SEC Charges Walt Disney with Disclosure Violations
The Securities and Exchange Commission on Monday instituted settled enforcement proceedings against The Walt Disney Company (Disney). The Commission charged Disney for failing to disclose certain related party transactions between Disney and its directors, and for failing to disclose certain compensation paid to a Disney director. Under the settlement, Disney consented to the entry of an Order that it cease and desist from violating the proxy solicitation and periodic reporting provisions of the federal securities laws.
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“Shareholders have a significant interest in information regarding relationships between the company and its directors,” said Linda Chatman Thomsen, Deputy Director of the SEC’s Division of Enforcement. “Failure to comply with the SEC’s disclosure rules in this area impedes shareholders’ ability to evaluate the objectivity and independence of directors.”
The Commission found that between 1999 and 2001, Disney failed to disclose relationships between the company and its directors which were required to be disclosed in its proxy statements and annual reports filed with the Commission.
In particular, Disney failed to disclose that the company employed three children of its directors, who received annual compensation ranging from $60,000 to more than $150,000. In addition, Disney did not disclose that the spouse of another director was employed by a subsidiary 50% owned by Disney and received compensation in excess of one million dollars annually. Further, Disney failed to disclose that it made regular payments to a corporation owned by a Disney director that provided air transportation to that director for Disney-related business purposes. Finally, Disney failed to disclose that it provided office space, secretarial services, a leased car, and a driver to another Disney director, services valued by the company at over $200,000 annually.
The Commission concluded that Disney’s failed disclosures violated Sections 13(a) and 14(a) of the Securities Exchange Act of 1934 and Rules 13a-1, 12b-20, and 14a-3(a) thereunder. Without admitting or denying the Commission’s findings, Disney consented to the issuance of the Commission’s Order, which requires Disney to cease and desist from committing or causing any violations and any future violations of the foregoing statutory provisions and rules.