walt disney 2012 proxy statement

8/3/2019 Walt Disney 2012 proxy statement

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January 20, 2012

Dear Fellow Shareholder,

I am pleased to invite you to our 2012 Annual Meeting of shareholders, which will be held onTuesday, March 13, 2012, at 10 a.m. at The Westin Crown Center in Kansas City, Missouri.

At the meeting, we will be electing 10 members of our Board of Directors. We will also be consider-ing ratification of the selection of PricewaterhouseCoopers LLP as our independent registeredpublic accountants, an amendment to our stock incentive plan and an advisory vote on executivecompensation.

You may vote your shares using the Internet or the telephone by following the instructionson page 69 of the proxy statement. Of course, you may also vote by returning a proxy card or vot-ing instruction form if you received a paper copy of this proxy statement.

If you wish to attend the meeting in person, you will need to request an admission ticket inadvance. You can request a ticket by following the instructions set forth on page 70 of the proxystatement. If you cannot attend the meeting, you can still listen to the meeting, which will bewebcast and available on our Investor Relations website.

Thank you very much for your continued interest in The Walt Disney Company.

Sincerely,

Robert A. IgerPresident and Chief Executive Officer


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The Walt Disney Company Notice of 2012 Annual Meeting and Proxy Statement500 South Buena Vista StreetBurbank, California 91521January 20, 2012

Notice of Meeting

The 2012 Annual Meeting of shareholders of The Walt Disney Company will be held at TheWestin Crown Center, One East Pershing Road, Kansas City, Missouri on Tuesday, March 13,2012, beginning at 10:00 a.m. The items of business are:

1. Election of the 10 nominees named in the proxy statement as Directors, each for a term ofone year.

2. Ratification of the appointment of PricewaterhouseCoopers LLP as the Companysindependent registered public accountants for fiscal 2012.

3. Approval of an amendment to the Companys 2011 Stock Incentive Plan.

4. Consideration of an advisory vote on executive compensation.

Shareholders of record of Disney common stock (NYSE: DIS) at the close of business on

January 13, 2012, are entitled to vote at the meeting and any postponements or adjourn-ments of the meeting. A list of these shareholders is available at the offices of the Companyin Burbank, California.

Alan N. BravermanSenior Executive Vice President, General Counsel

and Secretary

Important Notice Regarding the Availability of

Proxy Materials for the ShareholderMeeting to be Held on March 13, 2012

The proxy statement and annual report to shareholders and the means to vote by Internet areavailable at www.ProxyVote.com.

Your Vote is ImportantPlease vote as promptly as possibleby using the Internet or telephone or

by signing, dating and returning the Proxy Cardmailed to those who receive paper copies of this proxy statement

If you plan to attend the meeting, you must request an admission ticket in advancefollowing the instructions set forth on page 70 of this proxy statement. Tickets will beissued to registered and beneficial owners and to one guest accompanying eachregistered or beneficial owner.

Requests for admission tickets will be processed in the order in which they are received andmust be requested no later than March 8, 2012. Please note that seating is limited andrequests for tickets will be accepted on a first-come, first-served basis. On the day of themeeting, each shareholder will be required to present a valid picture identification such as adrivers license or passport with their admission ticket. Seating will begin at 9:00 a.m. and themeeting will begin at 10:00 a.m. Cameras (including cell phones with photographiccapabilities), recording devices and other electronic devices will not be permitted at themeeting.


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The Walt Disney Company Notice of 2012 Annual Meeting and Proxy Statement

Table of Contents

1 Introduction

1 Corporate Governance and BoardMatters

1 Corporate Governance Guidelines andCode of Ethics

1 Board Leadership

3 Committees

4 The Boards Role in Risk Oversight

5 Director Independence

6 Director Selection Process

8 Board Compensation

11 Certain Relationships and RelatedPerson Transactions

12 Shareholder Communications14 Executive Compensation

14 Compensation Committee Report

14 Compensation Discussion and Analysis

33 Compensation Tables

51 Audit-Related Matters

51 Audit Committee Report

52 Policy for Approval of Audit andPermitted Non-audit Services

52 Auditor Fees and Services

53 Items to Be Voted On

53 Election of Directors

59 Ratification of Appointment of

Independent Registered PublicAccountants

59 Approval of an Amendment to the 2011Stock Incentive Plan

68 Advisory Vote on ExecutiveCompensation

69 Other Matters

69 Information About Voting and theMeeting

69 Shares Outstanding

69 Voting

70 Attendance at the Meeting

71 Other Information

71 Stock Ownership

72 Section 16(a) Beneficial OwnershipReporting Compliance

72 Electronic Availability of ProxyStatement and Annual Report

72 Reduce Duplicate Mailings

73 Proxy Solicitation Costs


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500 South Buena Vista StreetBurbank, California 91521January 20, 2012

Introduction

This proxy statement contains information

relating to the annual meeting of share-holders of The Walt Disney Company to beheld on Tuesday, March 13, 2012, begin-ning at 10:00 a.m. local time, at TheWestin Crown Center, One East PershingRoad, Kansas City, Missouri. On or aboutJanuary 20, 2012, we began mailing anotice containing instructions on how toaccess this proxy statement and ourannual report online and we began mailinga full set of the proxy materials to share-holders who had previously requesteddelivery of the materials in paper copy. For

information on how to vote your shares,see the instructions included on the proxycard or instruction form and underInformation About Voting and the Meetingon page 69.

Corporate Governance and

Board Matters

There are currently 11 members of theBoard of Directors:

Susan E. ArnoldJohn S. ChenJudith L. EstrinRobert A. IgerFred H. LanghammerAylwin B. Lewis

Monica C. LozanoRobert W. MatschullatJohn E. Pepper, Jr.Sheryl K. SandbergOrin C. Smith

The Board met five times during fiscal2011. Each current Director attended atleast 75% of all of the meetings of theBoard and Committees on which he or sheserved and attended the Companys 2011annual shareholders meeting. Under the

Companys Corporate Governance Guide-lines, each Director is expected to dedi-cate sufficient time, energy and attentionto ensure the diligent performance of hisor her duties, including by attendingannual and special meetings of the share-holders of the Company, the Board andCommittees of which he or she is amember.

Corporate Governance Guidelines

and Code of Ethics

The Board of Directors has adopted Corpo-rate Governance Guidelines, which setforth a flexible framework within which theBoard, assisted by its Committees, directsthe affairs of the Company. The Guidelinesaddress, among other things, thecomposition and functions of the Board ofDirectors, director independence, stockownership by and compensation of Direc-tors, management succession and review,Board Committees and selection of newDirectors.

The Company has Standards of BusinessConduct, which are applicable to allemployees of the Company, including theprincipal executive officer, the principalfinancial officer and the principal account-ing officer. The Board has a separate Codeof Business Conduct and Ethics for Direc-tors, which contains provisions specificallyapplicable to Directors.

The Corporate Governance Guidelines, theStandards of Business Conduct and theCode of Business Conduct and Ethics for

Directorsare available on the CompanysInvestor Relations website under theCorporate Governance heading atwww.disney.com/investorsand in print toany shareholder who requests them fromthe Companys Secretary. If the Companyamends or waives the Code of BusinessConduct and Ethics for Directors, or theStandards of Business Conduct withrespect to the chief executive officer,principal financial officer or principalaccounting officer, it will post the amend-ment or waiver at the same location on its

website.

Board Leadership

John Pepper became non-executiveChairman of the Board effective January 1,2007. The role of the Chairman of theBoard has been, among other things: tocreate and maintain an effective workingrelationship with the Chief Executive Offi-

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cer and other members of managementand with the other members of the Board;to provide the Chief Executive Officerongoing direction as to Board needs,interests and opinions; and to assure thatthe Board agenda is appropriatelydirected to the matters of greatestimportance to the Company.

The Companys Corporate GovernanceGuidelines specify that the Chairman of theBoard will be an independent Director,unless the Board determines that a differ-ent structure would better serve the bestinterests of the shareholders, in whichcase, the Board will disclose in theCompanys proxy statement the reasonsfor a different arrangement and appoint anindependent director as lead director withduties and responsibilities detailed in theCorporate Governance Guidelines. For the

reasons that follow, the Board hasdetermined that in view of the unique setof circumstances that now exist at theCompany a different structure would bet-ter serve the interests of shareholders atthis time.

In weighing how to structure the Chair-mans role, the Board took into accountthe coincidence of two developments:(a) the decision by Mr. Pepper to stepdown from the Board at the next annualshareholder meeting, and (b) the fact that

Mr. Iger would be nearing the end of hisexisting employment agreement at thattime coupled with the Boards conclusionthat securing Mr. Igers leadership andskills for a period of almost five years,through mid-2016, would be of criticalvalue and importance to the Com-pany. The Board also believed that therewould be tremendous value in planning forthe appointment of a new chief executiveofficer towards the latter part of thatperiod while continuing to get the benefitof Mr. Igers skill and experience as an

executive of the Company to aid in thetransition for the duration of his contract.Lastly the Board concluded that namingMr. Iger as Mr. Peppers successor as anexecutive Chair through the expiration ofMr. Igers contract would further these andserve a number of important otherobjectives: it would add a substantial stra-tegic perspective to the Chair position,provide important continuity to Board

leadership and best position Mr. Iger toaccomplish the transition with the newchief executive officer as outlinedabove. In making this judgment, the Boardtook into account its evaluation ofMr. Igers performance as chief executiveofficer and president, his very positiverelationships with the other members of

the Board of Directors and the strategicvision and perspective he would bring tothe Chair position. The Board was uni-formly of the view that Mr. Iger wouldprovide excellent leadership of the Boardin the performance of its duties.

At the same time, the Board committed tothe appointment of an independent LeadDirector, thus embracing a structure thatwould continue to assure the appropriateindependent exercise of judgment by theBoard, and adopted amendments to the

Companys Corporate Governance Guide-linesto add to the already existingresponsibilities of the independent leaddirector. As amended, the duties of theindependent lead director are as follows:

Preside at all meetings of the Board ofDirectors at which the Chairman is notpresent, including executive sessions ofnon-management or independent direc-tors;

Call meetings of the independent ornon-management Directors;

Serve as liaison between the Chairmanand the independent andnon-management Directors;

Approve information sent to the Board ofDirectors;

Approve meeting agendas for the Boardof Directors, including assurance thatthere is sufficient time for discussion ofall agenda items;

Organize and lead the Boards evalua-tion of the Chief Executive Officer;

Be responsible for leading the Boardsannual self-assessment;

Be available for consultation and directcommunication upon the reasonablerequest of major shareholders;

Advise Committee Chairs with respect toagendas and information needs relatingto Committee meetings;

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Provide advice with respect to theselection of Committee Chairs; and

Perform such other duties as the Boardmay from time to time delegate to assistthe Board in the fulfillment of itsresponsibilities.

Taking all of this into account, the Boardconcluded that extending Mr. Igersemployment contract now and naming himas Chairman of the Board uponMr. Peppers retirement would put in placean effective plan for the future transition ofleadership that would best serve the inter-est of the Company and its shareholders.

Committees

The Board of Directors has four standingcommittees: Audit, Governance and

Nominating, Compensation and Executive.Information regarding these committees isprovided below. The charters of the Audit,Governance and Nominating andCompensation Committees are availableon the Companys Investor Relationswebsite under the Corporate Gover-nance heading at www.disney.com/investorsand in print to any shareholderwho requests them from the CompanysSecretary.

The members of the Audit Committee are:

Monica C. LozanoRobert W. MatschullatJohn E. Pepper, Jr.Orin C. Smith (Chair)

The functions of the Audit Committee aredescribed below under the heading AuditCommittee Report. The Audit Committeemet six times during fiscal 2011. All of themembers of the Audit Committee areindependent within the meaning of SECregulations, the listing standards of the

New York Stock Exchange and theCompanys Corporate Governance Guide-lines. The Board has determined thatMr. Smith, the chair of the Committee, andMr. Matschullat and Mr. Pepper are quali-fied as audit committee financial expertswithin the meaning of SEC regulations,and that they have accounting and relatedfinancial management expertise within themeaning of the listing standards of the

New York Stock Exchange, and thatMs. Lozano is financially literate within themeaning of the listing standards of theNew York Stock Exchange.

The members of the Governance andNominating Committee are:

Judith L. EstrinAylwin B. Lewis (Chair)Robert W. MatschullatJohn E. Pepper, Jr.Sheryl K. Sandberg

The Governance and Nominating Commit-tee is responsible for developing andimplementing policies and practices relat-ing to corporate governance, includingreviewing and monitoring implementationof the Companys Corporate GovernanceGuidelines. In addition, the Committeeassists the Board in developing criteria foropen Board positions, reviews back-ground information on potential candi-dates and makes recommendations to theBoard regarding such candidates. TheCommittee also reviews and approvestransactions between the Company andDirectors, officers, 5% stockholders andtheir affiliates under the CompanysRelated Person Transaction ApprovalPolicy, supervises the Boards annualreview of Director independence and theBoards annual self-evaluation, makesrecommendations to the Board withrespect to compensation of non-executivemembers of the Board of Directors, makesrecommendations to the Board withrespect to Committee assignments andoversees the Boards director educationpractices. The Committee met four timesduring fiscal 2011. All of the members ofthe Governance and Nominating Commit-tee are independent within the meaning ofthe listing standards of the New YorkStock Exchange and the CompanysCorporate Governance Guidelines.

The members of the CompensationCommittee are:

Susan E. ArnoldJohn S. ChenFred H. Langhammer (Chair)

Aylwin B. LewisJohn E. Pepper, Jr.

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The Compensation Committee is respon-sible for reviewing and approving corpo-rate goals and objectives relevant to thecompensation of the Companys chiefexecutive officer, evaluating the perform-ance of the chief executive officer and,either as a committee or together with theother independent members of the Board,

determining and approving the compensa-tion level for the chief executive officer.The Committee is also responsible formaking recommendations to the Boardregarding the compensation of otherexecutive officers and certain compensa-tion plans, and the Board has also dele-gated to the Committee the responsibilityfor approving these arrangements. Addi-tional information on the roles andresponsibilities of the CompensationCommittee is provided under the headingCompensation Discussion and Analysis,

below. In fiscal 2011, the CompensationCommittee met nine times. All of themembers of the Committee areindependent within the meaning of the list-ing standards of the New York StockExchange and the Companys CorporateGovernance Guidelines.

The members of the Executive Committeeare:

Robert A. IgerJohn E. Pepper, Jr. (Chair)

The Executive Committee serves primarilyas a means for taking action requiringBoard approval between regularly sched-uled meetings of the Board. The ExecutiveCommittee is authorized to act for the fullBoard on matters other than thosespecifically reserved by Delaware law tothe Board. In practice, the Committeesactions are generally limited to matterssuch as the authorization of transactionsincluding corporate credit facilities andborrowings. In fiscal 2011, the Executive

Committee held no meetings.

The Boards Role in Risk Oversight

As noted in the Companys CorporateGovernance Guidelinesthe Board, actingdirectly or through Committees, isresponsible for assessing major risk fac-tors relating to the Company and its per-formance and reviewing measures to

address and mitigate such risks. In dis-charging this responsibility, the Board,either directly or through its committees,assesses both the risks that inhere in thekey economic and market assumptionsthat underpin the Companys businessplans and growth strategies and sig-nificant operational risks related to the

conduct of the Companys day-to-dayoperations.

Risks that relate to the market and eco-nomic assumptions that underpin eachbusiness units growth plans are specifi-cally addressed in connection with theBoards annual review of the Companysfive-year plan. The Board also has theopportunity to address such risks at eachBoard meeting in connection with its regu-lar review of significant business andfinancial developments. The Board

reviews risks arising out of specific sig-nificant transactions when these trans-actions are presented to the Board forreview or approval.

Significant operational risks that relate toon-going business operations are thesubject of regularly scheduled reports toeither the full Board or one of its Commit-tees. The Board has established a processto determine on an annual basis whetherthese reports appropriately cover the sig-nificant risks that the Company may then

be facing.

Each of the Boards committeesaddresses risks that fall within thecommittees areas of responsibility. Forexample, the Audit Committee reviewsperiodically the audit plan of managementaudit, the international labor standardscompliance program, the Companysinformation technology risks and miti-gation strategies, the tax function, treas-ury operations (including insurance) andthe ethical standards program. In addition,

the Audit Committee receives regularreports from: corporate controllership andthe outside auditor on financial reportingmatters; management audit about sig-nificant findings; and the general counselregarding legal and regulatory risks. The

Audit Committee reserves time at eachmeeting for private sessions with the chieffinancial officer, general counsel, head ofmanagement audit and outside auditors.

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The Compensation Committee addressesrisks arising out of the Companys execu-tive compensation programs as describedat page 23, below.

The Chairman of the Board has promoted,and a lead independent director will whenappointed promote, effective communica-

tion and consideration of matters present-ing significant risks to the Companythrough his or her role in approving theBoards meeting agendas, advising com-mittee chairs and communicating betweenindependent directors and the chiefexecutive officer.

Director Independence

The provisions of the Companys Corpo-rate Governance GuidelinesregardingDirector independence meet and in some

areas exceed the listing standards of theNew York Stock Exchange. These provi-sions are included in the CompanysCorporate Governance Guidelines, whichare available on the Companys InvestorRelations website under the CorporateGovernance heading at www.disney.com/investors.

Pursuant to the Guidelines, the Boardundertook its annual review of Directorindependence in November 2011. Duringthis review, the Board considered trans-

actions and relationships between eachDirector or any member of his or herimmediate family and the Company and itssubsidiaries and affiliates. The Board alsoconsidered whether there were any trans-actions or relationships between Directorsor any member of their immediate family(or any entity of which a Director or animmediate family member is an executiveofficer, general partner or significantequity holder) and members of theCompanys senior management or theiraffiliates. As provided in the Guidelines,

the purpose of this review was todetermine whether any such relationshipsor transactions existed that were incon-sistent with a determination that the Direc-tor is independent.

As a result of this review, the Board affir-matively determined that all of the Direc-tors nominated for election at the 2012

Annual Meeting are independent of the

Company and its management under thestandards set forth in the CorporateGovernance Guidelines, with the exceptionof Mr. Iger. Mr. Iger is considered aninside Director because of his employmentas a senior executive of the Company.With respect to directors who served dur-ing the fiscal year but have not been

nominated for election at the 2012 AnnualMeeting, the Board also determined thatMr. Pepper is independent and had pre-viously determined that Mr. Bryson andMr. Jobs were not independent Directors.The Board determined that Mr. Brysonwas not an independent director as aresult of past relationships between theCompany, Lifetime Entertainment Tele-vision and Mr. Brysons wife. Until the endof fiscal year 2009, Lifetime was a jointventure that was 50% owned by theCompany. Late in fiscal year 2009, Life-

time was merged into A&E TelevisionNetworks, a joint venture that is 42%owned by the Company. Ms. Bryson wasan executive officer of Lifetime until 2008and a consultant to Lifetime through April2009. In addition, Lifetime acquired pro-gramming from and sold advertising timeto Company subsidiaries while Ms. Brysonwas affiliated with Lifetime in an aggregateamount that exceeded 2% of Lifetimestotal revenues during the applicable fiscalyears. Although the relationship betweenthe Company, Lifetime and Ms. Bryson

may not mandate disqualification fromindependence under the CompanysGuidelines, the Board determined that therelationship was sufficient to deemMr. Bryson non-independent while heserved as a Director. Mr. Jobs wasconsidered a non-independent outsidedirector because, during fiscal 2006, theCompany acquired Pixar, of whichMr. Jobs was chairman and chief execu-tive officer and the beneficial owner of50.6% of the issued and outstanding equi-ty.

In determining the independence of eachDirector, the Board considered the follow-ing relationships, which it determined wereimmaterial to the Directors independence.The Board considered that the Companyand its subsidiaries in the ordinary courseof business have, during the last threeyears, sold products and services to and/or purchased products and services from

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companies at which some of our Directorsor their immediate family members wereofficers or employees during fiscal 2011.In each case, the amount paid to orreceived from these companies in each ofthe last three years did not approach the2% of total revenue threshold in the Guide-lines. The Board also considered employ-

ment relationships with immediate familymembers of Directors that involved com-pensation of less than the threshold of$120,000 in the Companys Guidelines.The Board determined that none of therelationships it considered impaired theindependence of the Directors.

Director Selection Process

Working closely with the full Board, theGovernance and Nominating Committeedevelops criteria for open Board positions,

taking into account such factors as itdeems appropriate, which may include:the current composition of the Board; therange of talents, experiences and skillsthat would best complement those alreadyrepresented on the Board; the balance ofmanagement and independent Directors;and the need for financial or other speci-alized expertise. Applying these criteria,the Committee considers candidates forBoard membership suggested by itsmembers and other Board members, aswell as management and shareholders.

The Committee retains a third-partyexecutive search firm to identify andreview candidates upon request of theCommittee from time to time.

Once the Committee has identified aprospective nominee including pro-spective nominees recommended byshareholders it makes an initialdetermination as to whether to conduct afull evaluation. In making this determi-nation, the Committee takes into accountthe information provided to the Committee

with the recommendation of the candi-date, as well as the Committees ownknowledge and information obtainedthrough inquiries to third parties to theextent the Committee deems appropriate.The preliminary determination is basedprimarily on the need for additional Boardmembers and the likelihood that the pro-spective nominee can satisfy the criteriathat the Committee has established. If the

Committee determines, in consultationwith the Chairman of the Board and otherDirectors as appropriate, that additionalconsideration is warranted, it may requestthe third-party search firm to gather addi-tional information about the prospectivenominees background and experienceand to report its findings to the Commit-

tee. The Committee then evaluates theprospective nominee against the specificcriteria that it has established for the posi-tion, as well as the standards and qual-ifications set out in the CompanysCorporate Governance Guidelines, includ-ing:

the ability of the prospective nominee torepresent the interests of the share-holders of the Company;

the prospective nominees standards ofintegrity, commitment and independence

of thought and judgment; the prospective nominees ability to

dedicate sufficient time, energy andattention to the diligent performance ofhis or her duties, including the pro-spective nominees service on otherpublic company boards, as specificallyset out in the Companys CorporateGovernance Guidelines;

the extent to which the prospectivenominee contributes to the range oftalent, skill and expertise appropriate forthe Board;

the extent to which the prospectivenominee helps the Board reflect thediversity of the Companys shareholders,employees, customers and guests andthe communities in which it operates;and

the willingness of the prospective nomi-nee to meet the minimum equity interestholding guideline set out in the Compa-nys Corporate Governance Guidelines.

If the Committee decides, on the basis of

its preliminary review, to proceed withfurther consideration, members of theCommittee, as well as other members ofthe Board as appropriate, interview thenominee. After completing this evaluationand interview, the Committee makes arecommendation to the full Board, whichmakes the final determination whether tonominate or appoint the new Director afterconsidering the Committees report.

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In selecting nominees for Director, theBoard seeks to achieve a mix of memberswho together bring experience andpersonal backgrounds relevant to theCompanys strategic priorities and thescope and complexity of the Companysbusiness. In light of the Companys cur-rent priorities, the Board seeks experience

relevant to managing the creation of high-quality branded entertainment productsand services, addressing the impact ofrapidly changing technology and expand-ing business outside of the United States.The Board also seeks experience in large,diversified enterprises and demonstratedability to manage complex issues thatinvolve a balance of risk and reward andseeks directors who have expertise inspecific areas such as consumer and cul-tural trends, business innovation, growthstrategies and financial oversight. The

background information on current nomi-nees beginning on page 54 sets out howeach of the current nominees contributesto the mix of experience and qualificationsthe Board seeks.

In making its recommendations withrespect to the nomination for re-electionof existing Directors at the annual share-holders meeting, the Committee assessesthe composition of the Board at the timeand considers the extent to which theBoard continues to reflect the criteria setforth above.

A shareholder who wishes to recommenda prospective nominee for the Boardshould notify the Companys Secretary orany member of the Governance andNominating Committee in writing withwhatever supporting material the share-holder considers appropriate. The Gover-nance and Nominating Committee will alsoconsider whether to nominate any personnominated by a shareholder pursuant tothe provisions of the Companys Bylawsrelating to shareholder nominations as

described in Shareholder Communica-tionsbelow.

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Board Compensation

Under the Companys Corporate GovernanceGuidelines, non-employee Directorcompensation is determined annually by theBoard of Directors acting upon the recom-mendation of the Governance and Nominat-ing Committee. In formulating its

recommendation, the Governance andNominating Committee receives input fromthe third-party compensation consultantretained by the Compensation Committeeregarding market practices for directorcompensation. Directors who are alsoemployees of the Company receive no addi-tional compensation for service as a Direc-tor. During fiscal 2011, annual compensationfor non-employee Directors was as follows:

Annual Board retainer $ 80,000

Annual committee retainer1

$ 10,000Annual committee chair retainer2 $ 15,000

Annual deferred stock unit grant $140,000

Annual retainer for Board Chairman3 $500,000

1 Per committee.2 This is in addition to the annual committee

retainer the Director receives for serving on thecommittee.

3 In lieu of all other Director compensation exceptfor a portion of the annual deferred stock unitgrant, which is $56,000 for the Chairman. Paid inshares of Company common stock.

Effective October 1, 2011, the Boardincreased the annual board retainer to$100,000, increased the annual deferredstock unit grant to $150,000 and increased

the annual committee chair retainer for theAudit Committee chair to $20,000.

At Mr. Jobs request, the Board excludedMr. Jobs from receiving compensation as aDirector. In addition, at Mr. Brysonsrequest, the Board excluded Mr. Brysonfrom receiving compensation as Director

during a leave of absence from his dutiesbeginning May 31, 2011 until his resig-nation from the Board on October 21, 2011.

The Company does not provide retirementbenefits to any non-employee Directorswho served during fiscal 2011.

Unless the Board exempts a Director,each Director is required to retain at alltimes stock representing no less than 50%of the after-tax value of exercised optionsand shares received upon distribution of

deferred stock units until he or she leavesthe Board. The Companys CorporateGovernance Guidelinesalso encourageDirectors to own, or acquire within threeyears of first becoming a Director, sharesof common stock of the Company(including stock units received as Directorcompensation) having a market value of atleast three times the amount of the annualBoard retainer for the Director.

The following table identifies the compen-sation earned during fiscal 2011 by each

person who served as a non-employeeDirector during the year. Informationregarding the amounts in each columnfollows the table.

DIRECTOR COMPENSATION FOR FISCAL 2011

FeesEarnedor Paid

inCash

StockAwards

All OtherCompensat ion Tot al

Susan E. Arnold $ 90,000 $140,319 $ 7,528 $237,847

John E. Bryson 53,407 94,158 147,565

John S. Chen 90,000 140,319 4,044 234,363

Judith L. Estrin 90,000 140,319 7,365 237,684

Steven P. Jobs

Fred H. Langhammer 105,000 140,319 16,936 262,255

Aylwin B. Lewis 115,000 140,319 5,477 260,796

Monica C. Lozano 90,000 140,319 18,396 248,715

Robert W. Matschullat 100,000 140,319 20,535 260,854

John E. Pepper, Jr. (Chairman) 557,265 4,911 562,176

Sheryl K. Sandberg 90,000 140,319 13,544 243,863

Orin C. Smith 105,000 140,319 7,356 252,675

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Fees Earned or Paid in Cash. The annualBoard retainer and annual committee andcommittee-chair retainers are payable incash at the end of each quarter. TheCompanys Amended and Restated 1997Non-Employee Directors Stock andDeferred Compensation Plan allowsnon-employee Directors to elect each yearto receive all or part of their retainers inDisney stock or to defer all or part of thiscompensation until after their service as aDirector ends. Directors who elect toreceive stock instead of cash but who donot defer their compensation are creditedeach quarter with a dollar amount equal tofees earned that quarter and receiveshares after the end of each calendar yearbased on the average of the fair marketvalue of shares of the Companys commonstock at the end of each quarter. Directorswho elect to defer their compensation mayalso elect to receive cash or stock. Direc-tors who elect to receive deferredcompensation in cash receive a crediteach quarter, and the balance in theirdeferred cash account earns interest at anannual rate equal to the Moodys AverageCorporate (Industrial) Bond Yield, adjustedquarterly. For fiscal 2011, the averageinterest rate was 5.36%. Interest earnedon deferred amounts is included in the AllOther Compensation column. Directorswho elect to receive deferred compensa-tion in stock receive stock units each

quarter and shares of stock are distributedwith respect to these units after their serv-ice as a Director ends.

This column sets forth amounts payable incash on a current basis, whether paidcurrently or deferred by the Director to bepaid in cash or shares after their service

ends. This column does not include feespaid for service as Chairman of the Board,as those fees are required to be paid inthe form of shares of stock distributed tothe Chairman after the end of the calendaryear in which they were earned and aretherefore included in the Stock Awardscolumn.

The following table identifies for eachDirector the dollar amount included in theFees Earned or Paid in Cash columnreceived in cash, the dollar amountdeferred to be paid in cash, and the

number and dollar value of stock unitsreceived as deferred compensation. Thenumber of units awarded is equal to thedollar amount of fees accruing each quar-ter divided by the average over the last tentrading days of the quarter of the averageof the high and low trading price forshares of Company common stock oneach day in the ten-day period. In the caseof Ms. Lozano, a portion of the unitsrepresented fees paid currently in stockand was distributed as shares followingDecember 31, 2011.

FORM OF RECEIPT OF DIRECTOR FEES FOR FISCAL 2011

Deferred Fees

FeesPaid

Currentlyin Cash

To bePaid in

Cash

To be Paid inStock

Numberof Units

Value ofUnits

Susan E. Arnold $ 67,500 $11,250 300 $ 11,250

John E. Bryson 1,356 53,407

John S. Chen 45,000 1,225 45,000

Judith L. Estrin 90,000

Steven P. Jobs

Fred H. Langhammer 105,000

Aylwin B. Lewis 57,500 1,565 57,500

Monica C. Lozano 28,125 33,750 763 28,125

Robert W. Matschullat 2,722 100,000

John E. Pepper, Jr.

Sheryl K. Sandberg 45,000 1,225 45,000

Orin C. Smith 105,000

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Stock Awards. This column sets forth thegrant date fair market value of awards forservice in fiscal 2011 with respect to:

the annual deferred stock unit grant; and

for the Chairman of the Board, sharesawarded with respect to the annualretainer and the portion of the annual

deferred stock unit grant awarded to theChairman.

The grant date fair market value is equal tothe market value of the Companyscommon stock on the date of the awardtimes the number of shares underlying theunits.

The number of shares awarded to eachDirector was calculated by dividing theamount payable with respect to a quarterby the average over the last ten trading

days of the quarter of the average of thehigh and low trading price on each day.The following table identifies the numberof stock units awarded to each Directorduring fiscal 2011.

DIRECTOR STOCK UNIT AWARDS FOR FISCAL 2011

StockUnits

Awarded

Susan E. Arnold 3,811

John E. Bryson 2,373

John S. Chen 3,811


Steven P. Jobs


Aylwin B. Lewis 3,811

Monica C. Lozano 3,811

Robert W. Matschullat 3,811

John E. Pepper, Jr. 15,134

Sheryl K. Sandberg 3,811

Orin C. Smith 3,811

One fourth of the annual deferred stockunit grant and annual retainer is awardedat the end of each quarter. Shares withrespect to annual deferred stock unitgrants are normally distributed to theDirector on the second anniversary of theaward date, whether or not the Director isstill a Director on the date of distribution.

Shares with respect to the annual retainerfor the Chairman of the Board are dis-tributed after the end of the calendar yearin which they are earned.

At the end of any quarter in which divi-dends are distributed to shareholders,Directors receive additional stock units

with a value (based on the average of thehigh and low trading prices of Disneystock averaged over the last ten tradingdays of the quarter) equal to the amount ofdividends they would have received on allstock units held by them at the end of theprior quarter. Shares with respect to theseadditional units are distributed when theunderlying units are distributed. Unitsawarded in respect of dividends areincluded in the fair value of the stock unitswhen the units are initially awarded andtherefore are not included in the tables

above, but they are included in the totalunits held at the end of the fiscal year inthe following table.

The following table sets forth all stockunits held by each Director as of the endof fiscal 2011. All stock units are fullyvested when granted, but shares are dis-tributed with respect to the units only lat-er, as described above. Stock units in thistable are included in the share ownershiptable on page 71 except to the extent theymay have been distributed as shares and

sold prior to January 13, 2012.

DIRECTOR STOCK UNIT HOLDINGS ATTHE END OF FISCAL 2011

StockUnits



John S. Chen 17,690


Steven P. Jobs

Fred H. Langhammer 20,095 Aylwin B. Lewis 19,433




Sheryl K. Sandberg 7,195

Orin C. Smith 6,354

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Options Outstanding. Prior to fiscal 2011,each Director serving on March 1 of anyyear received an option on that date toacquire shares of Company stock. Theexercise price of the options was equal tothe average of the high and low pricesreported on the New York Stock Exchangeon the date of grant. The following table

sets forth the aggregate number of stockoptions outstanding for each Director atthe end of fiscal 2011.

DIRECTOR OPTION HOLDINGS ATTHE END OF FISCAL 2011

Number ofShares

UnderlyingOptions

Held



John S. Chen 46,503


Steven P. Jobs


Aylwin B. Lewis 46,503




Sheryl K. Sandberg

Orin C. Smith 34,503

All Other Compensation. To encourageDirectors to experience the Companysproducts, services and entertainmentofferings personally, the Board hasadopted a policy, that, subject to avail-ability, entitles each non-employee Direc-tor (and his or her spouse, children andgrandchildren) to use Company products,attend Company entertainment offeringsand visit Company properties (includingstaying at resorts, visiting theme parksand participating in cruises) at the

Companys expense, up to a maximum of$15,000 in fair market value per calendaryear plus reimbursement of associated taxliabilities. In addition, the Companyreimburses Directors for the travelexpenses of, or provides transportation onCompany aircraft for, immediate familymembers of Directors if the family mem-bers are specifically invited to attendevents for appropriate business purposes

and allows family members (includingdomestic partners) to accompany Direc-tors traveling on company aircraft forbusiness purposes on a space-availablebasis. The value of these benefits is notincluded in the table as permitted by SECrules because the aggregate incrementalcost to the Company of providing the

benefits did not exceed $10,000 for anyDirector. The reimbursement of associatedtax liabilities is included in the tableabove, which was less than $10,000 foreach Director other than Mr. Langhammer,Mr. Matschullat and Ms. Sandberg, forwhom the reimbursement was $11,060,$10,522 and $13,544, respectively. Thecolumn also includes interest earned ondeferred cash compensation, which wasless than $10,000 for each Director exceptfor Ms. Lozano, for whom interest earnedtotaled $18,100. In addition, pursuant to a

program available to all employees, theCompany offered to match certain con-tributions made by any Director to relieffor the consequences of the 2011 earth-quake and tsunami in Japan, and theCompany matched a contribution of$10,013 by Mr. Matschullat pursuant tothis program, which is also included in thiscolumn.

Certain Relationships and Related

Person Transactions

The Board of Directors has adopted a writ-ten policy for review of transactionsinvolving more than $120,000 in any fiscalyear in which the Company is a participantand in which any Director, executive offi-cer, holder of more than 5% of our out-standing shares or any immediate familymember of any of these persons has adirect or indirect material interest. Direc-tors, 5% shareholders and executive offi-cers are required to inform the Companyof any such transaction promptly afterthey become aware of it, and the Com-

pany collects information from Directorsand executive officers about their affili-ations and affiliations of their familymembers so the Company can search itsrecords for any such transactions. Trans-actions are presented to the Governanceand Nominating Committee of the Board(or to the Chairman of the Committee if theCommittee delegates this responsibility)for approval before they are entered into

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or, if this is not possible, for ratificationafter the transaction has been enteredinto. The Committee approves or ratifies atransaction if it determines that the trans-action is consistent with the best interestsof the Company, including whether thetransaction impairs independence of aDirector. The policy does not require

review of the following transactions: Employment of executive officers

approved by the Compensation Commit-tee;

Compensation of Directors approved bythe Board;

Transactions in which all shareholdersreceive benefits proportional to theirshareholdings;

Ordinary banking transactions identifiedin the policy;

Any transaction contemplated by theCompanys Certificate of Incorporation,Bylaws or Board action where the inter-est of the Director, executive officer, 5%shareholder or family member is dis-closed to the Board prior to such action;

Commercial transactions in the ordinarycourse of business with entities affiliatedwith Directors, executive officers, 5%shareholders or their family members ifthe aggregate amount involved during afiscal year is less than the greater of

(a) $1,000,000 and (b) 2% of the Compa-nys or other entitys gross revenues andthe related persons interest in thetransaction is based solely on his or herposition with the entity;

Charitable contributions to entitieswhere a Director is an executive officerof the entity if the amount is less thanthe lesser of $200,000 and 2% of theentitys annual contributions; and

Transactions with entities where theDirector, executive officer, 5% share-

holder or immediate family memberssole interest is as a non-executive officeremployee of, volunteer with, or directoror trustee of the entity.

During fiscal year 2011, the Companyengaged in four transactions with affiliatesof FMR LLC, which was the beneficialowner of more than 5% of the Companysoutstanding shares at times during

fiscal year 2011, but not at the end of thefiscal year. First, an affiliate of FMR servedas trustee of the Companys 401(k) planand the Company incurred approximately$0.3 million in fees for this and ancillaryservices, and entities affiliated with FMRbenefited from fees incurred by planparticipants on balances invested in

mutual funds through the plan. Second,during the fiscal year, the Companyentered into an agreement with an affiliateof FMR under which the affiliate provideshealth and welfare administration, retire-ment plan administration, and relatedemployee benefits consulting services. Inconnection with these services, theCompany incurred approximately $2.7 mil-lion in fees during fiscal 2011. Third, enti-ties affiliated with FMR purchasedadvertising time from the Companythrough transactions negotiated with

independent agents, and the Companyreceived approximately $10.6 million withrespect to these purchases during fiscal2011. Fourth, an affiliate of FMR obtainedconvention space, rooms and related serv-ices from the Company and the Companyreceived approximately $1.4 million withrespect to these services during fiscal2011. Each of these transactions werereviewed and approved by the Gover-nance and Nominating Committee underthe Related Person Transaction ApprovalPolicy.

Shareholder Communications

Generally. Shareholders may communi-cate with the Company through its Share-holder Services Department by writing to500 South Buena Vista Street, MC 9722,Burbank, California 91521, by callingShareholder Services at (818) 553-7200, orby sending an e-mail [email protected].

Additional information about contactingthe Company is available on the Compa-

nys investor relations website(www.disney.com/investors) under MyShareholder Account.

Shareholders and other persons interestedin communicating directly with the Chair-man of the Board or with the non-management Directors as a group may doso by writing to the Chairman of the Boardor (following the Annual Meeting, the Lead

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Independent Director), The Walt DisneyCompany, 500 South Buena Vista Street,Burbank, California 91521-1030. Under aprocess approved by the Governance andNominating Committee of the Board forhandling letters received by the Companyand addressed to non-managementmembers of the Board, the office of the

Secretary of the Company reviews all suchcorrespondence and forwards to Boardmembers a summary and/or copies of anysuch correspondence that, in the opinionof the Secretary, deals with the functionsof the Board or Committees thereof or thathe otherwise determines requires theirattention. Directors may at any time reviewa log of all correspondence received bythe Company that is addressed to mem-bers of the Board and request copies ofany such correspondence. Concerns relat-ing to accounting, internal controls or

auditing matters are immediately broughtto the attention of the Companys internalaudit department and handled in accord-ance with procedures established by the

Audit Committee with respect to suchmatters.

Shareholder Proposals for Inclusion in2013 Proxy Statement. To be eligible forinclusion in the proxy statement for our2013 Annual Meeting, shareholder pro-posals must be received by the Compa-

nys Secretary no later than the close ofbusiness on September 21, 2012. Pro-posals should be sent to the Secretary,The Walt Disney Company, 500 SouthBuena Vista Street, Burbank, California91521-1030 and follow the proceduresrequired by SEC Rule 14a-8.

Shareholder Director Nominations andOther Shareholder Proposals for Pre-sentation at the 2013 Annual Meet-ing. Under our bylaws, written notice ofshareholder nominations to the Board ofDirectors and any other business pro-posed by a shareholder that is not to beincluded in the proxy statement must bedelivered to the Companys Secretary notless than 90 nor more than 120 days priorto the first anniversary of the precedingyears annual meeting. Accordingly, anyshareholder who wishes to have a nomi-

nation or other business considered at the2013 Annual Meeting must deliver a writ-ten notice (containing the informationspecified in our bylaws regarding theshareholder and the proposed action) tothe Companys Secretary betweenNovember 13, 2012 and December 13,2012. SEC rules permit management tovote proxies in its discretion with respectto such matters if we advise shareholdershow management intends to vote.

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Executive Compensation

Compensation Committee Report

The Compensation Committee has:

(1) reviewed and discussed theCompensation Discussion and

Analysis included in this proxystatement with management; and

(2) based on the review anddiscussion referred to inparagraph (1) above,recommended to the Board ofDirectors that the CompensationDiscussion and Analysis beincluded in the Companys proxystatement relating to the 2012

Annual Meeting of shareholders.

Members of the Compensation Committee

Susan E. ArnoldJohn S. ChenFred H. Langhammer (Chair)

Aylwin B. LewisJohn E. Pepper, Jr.

Compensation Discussion and

Analysis

Overview

Disneys executive compensation programis designed to align the interests of seniormanagement with shareholders by tying asignificant portion of their compensationto the Companys performance as meas-ured by a variety of factors during thefiscal year in question, including financialreturns, stock price performance andefforts to position the Company for long-term success.

Under the program, the portion of compen-sation guaranteed to the Companysnamed executives at the beginning of any

fiscal year represents only a fraction of thetotal potential compensation. In the caseof Mr. Iger, less than 10% of the value ofhis target annual compensation this fiscalyear was assured at the beginning of theyear in the form of his base salary. Thevalue of the remaining 90% of Mr. Igerstarget annual compensation, including

performance-based bonus, stock awardsand options, is linked directly to theCompanys performance. Although thepercentages differ modestly for the othernamed executive officers, and benefitsand perquisites received during the yearcan increase the percentage of fixedcompensation somewhat, more than 80%of all annual compensation awarded to theother named executive officers during thefiscal year was tied to the Companysperformance.

In making decisions on performance-based compensation in fiscal 2011, theCompensation Committee considered theexceptional growth the Company achievedin the face of a persistent challengingeconomic environment. The Companyachieved record net income, revenue andearnings per share in fiscal 2011, with netincome increasing 21%, revenue increas-ing 7% and earnings per share, excludingthe impact of items that affected com-parability between the years,1 increasing23% over fiscal 2010. At the same time,

the Company continued to invest in anumber of projects designed to createlong-term growth in shareholder value,including an expansion of its cruise line,development of new or expanded attrac-tions at parks in Florida, California andHong Kong, and commencement of con-struction of a new park through a jointventure in Shanghai, China.

Taking into account these circumstances,total annual cash compensation increasedby 8.0% for the named executive officers

compared to last year. These increaseswere primarily due to increases in bonusesfor certain of the named executive officers

1 Earnings per share for the current year included restructuring and impairment charges and gains on the sales of Miramax and

BASS, which collectively had a net positive impact of $0.02. Earnings per share for the prior year included restructuring and

impairment charges, gains on the sales of investments in two television services in Europe, a gain on the sale of the Power

Rangersproperty, and an accounting gain related to the acquisition of The Disney Store Japan, which collectively had a net

adverse impact of $0.04.

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reflecting improved financial performanceof the Company and in recognition ofother performance factors. The grant datefair value of equity awards increased 7.1%for the named executive officers, primarilydue to application of contractual minimumrequirements. In the case of Mr. Iger, theincreased total annual compensation was

also due to an increase in his target bonusand equity award that the Committeedetermined was appropriate in light of

Mr. Igers exceptional leadership of theCompany and its review of compensationawarded to the chief executives of the fiveother, large, publically traded diversifiedmedia companies (CBS, Viacom, NewsCorp., Time Warner and Comcast). Overall,total annual compensation for the namedexecutive officers, including the grant date

fair value of annual equity awards,increased by 7.6% in fiscal 2011.

The following table sets forth the compensation received for the last three fiscal years by thethree named executive officers who held their current positions in each of fiscal 2009, 2010and 2011 and separately shows the compensation received by the two named executive offi-cers who held their current positions in fiscal 2010 and 2011. It provides, for each of theseyears: (a) cash compensation comprised of salary, benefits and perquisites included in thesummary compensation table and the annual performance-based bonus; (b) the grant-datefair value of regular annual equity awards during the fiscal year; (c) total annual compensationcomprised of fixed compensation, performance-based bonus and the grant-date fair value ofregular annual equity awards; and (d) grant-date fair value of any special equity awards

received during the fiscal year. The amounts in the table differ from those in the SummaryCompensation Table on page 33 in that this table does not include the change in pensionvalue included in the Summary Compensation Table. This table is not a substitute for theSummary Compensation Table and is intended to provide additional information that theCompany believes is useful in analyzing compensation decisions made with respect to thethree fiscal years covered.

Annual Compensation and Other Equity Awards

Year

Annual Compensation

Cash Compensation

AnnualEquity

Awards

TotalAnnual

Compensation

SpecialEquity

AwardsFixed

Compensation

Performance-BasedBonus Total

PercentChange

Robert A. Iger 2011 $2,962,932 $15,500,000 $18,462,932>>

13.6%

35.0%

$12,900,081 $31,363,013 2010 2,798,433 13,460,000 16,258,433 11,759,051 28,017,484

2009 2,780,063 9,260,000 12,040,063 9,538,408 21,578,471

Alan N. Braverman 2011 $1,259,640 $ 3,100,000 $ 4,359,640>>

3.3%

32.3%

$ 2,580,090 $ 6,939,7302010 1,190,049 3,030,000 4,220,049 2,351,856 6,571,905 $1,556,000

2009 1,154,919 2,035,000 3,189,919 2,331,653 5,521,572 3,035,500

Kevi n A. Mayer 2011 $ 760, 979 $ 1,207,000 $ 1,967,979 >>

-15.4%

42.5%

$ 1,623,283 $ 3,591,262 2010 736,987 1,590,000 2,326,987 1,817,356 4,144,343

2009 733,158 900,000 1,633,158 1,600,370 3,233,528

Total for three officers 2011 $4,983,551 $19,807,000 $24,790,551 >>

8.7%

35.2%

$17,103,454 $41,894,005 2010 4,725, 469 18, 080,000 22,805,469 15,928,263 38,733,732 $1, 556,000

2009 4,668,140 12,195,000 16,863,140 13,470,431 30,333,571 3,035,500

James A. Rasulo 2011 $1,457,743 $ 3,750,000 $ 5,207,743 > 2.5% $ 4,676,340 $ 9,884,083 2010 1,381,325 3,700,000 5,081,325 4,489,844 9,571,169 M. Jayne Parker 2011 $ 663, 205 $ 1,010,000 $ 1,673,205 > 16.7% $ 1,451,339 $ 3,124,544 2010 584,135 850,000 1,434,135 1,282,866 2,717,001 Total for five officers 2011 $7,104,499 $24,567,000 $31,671,499 > 8.0% $23,231,133 $54,902,632 2010 6,690, 929 22, 630,000 $29,320,929 21,700,973 51,021,902 $1, 556,000

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Compensation Objectives and Program

Design

The Companys executive compensationprogram seeks to promote the creation oflong-term shareholder value by:

tying a substantial portion of executives

total compensation to financial perform-ance measures that align with long-termshareholder value and leadership actionsthat are expected to position the Com-pany for long-term success; and

attracting and retaining high-caliberexecutives in a competitive market fortalent.

We use five different types of compensa-tion in pursuing these objectives:

a base salary;

a variable, annual, performance-basedbonus;

periodic grants of long-term, equity-based compensation such as stockoptions, restricted stock units andperformance-based restricted stockunits;

retirement plans and agreements andarrangements regarding compensationupon termination of employment; and

benefits and perquisites.

This section discusses how we havedesigned our compensation program toaddress these objectives.

Roles and Responsibilitiesaddressesthe process used to make compensationdecisions for executive officers.

Compensation Mixaddresses how webalance fixed and performance-basedcompensation to achieve our objectives.

Performance-Based Compensation

addresses the specific design elementsof the Companys performance-basedbonus and equity compensation pro-grams that are designed to aligncompensation with the creation of long-term shareholder value.

Fixed Compensationaddresses basesalary, benefits and perquisites andretirement plans.

Competitive Considerationsaddresseshow we evaluate the competitive marketfor talent and use that evaluation indesigning compensation packages.

Other considerationsaddresses the useof employment agreements and taxdeductibility of executive compensation.

Specific compensation decisions relatingto fiscal 2011 are discussed in the sectiontitled Fiscal 2011 Decisions.

Roles and Responsibilities

The Compensation Committee determinesthe compensation, including related termsof employment agreements for those whohave them, for each of the named execu-tive officers.

The Committee also conducts reviews ofthe Companys general executivecompensation policies and strategies andoversees and evaluates the Companysoverall compensation structure and pro-grams. The Committees responsibilitiesinclude:

reviewing and approving corporate goalsand objectives relevant to compensationof the chief executive officer and otherexecutive officers, and evaluating per-formance in light of those goals andobjectives;

determining compensation for executiveofficers and other senior officers;

evaluating and approving all grants ofequity-based compensation to executiveofficers and other senior officers; and

reviewing performance-based andequity-based incentive plans for thechief executive officer and other execu-tive officers and reviewing any otherbenefit programs presented to theCommittee by the chief executive officer.

In carrying out these responsibilities, theCommittee: reviews the Companys gen-eral executive compensation policies;determines salaries and bonuses for andequity awards to the named executiveofficers and such other officers as itdetermines appropriate; reviews benefitprograms for the named executive offi-cers; reviews and approves (or recom-

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mends approval to the Board where itdeems appropriate) all incentive,performance-based and equity-basedplans and any other benefit plans sub-mitted to it by the chief executive officer;and reviews and approves terms of allemployment agreements with namedexecutive officers and such other officers

as it deems appropriate.

The Compensation Committee determinesthe compensation of the chief executiveofficer without management input, but isassisted in this determination by itsindependent compensation consultant(described below) and reviews itsdetermination with the Board of Directors(without members of managementpresent). Terms of the employmentagreement with the chief executive officerare approved by the non-management

members of the Board of Directors afterconsidering the recommendation of theCompensation Committee.

In making determinations regardingcompensation for other named executiveofficers, the Committee considers therecommendations of the chief executiveofficer and the input received from itsindependent compensation consultant. Thechief executive officer recommendscompensation, including the compensationprovisions of employment agreements for

those who have them, for named executiveofficers other than himself and all other offi-cers whose compensation is determined bythe Compensation Committee. In makingthis recommendation, the chief executiveofficer evaluates the performance of theexecutive, considers the executivesresponsibilities and compensation in relationto other officers of the Company, and con-siders publicly available information regard-ing the competitive market for talent andinformation provided to him by the Com-pany and information provided to the

Committee by the Committees independentconsultant. The Committee advises the fullBoard of its deliberations regarding annualbonus and equity incentive awards fornamed executive officers.

Management also provides data, analysisand recommendations for the Commit-tees consideration regarding the Compa-nys executive compensation programs

and policies, preparing materials for theinformation of and review by the Compen-sation Committee. Management alsoadministers those programs and policiesconsistent with the direction of the Com-mittee. Management provides an ongoingreview of the effectiveness of thecompensation programs, including com-

petitiveness and alignment with theCompanys objectives, and recommendschanges, if necessary to promoteachievement of all program objectives.

The Committee meets regularly in execu-tive session without management presentto discuss compensation decisions andmatters relating to the design of compen-sation programs.

The Committee has retained the firm of PayGovernance LLC as its compensation

consultant to assist in the continual devel-opment and evaluation of compensationpolicies and the Committees determi-nations of compensation awards. TheCommittees consultant attendsCompensation Committee meetings, meetswith the Committee without managementpresent and provides third-party data,advice and expertise on proposed execu-tive compensation and executive compen-sation plan designs. At the direction of theCommittee, the consultant reviews briefingmaterials prepared by management and

outside advisers to management andadvises the Committee on the mattersincluded in the materials, including theconsistency of proposals with the Commit-tees compensation philosophy and com-parisons to programs at other companies.

At the request of the Committee, the con-sultant also prepares its own analysis ofcompensation matters, including position-ing of programs in the competitive marketand the design of plans consistent with theCommittees compensation philosophy.The Committee considers these analyses

as one factor in making decisions withrespect to compensation matters alongwith information and analyses it receivesfrom management and its own judgmentand experience. In particular, with respectto positioning of programs in the com-petitive market, the Committee considersthe analyses in the context of the factorsdiscussed under CompetitiveConsiderations,below.

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In October 2008, the CompensationCommittee adopted a policy requiring itsconsultant to be independent of Companymanagement. The policy provides that aconsultant will be considered independentif: the firm does not receive from theCompany fees for services or productsprovided to the Company in any fiscal year

that exceed 1% of the firms annual grossrevenues; the individual that advises theCommittee does not participate directly orby collaboration with others in the firm inthe provision of any services or productsto the Company without the approval ofthe chair of the Compensation Committeeunless the related fees are, in theaggregate, less than $100,000; the con-sultant does not provide any products orservices to any executive officer of theCompany; and the Committeepre-approves any specific engagement of

the firm if the estimated cost of theengagement exceeds $500,000. TheCommittee performs an annual assess-ment of the consultants independence todetermine whether the consultant isindependent. The Committee completedthis assessment in November 2011. Duringfiscal 2011, Pay Governance LLC, in addi-tion to providing general advice on theamount and form of executive and directorcompensation, advised the Committeewith respect to the compensation includedin an extension of Mr. Igers employment

agreement. Due to the importance of thisagreement and the deliberate consid-eration of it by the Committee, the fees foradvice provided with respect to thisagreement (all of which was incurred dur-ing the fiscal year) caused the total fees tobe paid to Pay Governance LLC duringfiscal 2011 to total approximately 1.5% ofthe firms gross revenue for the precedingyear. Because the fees for fiscal 2011exceeded the 1% threshold in theCommittees policy, the Committee con-ducted a further assessment of Pay

Governances independence. TheCommittee determined that, in light of thefact that all of its other independence cri-teria were satisfied and that fees from theCompany exceeded 1% of Pay Gover-

nance LLCs annual revenue only as aresult of unique circumstances that led tothe Committees request for additionalwork to gain the benefit of its independentadvice, Pay Governance LLC remainedindependent of Company managementand therefore confirmed that its consultantis independent.

All of the Services provided by Pay Gover-nance LLC during fiscal 2011 were to theCommittee (or the Governance and Nomi-nating Committee with respect to directorcompensation) to provide advice orrecommendations on the amount or formof executive and director compensation,and Pay Governance LLC did not provideany additional services to the Companyduring fiscal year 2011.

Compensation Mix

The Committee believes that a substantialportion of the total compensation of seniorexecutives should be variable and tied toperformance in order to align compensa-tion with measures that correlate withcreation of long-term shareholder value.This should offer an opportunity for gain inthe event of successful performance,matched with the prospect of reducedcompensation in the absence of success.The Committee also believes thatcompensation for more senior executive

officers, including the named executiveofficers, should be more heavily weightedtoward variable elements of compensationthan is the case for less senior officersbecause the performance of these officersis more likely to have a strong and directimpact in achieving strategic and financialgoals that are most likely to affect share-holder value.

At the same time, the Committee believesthat the Company must attract and retainhigh-caliber executives, and therefore

must offer a mixture of fixed and at-riskcompensation, and that the levels and mixof these types of compensation must beattractive in light of the competitive marketfor senior executive talent.

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The following charts show the percentage of total annual compensation (constituting cashcompensation and benefits plus the grant-date fair value of regular annual equity awards)awarded to Mr. Iger and to the other named executive officers that is performance-based(performance-based bonus and equity awards) versus fixed (salary and all other compensa-tion) based on amounts shown in the Annual Compensation and Other Equity Awards table,above:

Mr. Iger

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 20092011

PercentofTotalCompensationforYear

Fiscal Year

Fixed (Salary)

9.4%

Variable (Bonus)

49.4%

Variable (Equity)

41.1%

Fixed (Salary)

10.0%

Variable (Bonus)

48.0%

Variable (Equity)42.0%

Fixed (Salary)

12.9%

Variable (Bonus)

42.9%

Variable (Equity)

44.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 20092011

PercentofTotalCompensationforYear

Fiscal Year

Fixed (Salary)

17.6%

Variable (Bonus)38.5%

Variable (Equity)

43.9%

Fixed (Salary)

16.9%


Variable (Equity)

43.2%

Fixed (Salary)

21.6%


Variable (Equity)

44.9%

Other Named Executive Officers (fiscal 2009 excludes two named executive

officers who did not serve in fiscal 2009)

The amounts shown for equity compensa-tion above reflect the grant-date fair valueof equity awards, but the actual value ofthese awards will depend directly on theperformance of the Companys stock priceover the period during which restrictedunits vest and options can be exercisedand, with respect to performance-basedstock units, whether the performance testsfor vesting of these units are met. Thevalue realized by an executive for optionsand performance-based restricted stockunit awards could be as little as zero,which would occur with respect to optionsif the Companys stock price were lessthan the exercise price of options andwould occur with respect to performance-based restricted stock units if none of theperformance tests were met (includingtests to assure deductibility under Sec-tion 162(m) of the Internal Revenue Code).

Performance-based Compensation

The Company ties compensation to theachievement of performance that alignswith long-term shareholder value through:

an annual performance-based bonusdetermined using performance measuresdesigned to correlate closely with thecreation of long-term shareholder value;and

equity-based compensation whoserealizable value varies directly with themarket price of the Companys commonstock and all (for awards to the chiefexecutive officer after 2011) or a portionof which (for other senior executives) issubject to performance tests based onthe Companys stock price and earningsper share in addition to a test to assuredeductibility under Section 162(m).

Annual Performance-based Bonus. TheCompanys annual performance-basedbonus compensates individuals based onthe achievement of specific annual finan-cial and other objectives that the Commit-tee believes correlate closely with growthof long-term shareholder value. The proc-ess for determining the amount of thisbonus for named executive officersinvolves four basic steps:

(1) Setting a target bonus. Early in the

fiscal year, the Committee approves atarget bonus amount for each namedexecutive officer which generally,except in the case of the chief execu-tive officer, is expressed as a percent-age of the named executive officersfiscal year end salary. The target bonustakes into account all factors that theCommittee deems relevant, includingminimums set in the employment

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agreement where applicable, therecommendation of the chief executiveofficer (except with respect to his ownbonus), the nature and responsibility ofthe position and competitive marketconditions.

(2) Setting Company financial performance

ranges. Early each fiscal year, theCompensation Committee receivesrecommended financial performancemeasures and ranges from seniormanagement, reviews them with seniormanagement and the Committeescompensation consultant, and thensets performance measures andranges and reports their determinationto the full Board.

(3) Setting other performanceobjectives. The Committee believesthat the bulk of the bonus should be

based on objective measures of finan-cial performance, but also believes thatmore subjective elements are alsoimportant in recognizing achievementand motivating officers. Therefore, atthe same time it sets Company-widefinancial performance ranges, theCommittee also approves other per-formance objectives for the Company.These objectives are based on therecommendations of the chief execu-tive officer and the Committees dis-cussion with him regarding corporate

objectives. These objectives allow theCommittee to play a more proactiverole in identifying performanceobjectives beyond purely financialmeasures.

(4) Measuring performance and preliminarybonus determination. After the end ofthe fiscal year, the Committee reviewsthe Companys actual performanceagainst each of the financial perform-ance ranges established at the outsetof the year. In determining the extent towhich the financial performance rangesare met for a given period, the Commit-tee exercises its judgment whether toreflect or exclude the impact ofchanges in accounting principles andextraordinary, unusual or infrequentlyoccurring events.

To make its preliminary bonusdetermination, the Committee multi-plies an amount equal to 70% of the

target bonus by a factor reflectingactual performance compared to thefinancial performance ranges set at thebeginning of the year. The factorranges from a minimum of zero to amaximum of 200% for each executiveofficer.

The Committee then multiplies theremaining 30% of the target bonusamount by a factor to reflect theCommittees assessment of perform-ance against the other performanceobjectives set at the outset of the yearas well as the named executive offic-ers overall contribution to the Compa-nys success. This factor may rangefrom 0% to a maximum that, whencombined with the award based onfinancial performance factors, will,except in special circumstances suchas unusual challenges or extraordinarysuccesses, result in a bonus that doesnot exceed 200% of the target bonus.In arriving at this factor, the Committeeconsiders the recommendation of thechief executive officer in cases otherthan his own bonus, and the Commit-tee may consider the nature andimpact of events that resulted inadjustments to the financial perform-ance targets as described above.

All bonus awards for named executiveofficers are also subject to a test specifi-

cally designed to assure that the awardsare eligible for deductibility under Sec-tion 162(m), which is in addition to theperformance measures described above.

The Committee has the discretion, inappropriate circumstances, to award abonus less than the amount determined bythe steps set out above, including dis-cretion to award no bonus at all.

Equity-based Compensation. TheCompanys long-term incentive program

provides for the award of restricted stockunits and stock options to participatingemployees including the named executiveofficers. The program is designed to pro-vide incentives to create and maintainshareholder value over a multi-year periodby making annual awards whose valuedepends on and is directly related to sus-tained changes in the market price of theCompanys shares. For the named execu-

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tive officers, each annual award has typi-cally been in the form of a mix of stockoptions and restricted stock units as fol-lows:

stock options with an exercise price notless than the market price on the date ofgrant (40% of the grant-date fair value ofthe award);

restricted stock units whose vesting isconditioned on the satisfaction of per-formance conditions in addition to a testto ensure that the compensation isdeductible pursuant to Internal RevenueCode Section 162(m) (30% of the grant-date fair value of the award); and

restricted stock units whose vesting isnot subject to performance conditionsother than the test to ensure that thecompensation is deductible pursuant toInternal Revenue Code Section 162(m)(30% of the grant-date fair value of theaward).

Participants receive value from stockoptions only if and to the extent the mar-ket price of the Companys common stockwhen a participant exercises an awardexceeds the market price on the date ofgrant. Participants realize value onrestricted stock units subject to perform-ance tests only if and to the extent that thetests described below are met. The valueparticipants receive on restricted stock

units (whether or not subject to perform-ance tests) varies directly with the marketprice of the Companys common stock atthe time the units vest.

The Committee has weighted the awardsslightly more toward restricted stock unitsbecause these awards reflect bothincreases and decreases in stock pricefrom the grant-date market price and thustie compensation more closely to changesin shareholder value at all levels comparedto options, whose intrinsic value changes

with shareholder value only when themarket price of shares is above theexercise price. In addition, the weightingtoward restricted stock units allows theCommittee to deliver equivalent value withuse of fewer authorized shares.

In a new employment agreement enteredinto with Mr. Iger shortly after the end offiscal 2011, and effective October 2, 2011,

Mr. Iger and the Company agreed that50% of the grant-date fair value of futureequity awards to him would be in the formof stock options with an exercise price notless than the market price on the date ofgrant, and 50% of the grant-date fair valueof the awards would be in the form ofrestricted stock units whose vesting is

conditioned on the satisfaction ofperformance conditions in addition to atest to ensure that the compensation isdeductible pursuant to Internal RevenueCode Section 162(m). The Committeedetermined that it was appropriate torequire that all of Mr. Igers future stockunit awards be subject to performancetests because of the particular impactMr. Igers leadership can have on theperformance of the Company, and the mixof options and stock units was arrived atthrough negotiation with Mr. Iger.

The Committee may in the future adjustthe mix of award types or approve differ-ent award types, such as restricted stock,as part of the overall long-term incentiveaward. Awards made in connection with anew, extended or expanded employmentrelationship may involve a different mix ofrestricted stock units and options depend-ing on the Compensation Committeesassessment of the total compensationpackage being offered.

Stock options are generally scheduled tovest over four years after the awards aremade and generally remain exercisable forseven years (for awards made in 2005through 2009) or ten years (for all otherawards) after the date of the award. If theparticipant is age 60 or greater and has atleast ten years of service at the date ofretirement, options awarded after March2011 (and awarded at least one year beforeretirement), continue to vest and remainexercisable until the earlier of five years afterretirement and the original expiration date

(except that this does not apply for certainemployees outside the United States).Options awarded between December 2009and March 2011 continue to vest and remainexercisable for three, instead of five, years inthese circumstances.

Restricted stock units without perform-ance tests (other than the test to ensurethat the compensation is deductible pur-

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suant to Internal Revenue Code Sec-tion 162(m)) vest 25% per year beginningon the first anniversary of the award date.The vesting conditions of restricted stockunits with performance tests havechanged over time. Fiscal 2011 awardswith performance tests vest three yearsafter grant date. All restricted stock unit

awards made since December 2009 con-tinue to vest according to the original vest-ing schedule following retirement if theawards were made at least one yearbefore retirement and the participant isage 60 or greater and has at least tenyears of service at the date of retirement(except that the extended vesting doesnot apply for certain employees outsidethe United States.)

The Committee adjusts performance testsfor restricted stock units from time to time

in response to changes in the competitiveenvironment and to ensure that the pro-gram meets the objective of providingclear incentives tied to the creation oflong-term shareholder value. For unitssubject to a performance test awarded in2011, the number of units that vest isbased on a target number of units

adjusted to reflect performance, with thenumber of units vesting ranging from 0%to 150% of the target. As set forth in thetable immediately below, assuming con-tinued employment (or extension of vest-ing on retirement as described in thepreceding paragraph) and satisfaction ofthe Section 162(m) test as applicable to

awards to executive officers, the con-ditions to vesting and the determinant ofthe number of units that will vest is tied totwo performance measures: (a) theCompanys three-year total shareholderreturn (TSR in the table below) comparedto the total three-year shareholder returnof the companies in the S&P500 (based onmarket prices for the last 20 trading daysof the period ending one month prior tothe third anniversary of the award) and(b) the Companys growth in earnings pershare from continuing operations (EPS in

the table below) for the 12 quartersreported on or before one month prior tothe third anniversary compared to thegrowth in earnings per share from continu-ing operations of the companies in theS&P500 over the same period. The numberof units that vest will be determinedaccording to the following schedule:

First Performance Test Second Performance Test (if applicable)Percent of Target

Units Vesting*

TSR below 25th percentile EPS below 50th percentile 0%EPS 50th percentile or higher 50%

TSR equal to 25th

percentile to 50th

percentile EPS below 50th

percentile 50% to 100%EPS 50th percentile or higher 75% to 100%

TSR equal to 50th percentile to 75th percentile Not applicable 100% to 150%

TSR 75th percentile and above Not applicable 150%

* The percent of units vesting varies within ranges in a linear manner from the low end of the range to the high end of the rangebased on the Companys TSR percentile.

EPS for the Company will be adjusted asthe Committee deems appropriate in itssole discretion (i) to exclude the effect ofextraordinary, unusual and/or nonrecurringitems and (ii) to reflect such other factorsas the Committee deems appropriate to

fairly reflect earnings per share growth.Adjustments to the diluted EPS from con-tinuing operations of S&P 500 companieswill not normally be made.

Mr. Igers new employment agreementprovides that restricted stock unitsawarded after October 2, 2011, will havethe performance test described aboveunless the Committee determines to revise

the test in a way that does not materiallydiminish the value of the grant to Mr. Igeror the opportu

walt disney 2012 proxy statement

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