Disney has lots to brag about at annual meeting but may feel some heat

Walt Disney Co. will have plenty to crow about at its annual shareholders meeting in Chicago on Thursday, with the entertainment juggernaut enjoying stellar profits and a hot streak at the box office.

This weekend, the company’s film studio will release “Zootopia,” which is expected to have one of the strongest openings ever for a Disney animated film.

But the upbeat news will be tempered somewhat by lingering anxieties among investors over how Disney-owned networks such as ESPN are grappling with rapid changes in the television industry.

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The Burbank company is coming off a fiscal first quarter in which it generated record net income, powered by the success of “Star Wars: The Force Awakens,” which has grossed more than $2 billion worldwide since being released in December.

But the company also posted a 6% decline in operating income for its media networks unit, which includes ESPN and other television networks.

Shares of Disney have been in a slump since August, when Wall Street jitters about the state of the company’s TV business bubbled over. The stock dropped 16% that month — as analysts expressed concerns about subscriber losses and increasingly expensive sports rights at ESPN — and experienced an up-and-down second half of 2015.

Shares have dropped 8% this year and closed down 65 cents, or 0.7%, to $97 on Wednesday.

It’s possible, analysts said, that Disney Chairman and Chief Executive Robert Iger could use the meeting as a platform to highlight Disney’s cable television business — as he did in February during a conference call with analysts to discuss the company’s first-quarter earnings. Disney indicated then that ESPN lost subscribers during the quarter but did not specify how many.

Edward Jones Research analyst Robin Diedrich said she expects Disney to use the meeting to address issues in the TV business.

“Shareholders should be very pleased with the results and how the stock price has performed, but it has still fallen from its high, and the concerns about cord-cutting and the TV business in general are the reason for that,” Diedrich said. “I think that is going to be the main topic of conversation.”

On Thursday, shareholders will be asked to elect 11 members of its board of directors and consider two shareholder proposals. Both are scheduled to be presented at the meeting, which will be held in the Auditorium Theatre at Roosevelt University.

In the first of two proposals, investors will vote on whether Disney should eliminate from its charter and bylaws any voting requirement that calls for a greater than simple majority vote. Under the proposal, which has been put forward by James McRitchie, who publishes a website that tracks corporate governance issues, a simple majority voting rule would become standard at the company.

According to the proposal, which is included in a filing with the Securities and Exchange Commission, “Supermajority requirements are used to block initiatives supported by most shareholders but opposed by a status quo management.”

Disney’s board recommends a vote against the proposal. The board has proposed doing away with the requirement for a supermajority vote in matters relating to the sale of the company.

In the past, supermajority voting provisions were used by companies as a protection against hostile takeover efforts, but many firms have done away with such requirements as laws governing corporations have evolved.

In the second measure, which has been proposed by Zevin Asset Management, shareholders will vote on whether Disney should produce an annual report on its lobbying efforts. The report would detail the company’s policies and procedures regarding lobbying, and disclose payments made by Disney as part of those efforts.

Disney’s board has recommended a vote against the measure, saying in its regulatory filing that the company already discloses information about its lobbying activities with the U.S. House of Representatives and the U.S. Senate and other entities as required by law. The board also said that the proposed changes would require the company to reveal information about its lobbying activities that “exceed disclosure currently required by law.”

In recent years, the shareholder gatherings have been used by Disney to reveal tidbits about its upcoming film and theme park projects.

At last year’s meeting in San Francisco, Disney said that it would make a sequel to “Frozen,” the blockbuster animated film from 2013. Two years ago, Iger divulged plot points of “Star Wars: The Force Awakens” and said that the company’s Pixar Animation Studios would make a sequel to the 2004 hit “The Incredibles.” And in 2013, Disney unveiled the first computer rendering of its multibillion-dollar Shanghai Disney Resort, which will open later this year.

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Twitter: @DanielNMiller

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