WASHINGTON – The Securities and Exchange Commission (search) said Monday that it charged entertainment group Walt Disney Co. (DIS) for failing to disclose relationships between the company and its directors.
Amid continued turmoil in Disney's boardroom, the SEC said the Burbank, Calif.-based company agreed to a cease-and-desist order pledging not to violate disclosure rules in the future.
No monetary penalty was imposed in the case in which the SEC accused Disney of failing to tell investors that, between 1999 and 2001, it employed three adult children of directors.
The children of directors Reveta Bowers, Stanley Gold (search) and Raymond Watson were paid $60,000 to $150,000 per year, the SEC said. Bowers and Watson have retired from the Disney board.
Gold quit the board in 2003 and has since campaigned along with Roy Disney (search), nephew of cartoon pioneer Walt Disney, for the ouster of Disney Chief Executive Officer Michael Eisner (search).
Often criticized for his management style and large pay packages, Eisner has been a focus of controversy. The board has stripped him of his chairmanship, but he remains CEO. Disney's board said recently it will find a new CEO by mid-2005.
"Shareholders have a significant interest in information regarding relationships between the company and its directors," said SEC Deputy Enforcement Director Linda Thomsen.
"Failure to comply with the SEC's disclosure rules in this area impedes shareholders' ability to evaluate the objectivity and independence of directors," she said in a statement.
The SEC said Disney did not disclose that a 50-percent-owned unit employed the wife of Disney director John Bryson and that she earned more than $1 million a year.
She was hired in September 1999 -- a year before Bryson joined the board -- and her job was not disclosed to the SEC by Disney until August 2002, the commission said.
Additionally, it said, Disney failed to tell investors about a long-term business relationship with Air Shamrock, an airplane company that was owned by Roy Disney and run by Gold.
From 1984 through 2003, the SEC said, Roy Disney regularly traveled on planes owned by Air Shamrock (search), which received regular payments from Disney Co. for his Disney travel.
Finally, the SEC said, Disney failed to disclose that it provided office space and other services valued at more than $200,000 annually to board member Thomas Murphy.
A spokesman for Disney had no comment on the SEC action.
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