Disney is a company that is involved both in media and entertainment. It is probably the number two in the world on the list of the Media Corporations. The company deals with assets that include movies, music, printing and television. The company has a vast established media networks comprising of cable networks (ABC, SOAPnet, ESPN and Disney channels) and broadcasting firms (ABC television, WLS-television, KFSN television among others). The company also owns over 70 radio stations. In the governance, structure the company is run by CEO and board of directors (Lenvok 2011).
In the contemporary business environment, the organization must put into place policies that will motivate their employees to remain committed and loyal to the firm. It is currently so easy for the CEO to quit from one organization to the other, in the search for greener pastures and a good environment to exercise their knowledge and capability to zenith. Therefore, proper compensation for the CEO’s should not be taken for granted by a company with a vision to expand its customer boundaries. The company has ample programs meant to compensate the CEO. However, the understanding of the policies of how these compensations are calculated is complicated. Most of the CEO may feel like it just mere terms and theoretical that has no practicality in it. The complicated flow of a compensation scheme creates difficulty in analyzing the actual value for the CEO in an efficient non-complicated manner. This creates uncertainties and vague program just to woo the CEO’s heart to submit to the activities. Consequently, unless these programs are interpreted and explained to an individual by a lawyer and a company administrative bench, it may fail to motivate the CEO. Critically, the company has enough compensation schemes that can positively boost the CEO’s morale to work in the organization. Among the compensations that are worth noting include basic salary, incentive compensation, equity awards, stocks options, medical coverage, indemnities and payment upon early termination among others. These compensations play a significant role in motivating the CEO into his chores (Joshua K. 2009).
Ownership and Managerial Control
The company has well demarcated level of ownership and managerial control. The ownership can be evidenced in the allocation of shares and dividends, which are well separated from the leadership control. Share allocation is guided by policies that cannot be altered by the decision of the CEO without the approval of the board of directors. The rules seem adequate to guide the separate roles. The directors are independent of the company. This ensures that they are able to make sound decisions regarding the shareholders’ interest. This reveals an adequate field to exercise their influence, especially when shareholders’ interests are different from those of the management team. There have been queries over the independence of directors in this company. These were arising from the close relationship between the directors and the company (Orwall, B 2010).
The board of directors has the role to select, evaluate and set compensation for the CEO, oversee share repurchase program among other activities. Disney is composed of 13 directors. The directors have a profound experience in the business world, which give the company a firm hold in the business field escalating its profit. Some of the known influential directors in the Disney’s board of directors are Facebook’s CEO Sheryl Sandberg and the late Steve Jobs. The directors form a compact leadership bench that has continuously seen the company grow to peak levels. After the sad history of the directors’ performance especially during 2004-2006, the company has since achieved credit for its management (Lenvok 2011).
The revolution of board membership qualifications and the performance of the company are a vivid clue of a performing the board of governance. There has been minimal claim of violation of corporate governance since the times of Mr. Eisten. The board of directors has managed to bring the company and its’ affiliates in to an order, in respect to the operation. For instance, the board announced the extension of contract for the current CEO Robert Iger in October 2011. The board had also agreed on naming Iger as the chairperson after the retirement of John E. Pepper. This step shows a board of directors that are committed to upholding the fidelity of company’s activities. Through this, company will maintain a long-term value for the shareholders. The board of directors seems amply armed to direct the company into a bright future. This is necessitated by the inclusion of FTSE4Good Index Series (Lenvok 2011).
Improving the Effectiveness of the Board of Directors
The board of directors is the most influential body in a corporate organization. Therefore, it should be strengthened in the best way possible for the effective running of an organization. Disney has taken a bold step in reinforcing the board of directors to improve its performance and outcome. All the members in the board have a history of being or having been a CEO of prominence, well established firms. This ensures that they have the needed experience to make practical decisions critically. In ensuring that the members are available and committed for companies’ decision-making, it is only those who have minimal directory functions in other companies that win the favor of being directors. To maintaining the gender representation, 31 % of the directors are female.
Moreover, other steps to boost up the independency of the board of directors to a level where stakeholders can trust the group. A new definition of independence of a director has been established which requires an individual to be over five years, since being the company's employee. The directors are also supposed to own over $100,000 Disney stocks and should not be an executive member or with a close relationship ties with the executive or the company. There were also interests of reducing the age limit for the qualifying members in the board of directors and the size. In this vein, the number of directors, who have retired from the active involvement in their companies, is limited to six, while those over 70 years are not supposed to be more than four. There is also a perfect consumer product representation in the proportion of directors (Orwall 2010).
External Corporate Governance Involvement
The Disney governance was questioned, and the shareholders lack trust in the corporate governance in the early 2000. The company experiences a crisis in governance where the CEO appointed his well-known alley, during the tenor of Michael Eisner’s. The president was then fired with a chunk of payment ($ 140 million). This led to courtroom intervention to solve the issue that had raised uproar of the stakeholders. This displayed the weakness in the management of the corporate governance where the board failed to block such actions. In the ruling, the judge mentioned the inability of the board of directors due to autocracy of Eisner that had handicapped the board in its responsibilities (Downes 2007).
From this instance, there have been varied modifications and precautions to avoid a replica of the same. There were claims that Eisner solely recommended for people to fill the positions without consensus from the board of directors. The company has hence included an experienced lawyer in the executive an attempt to strengthen the governance of the company. The 2003, Roy Eisner was asked to resign from his position for forcing the adoption of a rule that required all directors beyond 72 years to resign or retire. This drew a lot of public interest, which haunted the company’s operations. (Lenvok 2011)
The signing of Sarbanes-Oxley Act of 2002 in to law resulted in revising of the terms and policies of the guiding the nomination of directors. The law led to redefinition of independence in the company for the board of directors. This raised concern when some qualified directors failed to secure a place due to their affiliates with the company. The law demands that any director of corporate company should avoid financial, family, employment or business association with such firms where they serve. This led to the realization that most of the so-called independence directors were related in a way with the company. However, the Disney had to comply with the law (Dess 2008).
Modifications in Corporate Governance
A major criticism of the Disney Company is that most of the directors are located in America and Canada. For this company to be globally accepted, it has to embrace and incorporate people from other regions. China is one of the countries where the corporate governance is different from those of the United States. Other countries, which have differences in corporate governance from that of the USA, include Japan and Germany. The advancement in the corporate governance is drawing interest on the shareholder value other than the market (Downes 2007).
Disney corporate governance is inclined to the laws of the USA. This has forced it to find it difficult to operate in countries such as Japan and Germany. The reason behind this is that these countries do not apply the internal and external governance mechanism adopted in the USA. For instance, when the Disney was opening its first hotel in Japan, Disney’s Ambassador Hotel, it had to harmonize its governance to suit those of Japan. Japanese have intimate association in respect to the family than the American approach. The involvement of the bank in the shareholding proportion is also different in the two countries. This resulted in the company’s modifying its corporate governance to suit Japan’s corporate governance, and comply with the state law (Dess 2008).