LPWire: Letter States Disney Management to Obstruct Access to 401K Trustee Vote Cause for Concern

Attorneys for Roy Disney and Stanley Gold Say Expenses by Walt Disney Management to Obstruct Access to 401K Trustee Vote Is Cause for Concern

Attorneys for Roy E. Disney and Stanley P. Gold today sent the following letters to lawyers for the Walt Disney Company.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP
350 South Grand Avenue, 32nd Floor
Los Angeles, CA 90071
Tel: 213.473.2000
Fax: 213.473-2222
www.friedfrank.com

April 7, 2004
By Fax
Morton A. Pierce
Paul J. Wessel
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092

Re: The Walt Disney Company 2004 Annual Meeting

Dear Messrs. Pierce and Wessel,

In response to your letter of April 5, 2004, I can only express dismay that The Walt Disney Company has engaged yet another law firm for the purpose of delaying my clients' access to the voting results. The effort and expense to which Company management is going to obstruct our access gives my clients further cause for concern.

The last communication I received from Company counsel (that time, Delaware counsel) prior to your letter raised concerns about whether IVS would permit us access to the vote prior to IVS' final review. I promptly provided Delaware counsel with the requested information about the person we had spoken with at IVS and invited Delaware counsel to confirm that IVS not only had no objection to our access before final review but had agreed such access would not delay or impede IVS' review. I had expected that the Company would in fact check with IVS and grant my clients access to the voting materials. Instead, the next communication we receive is from yet a different law firm, this time raising a different reason my clients cannot be provided access to the voting materials.

As we have repeatedly informed the Company, we have no intention of disclosing the voting instructions delivered by any individual 401(k) participant to the 401(k) plans' trustee. We understand that ERISA's confidentiality requirements are necessary to protect individual employees from retribution so that employees will feel free to vote their conscience. This concern for individual employees' continued employment is one of the reasons that the Company is not permitted to receive a record of the individual participants' voting instructions. However, we do not believe that such concerns, or ERISA's confidentiality requirements, apply to disclosure of the trustee's vote of the 401(k) plan shares, where individual participants are not identified and the vote is not broken out by participant.

In your letter, you argue that release of the trustee's vote could lead to "undue pressure or coercion" of the 401(k) participants. This assertion strikes us as odd given that Fidelity, the trustee of the 401(k) plans, informed our proxy advisors at MacKenzie Partners that Fidelity delivered its ballot directly to the Company and confirmed that vote in a subsequent telephone call with the Company. If the trustee's vote can be provided to the Company, who arguably has the most at stake and, as employer of many of the plan participants, is in the position to place "undue pressure or coercion" on the participants, we fail to see why the trustee's vote should not be released publicly. The purpose of the ERISA confidentiality restrictions is to insulate individual employees decisionmaking from employer retribution, not to protect the employer from the disclosure of unfavorable trustee voting results. Accordingly, we disagree with your assertion that ERISA's confidentiality strictures prohibit the disclosure of the trustee's vote of the 401(k) shares, and we will not consent to any restriction on the disclosure of such vote.

In addition, despite our repeated requests, the Company has failed to provide us with any examples of confidentiality agreements signed in connection with the review of the voting results of a shareholder meeting. It is our experience, and that of our Delaware counsel and our proxy advisors, that no such restrictions are imposed in connection with such review, either on the voting results as a whole or on the trustee's vote of the 401(k) shares, and we continue to be interested in seeing any precedent for the Company's requested confidentiality agreement. We can only presume that your continued failure to provide us any precedent is indicative of your inability to find any such authority.

I also direct your attention to the March 25, 2004 letter we received from the Company's Delaware counsel in which we were told that "when the Company has in its possession information about the details of the 401(k) vote that it can publicly release, it will be made publicly available." If the Company's position is now that the trustee's vote cannot be released at all, then in the Company's view, there are no details of the 401(k) vote that can be publicly released, and the assurance we received from Delaware counsel was meaningless.

Although you seek to belittle the importance of the 401(k) trustee's vote with assertions about the composition of the 401(k) plan participants and whether they voted, we think that shareholders and the Board of Directors have a right to know the trustee's vote, especially given rumors in the marketplace of a greater than 70% NO (withhold) vote against Michael Eisner by the trustee at the direction of the 401(k) participants. Unfortunately, we cannot respond to your detailed assertions about the 401(k) votes because you have not provided us with any voting information to assess those assertions.

In sum, your construction of unprecedented and unreasonable barriers to our access to the voting materials lead us to believe your intent is to delay and obfuscate the release of the voting results. This continued unwillingness to provide us promised access has left us no choice but to bring an action against the Company in Delaware court seeking to compel disclosure of the voting materials. We regret being forced to take this action, but you have left us with no other recourse.

Following is the March 30, 2004 letter:

FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP
350 South Grand Avenue, 32nd Floor
Los Angeles, CA 90071
Tel: 213.473.2000
Fax: 213.473-2222
www.friedfrank.com
March 30, 2004

By Fax
Donald J. Wolfe, Jr.
Potter Anderson & Corroon LLP
1313 North Market Street
Wilmington, Delaware 19899-0951
Re: The Walt Disney Company 2004 Annual Meeting
Dear Mr. Wolfe,

In response to your letter of March 25, 2004, please note that on March 18, 2004, prior to our initial request to your client, Michael Barbera of IVS informed our proxy advisors that IVS was comfortable providing us access to all of the ballots cast at the Annual Meeting and all of the proxies cast by banks and brokers, including the ADP summary proxies (the "Non-Record Holder Materials") prior to IVS' completion of its review, subject only to your client's consent. Our proxy advisors and Delaware counsel spoke with Mr. Barbera again on March 29, 2004, and he reiterated this position and confirmed that our review would neither inconvenience IVS nor delay the final tally by IVS. Mr. Barbera also stated that he had previously conveyed IVS' willingness to cooperate with our request to John Grossbauer of your firm. Accordingly, we fail to understand why your March 25, 2004 letter stated that IVS was not willing to allow us access.

Yesterday, Mr. Barbera also informed our proxy advisors and Delaware counsel that IVS expects to finish its review of the Non-Record Holder Materials in the next day or two and will then turn to its review of the record holder votes. In light of Mr. Barbera's prior willingness, we believe that providing us access to the Non-Record Holder Materials at this juncture is especially appropriate as we could expedite the review of the Non-Record Holder Materials while IVS is working on reviewing the record holder materials.

We also note that on March 22, 2004 we sent to David K. Thompson a mark-up of your client's proposed confidentiality agreement. Although a week has passed, we have not yet received a response from either you or your client. Please let us know when we can expect a reply, and, if our mark-up is not acceptable to your client, please include any authority supporting the imposition of confidentiality restrictions more onerous than those we have proposed in our mark-up in the context of a vote review.

--Posted April 7, 2004
Source: Roy Disney and Stanley Gold