Sometimes something happens to remind us that for all the progress we’ve made after many years of trying, companies still don’t take activist investors as seriously as we’d like, we still have a long way to go, and sometimes it feels a little like it’s our own fault. Last week one of those things happened.

A relatively low-key announcement from Disney shows how executives deflect investors with relatively little pain. In settling with a group of shareholders over a proxy access proposal, Disney surrendered virtually nothing.

We concede immediately that we don’t know the complete story behind this settlement. We base our assessment only on the public account, so if anyone cares to shed light on what really happened, we’d gladly change our mind. For now, though, it looks like shareholders let Disney off easy.

Disney’s Notorious Past and Quiet Present

Disney has had more than its fair share of activist investing and governance notoriety. For years CEO Michael Eisner ruled over a complacent, ineffective BoD. His run there culminated in a famous shareholder lawsuit over the multi-million dollar severance package for Michael Ovitz, recounted wonderfully in the book Disney War.

Things quieted down after Robert Iger became CEO in 2005. Like any iconic US company, it attracts the usual assortment of odd shareholder resolutions, related to Chinese labor practices and the like. In 2010 someone managed submit a resolution urging the company to not discriminate against “ex-gay” employees.

In 2007 Harvard Law School professor Lucian Bebchuk proposed a resolution seeking shareholder approval of any poison pill. It attracted sufficient votes such that the following year Disney complied.

Proxy Access in 2013 and 2014

After a few quiet years, then, in 2013 Hermes submitted a non-binding resolution asking the BoD to implement proxy access. Hermes proposed a fairly standard structure, in which shareholders representing at least 3% of the shares and who have owned their shares for at least three years can include on the company proxy materials nominees numbering no more than 20% of the BoD.

Hermes campaigned a bit for the proposal, issuing one news release a few days before the Disney annual meeting. CalSTRS also issued a letter supporting the proposal. After this effort, the resolution won 40% of the votes cast, a very nice result.

Earlier this year, then, Hermes and CalSTRS teamed with the Connecticut state employee pension fund to propose the same proxy access structure at the March 18 annual meeting. One would expect the proposal to win at least 40% of the votes, and perhaps more with a concerted effort. Yet, we did not see any news releases or proxy materials from shareholders soliciting support for the proposal. Disney published a spirited defense of their corp gov and exec comp structure, which they presumably had presented to shareholders.

An Unsatisfactory Settlement

A day before the annual meeting, Disney announced that the three shareholders had withdrawn the proxy access proposal. At the same time, the company adopted a policy pertaining to the CEO and BoD Chair:

1. The [BoD] shall ... be an independent director unless the [BoD] concludes that ... the best interests of shareholders would be otherwise better served. [If the BoD] determines that the best interests of shareholders would be better served by a [non-independent BoD Chair], the Board shall (a) provide a written statement in its next proxy materials discussing why the different arrangement is in the best interests of shareholders, (b) [annually] determine whether the arrangement remains in the best interests of shareholders and include a written statement in the proxy materials giving the reasons for this determination, and (c) designate [a Lead Independent Director].
   

Evidently, the investors surrendered the proxy access proposal, and gained ... not much. We read this as the BoD, in its sole discretion, can combine the BoD Chair and CEO roles if they explain it in the proxy materials, and designate a Lead Independent Director. They didn’t even amend the bylaws, but rather changed an unenforceable internal guideline.

Let us reiterate that we don’t know what the three shareholders know. In particular, they may have counted votes and concluded that at best they could win about 40% again. If so, Disney would likely see it, too, and would happily repeat last year’s vote. Or, maybe Disney offered it, or the investors proposed it (the Connecticut fund wanted something similar in 2013).

We don’t know what happened, and why investors didn’t push harder. We will gladly update our view if we do find out. It sure looks like Disney appears to comply with good corp gov practice yet surrenders nothing of practical value. And, investors look like they give up a decent chance to score a critical reform at an important company, with nothing in return.