Employment Agreement

On November 30, 2018, following extensive engagement with investors regarding the terms of the compensation received by Mr. Iger in connection with the December 2017 extension of his employment agreement, the Board and Mr. Iger agreed to increase the rigor of the performance test relating to the aforementioned performance-based award.

As originally awarded, 50% of the target number of units would have been earned if the Company's total shareholder return ("TSR") over the applicable

performance period equaled the 25th percentile of the total shareholder return of the companies in the S&P 500 Index ("Relative TSR"), with the target number of units being earned at the 50th percentile, and a maximum of 150% of the target number of units being earned at the 75th percentile. As revised:

    No units will be earned if the Company's Relative TSR is less than or equal to the 25th percentile, the level at which the target number of units is earned has increased from the 50th percentile to the 65th percentile, and the maximum number of units that can be earned (at the 75th percentile) has decreased from 150% to 125%.
    The percentage of the target number of units earned is determined by mathematical linear interpolation at performance levels between the 25th and the 65th percentile (from 0% at the 25th to 100% at the 65th percentile), and between the 65th and the 75th percentile (from 100% at the 65th to 125% at the 75th percentile).

In addition, if the Company's TSR over the performance period is negative, Mr. Iger may not earn more than 100% of the target number of units.

To maintain the initial negotiated value of the award as of the time it was granted in light of more challenging performance criteria that reduce the likelihood of earning the units, the target number of units subject to the award was increased to 937,599 units, as determined by applying a Monte Carlo simulation and the price of the Company's common stock established for purposes of applying the exchange ratio under the merger agreement for the TFCF acquisition.

As a result of this amendment and the more rigorous performance criteria, Mr. Iger will receive fewer shares than under the original award if the Company's Relative TSR does not exceed the 60.5th percentile over the performance period. For example:

    At the 25th percentile, Mr. Iger will receive no shares versus 343,949 shares under the original award, a reduction of 100%.
    At the 35th percentile, Mr. Iger will receive 234,400 shares versus 481,529 shares under the original award, a reduction of 51%.
    At the 50th percentile, Mr. Iger will receive 585,999 shares versus 687,898 shares under the original award, a reduction of 15%.
    At the 60.5th percentile, Mr. Iger will receive shares equivalent to the number he would have received under the original award at the 60.5th percentile, and at the 75th percentile and above will receive no more than a 14% increase in achievable units compared to the original award.

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The Board and Mr. Iger also agreed that annual performance share unit awards granted to Mr. Iger following the closing of the TFCF acquisition will include the limitation to 100% of the target number of units if the Company's TSR over the relevant performance period is negative.

March 2019 Amendment to Mr. Iger's Employment Agreement

In response to further feedback from investors and shortly before the Company's annual meeting in March 2019, the Company and Mr. Iger entered into an additional amendment to Mr. Iger's employment agreement that was focused on changes to Mr. Iger's annual compensation.

These changes included:

    Reduced by $13.5 million the annual total compensation opportunities that the Company would have made available to Mr. Iger upon the closing of the TFCF acquisition as follows:
    o
    eliminated the annual base salary increase of $0.5 million and thus maintained annual base salary at $3.0 million;
    o
    eliminated the annualized $8.0 million increase in annual target bonus opportunity and thus maintained annual target bonus opportunity at $12.0 million; and
    o
    decreased by $5.0 million the annual target long-term incentive award opportunity for periods following closing of the TFCF acquisition to $20.0 million.
    Provided that the terms and conditions with respect to the long-term performance awards are the same in all material respects as the terms applicable to the long-term awards granted to Mr. Iger for the 2017 fiscal year
    Eliminated the increase from 150% to 200% in the maximum opportunity that would have taken effect at closing of the TFCF acquisition with respect to long-term performance awards subject to a total shareholder return performance objective made to Mr. Iger in fiscal 2018 and subsequent fiscal years

December 2019 Bonus Elimination

The amendment dated March 22, 2017 to Mr. Iger's employment agreement provided that Mr. Iger would receive a bonus of $5 million if he completed the term of his employment through July 2, 2019. In response to shareholder feedback regarding total compensation, the Committee discussed with Mr. Iger, and Mr. Iger agreed to the elimination of that $5 million bonus.

Amendment to Mr. Braverman's Employment Agreement

In December 2018, the Company and Mr. Braverman entered into an amendment to Mr. Braverman's employment agreement extending the term of Mr. Braverman's employment from July 2, 2019 to December 31, 2020. Additionally, the amendment increased the target annual long-term equity incentive award value from 225% to 300% of his annual base salary as expected to be in effect at the end of the fiscal year.

In October 2019, following the completion of fiscal 2019, the Company and Mr. Braverman entered into an amendment to Mr. Braverman's employment agreement extending the term of Mr. Braverman's employment from December 31, 2020 to December 31, 2021. Additionally, the amendment increased his annual base salary to $1,750,000 effective September 26, 2019, and thereafter, Mr. Braverman's salary shall be determined by the Company in its sole discretion but shall not be less than $1,750,000. The amendment also increased the target annual long-term equity incentive award value from 300% to 350% of his annual base salary.

Performance Goals

The Compensation Committee normally develops performance goals for each fiscal year early in that year, and evaluates performance against those goals after the fiscal year has ended to arrive at its compensation decisions.

Goals

    Financial Performance

In November 2018, the Compensation Committee reviewed the annual performance-based bonus program. The Committee determined to retain the financial measures and relative weights for calculating the portion of the named executive officers' bonuses that is based on financial performance as follows:

    adjusted segment operating income (25.0%)
    adjusted EPS (28.6%)
    adjusted after-tax free cash flow (21.4%)
    adjusted return on invested capital (25.0%)

The Committee retained these measures and weightings, which are unchanged from the previous fiscal year, because it believes successful performance against these measures promotes the creation of long-term shareholder value.

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The Committee also developed performance ranges for each of the measures in November 2018. These ranges are used to determine the multiplier that is applied to 70% of each named executive officer's target bonus. The overall financial performance multiple is equal to the weighted average of the performance multiples for each of the four measures. The performance multiple for each measure is zero if performance is below the bottom of the range and varies from 35% at the low end of the range to a maximum of 200% at the top end of the range. The Committee believes the top of each range represents extraordinary performance and the bottom represents disappointing performance.

For fiscal 2019, the Committee increased the overall level of the ranges for adjusted EPS, adjusted after-tax free cash flow and adjusted return on invested capital to provide incentives for overall growth. The Committee recognized the significant investments in our direct-to-consumer business, and therefore reduced the overall level of the range for adjusted segment operating income. The following table shows actual performance in fiscal 2018 and the performance ranges chosen by the Committee for fiscal 2019 (dollars in millions except per share amounts):

  Fiscal 2018
Actual


Fiscal 2019
Performance
Range



Adjusted Segment Operating Income*

  $15,919   $11,643-$16,089  
     

Adjusted EPS*

  $6.48   $5.06-$7.35  

Adjusted After-Tax Free Cash Flow**

  $9,327   $4,863-$12,821  
     

Adjusted Return on Invested Capital***

  13.0%   11.3%-14.5%  
*
For purposes of the annual performance-based bonuses, "adjusted segment operating income" and adjusted EPS reflect the adjustments described on page 32.
**
For purposes of the annual performance-based bonuses, "adjusted after-tax free cash flow" takes into account the adjustments described on page 32 and was defined as cash provided by operations adjusted for cash paid for restructuring costs and less investments in parks, resorts and other properties, all on a consolidated basis.
***
For purposes of the annual performance-based bonuses, "adjusted return on invested capital" takes into account the adjustments described on page 32 and was defined as the aggregate adjusted segment operating income less corporate and unallocated shared expenses (both on an after-tax basis), divided by average net assets (including net goodwill) and related impacts including, all on a consolidated basis.

    Other Performance Factors

The Committee also developed other performance factors for the fiscal 2019 annual bonus in November 2018. The Committee established the following factors based on the recommendation of Mr. Iger and the strategic objectives of the Company:

    Achieve integration and synergy goals related to the TFCF acquisition
    Expand our audience through innovative products and high-quality branded content and storytelling
    Drive the successful development and growth of our direct-to-consumer products
    Increase the diverse composition of our workforce, with a focus on management and executives; actively engage in creating a culture of inclusion and expand inclusive content into the marketplace

Evaluating Performance

The Compensation Committee reviewed the overall operating results of the Company in fiscal 2019, evaluating them against the performance ranges developed by the Committee early in the fiscal year, prior to the closing of the TFCF and Hulu transactions. The Committee made adjustments to financial performance contemplated by the bonus plan design to exclude non-recurring items. Specifically, the Compensation Committee adjusted actual fiscal 2019 performance to exclude the impacts of the partial year consolidation of TFCF and Hulu and related impacts including non-recurring restructuring and impairment charges, purchase accounting, tax impacts, the impact of the bond tender related to the TFCF acquisition, the Hulu gain and discontinued operations.

In its evaluation, the Committee took into account that our named executive officers delivered strong adjusted financial performance even while also presiding over the transformational TFCF acquisition, which significantly enhances the long-term prospects of the Company. This performance contributed to increases in adjusted EPS of 12% and adjusted after-tax free cash-flow of 8%. The adjusted return on invested capital grew 150 basis points, while adjusted segment operating income declined by 4% due in part to the significant investments in our direct-to-consumer business.

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The following charts illustrate actual performance in fiscal 2019 (as adjusted) compared to performance ranges with respect to each of the relevant financial measures relative to prior year performance and the ranges developed at the beginning of the fiscal year, as well as the resulting performance factor used in calculating the aggregate financial performance goal multiple. Dollars in millions except per share amounts.

CHART

Based on these results, the weighted financial performance factor was 173% in fiscal 2019 compared to a factor of 139% in fiscal 2018. Additional detail regarding the performance of the Company is set forth in the proxy statement summary beginning on page 1 and our Annual Report on Form 10-K for fiscal 2019.

With respect to the other performance factors, the Committee recognized the overall early performance of TFCF and Hulu. For information regarding the contributions of these businesses, see our Annual Report on Form 10-K for fiscal 2019. The Committee took favorably into account as part of its other performance factor consideration the transformative accomplishments of the named executive officers, including:

    executing the organizational changes made to facilitate the Company's direct-to-consumer strategy;
    closing and integrating the TFCF acquisition;
    management's actions to meaningfully exceed the Company's initial cost synergy commitment;
    the immediate impact TFCF's assets are having on our direct-to-consumer initiatives (including, for example, the inclusion of National Geographic and The Simpsons content on Disney+ and FX content on Hulu); and
    the progress made in creating a strong creative collaboration across the legacy Disney and TFCF teams.

See tabular disclosure for each named executive officer below under "Individual Compensation Decisions" for additional information regarding key contributions and accomplishments of each named executive officer.

Individual Compensation Decisions

Elimination of Mr. Iger's $5 Million Completion Bonus

As described above, following our 2019 Annual Meeting, the Compensation Committee continued to consider shareholder feedback regarding Mr. Iger's executive compensation, particularly the quantum of his overall compensation. Accordingly, in December 2019, the Committee discussed with Mr. Iger, and Mr. Iger agreed to the elimination of $5 million Mr. Iger would have been paid for having fulfilled his commitment to complete the July 2, 2019 term of his employment pursuant to the amendment to his employment agreement dated March 22, 2017.

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Annual Compensation Decisions

The following table summarizes annual compensation decisions made by the Committee with respect to each of the named executive officers. The Committee established the salary and performance-based bonus target multiple of salary for each of the named executive officers early in the fiscal year (except as noted below). The final bonus award was calculated after the fiscal year ended using the financial performance factor of 173% described above. The other performance factors determined by the Committee described below applied to the target bonus opportunity for that executive.

    Salary

Performance-Based Bonus

Equity Awards
                                 

 


 


 


Fiscal Year
End 2019
Annual Salary





 


 


Target



Financial
Performance
Factor1





Other
Performance
Factor2





Award
Amount




 


 


Value



Target
Performance
Units3





Time-
Based
Units3





Options3



 
  Robert A. Iger $3,000,000 $12,000,000 173% 200% $21,750,000 $19,656,186 4 86,824 4 338,694 4  
  Alan N. Braverman   $1,750,000     $3,500,000 173% 200% $6,340,000     $5,000,037 12,777 13,570 69,655  
Christine M. McCarthy $1,800,000 $3,600,000 173% 200% $6,520,000 $5,500,090 14,055 14,927 76,621  
  M. Jayne Parker   $1,054,463     $1,476,248 173% 200% $2,680,000     $3,400,162 8,689 9,228 47,366  
Zenia B. Mucha $1,161,840 $1,452,300 173% 200% $2,630,000 $2,600,092 6,644 7,057 36,221  
1
Multiplied by 70% of the target amount.
2
Multiplied by 30% of the target amount.
3
The number of restricted stock units and options was calculated from the value of the award as described in the table on pages 21 to 22.
4
In connection with the close of the TFCF acquisition, Mr. Iger was granted 11,003 PBUs and 46,803 options on March 21, 2019. These awards have an aggregate value of $2,373,682.

The compensation set forth above and described below differs from the total compensation reported in the Summary Compensation Table as follows:

    the compensation set forth above does not include the change in pension value and nonqualified deferred compensation earnings as these items do not reflect decisions made by the Committee during the fiscal year.
    the compensation set forth above does not include perquisites and benefits and other compensation as these items are generally determined by contract and do not reflect decisions made by the Committee during the fiscal year.

The Committee's determination on each of these matters was based on the recommendation of Mr. Iger (except in the case of his own compensation), the parameters established by the executive's employment agreement and the factors described below. In determining the appropriate other performance factor for individual executives, the Committee and Mr. Iger take into consideration that the named executive officers operate as a team in contributing to success across the Company. In addition, in determining equity awards, the Committee considered its overall long-term incentive guidelines for all executives, which, in the context of the competitive market for executive talent, attempt to balance the benefits of incentive compensation tied to performance of the Company's common stock with the dilutive effect of equity compensation awards.

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Mr. Iger

    Salary       Mr. Iger's 2019 annual salary rate was unchanged from his 2018 salary and is equal to the amount set in his employment agreement.    
    Performance-
based Bonus
      Target Bonus
Mr. Iger's fiscal 2019 target bonus amount was unchanged from fiscal 2018 and is equal to the amount provided for in his employment agreement.

Other Performance Factor
The Compensation Committee applied a factor of 200% with respect to other performance factors for Mr. Iger in fiscal 2019 compared to a factor of 175% in fiscal 2018. In fiscal 2019, Mr. Iger provided outstanding leadership in achieving improvements in financial performance while continuing to position the Company for future growth, highlighted by the acquisition of TFCF and the development of a direct-to-consumer strategy. Other key accomplishments during the year included:

Outstanding Studio performance with five films generating over $1 billion in global box office sales. The successful slate included Avengers: Endgame, The Lion King, Captain Marvel, Toy Story 4 and Aladdin.

Record operating results at Parks & Resorts, while opening Star Wars: Galaxy's Edge at Disneyland and Walt Disney World.

Expansion of our direct-to-consumer streaming offering with the acquisition of operating control over Hulu and preparation for the successful launch of Disney+.

The naming of Disney as one of the "Most Reputable Companies" by Forbes and one of the world's "Most Admired Companies" by Fortune. Disney was also recognized as the #1 "Most Innovative Company" in Media by Fast Company and #1 in the "Brand Intimacy Study" by MBLM, which recognized our power in building bonds with consumers.

   
    Equity Award Value       The Committee left the value of Mr. Iger's annual equity award approximately equal to the value of his fiscal 2018 award. In addition to his annual equity award, in connection with the TFCF acquisition, Mr. Iger received a grant of both performance-based stock units and options valued at $2,373,682 pursuant to the terms of his employment agreement. The amount of this additional award was based on the timing of the closing of the TFCF acquisition.    

Mr. Braverman

    Salary       The Committee increased Mr. Braverman's salary to $1,750,000 in connection with his October contract extension, effective September 26, 2019, to reflect changes in the market for executive talent and his continued outstanding performance.    
    Performance-
based Bonus
      Target Bonus
Mr. Braverman's target bonus for fiscal 2019 is equal to two times his fiscal year-end salary, as set forth in his employment agreement.

Other Performance Factor
The Committee applied a factor of 200% with respect to other performance factors for Mr. Braverman in fiscal 2019 compared to a factor of 166% in fiscal 2018. The determination this year reflected Mr. Iger's recommendation and Mr. Braverman's accomplishments during the year, which included:

Oversight of legal strategy of the acquisition of TFCF, including the responsibility for managing the antitrust and other regulatory clearances.

Continued leadership of the Company's legal positions on significant litigation matters, transactions and regulatory developments.

Oversight of the regulatory and transactional legal work associated with executing the required sale of TFCF's regional sports networks in the U.S.

Continued promotion of diversity of hiring in the legal department and promotion of the department's pro bono legal program, each of which resulted in industry recognition.

   
    Equity Award
Value
      The equity award value for Mr. Braverman is equal to 2.9 times his fiscal year-end salary.    
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Ms. McCarthy

    Salary       Ms. McCarthy's 2019 annual salary was unchanged from her 2018 salary and is equal to the amount set in her employment agreement.    
    Performance-
based Bonus
      Target Bonus
Ms. McCarthy's target bonus for fiscal 2019 is equal to two times her fiscal year-end salary, as set forth in her employment agreement.

Other Performance Factor
The Committee applied a factor of 200% with respect to other performance factors for Ms. McCarthy in fiscal 2019 compared to a factor of 166% in fiscal 2018. The determination this year reflected Mr. Iger's recommendation and Ms. McCarthy's accomplishments during the year, which included:

Oversight and execution of financing for key business initiatives, including the acquisition of TFCF.

Implementation of Disney's new segment reporting structure and integration of TFCF's businesses into all financial processes.

Oversight of the transactional financial work associated with executing the required sale of TFCF's regional sports networks in the U.S.

Continued promotion of diversity among the financial organization.

   
    Equity Award
Value
      The annual equity award value for Ms. McCarthy is equal to 3.1 times her fiscal year-end salary.    

Ms. Parker

    Salary       The Committee increased Ms. Parker's 2019 salary by 5% to reflect changes in the market for executive talent and her continued outstanding performance.    
    Performance-
based Bonus
      Target Bonus
Ms. Parker's target bonus for fiscal 2019 is equal to 1.4 times her fiscal year-end salary, as set forth in her employment agreement.

Other Performance Factor
The Committee applied a factor of 200% with respect to other performance factors for Ms. Parker in fiscal 2019 compared to a factor of 173% in fiscal 2018. The determination this year reflected Mr. Iger's recommendation and Ms. Parker's accomplishments during the year, which included:

Leadership of the human resources strategy relating to the TFCF acquisition by developing and implementing a support model with dedicated resources and project management plans to ensure successful integration.

Continued enhancement of employee experience through a variety of initiatives, including Disney Aspire, an employee education program with over 11,000 U.S. hourly employees participating.

Continued development of world-class talent through an executive assessment process for developing senior executive candidates.

Leadership through multiple natural disasters and employee emergency events and continued integration of strong global security and intellectual property protection practices in response to a heightened security environment worldwide.

   
    Equity Award
Value
      The equity award value for Ms. Parker is equal to 3.2 times her fiscal year-end salary.    
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Ms. Mucha

    Salary       Ms. Mucha's 2019 annual salary was unchanged from her 2018 salary and is equal to the amount set in her employment agreement.    
    Performance-
based Bonus
      Target Bonus
Ms. Mucha's target bonus for fiscal 2019 is equal to 1.25 times her fiscal year-end salary, as set forth in her employment agreement.

Other Performance Factor
The Committee applied a factor of 200% with respect to other performance factors for Ms. Mucha in fiscal 2019 compared to a factor of 133% in fiscal 2018. The determination this year reflected Mr. Iger's recommendation and Ms. Mucha's accomplishments during the year, which included:

Enhancement of the reputation of the Disney brand worldwide through leadership of global communications for the Company and all its business units.

Expansion of the use of cutting-edge communication systems in order to measure the Company's reputation and detect potential crises before they happen.

Execution of strategic communication plans in support of the launch of the Company's strategic initatives, including the direct-to-consumer business and Disney+, the TFCF acquisition and the reorganization of the Company's business segments.

Utilization of Disney's array of social media platforms and digital communications vehicles to reach the Company's audience directly.

   
    Equity Award
Value
      The equity award value for Ms. Mucha is equal to 2.2 times her fiscal year-end salary.    

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 this review and discussion, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's proxy statement relating to the 2020 Annual Meeting of shareholders.

Members of the Compensation Committee

Mary T. Barra
Maria Elena Lagomasino (Chair)
Mark G. Parker

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Compensation Tables

Fiscal 2019 Summary Compensation Table

The following table provides information concerning the total compensation earned in fiscal 2017 (except for Ms. Mucha, who was not a named executive officer in that year), fiscal 2018 and fiscal 2019 by the chief executive officer, the chief financial officer, and three other persons serving as executive officers at the end of fiscal 2019 who were the most highly compensated executive officers of the Company in fiscal 2019. These five officers are referred to as the named executive officers or NEOs in this proxy statement. Information regarding the amounts in each column follows the table.

  Name and Principal Position


Fiscal
Year


Salary
Stock
Awards1


Option
Awards






Non-Equity
Incentive
Plan
Compensation











Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings2









All Other
Compensation


Total
 
    Robert A. Iger   2019   $3,000,000   $10,072,895   $9,583,291   $21,750,000   $1,967,234   $1,144,342   $47,517,762    
                   
  Chairman and Chief Executive   2018   2,875,000   35,352,327   8,270,976   18,000,000     1,146,911   65,645,214    
                   
  Officer   2017   2,500,000   8,984,191   8,298,322   15,200,000     1,301,167   36,283,680    
                   
    Alan N. Braverman     2019   1,660,061   3,000,026   2,000,011     6,340,000     $639,894     79,888   13,719,880    
    Senior Executive Vice President,     2018   1,600,213   2,400,080   1,600,004     4,750,000         69,233   10,419,530    
    General Counsel and Secretary     2017   1,565,000   1,878,142   1,252,020     3,600,000     56,359     95,938   8,447,459    
    Christine M. McCarthy   2019   1,800,000   3,300,064   2,200,026   6,520,000   $1,083,130   70,935   14,974,155    
                   
  Senior Executive Vice President   2018   1,533,750   2,700,063   1,800,001   5,300,000   434,539   71,397   11,839,750    
                   
  and Chief Financial Officer   2017   1,323,077   1,950,118   1,300,000   3,450,000   852,787   70,600   8,946,582    
                   
    M. Jayne Parker     2019   1,041,717   2,040,137   1,360,025     2,680,000     $1,807,756     91,227   9,020,862    
    Senior Executive Vice President and     2018   996,938   1,950,105   1,300,022     2,100,000     380,524     80,456   6,808,045    
    Chief Human Resources Officer     2017   851,154   1,320,171   880,020     1,570,000     392,107     77,112   5,090,564    
    Zenia B. Mucha   2019   1,161,840   1,560,075   1,040,017   2,630,000   $1,128,891   41,968   7,562,791    
                   
    Senior Executive Vice President and   2018   961,150   1,269,161   846,016   2,000,000     24,452   5,100,779    
    Chief Communications Officer                                    
                   
1
Stock awards for each fiscal year 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 awards values would be as follows:

 

Fiscal Year



Mr. Iger

Mr. Braverman

Ms. McCarthy

Ms. Parker

Ms. Mucha
 

 

2019

  $ 14,375,162   $3,618,582   $3,980,490   $ 2,460,786   $1,881,722    

 

2018

    149,639,748     2,852,152     3,208,650     2,317,405     1,508,227    
             

 

2017

  12,447,500   2,240,131   2,325,983   1,574,625      
             
2
As described more fully under "Change in Pension Value and Nonqualified Deferred Compensation Earnings" below, changes in pension value in 2019 were driven largely by changes in the discount rate applied to calculate the present value of future pension payments. In fiscal 2018, the changes in pension value for Mr. Iger, Mr. Braverman and Ms. Mucha were negative $833,295, $167,536 and $524,820. In fiscal 2017, the change in pension value for Mr. Iger was negative $428,437.

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Salary.    This column sets forth the base salary earned during each fiscal year.

Stock Awards.    This column sets forth the grant date fair value of the restricted stock unit awards granted to the named executive officers during each fiscal year as part of the Company's long-term incentive compensation program. The grant date fair value of these awards was calculated by multiplying the number of units awarded by 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 unit awards subject to vesting conditions other than the test to assure deductibility under Section 162(m) of the Internal Revenue Code. The valuation adjustments for performance-based awards reflect the fact that the number of shares received on vesting varies based on the level of performance achieved and were determined using a Monte Carlo simulation that determines the probability that the performance targets will be achieved. The grant date fair value of the restricted stock unit awards granted during fiscal 2019 is also included in the Fiscal 2019 Grants of Plan Based Awards table on page 40.

Option Awards.    This column sets forth the grant date fair value of options to purchase shares of the Company's common stock granted to the named executive officers during each fiscal year. The grant-date fair value of these options was calculated using a binomial option pricing model. The assumptions used in estimating the fair value of these options are set forth in footnote 13 to the Company's Audited Financial Statements for fiscal 2019. The grant date fair value of the options granted during fiscal 2019 is also included in the Fiscal 2019 Grants of Plan Based Awards table on page 40.

Non-Equity Incentive Plan Compensation.    This column sets forth the amount of compensation earned by the named executive officers under the Company's annual performance-based bonus program during each fiscal year. A description of the Company's annual performance-based bonus program is included in the discussion of "Fiscal 2019 Total Direct Compensation" in the "Executive Compensation Program Structure" section beginning on page 21, and the determination of performance-based bonuses for fiscal 2019 is described in the "2019 Compensation Decisions" section of the Compensation Discussion and Analysis beginning on page 28.

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 benefits under all

defined benefit plans, including supplemental plans, during each fiscal year. The amounts reported in this column vary with a number of factors, including the discount rate applied to determine the value of future payment streams. The discount rate used pursuant to pension accounting rules to calculate the present value of future payments was 3.88% for fiscal 2017, 4.31% for fiscal 2018 and 3.22% for fiscal 2019. Neither increases nor decreases in pension value resulting from changes in the discount rate result in any increase or decrease in benefits payable to participants under the plan. Pension values for some executive officers in fiscal 2018 increased despite the small increases in the discount rate due to the effect of an additional year of service and higher compensation levels. The decrease in the discount rate in fiscal 2019 resulted in substantial increases in the present value of future payments.

Mr. Iger, Ms. McCarthy, Ms. Parker and Ms. Mucha were credited with earnings on deferred compensation as disclosed below under "Fiscal 2019 Deferred Compensation Table." These earnings were at rates that were not above market rates and therefore are not reported in this column.

All Other Compensation.    This column sets forth all of the compensation for each fiscal year that we could not properly report in any other column of the table, including:

    the incremental cost to the Company of perquisites and other personal benefits;
    the amount of Company contributions to employee savings plans;
    the dollar value of insurance premiums paid by the Company with respect to excess liability insurance for the named executive officers; and
    the dollar amount of matching charitable contributions made to charities pursuant to the Company's charitable gift matching program, which is available to all regular US employees with at least one year of service.

The dollar amount of matching charitable contributions was, $50,000 for Mr. Iger, $20,343 for Mr. Braverman, $50,000 for Ms. McCarthy, $49,500 for Ms. Parker and $20,000 for Ms. Mucha.

In accordance with the SEC's interpretations of its rules, this column also sets forth the incremental cost to the Company of certain items that are provided to the named executive officers for business purposes but which may not be considered integrally related to his or her duties.

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Executive Compensation
 
 

The following table sets forth the incremental cost to the Company of each perquisite and other 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 2019.

 

 

Personal
Air Travel



Security

Other

Total
 

 

Robert A. Iger

  $ 367,127   $ 675,544   $ 45,102   $ 1,087,773    

 

Alan N. Braverman

            52,977     52,977    
           

 

Christine M. McCarthy

      14,400   14,400    

 

M. Jayne Parker

            35,078     35,078    
           

 

Zenia B. Mucha

      15,400   15,400    

The incremental cost to the Company 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 a named executive officer on flights that were business in nature. Where a personal flight coincided with the repositioning of an aircraft following a business flight, only the incremental costs of the flight compared to an immediate repositioning of the aircraft are included. As noted

    on page 23, above, Mr. Iger is required for security reasons to use corporate aircraft for all of his personal travel.

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

The "Other" column in the table above includes, to the extent a named executive officer elected to receive any of these benefits, the incremental cost to the Company of the vehicle benefit, personal air travel, reimbursement of up to $1,000 per calendar year for wellness-related purposes such as fitness and nutrition management, and reimbursement of expenses for financial consulting. With respect to Mr. Iger, the "Other" column also includes the filing fee and related legal fees incurred in connection with a filing by Mr. Iger under the Hart-Scott-Rodino Antitrust Improvements Act that was required as a result of Mr. Iger's participation in the Company's equity compensation program.

The named executive officers also were eligible to receive the other benefits described in the Compensation Discussion and Analysis under the discussion of "Benefits and Perquisites" in the "Compensation Program Elements" section, which involved no incremental cost to the Company or are offered through group life, health or medical reimbursement plans that are available generally to all of the Company's salaried employees.

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The Walt Disney Company Notice of 2020 Annual Meeting and Proxy Statement      39

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Fiscal 2019 Grants of Plan Based Awards Table

The following table provides information concerning the range of awards available to the named executive officers under the Company's annual performance-based bonus program for fiscal 2019 and information concerning the option grants and restricted stock unit awards made to the named executive officers during fiscal 2019. Additional information regarding the amounts reported in each column follows the table.

 

 

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

 

   

Grant
Date


 
Threshold

  Target

Maximum
   
Threshold

Target

Maximum
 






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






 

 

    12/19/2018                                           291,891   $110.54   $109.22   $8,381,095