announced changes Thursday to its long-term incentive program.
The entertainment conglomerate -- which is entangled in a Delaware court battle stemming from the outsized compensation enjoyed by the company's onetime president -- said the changes reflect a shift away from stock options and would introduce new performance-based vesting requirements on part of long-term compensation granted to senior executives.
"We want to maintain our shareholders' confidence by creating a stronger alignment between the interests of our management teams and those of our investors," said Judith Estrin, chairman of the Disney board's compensation committee, in a statement. "At the same time, we want to attract and retain experienced and highly qualified executives by offering real ownership and great long-term financial incentives. We feel that the modifications we have made will help achieve that balance."
Disney shares rose 2 cents Thursday to trade at $27.65.
Under the revised long-term incentive compensation program, one half of restricted stock units granted to senior executives will vest only if the company's "total shareholder return" -- defined as stock appreciation plus dividends reinvested on a pretax basis -- exceeds that of the
S&P 500 Index
over either the prior one-year or three-year time period.
For certain executives, the vesting of all restricted stock will be contingent on additional performance-based requirements set by the compensation committee under the company's 2002 executive performance plan.
Under the revised plan, grants to senior executives would be composed of about 60% restricted stock and 40% stock options.
Under new stock ownership and holding requirements, Disney's top five executive officers will be expected to acquire and hold Disney stock equal in value to at least three to five times their base salary, depending on their positions.
For all stock option grants starting in 2005, the top five execs, upon exercising those options, will have to retain, for 12 months, ownership of shares representing at least 75% of the after-tax gain realized on the options. The CEO will have to retain 100%.
The term of new options will be reduced from 10 years to seven years "to match current market practices," Disney said. The company also reaffirmed that it will not reprice options without shareholder approval.
Changes to the long-term incentive program -- which covers around 3,500 Disney employees, will take effect with the company's annual grant awards to be made in January, the company said.