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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

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Soliciting Material under §240.14a-12

 

The Walt Disney Company

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LOGO

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GRAPHIC

January 11, 2019

Dear Fellow Shareholder,

I am pleased to invite you to our 2019 Annual Meeting of shareholders, which will be held on Thursday, March 7, 2019, at 10 a.m. at the Stifel Theatre in St. Louis, Missouri.

At the meeting, we will be electing nine members of our Board of Directors. We will also be considering ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants, an advisory vote to approve executive compensation, and two shareholder proposals.

You may vote your shares using the Internet or the telephone by following the instructions on page 70 of the proxy statement. Of course, you may also vote by returning a proxy card or voting 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 obtain an admission ticket in advance. You can obtain a ticket by following the instructions on page 71 of the proxy statement. If you cannot attend the meeting, you can still listen to the meeting, which will be webcast and available on our Investor Relations website.

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

Sincerely,

GRAPHIC

Robert A. Iger
Chairman and Chief Executive Officer

   


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GRAPHIC   The Walt Disney Company
  Notice of 2018 Annual Meeting

The 2019 Annual Meeting of shareholders of The Walt Disney Company will be held:

The items of business are:

Shareholders of record of Disney common stock (NYSE: DIS) at the close of business on January 7, 2019, are entitled to vote at the meeting and any postponements or adjournments of the meeting. A list of these shareholders is available at the offices of the Company in Burbank, California.

As previously announced, Disney has entered into an Amended and Restated Agreement and Plan of Merger (the "Merger Agreement"), dated as of June 20, 2018, among Disney, Twenty-First Century Fox, Inc., TWDC Holdco 613 Corp. ("New Disney"), WDC Merger Enterprises I, Inc., and WDC Merger Enterprises II, Inc. Subject to the terms and conditions set forth in the Merger Agreement, Disney will, upon closing of the transactions contemplated by the Merger Agreement, become a wholly-owned subsidiary of New Disney. If the transactions close prior to March 7, 2019, the meeting held on March 7, 2019 will be the 2019 Annual Meeting of shareholders of New Disney and this notice of meeting will be deemed to have been provided in respect of the 2019 Annual Meeting of shareholders of New Disney. In such case, shareholders of Disney as of the Record Date will be entitled to attend the 2019 Annual Meeting of shareholders of New Disney, and votes cast by shareholders of Disney in proxy or in person will constitute instructions to Disney (as the sole shareholder of New Disney as of the Record Date) to vote its shares of New Disney at the meeting. Disney will in that case vote its shares of New Disney in proportion to the votes cast by Disney shareholders.

The closing of the transactions contemplated by the Merger Agreement is subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement and there can be no assurance as to when or if the transactions will close.

January 11, 2019
Burbank, California

GRAPHIC

Alan N. Braverman
Senior Executive Vice President,
General Counsel and Secretary

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on March 7, 2019

The proxy statement and annual report to shareholders and the means to vote by Internet are available at www.ProxyVote.com/Disney.

Your Vote is Important

Please vote as promptly as possible by using the Internet or telephone or by signing, dating and returning the Proxy Card mailed to those who receive paper copies of this proxy statement.


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Table of Contents

 

Proxy Summary

  1
 

Corporate Governance and Board Matters

 
11
 

Governing Documents

  11
 

The Board of Directors

  11
 

Board Leadership

  11
 

Committees

  12
 

The Board's Role in Risk Oversight

  13
 

Director Selection Process

  14
 

Director Independence

  15
 

Certain Relationships and Related Person Transactions

  16
 

Shareholder Communications

  17
 

Director Compensation

 
18
 

Executive Compensation

 
21
 

Compensation Discussion and Analysis

  21
 

Executive Compensation Program Structure

  21
 

2018 Compensation Decisions

  30
 

Compensation Committee Report

  38
 

Compensation Tables

  39
 

Audit-Related Matters

 
58
 

Audit Committee Report

  58
 

Policy for Approval of Audit and Permitted Non-audit Services

  59
 

Auditor Fees and Services

  59
 

Items to Be Voted On

 
60
 

Election of Directors

  60
 

Ratification of Appointment of Independent Registered Public Accountants

  65
 

Advisory Vote on Executive Compensation

  65
 

Shareholder Proposals

  66
 

Other Matters

  69
 

Information About Voting and the Meeting

 
70
 

Shares Outstanding

  70
 

Voting

  70
 

Attendance at the Meeting

  71
 

Other Information

 
72
 

Stock Ownership

  72
 

Section 16(a) Beneficial Ownership Reporting Compliance

  73
 

Electronic Availability of Proxy Statement and Annual Report

  73
 

Mailings to Multiple Shareholders at the Same Address

  73
 

Proxy Solicitation Costs

  74
 

Annex A — Reconciliation of Non-GAAP Measures

 
A-1

The Walt Disney Company (500 South Buena Vista Street, Burbank, California 91521) is providing you with this proxy statement relating to its 2019 Annual Meeting of shareholders. We began mailing a notice on January 11, 2019 containing instructions on how to access this proxy statement and our annual report online, and we also began mailing a full set of the proxy materials to shareholders who had previously requested delivery of the materials in paper copy. References to "the Company", "Disney" or "our" in this Proxy Statement refer to The Walt Disney Company (or, unless the context otherwise requires, with respect to events occurring after the completion of the transactions contemplated by the Merger Agreement, to New Disney (as each such term is defined in the foregoing Notice of 2019 Annual Meeting)) and, as applicable, its consolidated subsidiaries.

   

The Walt Disney Company Notice of 2019 Annual Meeting and Proxy Statement


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GRAPHIC   Proxy Summary

Proposals to be Voted On

The following proposals will be voted on at the Annual Meeting of shareholders.

 
   
  For More Information
  Board Recommendation
Proposal 1: Election of nine directors   Pages 60 to 64   GRAPHIC For Each Nominee
Susan E. Arnold   Robert A. Iger        
Mary T. Barra   Maria Elena Lagomasino        
Safra A. Catz   Mark G. Parker        
Francis A. deSouza   Derica W. Rice        
Michael Froman            
Proposal 2:       Page 65   GRAPHIC For
Ratification of appointment of independent registered public accountants        
Proposal 3:       Pages 65 to 66   GRAPHIC For
Advisory resolution on executive compensation        
Proposal 4:       Pages 66 to 68   GRAPHIC Against
Shareholder proposal requesting an annual report disclosing information regarding the Company's lobbying policies and activities        
Proposal 5:       Pages 68 to 69   GRAPHIC Against
Shareholder proposal requesting a report on use of additional cyber security and data privacy metrics in determining compensation of senior executives        

You may cast your vote in any of the following ways:

  GRAPHIC   GRAPHIC   GRAPHIC   GRAPHIC   GRAPHIC

 

Internet

 

 

 

Phone

 

Mail

 

In Person
  Visit www.ProxyVote.com/Disney. You will need the 16-digit number included in your proxy card, voter instruction form or notice.   You can scan this QR code to vote with your mobile phone. You will need the 16-digit number included in your proxy card, voter instruction form or notice.   Call 1-800-690-6903 or the number on your voter instruction form. You will need the 16-digit number included in your proxy card, voter instruction form or notice.   Send your completed and signed proxy card or voter instruction form to the address on your proxy card or voter instruction form.   See below regarding Attendance at the Meeting.

Attendance at the Meeting

If you plan to attend the meeting, you must be a shareholder on the record date and obtain an admission ticket in advance following the instructions set forth on page 71 of this proxy statement. Tickets will be available to registered and beneficial owners and up to one guest accompanying each registered or beneficial owner if permitted. These tickets will also be valid for purposes of attending the 2019 annual meeting of shareholders of New Disney, which will be held in lieu of the 2019 Disney annual meeting if the transactions contemplated by the Merger Agreement close prior to March 7, 2019.

Requests for admission tickets will be processed in the order in which they are received and must be requested

no later than 11:59 p.m. Eastern Time on March 6, 2019. Please note that seating is limited and requests for tickets will be accepted on a first-come, first-served basis. On the day of the meeting, each shareholder will be required to present valid picture identification such as a driver's license or passport with their admission ticket. Seating will begin at 9:00 a.m. and the meeting will begin promptly at 10:00 a.m. Large bags, backpacks, suitcases, briefcases, cameras, cell phones, recording devices and other electronic devices will not be permitted at the meeting. You will be required to enter through a security checkpoint before being granted access to the meeting.

   

Proxy Summary


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GRAPHIC   Proxy Summary

This summary provides highlights of certain information in this proxy statement. As it is only a summary, please review the complete proxy statement and 2018 annual report before you vote.

Annual compensation for fiscal 2018 reflected strong financial performance including record revenue, net income and earnings per share while we continued to position the Company for future growth, including through the agreement to acquire 21st Century Fox and continued development of our direct-to-consumer strategy.

Following last year's vote on the advisory resolution on executive compensation, the Board undertook extensive engagement with investors regarding the results of that vote and the Board and Mr. Iger agreed to more rigorous performance standards for stock units awarded to Mr. Iger in late 2017.

                                                                          2018 Shareholder Engagement

GRAPHIC

In December 2017, in connection with our agreement to acquire businesses of 21st Century Fox (the "21CF Acquisition"), the Board concluded that Mr. Iger was the best person to lead Disney through the acquisition and integration of 21st Century Fox and reached an agreement to extend Mr. Iger's tenure as Chairman and Chief Executive Officer through December 2021. As part of that agreement, the Board increased Mr. Iger's annual salary, increased his target annual incentive bonus and target long-term incentive award once the 21CF Acquisition is completed, awarded him restricted stock units and awarded him performance-based restricted stock units that are conditioned on completion of the 21CF Acquisition.

At our 2018 annual shareholder meeting, 52% of the shares cast voted against the advisory resolution on executive compensation. As part of our ongoing dialogue with investors, the Compensation Committee undertook extensive engagement with shareholders in order to fully understand concerns with our compensation practices.

Investor feedback in these discussions coalesced around the terms of the performance-based equity award made in connection with the extension of Mr. Iger's tenure, and concerns that performance requirements should be more rigorous given the magnitude of the award. In response to this feedback, the Board acting on the recommendation of the Compensation Committee approved, and Mr. Iger agreed, to increase the rigor of the performance test for the performance-based equity award. These changes are summarized on pages 9 to 10 of this summary and described in detail on pages 30 to 31 of the proxy statement.

The Board believes that these changes serve to further align Mr. Iger's earning opportunity with shareholder value creation and underscore Mr. Iger's and the Board's confidence that our current strategic direction will generate value for shareholders.

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                                                                          Fiscal 2018 Performance

GRAPHIC

In fiscal 2018 Disney delivered record revenue, net income and diluted earnings per share (EPS), with higher segment operating income driven by increases at Parks and Resorts and Studio Entertainment, partially offset by decreases at Media Networks and Consumer Products & Interactive Media.

Strategically, Disney agreed to the 21CF Acquisition and continued development of our direct-to-consumer business, including the highly anticipated launch of our Disney-branded streaming service.

Our fiscal 2018 performance was not only strong on a year-over-year basis, but also generally compared favorably to the strong performance in fiscal 2016, a year which uniquely benefited from the successful relaunch of the Star Wars franchise. EPS, net income and revenue all grew between fiscal 2016 and fiscal 2018 at compound annual growth rates (CAGR) of 21% for EPS, 16% for net income and 3% for revenue. Adjusting for the non-recurring impact of tax reform and gains from real estate sales in fiscal 2018, EPS and net income grew between fiscal 2016 and fiscal 2018 at CAGRs of 10% for EPS and 6% for net income.

*
For a reconciliation of segment operating income to net income, and net income and EPS to net income and EPS excluding the non-recurring impact of tax reform and gains from real estate, see Annex A.
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In fiscal 2018 at Parks and Resorts, record segment operating income was due to growth at both our domestic and international operations. The increase domestically was due to higher guest spending and volumes. Internationally, the increase was due to higher guest spending and volumes in Paris and Hong Kong. In fiscal 2018, the Studio also generated record operating income. This was due to the exceptional performance of our theatrical releases driven by Black Panther, Star Wars: The Last Jedi, Avengers: Infinity War and Incredibles 2. The decrease at Media Networks was due to lower advertising revenue, higher losses from Hulu and BAMTech as we continue to invest in these businesses and contractual rate increases for sports programming. The decrease at Consumer Products & Interactive Media was primarily due to lower income from licensing activities and a decrease in comparable store sales at our retail business.

The Company's long-term record of strong performance is reflected in one-, five- and ten-year total shareholder returns (TSRs) that outperformed the S&P 500, by 116 percentage points in the case of the ten-year TSR.

GRAPHIC

We also outperformed our Media Industry Peers (used for benchmarking purposes as described on page 21) over the same periods.

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This outperformance for the one-, five- and ten-year periods is even greater if Disney itself is excluded from the Media Industry Peers, as the TSR for the other companies was 5%, 36% and 284% for those periods.

                                                                          Compensation Structure and Philosophy

GRAPHIC

The Compensation Committee firmly believes in pay for performance. Again in fiscal 2018, 90% of Mr. Iger's target annual total direct compensation depended on the Company's financial results and the performance of Disney stock, creating close alignment between his incentives and shareholder value creation.

Base salary is the only fixed element of Mr. Iger's annual compensation. Substantially all other annual compensation breaks into the following performance-based categories:

A performance-based annual cash bonus opportunity that is:
(a)
70% dependent on achievement of performance against four financial measures (segment operating income, adjusted EPS, after-tax free cash flow and return on invested capital), all of which the Compensation Committee believes have driven long-term shareholder value creation; and
(b)
30% dependent on the Compensation Committee's assessment of individual contributions toward achievement of qualitative goals tied to the Company's strategic priorities.
An annual equity award, which for the Chief Executive Officer is comprised of 50% options and 50% performance-based units. The realized option value depends on the performance of Disney stock and the realized performance-unit value depends on three-year achievement of relative TSR and EPS performance.

                                                                          Fiscal 2018 Chief Executive Officer Compensation

 

  
    

Over the course of his tenure as Chief Executive Officer, Mr. Iger has delivered spectacular financial performance and created significant shareholder value, driven by key strategic moves and exceptional execution.

Since fiscal 2005, Disney has achieved exceptional financial performance highlighted by:

13% compounded annual growth in income from continuing operations attributable to Disney (12% adjusted for the non-recurring impact of tax reform and gains from real estate sales in fiscal 2018):

  
    

4      Proxy Summary

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16% compounded annual growth in EPS (15% adjusted for the non-recurring impact of tax reform and gains from real estate sales in fiscal 2018):
485% increase in total shareholder return:
This marked significant outperformance relative to the S&P 500 and Media Industry Peers, whose total returns increased 212% and 259% respectively, over this period:
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Against the backdrop of this track record of consistent strong performance, the Compensation Committee made the following decisions with respect to Mr. Iger's annual compensation for fiscal 2018.

Salary: The Compensation Committee raised Mr. Iger's annual salary from $2.5 million to $3.0 million in connection with his contract extension. Base salary remains only 7% of Mr. Iger's total annual compensation (i.e., excluding the equity award associated with extension of his employment agreement), in-line with last year.

Annual Equity Awards: The Compensation Committee left the value of Mr. Iger's annual equity award for fiscal 2018 approximately equal to the values for the last six fiscal years. Half of the equity award is in the form of performance-based stock units and half is in the form of stock options.

GRAPHIC

Non-Equity Incentive Plan Compensation: Mr. Iger's performance-based cash bonus of $18.0 million (compared to $15.2 million for fiscal 2017) reflects performance against the four financial performance measures and qualitative goals as discussed below:

Financial Performance Measures:  The Compensation Committee sets performance ranges for the four financial performance measures that are used to determine 70% of each named executive officer's bonus award early in the fiscal year. In establishing these ranges for fiscal 2018, the Committee increased the overall level of the ranges for adjusted EPS and adjusted after-tax free cash flow to provide incentives for overall growth. The Committee recognized the significant capital investments in BAMTech and Parks and Resorts, and therefore reduced the overall level of the ranges for adjusted segment operating income and adjusted return on invested capital.

  
    

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Other Performance Factor:  In setting the other performance factor for Mr. Iger, the Compensation Committee considered Mr. Iger's outstanding leadership in developing the strategic direction of the Company, highlighted by the pending 21CF Acquisition, the development of a direct-to-consumer strategy and the related reorganization of the Company, as well as outstanding studio performance, the successful launch of ESPN+, and record operating results at our parks and resorts. Taking all this into account, the Compensation Committee applied a factor of 175% for Mr. Iger's qualitative performance in fiscal 2018.

The achievement of strong financial performance while executing transformative strategic change for future growth led the Committee to increase Mr. Iger's incentive bonus award by $2.8 million compared to the award in fiscal 2017. Despite this increase, Mr. Iger's 2018 bonus is well below the level he received in the three years prior to fiscal 2017, in both dollar amount and relative to adjusted EPS and adjusted segment operating income, as illustrated below.

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The Committee believes Mr. Iger's annual compensation in fiscal 2018 continues to reflect the rigor of its pay for performance orientation, as demonstrated by a comparison of the Company's performance and Mr. Iger's annual compensation over the last five years. As shown below, the Company's adjusted EPS grew at a compound annual growth rate of 11% from fiscal 2014 to fiscal 2018 and adjusted segment operating income grew 5% over the period. Despite this growth, Mr. Iger's incentive bonus award decreased 6% and his total annual compensation decreased 4% on a compounded basis over this period.

 
FY14

FY15

FY16

FY17

FY18



Compounded
Growth
FY14-FY18



Adjusted EPS*

  $ 4.32   $ 5.14   $ 5.72   $ 5.67   $ 6.48   11%  
             

Adjusted Segment Operating Income ($M)**

  $ 13,005   $ 14,607   $ 15,721   $ 14,900   $ 15,919     5%  

Mr. Iger's Incentive Bonus Award ($M)

  $ 22.8   $ 22.3   $ 20.0   $ 15.2   $ 18.0   (6% )
             

Mr. Iger's Total Compensation ($M)

  $ 46.5   $ 44.9   $ 43.9   $ 36.3   $ 39.3 ***   (4% )
*
Adjusted EPS is EPS as adjusted by the Compensation Committee for purposes of determining compensation. For fiscal 2018, the adjustments are those described above under "Financial Performance Measures." For fiscal 2014 through 2017, the adjustments are those described in the proxy statements for the 2015 through 2018 annual meetings.
**
Adjusted Segment Operating Income is Segment Operating Income as adjusted by the Compensation Committee for purposes of determining compensation. For fiscal 2018, the adjustments are those described above under "Financial Performance Measures." For fiscal 2014 through 2017, the adjustments are those described in the proxy statements for the 2015 through 2018 annual meetings.
***
Stock awards made in connection with Mr. Iger's contract extension, but not part of Mr. Iger's annual compensation are not included here. Those awards are discussed under "Changes to Mr. Iger's Performance-Based Stock Unit Awards" immediately below and the "Compensation Discussion and Analysis" in the proxy statement.

Additional details on our compensation program and fiscal 2018 compensation can be found in the Executive Compensation section of this proxy statement beginning on page 21.

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                                                                          Changes to Mr. Iger's Performance-Based Stock Unit Awards

GRAPHIC

Taking into account the investor feedback received in connection with the vote on the advisory resolution on executive compensation at the 2018 annual shareholder meeting, the Board acting on the recommendation of the Compensation Committee approved, and Mr. Iger agreed to, several changes to the performance-based units awarded to Mr. Iger in December 2017. The changes to the award are as follows:

Reduced threshold pay at the 25th percentile to zero — Previously, 50% of the target number of units subject to the award would have vested if the Company's TSR through the end of the performance period was at the 25th percentile of TSRs for the companies in the S&P 500. As revised, none of the shares will vest if the Company's relative TSR is at the 25th percentile.
Increased target performance from the 50th to the 65th percentile of peers — Previously, the target number of units subject to the award would have vested if the Company's TSR was at the 50th percentile relative to the TSR of other companies in the S&P 500; as revised, the Company's TSR must be at the 65th percentile of the S&P 500 for the target number of units to vest.
Reduced the cap at the 75th percentile — Previously, Mr. Iger could earn 150% of the target number of units at the 75th percentile; as revised, the award is capped at a 125% payout at the 75th percentile.
Held target value constant — In light of the more challenging performance criteria, the value of the award would have decreased absent an increase in the target number of units. To maintain the value of the award as of the date it was granted, the target number of units subject to the award was increased to 937,599 units.
Limitation on award for negative TSR — If the Company's absolute TSR over the performance period is negative, no more than 100% of the target number of units would vest, even if relative TSR performance exceeded the 65th percentile.
Decreased earning opportunity below the 60th percentile — Despite the increase in the number of target units, at every point on the curve below the 60.5th percentile, fewer shares will vest than under the original agreement.

The following chart illustrates the shift in the number of units that would vest at every level of relative TSR performance (assuming that absolute TSR performance is positive).

         GRAPHIC

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In addition to these changes to the performance-based units awarded in December 2017, the Board approved, and Mr. Iger agreed to, cap the future performance-based award payouts to 100% of target if the Company's absolute TSR is negative.

                                                                          Shareholder Proposals

   
    

In this year's proxy statement, you will find two shareholder proposals, one seeking additional disclosure regarding lobbying expenses and one seeking a report on cyber security and data privacy.

Lobbying Disclosure:  The proposal requests the Company to provide additional disclosure regarding its political activities, including information regarding its lobbying activities. The Company already provides substantial disclosure regarding our political activities, and the additional requested disclosure would exceed that provided by many other companies, putting the Company at a disadvantage without providing meaningful new information to shareholders. The Board therefore recommends that you vote against this proposal.

Report on Cyber Security and Data Privacy Compensation Metrics:  The proposal requests the Company to publish a report assessing the feasibility of integrating additional cyber security and data privacy metrics into the performance measures of senior executives under the Company's compensation incentive plans. Our compensation program for senior executives already considers cyber security and data privacy for executives with responsibility in this area in evaluating non-financial performance factors in setting individual incentive bonus awards. Accordingly, the Board recommends that you vote against this proposal because it is unnecessary and would not promote enhanced protection of data security and data privacy.

You can read our detailed positions on these proposals on pages 66 to 69 of the proxy statement.

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GRAPHIC   Corporate Governance
  and Board Matters

Governing Documents

The Board of Directors has adopted Corporate Governance Guidelines, which set forth a flexible framework within which the Board, assisted by its committees, directs the affairs of the Company. The Guidelines address, among other things, the composition and functions of the Board of Directors, director independence, stock ownership by and compensation of Directors, management succession and review, Board leadership, Board committees and selection of new Directors.

The Company has Standards of Business Conduct, which are applicable to all employees of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer. The Board has a separate Code of Business Conduct and Ethics for Directors, which contains provisions specifically applicable to Directors.

Each Committee on the Board of Directors is governed by a charter adopted by the Board of Directors.

The Corporate Governance Guidelines, the Standards of Business Conduct, the Code of Business Conduct and Ethics for Directors and each of the Committee charters are available on the Company's Investor Relations website under the "Corporate Governance" heading at www.disney.com/investors and in print to any shareholder who requests them from the Company's Secretary. If the Company amends or waives the Code of Business Conduct and Ethics for Directors or the Standards of Business Conduct with respect to the principal executive officer, principal financial officer or principal accounting officer, it will post the amendment or waiver at the same location on its website.

The Board of Directors

The current members of the Board of Directors are:

    Susan E. Arnold   Robert A. Iger    
    Mary T. Barra   Maria Elena Lagomasino    
    Safra A. Catz   Fred H. Langhammer    
    John S. Chen   Aylwin B. Lewis    
    Francis A. deSouza   Mark G. Parker    
    Michael Froman        

The Board met nine times during fiscal 2018. Each current Director attended at least 75% of all of the meetings of the Board and committees on which he or

she served that occurred while he or she served on the Board or the committees. All continuing directors holding office at the time attended the Company's 2018 annual shareholders meeting. Under the Company's Corporate Governance Guidelines, each Director is expected to dedicate sufficient time, energy and attention to ensure the diligent performance of his or her duties, including by attending meetings of the shareholders of the Company, and meetings of the Board and committees of which he or she is a member.

Board Leadership

The Company's Corporate Governance Guidelines specify that the Chairman of the Board shall in the normal course be an independent Director, unless the Board determines that, in light of the circumstances then present when any such decision is made, a different structure would better serve the best interests of the shareholders. The Guidelines also provide that the Board will disclose in each proxy statement the reasons for a different arrangement and appoint an independent Director as Lead Director with duties and responsibilities detailed in the Corporate Governance Guidelines.

Mr. Iger has served as Chairman since March of 2012, when he assumed that position upon the retirement of John Pepper who had previously served as Chairman. In making Mr. Iger Chairman, the Board determined that doing so would promote a number of important objectives: it would add a substantial strategic perspective to the Chair position and put in place an effective plan for the future transition of leadership while at the same time providing important continuity to Board leadership. In making these judgments, the Board took

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into account its evaluation of Mr. Iger's performance as Chief Executive Officer and President, his very positive relationships with the other members of the Board of Directors and the strategic vision and perspective he would bring to the position of Chairman. The Board was uniformly of the view that Mr. Iger would provide excellent leadership of the Board in the performance of its duties and that naming him as Chairman would serve the best interests of shareholders.

Mr. Iger's employment agreement provides that he will serve as Chief Executive Officer and Chairman through the end of its term. Each year, the independent members of the Board determine whether to elect Mr. Iger Chairman in accordance with the employment agreement. In doing so, the Board considers whether Mr. Iger's continuing to serve as both Chairman and Chief Executive Officer would be in the best interests of shareholders. Based on the demonstrated success of this structure to date, both in terms of the functioning of the Board and the growth of the Company, and the continued benefits of retaining Mr. Iger's strategic perspective in the position of Chairman, the Board has concluded that Mr. Iger's continuing service as Chairman remains in the best interests of shareholders and that, absent an unexpected change in circumstances, he should continue to serve in the role through the term of his agreement.

At the time Mr. Iger became Chairman, the Board elected an independent Lead Director. The duties of the independent Lead Director were expanded in connection with the appointment of Mr. Iger as Chairman, and were further expanded in 2013 based on feedback from investors regarding Lead Director duties. Susan Arnold was elected independent Lead

Director in March 2018. The duties of the Lead Director are as follows:

Preside at all meetings of the Board of Directors at which the Chairman is not present, including executive sessions of non-management or independent Directors;
Call meetings of the independent or non-management Directors;
Serve as liaison between the Chairman and the independent and non-management Directors;
Advise as to the scope, quality, quantity and timeliness of information sent to the Board of Directors;
In collaboration with the Chief Executive Officer and Chairman, and with input from other members of the Board, develop and have final authority to approve meeting agendas for the Board of Directors, including assurance that there is sufficient time for discussion of all agenda items;
Organize and lead the Board's annual evaluation of the Chief Executive Officer;
Be responsible for leading the Board's annual self-assessment;
Be available for consultation and direct communication upon the reasonable request of major shareholders;
Advise Committee Chairs with respect to agendas and information needs relating to Committee meetings;
Provide advice with respect to the selection of Committee Chairs; and
Perform such other duties as the Board may from time to time delegate to assist the Board in the fulfillment of its responsibilities.

Committees

The Board of Directors has four standing committees: Audit, Governance and Nominating, Compensation and

Executive. Information regarding these committees is provided below.

Audit Committee  

Safra A. Catz
John S. Chen (Chair)
Francis A. deSouza
Michael Froman
Aylwin B. Lewis
  The functions of the Audit Committee are described below under the heading "Audit Committee Report." The Audit Committee met eight times during fiscal 2018. All of the members of the Audit Committee are independent within the meaning of SEC regulations, the listing standards of the New York Stock Exchange and the Company's Corporate Governance Guidelines. The Board has determined that each of Ms. Catz, Mr. Chen, Mr. deSouza and Mr. Lewis is qualified as an audit committee financial expert within the meaning of SEC regulations and that they have accounting and related financial management expertise within the meaning of the listing standards of the New York Stock Exchange, and that Mr. Froman is financially literate within the meaning of the listing standards of the New York Stock Exchange.
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Governance and Nominating Committee  

Susan E. Arnold (Chair)
Maria Elena Lagomasino
Fred H. Langhammer
Mark G. Parker
  The Governance and Nominating Committee is responsible for developing and implementing policies and practices relating to corporate governance, including reviewing and monitoring implementation of the Company's Corporate Governance Guidelines. In addition, the Committee assists the Board in developing criteria for open Board positions, reviews background information on potential candidates and makes recommendations to the Board regarding such candidates. The Committee also reviews and approves transactions between the Company and Directors, officers, 5% shareholders and their affiliates under the Company's Related Person Transaction Approval Policy, supervises the Board's annual review of Director independence and the Board's annual self-evaluation, makes recommendations to the Board with respect to compensation of non-executive members of the Board of Directors, makes recommendations to the Board with respect to Committee assignments and oversees the Board's director education practices. The Committee met five times during fiscal 2018. All of the members of the Governance and Nominating Committee are independent within the meaning of the listing standards of the New York Stock Exchange and the Company's Corporate Governance Guidelines.

 

Compensation Committee  

Mary T. Barra
Maria Elena Lagomasino
Aylwin B. Lewis (Chair)
  The Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to the compensation of the Company's Chief Executive Officer, evaluating the performance of the Chief Executive Officer and, either as a committee or together with the other independent members of the Board, determining and approving the compensation level for the Chief Executive Officer. The Committee is also responsible for making recommendations to the Board regarding the compensation of other executive officers and certain compensation plans, and the Board has also delegated to the Committee the responsibility for approving these arrangements. Additional information on the roles and responsibilities of the Compensation Committee is provided under the heading "Compensation Discussion and Analysis," below. In fiscal 2018, the Compensation Committee met ten times. All of the members of the Committee are independent within the meaning of SEC regulations, the listing standards of the New York Stock Exchange and the Company's Corporate Governance Guidelines.

 

Executive Committee  

Susan E. Arnold (Chair)
Robert A. Iger
  The Executive Committee serves primarily as a means for taking action requiring Board approval between regularly scheduled meetings of the Board. The Executive Committee is authorized to act for the full Board on matters other than those specifically reserved by Delaware law to the Board. In practice, the Committee rarely takes action and in fiscal 2018, the Executive Committee held no meetings.

 

The Board's Role in Risk Oversight

As noted in the Company's Corporate Governance Guidelines, the Board, acting directly or through committees, is responsible for "assessing major risk factors relating to the Company and its performance" and "reviewing measures to address and mitigate such risks." In discharging this responsibility, the Board, either directly or through committees, assesses both (a) risks that relate to the key economic and market assumptions that inform the Company's business plans (including significant transactions) and growth strategies and (b) significant operational risks related to the conduct of the Company's day-to-day operations.

Risks relating to the market and economic assumptions that inform the Company's business plans and growth strategies are specifically addressed with respect to each business unit in connection with the Board's review of the Company's five-year plan. The Board also has the opportunity to address such risks at each Board meeting in connection with its regular review of significant business and financial developments. The Board reviews risks arising out of specific significant transactions when these transactions are presented to the Board for review or approval.

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Significant operational risks that relate to on-going business operations are the subject of regularly scheduled reports to either the full Board or one of its committees. The Board acting through the Audit Committee reviews as appropriate whether these reports cover the significant risks that the Company may then be facing.

Each of the Board's committees addresses risks that fall within the committee's areas of responsibility. For example, the Audit Committee periodically reviews the audit plan of the internal audit department, the international labor standards compliance program, the tax function, treasury operations, insurance, and the Company's standards of business conduct compliance program. In addition, the Audit Committee receives regular reports from: corporate controllership and the outside auditor on financial reporting matters; the internal audit department about significant findings; and the general counsel regarding legal and regulatory risks. The Audit Committee reviews

information technology risks and mitigation strategies with the Company's chief information officer at least annually. The Audit Committee reserves time at each meeting for private sessions with the chief financial officer, general counsel, head of the internal audit department and outside auditors. The Compensation Committee addresses risks arising out of the Company's executive compensation programs as described at pages 26 to 27, below. The operational risks periodically reviewed by committees are also reviewed by the entire Board when a Committee or the Board determines this is appropriate.

The independent Lead Director promotes effective communication and consideration of matters presenting significant risks to the Company through her role in developing the Board's meeting agendas, advising committee chairs, chairing meetings of the independent Directors and facilitating communications between independent Directors and the Chief Executive Officer.

Management Succession Planning

The Board considers the selection, retention and succession planning for the chief executive officer of the Company to be its most important priority. The Board reserves time at every regularly scheduled Board meeting to meet in executive session without the chief executive officer present during which it discusses management succession as appropriate. The Board also discusses management succession with the chief executive officer present at least once each year, and more often as circumstances warrant. These discussions include evaluation of potential internal candidates for succession and focus on particular individuals as

appropriate. In the course of these discussions, the Board identifies potential candidates and advises the chief executive officer of the exposure these candidates should receive to maximize the ability of the Board to evaluate the candidates' qualifications. The Board also evaluates the experience the candidates should gain to develop their ability to succeed if they become chief executive officer. The Board is confident that effective leadership of the Company would be assured and a highly qualified successor to Mr. Iger can be selected whenever one would need to be named.

Director Selection Process

Working closely with the full Board, the Governance and Nominating Committee develops criteria for open Board positions. In developing these criteria, the Committee takes into account a variety of factors, which may include: the current composition of the Board and expected retirements from the Board; the range of talents, experiences and skills that would best complement those already represented on the Board; the balance of management and independent Directors; and the need for financial or other specialized expertise. Applying these criteria, the Committee considers candidates for Board membership suggested by Committee members, other Board members, management, and shareholders. The Committee retains a third-party executive search firm to identify and review candidates upon request of the Committee from time to time.

Once the Committee has identified a prospective nominee — including prospective nominees recommended by shareholders — it makes an initial determination as to whether to conduct a full evaluation. In making this determination, the Committee takes into account the information provided to the Committee with the recommendation of the candidate, as well as the Committee's own knowledge and information obtained through inquiries to third parties to the extent the Committee deems appropriate. The preliminary determination is based primarily on the need for additional Board members and the likelihood that the prospective nominee can satisfy the criteria that the Committee has established. If the Committee determines, in consultation with the Chairman of the Board and other Directors as appropriate, that additional consideration is warranted, it may request the third-party search firm to gather additional information about the

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prospective nominee's background and experience and to report its findings to the Committee. The Committee then evaluates the prospective nominee against the specific criteria that it has established for the position, as well as the standards and qualifications set out in the Company's Corporate Governance Guidelines, including:

the ability of the prospective nominee to represent the interests of the shareholders of the Company;
the prospective nominee's standards of integrity, commitment and independence of thought and judgment;
the prospective nominee's ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties, including the prospective nominee's service on other public company boards, as specifically set out in the Company's Corporate Governance Guidelines;
the extent to which the prospective nominee contributes to the range of talent, skill and expertise appropriate for the Board;
the extent to which the prospective nominee helps the Board reflect the diversity of the Company's shareholders, employees, customers and guests and the communities in which it operates; and
the willingness of the prospective nominee to meet the minimum equity interest holding guideline set out in the Company's Corporate Governance Guidelines.

If the Committee decides, on the basis of its preliminary review, to proceed with further consideration, members of the Committee, as well as other members of the Board as appropriate, interview the nominee. After completing this evaluation and interview, the Committee makes a recommendation to the full Board, which makes the final determination whether to nominate or appoint the new Director after considering the Committee's report.

In selecting nominees for Director, the Board seeks to achieve a mix of members who together bring experience and personal backgrounds relevant to the Company's strategic priorities and the scope and complexity of the Company's business. In light of the Company's current priorities, the Board seeks experience relevant to managing branded franchises, the creation of high-quality branded entertainment products and services, addressing the impact of rapidly changing technology and the management of a multi-national business. The Board also seeks experience in large, diversified enterprises and demonstrated ability to manage complex issues that involve a balance of risk and reward and seeks Directors who have expertise in specific areas such as consumer and cultural trends, business innovation, growth strategies, financial oversight and international business and governmental issues. The background information on current nominees beginning on page 60 sets out how each of the current nominees contributes to the mix of experience and qualifications the Board seeks.

In making its recommendations with respect to the nomination for re-election of existing Directors at the annual shareholders meeting, the Committee assesses the composition of the Board at the time and considers the extent to which the Board continues to reflect the criteria set forth above.

A shareholder who wishes to recommend a prospective nominee for the Board should notify the Company's Secretary or any member of the Governance and Nominating Committee in writing with whatever supporting material the shareholder considers appropriate. The Governance and Nominating Committee will also consider whether to nominate any person nominated by a shareholder pursuant to the provisions of the Company's Bylaws relating to shareholder nominations as described in "Shareholder Communications" below.

Director Independence

The provisions of the Company's Corporate Governance Guidelines regarding Director independence meet and in some respects exceed the listing standards of the New York Stock Exchange. These provisions are included in the Company's Corporate Governance Guidelines, which are available on the Company's Investor Relations website under the "Corporate Governance" heading at www.disney.com/investors.

Pursuant to the Guidelines, the Board undertook its annual review of Director independence in November 2018. During this review, the Board considered transactions and relationships between the Company and its subsidiaries and affiliates on the one hand and, on the other hand, Directors, immediate family members

of Directors, or entities of which a Director or an immediate family member is an executive officer, general partner or significant equity holder. The Board also considered whether there were any transactions or relationships between any of these persons or entities and any members of the Company's senior management or their affiliates. As provided in the Guidelines, the purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the Director is independent.

As a result of this review, the Board affirmatively determined that all of the Directors serving in fiscal

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2018 or nominated for election at the 2019 Annual Meeting are independent of the Company and its management under the standards set forth in the Corporate Governance Guidelines, with the exception of Mr. Iger. Mr. Iger is considered an inside Director because of his employment as a senior executive of the Company.

In determining the independence of each Director, the Board considered and deemed immaterial to the Directors' independence transactions involving the sale

of products and services in the ordinary course of business between the Company, on the one hand, and, on the other, companies or organizations at which some of our Directors or their immediate family members were officers or employees during fiscal 2018. In each case, the amount paid to or received from these companies or organizations in each of the last three years was below the 2% of total revenue threshold in the Guidelines. The Board determined that none of the relationships it considered impaired the independence of the Directors.

Certain Relationships and Related Person Transactions

The Board of Directors has adopted a written policy for review of transactions involving more than $120,000 in any fiscal year in which the Company is a participant and in which any Director, executive officer, holder of more than 5% of our outstanding shares or any immediate family member of any of these persons has a direct or indirect material interest. Directors, 5% shareholders and executive officers are required to inform the Company of any such transaction promptly after they become aware of it, and the Company collects information from Directors and executive officers about their affiliations and affiliations of their family members so the Company can search its records for any such transactions. Transactions are presented to the Governance and Nominating Committee of the Board (or to the Chairman of the Committee if the Committee delegates this responsibility) for approval before they are entered into or, if this is not possible, for ratification after the transaction has been entered into. The Committee approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company, including whether the transaction impairs independence of a Director. The policy does not require review of the following transactions:

Employment of executive officers approved by the Compensation Committee;
Compensation of Directors approved by the Board;
Transactions in which all shareholders receive benefits proportional to their shareholdings;
Ordinary banking transactions identified in the policy;
Any transaction specifically contemplated by the Company's Restated Certificate of Incorporation or Bylaws, or any action approved by the Board where the interest of the Director, executive officer, 5% shareholder or family member is disclosed to the Board prior to such action;
Commercial transactions in the ordinary course of business with entities affiliated with Directors, executive officers, 5% shareholders or their family members if the aggregate amount involved during a fiscal year is less than the greater of (a) $1,000,000 and (b) 2% of the Company's or other entity's gross revenues and the related person's interest in the transaction is based solely on his or her position with the entity;
Charitable contributions to entities where a Director is an executive officer of the entity if the amount is less than the lesser of $200,000 and 2% of the entity's annual contributions; and
Transactions with entities where the Director, executive officer, 5% shareholder or immediate family member's sole interest is as a non-executive officer employee of, volunteer with, or director or trustee of the entity.

Each of the investment management firms Vanguard Group, Inc. and Blackrock, Inc., through their affiliates, held more than 5% of the Company's shares during fiscal 2018. Funds managed by affiliates of Vanguard and Blackrock are included as investment options in defined contribution plans offered to Disney employees. In addition, Blackrock manages investment portfolios for the Company's pension funds and provides reporting services related to management of investments in the pension funds. Vanguard and Blackrock received fees of approximately $1 million and $10.9 million, respectively, in fiscal 2018 based on the amounts invested in funds managed by them, and Blackrock received fees of approximately $300,000 for the reporting services. These relationships were in place before Vanguard and Blackrock reported beneficial ownership of more than 5% of the Company's outstanding shares. The ongoing relationships were reviewed and approved by the Governance and Nominating Committee under the Related Person Transaction Approval Policy in November 2018.

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Shareholder Communications

Generally. Shareholders may communicate with the Company through its Transfer Agent, Broadridge Corporate Issuer Solutions, by writing to Disney Shareholder Services, c/o Broadridge Corporate Issuer Solutions, P.O. Box 1342, Brentwood, NY 11717, by calling Disney Shareholder Services care of Broadridge at 1-855-553-4763, or by sending an e-mail to disneyshareholder@broadridge.com. Additional information about contacting the Company is available on the Disney Shareholder Services website (www.disneyshareholder.com) under the "Contact Us" tab.

Shareholders and other persons interested in communicating directly with the independent Lead Director or with the non-management Directors as a group may do so by writing to the independent Lead Director, The Walt Disney Company, 500 South Buena Vista Street, Burbank, California 91521-1030. Under a process approved by the Governance and Nominating Committee of the Board for handling letters received by the Company and addressed to non-management members of the Board, the office of the Secretary of the Company reviews all such correspondence and forwards to Board members a summary and/or copies of any such correspondence that, in the opinion of the Secretary, deals with the functions of the Board or committees thereof or that he otherwise determines requires their attention. The Governance and Nominating Committee reviews summaries of all correspondence from identified shareholders at each regular meeting of the Committee. Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board and request copies of any such correspondence.

Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Company's internal audit department and handled in accordance with procedures established by the Audit Committee with respect to such matters.

Shareholder Proposals for Inclusion in 2020 Proxy Statement. To be eligible for inclusion in the proxy statement for our 2020 Annual Meeting, shareholder

proposals must be received by the Company's Secretary no later than the close of business on September 13, 2019. Proposals should be sent to the Secretary, The Walt Disney Company, 500 South Buena Vista Street, Burbank, California 91521-1030 and follow the procedures required by SEC Rule 14a-8.

Shareholder Director Nominations for Inclusion in 2020 Proxy Statement. Under our Bylaws, written notice of shareholder nominations to the Board of Directors that are to be included in the proxy statement pursuant to the proxy access provisions in Article II, Section 11 of our Bylaws must be delivered to the Company's Secretary not later than 120 nor earlier than 150 days prior to the first anniversary of the preceding year's annual meeting. Accordingly any eligible shareholder who wishes to have a nomination considered at the 2020 Annual Meeting and included in the Company's proxy statement must deliver a written notice (containing the information specified in our Bylaws regarding the shareholder and the proposed nominee) to the Company's Secretary between October 9, 2019 and November 8, 2019.

Shareholder Director Nomination and Other Shareholder Proposals for Presentation at the 2020 Annual Meeting Not Included in 2020 Proxy Statement. Under our Bylaws, written notice of shareholder nominations to the Board of Directors or any other business proposed by a shareholder that is not to be included in the proxy statement must be delivered to the Company's Secretary not later than 90 nor earlier than 120 days prior to the first anniversary of the preceding year's annual meeting. Accordingly, any shareholder who wishes to have a nomination or other business considered at the 2020 Annual Meeting but not included in the Company's proxy statement must deliver a written notice (containing the information specified in our Bylaws regarding the shareholder and the proposed action) to the Company's Secretary between November 8, 2019 and December 8, 2019. SEC rules permit management to vote proxies in its discretion with respect to such matters if we advise shareholders how management intends to vote.

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GRAPHIC   Director
  Compensation

The elements of annual Director compensation for fiscal 2018 were as follows.

Annual Board retainer   $110,000  
   
Annual committee retainer (except Executive Committee)1   $10,000  
Annual Governance and Nominating Committee chair retainer2   $15,000  
   
Annual Compensation Committee chair retainer2   $20,000  
Annual Audit Committee chair retainer2   $25,000  
   
Annual deferred stock unit grant   $185,000  
Annual retainer for independent Lead Director3   $50,000  
   
1
Per committee.
2
This is in addition to the annual committee retainer the Director receives for serving on the committee.
3
This is in addition to the annual Board retainer, committee fees and the annual deferred stock unit grant.

Effective October 1, 2018, the annual Board retainer increased to $115,000 and the annual deferred stock unit grant increased to $190,000.

To encourage Directors to experience the Company's products, services and entertainment offerings personally, each non-employee Director may receive Company products and services up to a maximum of $15,000 in fair market value per calendar year plus reimbursement of associated tax liabilities. Director's spouses, children and grandchildren may also participate in this benefit within each Director's $15,000 limit.

The Company reimburses Directors for the travel expenses of, or provides transportation on Company aircraft for, immediate family members of Directors if the family members are specifically invited to attend events for appropriate business purposes. Family members (including domestic partners) may accompany Directors traveling on Company aircraft for business purposes on a space-available basis.

Directors participate in the Company's employee gift matching program on the same terms as senior executives. Under this program, the Company matches contributions of up to $50,000 per calendar year per Director to charitable and educational institutions meeting the Company's criteria.

Directors who are also employees of the Company receive no additional compensation for service as a Director.

Under the Company's Corporate Governance Guidelines, non-employee Director compensation is determined annually by the Board of Directors acting on the recommendation of the Governance and Nominating Committee. In formulating its recommendation, the Governance and Nominating Committee receives input from the third-party compensation consultant retained by the Compensation Committee regarding market practices for Director compensation.

Director Compensation for Fiscal 2018

The following table sets forth compensation earned during fiscal 2018 by each person who served as a non-employee Director during the year.

  Fees
Earned
or Paid
in Cash




Stock
Awards


All Other
Compensation


Total

Susan E. Arnold

  $156,833   $185,341   $42,934   $385,108  
         

Mary T. Barra

  117,500   185,341   50,000   352,841  

Safra A. Catz

  78,694   124,014     202,708  
         

John S. Chen

  145,000   185,341   10,758   341,099  

Francis A. deSouza

  78,694   124,014     202,708  
         

Jack Dorsey

  52,333   79,672     132,005  

Michael Froman

  7,174   12,498     19,672  
         

Maria Elena Lagomasino

  125,667   185,341   11,502   322,510  

Fred H. Langhammer

  120,028   185,341   69,808   375,177  
         

Aylwin B. Lewis

  150,000   185,341     335,341  

Robert W. Matschullat

  56,694   79,672   131,082   267,448  
         

Mark G. Parker

  120,000   185,341   49,000   354,341  

Sheryl K. Sandberg

  52,333   79,672   68,843   200,848  
         

Orin C. Smith                      

  81,250   76,105   10,449   167,804  

Fees Earned or Paid in Cash.    "Fees Earned or Paid in Cash" includes the annual Board retainer and annual committee and committee-chair retainers, whether paid currently or deferred by the Director to be paid in cash or shares after service ends. Directors are permitted to elect each year to receive all or part of their retainers in Disney stock and, whether paid in cash or stock, to defer all or part of their retainers until after service as a Director ends. Directors who elect to receive deferred compensation in cash receive a credit each quarter, and the balance in their deferred cash account earns interest at an annual rate equal to the Moody's Average Corporate (Industrial) Bond Yield, adjusted quarterly, for amounts deferred prior to calendar 2018. For amounts deferred after calendar year 2017, the interest rate is equal to 120% of the Applicable Long-Term Federal Interest Rate as determined from time to time by the United States Internal Revenue Service. For fiscal 2018, the average interest rate was 4.08%.

The following table sets forth the form of fees received by each Director who elected to receive compensation in a form other than currently paid cash. The number of

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stock units awarded is equal to the dollar amount of fees accruing each quarter divided by the average over the last ten trading days of the quarter of the average of the high and low trading price for shares of Company common stock on each day in the ten-day period. Stock units distributed currently were accumulated throughout the year and distributed as shares following December 31, 2018.

      Cash

Stock Units

 

 

                                   

 

    Paid
Currently


Deferred
      Value
Distributed
Currently





Value
Deferred


Number
Of Units


 

 

Mary T. Barra

              $ 117,500   1,099  
                   

 

Safra A. Catz

                  $78,694       736    

 

Francis A. deSouza

    $39,347         39,347     368    
                   

 

Jack Dorsey

      26,167             26,167       247    

 

Maria Elena Lagomasino

              125,667   1,175    
                   

 

Aylwin B. Lewis

      103,125                 46,875   436    

 

Mark G. Parker

              120,000   1,122    
                   

 

Sheryl K. Sandberg

      26,167             26,167       247    

Stock Awards.    "Stock Awards" sets forth the market value of the deferred stock unit grants to Directors and the amount reported is equal to the market value of the Company's common stock on the date of the award times the number of shares underlying the units. Units are awarded at the end of each quarter and the number of units is determined by dividing the amount payable with respect to the quarter by the average over the last ten trading days of the quarter of the average of the high and low trading price for shares of the Company common stock on each day in the ten-day period. Each Director other than Ms. Catz, Mr. deSouza, Mr. Dorsey, Mr. Froman, Mr. Matschullat, Ms. Sandberg and Mr. Smith was awarded 1,730 units in fiscal 2018. Ms. Catz and Mr. deSouza were each awarded 1,150 units, Mr. Dorsey, Mr. Matschullat and Ms. Sandberg were each awarded 763 units, Mr. Smith was awarded 727 units, and Mr. Froman was awarded 107 units in fiscal 2018.

Unless a Director elects to defer receipt of shares until after his or her service as a Director ends, shares with respect to annual deferred stock unit grants are normally distributed to the Director on the second anniversary of the award date, whether or not the Director is still a Director on the date of distribution.

At the end of any quarter in which dividends are distributed to shareholders, Directors receive additional stock units with a value (based on the average of the high and low trading prices of the Company common stock averaged over the last ten trading days of the quarter) equal to the amount of dividends they would have received on all stock units held by them at the end of the prior quarter. Shares with respect to these additional units are distributed when the underlying units are distributed. Units awarded in respect of dividends are included in the fair value of the stock units when the units are initially awarded and therefore are not

included in the tables above, but they are included in the total units held at the end of the fiscal year in the table below.

Prior to fiscal 2011, each Director serving on March 1 of any year received an option on that date to acquire shares of Company stock. The exercise price of the options was equal to the average of the high and low prices reported on the New York Stock Exchange on the date of grant.

The following table sets forth all stock units and options held by each Director serving during fiscal 2018 as of the end of fiscal 2018. All stock units are fully vested when granted, but shares are distributed with respect to the units only later, as described above. Stock units in this table are included in the share ownership table on page 72 except to the extent they may have been distributed as shares and sold prior to January 7, 2019.

 

Stock
Units







Number of
Shares
Underlying
Options
Held





Susan E. Arnold

  18,372    
     

Safra A. Catz

    3,157      

Mary T. Barra

  1,895    
     

John S. Chen

    28,444     6,143  

Francis A. deSouza

  1,525    
     

Jack Dorsey

    2,685      

Michael Froman

  107    
     

Maria Elena Lagomasino

    8,521      

Fred H. Langhammer

  18,749    
     

Aylwin B. Lewis

    24,193     6,143  

Robert W. Matschullat

  32,555   6,143  
     

Mark G. Parker

    7,766      

Sheryl K. Sandberg

  2,685    
     

The Company's Corporate Governance Guidelines encourage Directors to own, or acquire within three years of first becoming a Director, shares of common stock of the Company (including stock units received as Director compensation) having a market value of at least five times the amount of the annual Board retainer for the Director. Unless the Board exempts a Director, each Director is also required to retain stock representing no less than 50% of the after-tax value of exercised options and shares received upon distribution of deferred stock units until he or she meets the stock holding guideline described above.

Based on the holdings of units and shares on January 7, 2019, each currently serving Director complied with the minimum holding requirement on that date except Ms. Barra, Ms. Catz, Mr. deSouza and Mr. Froman, who are each within the three-year period following the date on which she or he first became a Director.

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All Other Compensation.    "All Other Compensation" includes:

Reimbursement of tax liabilities associated with the product familiarization benefits. The value of the product familiarization benefits themselves and travel benefits are not included in the table as permitted by SEC rules because the aggregate incremental cost to the Company of providing these benefits did not exceed $10,000 for any Director. The reimbursement of associated tax liabilities was less than $10,000 for each Director other than Mr. Chen, Ms. Lagomasino, Mr. Langhammer, Mr. Matschullat, Ms. Sandberg and Mr. Smith for whom the reimbursement was $10,758, $11,502, $13,813, $18,860, $18,843 and $10,449, respectively.
Interest earned on deferred cash compensation, which was less than $10,000 for each Director.

The matching charitable contribution of the Company, which was $35,000 for Ms. Arnold, $50,000 for Ms. Barra and Ms. Sandberg, $49,915 for Mr. Langhammer, $112,222 for Mr. Matschullat, and $49,000 for Mr. Parker. Matched amounts exceed $50,000 in a fiscal year if contributions for separate calendar years are made in the same fiscal year or if there were delays in processing earlier year matches.
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GRAPHIC   Executive
  Compensation

Compensation Discussion and Analysis

Executive Compensation
Program Structure

Objectives and Methods

We design our executive compensation program to drive the creation of long-term shareholder value. We do this by tying compensation to the achievement of performance goals that promote the creation of shareholder value and by designing compensation to attract and retain high-caliber executives in a competitive market for talent.

We have adopted the following approach to achieve these objectives:

     Pay for Performance     Provide a strong relationship of pay to performance through:

A performance-based bonus tied to the achievement of financial performance factors and an assessment of each executive's individual performance against other performance factors

Equity awards that deliver value based on stock price performance and, in the case of performance-based stock units, whose vesting depends on meeting performance targets

 
    Competitive
Compensation Levels
      Provide compensation opportunities that take into account compensation levels and practices of our peers, but without targeting any specific percentile of relative compensation    
    Compensation Mix     Provide a mix of variable and fixed compensation that:

Is heavily weighted toward variable performance-based compensation for senior executives

Uses short-term (annual performance-based bonus) and longer-term performance measures (equity awards) to balance appropriately incentives for both short and long-term performance

 

 

Peer Groups

The Compensation Committee believes that the pool of talent with the set of creative and organizational skills needed to run a global creative organization like the Company is quite limited and that, accordingly, the market for executive talent to lead the Company is best reflected by the five other major media companies who have represented competition for this talent — CBS, Comcast, 21st Century Fox, Time Warner and Viacom (with Disney, the "Media Industry Peers"). Although Time Warner was acquired during the fiscal year, it was considered a peer because it remained independent for most of the fiscal year. Disney has more employees, a more extensive global footprint and a greater market capitalization than any of the Media Industry Peers as well as greater revenue, more diverse business segments and greater operating income than all but one of the Media Industry Peers.

The Committee believes that executives with the background needed to manage companies such as ours have career options with compensation opportunities that normally exceed those available in most other industries and that compensation levels within the peer

group are driven by the dynamics of compensation in the entertainment industry and not the ownership structure of a particular company.

The Committee believes that the features of the Company's overall compensation structure, policies and practices should normally be consistent for all executives. Because the four distinct segments of our operations span multiple industries, the Committee believes that a consistent approach across the breadth of the Company's operations with respect to such features is best achieved by reference to a general industry group that is broader than the Media Industry Peers.

The peer group used for establishing compensation structure, policies and practices consists of companies that have:

A consumer orientation and/or strong brand recognition;
A global presence and operations;
Annual revenue no less than 40% and no more than two and a half times our annual revenue; and
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A market capitalization no less than one-quarter and no more than four times our market capitalization;
Plus companies that do not meet the revenue test, but that are included in the peer groups used by one or more of the Media Industry Peers.
The companies that meet these criteria and were included in the peer group at the beginning of fiscal 2018 were:

Accenture

Alphabet

Amazon.com

AT&T

CBS

Charter Communications

Cisco Systems

Coca-Cola

Comcast

Facebook

IBM

 

Intel

Johnson & Johnson

Microsoft

Oracle

PepsiCo

Procter & Gamble

Time Warner

21st Century Fox

Verizon Communications

Viacom

Advised by its independent consultant, the Committee reviewed the criteria for selecting members of this peer group during fiscal 2018 and determined that the criteria remained appropriate.

The overall financial performance of the Company is driven by the sum of the individual performances of the Company's four segments — Media Networks, Parks and Resorts, Studio Entertainment and Consumer Products & Interactive Media. While the Company announced a strategic reorganization of its businesses into four operating segments in March 2018 (the newly-formed Direct-to-Consumer and International; the combined Parks, Experiences and Consumer Products; Media Networks; and Studio Entertainment) we continued to report financial results based on the old segments throughout the fiscal year while we updated reporting systems to accommodate the new structure. Accordingly, we evaluated compensation in fiscal 2018 based on the earlier segments.

Each of the Company's segments competes in different sectors of the overall market. The Committee believes that, given the span of the Company's businesses, the best measure of relative performance is how the Company's diverse businesses have fared in the face of the economic trends that impact companies in the overall market and that the best benchmark for measuring such success is the Company's relative performance compared to that of the companies comprising the S&P 500. Accordingly, the Committee — like the other media companies and many other businesses — has selected the S&P 500 to set the context for evaluating the Company's performance and to measure relative performance for performance-based restricted stock unit awards.

The following table summarizes the three distinct peer groups we use for the three distinct purposes described above:

    Peer Group
Purpose
Composition
 
  Media Industry Peers   Evaluating compensation levels for the named executive officers   Disney and the five other major media companies:

CBS

Comcast

21st Century Fox

Time Warner

Viacom

   
       
    General Industry Peers   Evaluating general compensation structure, policies and practices   21 similarly-sized global companies with a consumer orientation and/or strong brand recognition    
  Performance Peers   Evaluating relative economic performance of the Company   Standard & Poor's (S&P) 500    
       
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Executive Compensation
 
 

Compensation Program Elements

2018 Total Direct Compensation

The following table sets forth the elements of total direct compensation for our named executive officers (NEOs) in fiscal 2018 and the objectives and key features of each element:

Compensation
Type



 
Pay Element


 
Objectives and Key Features


FIXED     Salary  

Objectives

The Committee sets salaries to reflect job responsibilities and to provide competitive fixed pay to balance performance-based risks.

Key Features

Minimum salaries set in employment agreement

Compensation Committee discretion to adjust annually based on changes in experience, nature and responsibility of the position, competitive considerations, and CEO recommendation (except his own salary)

   
 
  CASH COMPENSATION   Performance-
based Bonus
 

Objectives

The Committee structures the bonus program to incentivize performance at the high end of ranges for financial performance measures that it establishes each year to drive meaningful growth over the prior year. The Committee believes that incentivizing performance in this fashion will lead to long-term, sustainable gains in shareholder value.

Key Features

Target bonus for each NEO normally set by Committee early in the fiscal year in light of employment agreement provisions, competitive considerations, CEO recommendation (except his own target), and other factors Committee deems appropriate; bonus opportunity normally limited to 200% of target bonus

Payout on 70% of target determined by performance against financial performance ranges established early in the fiscal year

Payout on 30% of target determined by Committee's assessment of individual performance based both on other performance objectives established early in the fiscal year and on CEO recommendation (except his own payout)

In addition, Mr. Iger had an opportunity to earn in fiscal 2018 a performance-based retention award (awarded in 2014) to the extent the Company's cumulative adjusted operating income for the five years ending September 29, 2018 exceeded $76.01 billion (as to which the condition was not met and no payment was made) and, has an opportunity to earn in fiscal 2019 a cash bonus of $5 million if he remains employed by the Company until July 2, 2019.

Annual payments to executive officers have been subject to a performance test under Section 162(m) of the Internal Revenue Code to the extent necessary and available to obtain deductibility of the payments

   
 
VARIABLE   EQUITY COMPENSATION   Equity
Awards
Generally
 

Objectives

The Committee structures equity awards to directly reward long-term gains in shareholder value. Equity awards carry vesting terms that extend up to four years and include performance units whose value depends on company performance relative to the S&P 500. These awards provide incentives to create and sustain long-term growth in shareholder value.

Key Features

Combined value of options, performance units and time-based units determined by the Committee in light of employment agreement provisions, competitive market conditions, evaluation of executive's performance and CEO recommendation (except for his own award)

Allocation of annual awards for CEO (based on award value):

50% performance-based restricted stock units

50% stock options

Allocation of annual awards for other NEOs (based on award value):

30% performance-based restricted stock units

30% time-vesting restricted stock units

40% stock options

Mr. Iger was also awarded time-vesting and performance-based restricted stock units to induce him to extend his employment agreement in connection with the 21CF Acquisition as described on pages 30 to 31.

   

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Compensation
Type



 
Pay Element


 
Objectives and Key Features


    Stock Option
Awards
 

Key Features

Exercise price equal to average of the high and low trading prices on day of award

Option re-pricing without shareholder approval is prohibited

10-year term

Vest 25% per year

   
 
VARIABLE   EQUITY COMPENSATION   Annual
Performance-
Based
Restricted
Stock Units
 

Key Features

Performance-based units reward executives only if specified financial performance measures are met

Subject to performance tests, units vest three years after grant date

Half of award vests based on Total Shareholder Return relative to S&P 500 and half of award vests based on EPS growth relative to S&P 500, each as described on pages 43 to 44

Annual units awarded to executive officers are subject to Section 162(m) test to the extent necessary and available to obtain deductibility of the payments

   
 
    Annual
Time-Based
Restricted
Stock Units
 

Key Features

25% vest each year following grant date

All annual units awarded to executive officers are subject to Section 162(m) test to the extent necessary and available to obtain deductibility of the payments

   

 

Compensation at Risk

The Committee believes that most of the compensation for named executive officers should be at risk and tied to a combination of long-term and short-term Company performance. 90% of the target compensation for the CEO, and approximately 80% of the target compensation for other named executive officers, varies with either short or long-term Company performance.

In establishing a mix of fixed to variable compensation, the mix of various equity awards, target bonus levels, grant date equity award values and performance ranges, the Committee seeks to maintain its goal of making compensation overwhelmingly tied to performance while

at the same time affording compensation opportunities that, in success, would be competitive with alternatives available to the executive. In particular, the Committee expects that performance at the high end of ranges will result in overall compensation that is sufficiently attractive relative to compensation available at successful competitors and that performance at the low end of ranges will result in overall compensation that is less than that available from competitors who are more successful.

In determining the mix between options and restricted stock units, the Committee also considers the number of shares required for each of these types of award to deliver the appropriate value to executives.

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Executive Compensation
 
 

The following chart shows the percentage of the target total direct annual compensation (constituting base salary and performance-based bonus plus the grant-date fair value of regular annual equity awards) for Mr. Iger that was variable with performance (performance-based bonus and equity awards) versus fixed (salary) in fiscal 2018. The chart does not reflect the impact of the equity awards made in connection with the extension of his employment agreement in December 2017 (whose value is variable with performance) or the impact of the fixed bonus Mr. Iger will receive if he remains employed through July 2, 2019.

2018 Target Total Direct Annual Compensation Mix for CEO

90% of CEO annual target compensation is considered performance-based

CHART

For the other NEOs, 81% of average target annual compensation is considered performance-based.

Employment Agreements

We enter into employment agreements with our senior executives when the Compensation Committee determines that it is appropriate to attract or retain an executive or where an employment agreement is consistent with our practices with respect to other similarly situated executives.

We have employment agreements with each of the named executive officers that extend to the dates shown below:

  Term Ends

Robert A. Iger

  December 31, 2021*

Alan N. Braverman

  December 31, 2020

Christine M. McCarthy

  June 30, 2021

Zenia B. Mucha

  December 31, 2021

M. Jayne Parker

  June 30, 2021

Kevin A. Mayer

  December 31, 2022
*
Pursuant to an amendment dated December 13, 2017 and assuming completion of the 21CF Acquisition. Otherwise, termination is July 2, 2019 or, if later, 90 days after termination of the merger agreement without closing the transaction.

Material terms of the employment agreements with the named executive officers are reflected under "Total Direct Compensation," above, and "Benefits and Perquisites," "2018 Compensation Decisions" and "Compensation Tables — Potential Payments and Rights on Termination or Change in Control," below.

Benefits and Perquisites

The Company provides employees with benefits and perquisites based on competitive market conditions. All salaried employees, including the named executive officers, receive the following benefits:

health care coverage;
life and disability insurance protection;
reimbursement of certain educational expenses;
access to favorably priced group insurance coverage; and
Company matching of gifts of up to $25,000 per employee each calendar year to qualified charitable organizations.

Officers at the vice president level and above, including named executive officers, receive the following benefits:

complimentary access to the Company's theme parks and some resort facilities;
discounts on Company merchandise and resort facilities;
for officers at the vice president level and higher before October 1, 2012, a fixed monthly payment to offset the costs of owning and maintaining an automobile;
relocation assistance;
eligibility for annual reimbursement of up to $1,000 for wellness-related purposes such as fitness, nutrition and physical exams; and
personal use of tickets acquired by the Company for business entertainment when they become available because no business use has been arranged.

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Named executive officers (and some other senior executives) are also entitled to the following additional benefits and perquisites: basic financial planning services, enhanced excess liability coverage, increased relocation assistance, an increased automobile benefit, and an increased Company matching gift amount of $50,000.

The Company pays the cost of security services and equipment for the Chief Executive Officer in an amount that the Board of Directors believes is reasonable in light of his security needs and, in the interest of security, requires the Chief Executive Officer to use corporate aircraft for all personal travel. Other senior executive officers may also have security expenses reimbursed and are permitted at times to use corporate aircraft for personal travel, in each case at the discretion of the Chief Executive Officer.

Retirement Plans

Named executive officers participate in defined benefit programs available to all of our salaried employees hired prior to January 1, 2012 and defined contribution retirement programs available to all of our salaried employees.

Tax-qualified defined benefit and defined contribution plans limit the benefit to participants whose compensation or benefits would exceed maximums imposed by applicable tax laws. To provide retirement benefits commensurate with compensation levels, the Company offers non-qualified plans to key salaried employees, including the named executive officers, using substantially the same formula for calculating benefits as is used under the tax-qualified defined benefit plans on compensation in excess of the compensation limitations and maximum benefit accruals. The Company also offers deferral of income in addition to that permitted under tax qualified defined contribution plans.

Additional information regarding the terms of retirement and deferred compensation programs for the named executive officers is included in "Compensation Tables — Pension Benefits" beginning on page 49 and "Compensation Tables — Fiscal 2018 Nonqualified Deferred Compensation Table" beginning on page 50.

Risk Management Considerations

The Compensation Committee believes that the following features of our annual performance-based bonus and equity programs appropriately incentivize the creation of long-term shareholder value while discouraging behavior that could lead to excessive risk:

Financial Performance Metrics.  The financial metrics used to determine the amount of an executive's bonus are measures the Committee believes drive long-term shareholder value. The ranges set for these measures are intended to reward success without encouraging excessive risk taking.
Limit on Bonus.  The overall bonus opportunity is not expected to exceed two times the target amount, no matter how much financial performance exceeds the ranges established at the beginning of the fiscal year.
Equity Vesting Periods.  Performance-based stock units generally vest in three years. Time-based stock units and options vest annually over four years and options remain exercisable for 10 years. These periods are designed to reward sustained performance over several periods, rather than performance in a single period.
Equity Retention Guidelines.  Named executive officers are required to acquire within five years of becoming an executive officer, and hold as long as they are executive officers of the Company, shares (including restricted stock units) having a value of at least three times their base salary amounts, or five times in the case of the Chief Executive Officer. If these levels have not been reached, these officers are required to retain ownership of shares representing at least 75% of the net after-tax gain (100% in the case of the Chief Executive Officer) realized on exercise of options for a minimum of 12 months. Based on holdings of units and shares on January 7, 2019, each named executive officer exceeded the minimum holding requirement on that date.
No Hedging or Pledging.  The Company's insider trading compliance program prohibits members of the Board of Directors, named executive officers and all other employees subject to the Company's insider trading compliance program from entering into any transaction designed to hedge, or having the effect of hedging, the economic risk of owning the Company's securities and prohibits these persons from pledging Company securities.
Clawback Policy.  If the Company is required to restate its financial results due to material noncompliance with financial reporting requirements under the securities laws as a result of misconduct by an executive officer, applicable law permits the Company to recover incentive compensation from that executive officer (including profits realized from the sale of Company securities). In such a situation, the Board of Directors would exercise its business judgment to determine what action it believes is appropriate. Action may include recovery or cancellation of any bonus or incentive payments made to an executive on the basis of having met or exceeded performance targets during a period of fraudulent activity or a material misstatement of financial results if the Board determines that such recovery or cancellation is appropriate due to intentional misconduct by the executive officer that resulted in performance targets being achieved that would not have been achieved absent such misconduct.
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At the Compensation Committee's request, management conducted its annual assessment of the risk profile of our compensation programs in November 2018. The assessment included an inventory of the compensation programs at each of the Company's segments and an evaluation of whether any program contained elements that created risks that could have a material adverse impact on the Company. Management provided the results of this assessment to Frederic W. Cook & Co., Inc., which evaluated the findings and reviewed them with the Committee. As a result of this review, the Committee determined that the risks arising from the Company's policies and practices are not reasonably likely to have a material adverse effect on the Company.

Other Considerations

Timing of Equity Awards

Equity awards are made by the Compensation Committee on dates the Committee meets. Committee meetings are normally scheduled well in advance and are not scheduled with an eye to announcements of material information regarding the Company. The Committee may make an award with an effective date in the future contingent on commencement of employment, execution of a new employment agreement or some other subsequent event, or may act by unanimous written consent on the date of such an event when the proposed issuances have been reviewed by the Committee prior to the date of the event.

Extended Vesting of Equity Awards

Options and restricted stock units continue to vest beyond retirement (and options remain exercisable) if (1) they were awarded at least one year prior to the date of an employee's retirement and (2) the employee was age 60 or older and had at least ten years of service on the date he or she retired. In these circumstances:

Options continue to vest following retirement according to the original vesting schedule. They remain exercisable for up to five years following retirement. Options do not, however, remain exercisable beyond the original expiration date of the option.
Restricted stock units continue to vest following retirement according to the original vesting schedule, but vesting remains subject to any applicable performance conditions (except, in some cases, the test to ensure that the compensation is deductible pursuant to Section 162(m)).

The extended vesting and exercisability is not available to certain employees outside the United States.

Options and restricted stock units awarded to executive officers with employment agreements also continue to vest (and options remain exercisable) beyond termination of employment if the executive's employment is terminated by the Company without cause or by the executive with good reason. In this case, options and restricted stock units continue to vest (and options remain exercisable) as though the executive remained employed through the end of the stated term of the employment agreement. If the executive would be age 60 or older and have at least ten years of service as of the end of the stated term of the employment agreement, the options and restricted stock units awarded at least one year prior to the end of the stated term of the agreement would continue to vest (and options remain exercisable) beyond the stated term of the employment agreement as described above.

Deductibility of Compensation

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1 million paid for any fiscal year to the corporation's chief executive officer and up to three other executive officers (other than the chief financial officer) whose compensation must be included in this proxy statement because they are our most highly compensated executive officers. Section 162(m) exempts qualifying performance-based compensation with respect to taxable years beginning on or before December 31, 2017 and payable pursuant to a binding written agreement in effect on November 2, 2017. Thus, performance-based awards that are deductible in the Company's current fiscal year and performance-based awards outstanding on that date or awarded thereafter pursuant to a binding written agreement can be exempt from the deduction limit if applicable requirements are met.

The Compensation Committee has historically structured awards to executive officers under the Company's annual performance-based bonus program so that a bonus equal to the maximum amount that can be awarded the officer under the Amended and Restated 2002 Executive Performance Plan (or a lesser award pursuant to the Committee's right to exercise negative discretion) and annual equity awards issued pursuant to the Company's equity awards programs qualified for this exemption. The Committee believes that shareholder interests are best served if its discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expenses. Therefore, the Committee has approved salaries and other awards for executive officers that were not fully deductible because of Section 162(m) and, in light of the repeal of the

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performance-based compensation exception to Section 162(m), expects in the future to approve additional compensation that is not deductible for income tax purposes.

To qualify for the exemption from Section 162(m) to the extent available, awards to executive officers under the annual performance-based bonus program and the long-term incentive program that are available for the exemption are made payable or vest at maximum levels subject to achievement of a performance test based on adjusted net income. If this test is satisfied, the additional performance tests described in this Compensation Discussion and Analysis are applied to determine the actual payout of such bonuses and awards, which in order to remain deductible may not be more than the maximum level funded based on achievement of the

Section 162(m) test. Adjusted net income means net income adjusted, as appropriate, to exclude the following items or variances: change in accounting principles; acquisitions; dispositions of a business; asset impairments; restructuring charges; extraordinary, unusual or infrequent items; and extraordinary litigation costs and insurance recoveries. For fiscal 2018, the adjusted net income target was $5.9 billion, and the Company achieved adjusted net income of $10.7 billion. Net income was adjusted by gains due to non-recurring tax reform benefits, gains on the sale of real estate and property rights, and restructuring and impairment charges.

Therefore, the Section 162(m) test was satisfied with respect to bonuses earned in fiscal 2018 and restricted stock units vesting based on fiscal 2018 results.

Compensation Process

The following table outlines the process for determining annual compensation awards for named executive officers:

    Salaries
  Performance-Based Bonus
 
   

Annually, normally at the end of the calendar year, the CEO recommends salaries for executives other than himself for the following calendar year

Committee reviews proposed salary changes with input from consultant

Committee determines annual salaries for all NEOs

Committee reviews determinations with the other non-management directors

     

Committee participates in regular Board review of operating plans and results and review of annual operating plan at the beginning of the fiscal year

Management recommends financial and other performance measures, weightings and ranges

Early in the fiscal year, the Committee reviews proposed performance measures and ranges with input from consultant and determines performance measures and ranges that it believes establish appropriate stretch goals

   
    Equity Awards
 

CEO recommends bonus targets for executives other

   
   

In first fiscal quarter, CEO recommends grant date fair value of awards for executives other than himself

Committee reviews proposed awards with input from consultant and reviews with other non-management directors

Committee determines the dollar values of awards

Exercise price and number of options and restricted stock units are determined by formula based on market price of common shares on the date of award

          than himself

Early in the fiscal year, the Committee reviews bonus targets with input from its consultant and in light of the targets established by employment agreements and competitive conditions and determines bonus targets as a percentage of fiscal year-end salary for each executive

After the end of the fiscal year, management presents financial results to the Committee

CEO recommends other performance factor multipliers for executives other than himself

Committee reviews the results and determines whether to make any adjustments to financial results and determines other performance factor multipliers and establishes bonus

Committee reviews determinations with the other non-management directors and, in the case of the CEO, seeks their concurrence in the Committee's determination

   
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The following table outlines the process for determining terms of employment agreements and compensation plans in which the named executive officers participate:

    Employment Agreements
  Compensation Plans
 
    CEO

Committee arrives at proposed terms of agreement with input from consultant

Committee recommends terms of agreement to other non-management directors following negotiation with CEO

Committee participates with other non-management directors in determining terms of agreement for CEO

Other NEOs

CEO recommends terms of agreements

Committee reviews proposed terms of agreements with input from consultant

Committee determines material terms of agreements, subject to consultation with Board where the Committee deems appropriate

     

Committee requests management and its consultant to review compensation plans

Management and its consultant recommend changes to compensation plans in response to requests or on their own initiative

Committee reviews proposed changes to compensation plans with input from its consultant

Committee determines changes to compensation plans or recommends to Board if Board action is required

Committee participates with Board in determining changes when Board action is required

   

 

Management Input

In addition to the CEO recommendations described above, management regularly:

provides data, analysis and recommendations to the Compensation Committee regarding the Company's executive compensation programs and policies;
administers those programs and policies as directed by the Committee;
provides an ongoing review of the effectiveness of the compensation programs, including competitiveness and alignment with the Company's objectives; and
recommends changes to compensation programs if needed to help achieve program objectives.

The Committee meets regularly in executive session without management present to discuss compensation decisions and matters relating to the design and operation of the executive compensation program.

Compensation Consultant

The Compensation Committee has retained the firm of Frederic W. Cook & Co., Inc. as its compensation consultant. The consultant assists the Committee's development and evaluation of compensation policies and practices and the Committee's determinations of compensation awards by:

attending Committee meetings;
meeting with the Committee without management present;
providing third-party data, advice and expertise on proposed executive compensation awards and plan designs;
reviewing briefing materials prepared by management and outside advisers and advising the Committee on the matters included in these materials, including the consistency of proposals with the Committee's compensation philosophy and comparisons to programs at other companies; and
preparing its own analysis of compensation matters, including positioning of programs in the competitive market and the design of plans consistent with the Committee's compensation philosophy.

The Committee considers input from the consultant as one factor in making decisions on compensation matters, along with information and analyses it receives from management and its own judgment and experience.

The Compensation Committee has adopted a policy requiring its consultant to be independent of Company management. The Committee performs an annual assessment of the consultant's independence to determine whether the consultant is independent. The Committee assessed Frederic W. Cook & Co. Inc.'s independence in November 2018 and confirmed that the firm's work has not raised any conflict of interest and the firm is independent under the policy.

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2018 Compensation Decisions

This section discusses the specific decisions made by the Compensation Committee in fiscal 2018 or with respect to fiscal 2018 compensation.

Investor Engagement

At our 2018 Annual Meeting, 52% of shares cast voted against the advisory vote on executive compensation. In light of the level of support reflected by this vote, the Board and the Compensation Committee intensified its normal level of engagement with shareholders. Throughout the year, members of the Committee discussed with certain investors the reasons for their votes on the advisory vote. Investor feeback in these discussions coalesced around the terms of the performance-based equity award made in connection with the extension of Mr. Iger's tenure, and concerns that performance requirements should be more rigorous given the magnitude of the award. In light of this feedback, the Committee determined that it was appropriate to seek adjustments to the performance goals. Accordingly, the Committee recommended, and the Board and Mr. Iger agreed to, adjustments increasing the rigor of the performance goals required for Mr. Iger to vest in the performance-based units and also agreed to a limitation on annual performance-based equity awards, each as described in detail below.

The engagement relating to the results of the advisory vote on executive compensation was in addition to our regular engagement program, which focuses on conversations with shareholders prior to the annual meeting. In the outreach focused on the annual meeting, we spoke with most of our twenty largest investors and contacted about 80% of our largest 50 investors, seeking input on compensation and governance matters. To enable the Board and the Compensation Committee to consider direct shareholder feedback, the Compensation Committee is updated on these conversations with investors and Committee and other Board members participate directly in a number of them.

Employment Agreements

Extension of Mr. Iger's Employment Agreement

As discussed in the proxy statement for the 2018 Annual Shareholder meeting, in December 2017, in connection with the Company's signing a merger agreement relating to the 21CF Acquisition, the Board concluded that Mr. Iger was the best person to lead Disney through the acquisition and the integration of 21st Century Fox. The Board and Mr. Iger therefore agreed to extend to

December 31, 2021 the period during which Mr. Iger would remain employed with the Company and serve as Chairman and Chief Executive Officer if the 21CF Acquisition is completed. In connection with this extension, Mr. Iger's base salary increased to $3.0 million effective January 1, 2018 and his salary will increase to $3.5 million, his target annual incentive will increase to $20 million and his annual target long-term incentive award will increase to $25 million (and the potential payout on performance units may increase to 200% of target) when the 21CF Acquisition is completed. Mr. Iger also received an award of 245,098 restricted stock units that will vest over four years regardless of whether the transaction is completed.

Mr. Iger also received an award of 687,898 performance-based units that would vest on December 31, 2021 if (1) the 21CF Acquisition is completed and (2) subject to satisfaction of a performance-vesting requirement based on total shareholder return of the Company's common stock relative to the total shareholder returns of the S&P 500. On November 30, 2018, following extensive engagement with investors regarding the terms of the compensation received by Mr. Iger in connection with the December 2017 extension of his employment agreement, the Board and Mr. Iger agreed to increase the rigor of the performance test relating to this award.

As originally awarded, 50% of the target number of units would have been earned if the Company's total shareholder return ("TSR") over the applicable performance period equaled the 25th percentile of the total shareholder return of the companies in the S&P 500 Index ("Relative TSR"), with the target number of units being earned at the 50th percentile, and a maximum of 150% of the target number of units being earned at the 75th percentile. As revised:

No units will be earned if the Company's Relative TSR is less than or equal to the 25th percentile, the level at which the target number of units is earned has increased from the 50th percentile to the 65th percentile, and the maximum number of units that can be earned (at the 75th percentile) has decreased from 150% to 125%.
The percentage of the target number of units earned is determined by mathematical linear interpolation at performance levels between the 25th and the 65th percentile (from 0% at the 25th to 100% at the 65th percentile), and between the 65th and the 75th percentile (from 100% at the 65th to 125% at the 75th percentile).
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In addition, if the Company's TSR over the performance period is negative, Mr. Iger may not earn more than 100% of the target number of units.

To maintain the initial negotiated value of the award as of the time it was granted in light of more challenging performance criteria that reduce the likelihood of earning the units, the target number of units subject to the award has been increased to 937,599 units, as determined by applying a Monte Carlo simulation and the price of the Company's common stock established for purposes of applying the exchange ratio under the merger agreement for the 21CF Acquisition.

As a result of this Amendment and the more rigorous performance goals, Mr. Iger will receive fewer shares than under the original award if the Company's Relative TSR does not exceed the 60.5th percentile over the performance period. For example:

At the 25th percentile, Mr. Iger will receive no shares versus 343,949 shares under the original award, a reduction of 100%.
At the 35th percentile, Mr. Iger will receive 234,400 shares versus 481,529 shares under the original award, a reduction of 51%.
At the 50th percentile, Mr. Iger will receive 585,999 shares versus 687,898 shares under the original award, a reduction of 15%.
At the 60.5th percentile, Mr. Iger will receive shares equivalent to the number he would have received under the original award at the 60.5th percentile, and at the 75th percentile and above will receive no more than a 14% increase in achievable units compared to the original award.

The Board and Mr. Iger also agreed that annual performance share unit awards granted to Mr. Iger following the closing of the 21CF Acquisition will include the limitation to 100% of the target number of units if the Company's TSR over the relevant performance period is negative.

New Employment Agreement for Mr. Mayer

In May 2018, the Company and Mr. Mayer entered into a new employment agreement effective as of March 14, 2018 in connection with Mr. Mayer becoming Chairman, Direct-to-Consumer and International, replacing his employment agreement under his prior position. Mr. Mayer's new employment agreement made the following changes to his prior agreement:

changed the employer and counterparty to Walt Disney International ("WDI");
extended the term of the agreement to December 31, 2022;
increased Mr. Mayer's minimum annual salary from $1,500,000 to $1,800,000; and
eliminated a provision for Mr. Mayer to enter into a new one-year employment agreement at the stated termination of his agreement.

The remaining material terms of Mr. Mayer's employment agreement are substantially the same as under his prior agreement.

Amendment to Mr. Braverman's Employment Agreement

In December 2018, the Company and Mr. Braverman entered into an amendment to Mr. Braverman's employment agreement extending the term of Mr. Braverman's employment from July 2, 2019 to December 31, 2020. Additionally, the amendment increased the target annual long-term equity incentive award value from 225% to 300% of his annual base salary as expected to be in effect at the end of the fiscal year.

Employment Agreement for Ms. Mucha

The Compensation Committee approved a new employment agreement for Ms. Mucha in connection with the extension of the term of Ms. Mucha's employment. The agreement provides that Ms. Mucha's term as Senior Executive Vice President and Chief Communications Officer will run through December 31, 2021. The agreement provides for a minimum annual base salary of $1,161,840 and provides that the target for calculating Ms. Mucha's annual performance-based bonus opportunity will be 125% of her annual base salary as expected to be in effect at the end of the applicable fiscal year. The agreement also provides that the target accounting value of Ms. Mucha's annual long-term incentive compensation award will be 225% of her annual base salary as expected to be in effect at the end of the fiscal year, with the Compensation Committee retaining discretion to adjust the target value of the award in any fiscal year based on its evaluation of performance and/or any economic, financial or market conditions affecting the Company. The awards will be subject to substantially the same terms and conditions (including vesting and performance conditions) as will be established for other executive officers of the Company in accordance with the Board's policies for the grant of equity-based awards, as in effect at the time of the award.

Other material terms of the employment agreement with Ms. Mucha are described under "Compensation Program Elements," above, and "Compensation Tables — Potential Payments and Rights on Termination or Change in Control," below.

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Performance Goals

The Compensation Committee sets performance goals for each fiscal year early in that year, and evaluates performance against those goals after the fiscal year has ended to arrive at its compensation decisions.

Setting Goals

In November 2017, the Compensation Committee reviewed the functioning of the annual performance-based bonus program and retained the following financial measures and relative weights for calculating the portion of the named executive officers' bonuses that is based on financial performance:

adjusted segment operating income (25.0%)
adjusted EPS (28.6%)
adjusted after-tax free cash flow (21.4%)
adjusted return on invested capital (25.0%)

The Committee retained these measures and weightings because it believes successful performance against these measures promotes the creation of long-term shareholder value. The Committee places slightly more weight on adjusted EPS and slightly less weight on after-tax free cash flow because, between the two, it believes adjusted EPS is somewhat more closely related to shareholder value.

The Committee also established performance ranges for each of the measures in November 2017. These ranges are used to determine the multiplier that is applied to 70% of each named executive officer's target bonus. The overall financial performance multiple is equal to the weighted average of the performance multiples for each of the four measures. The performance multiple for each measure is zero if performance is below the bottom of the range and varies from 35% at the low end of the range to a maximum of 200% at the top end of the range. The Committee believes the top of each range represents extraordinary performance and the bottom represents disappointing performance.

In establishing these ranges for fiscal 2018, the Committee increased the overall level of the ranges for adjusted EPS and adjusted after-tax free cash flow to provide incentives for overall growth. The Committee recognized the significant capital investments in BAMTech and Parks and Resorts, and therefore reduced the overall level of the ranges for adjusted segment operating income and adjusted return on invested capital. The following table shows actual performance in fiscal 2017 and the target

ranges chosen by the Committee for fiscal 2018 (dollars in millions except per share amounts):

  Fiscal 2017
Actual


Fiscal 2018
Target Range


Adjusted Segment Operating Income*

  $14,900   $12,650-$17,112  
     

Adjusted EPS*

  $5.67   $4.80-$6.96  

Adjusted After-tax free cash flow**

  $9,044   $4,366-$11,510  
     

Adjusted Return on Invested Capital***

  13.1%   10.6%-13.8%  
*
For purposes of the annual performance-based bonuses, "adjusted segment operating income" adjusted EPS reflect the adjustments described on page 33.
**
For purposes of the annual performance-based bonuses, "adjusted after-tax free cash flow" takes into account the adjustments described on page 33 and was defined as cash provided by operations plus cash paid for restructuring costs and less investments in parks, resorts and other properties, all on an equity basis (i.e., including Hong Kong Disneyland and Shanghai Disney Resort as if they were equity investments rather than on a consolidated basis).
***
For purposes of the annual performance-based bonuses, "adjusted return on invested capital" takes into account the adjustments described on page 33 and was defined as the aggregate adjusted segment operating income less corporate and unallocated shared expenses (both on an after-tax basis), divided by average net assets (including net goodwill) invested in operations, all on an equity basis (i.e., including Hong Kong Disneyland and Shanghai Disney Resort as if they were equity investments rather than on a consolidated basis).

The Committee also established other performance factors for the fiscal 2018 annual bonus in November 2017. The Committee established the following factors based on the recommendation of Mr. Iger and the strategic objectives of the Company:

Foster quality, creativity and innovation in how we create, market and distribute all of our products
Drive long-term growth internationally
Manage efficiency across all areas of spending, supporting cross-segment or enterprise centers of excellence where appropriate
Support the hiring, development and talent planning of diverse executives, and put into development content, products, and guest experiences that appeal to diverse audiences
Fully support and progress the expansion of product and content distribution directly to customers

Evaluating Performance

After the fiscal year ended, the Compensation Committee reviewed the overall performance of the Company, which reflected financial growth in a number of areas. These included higher guest volume and spending at domestic parks, Disneyland Paris and Hong Kong Disneyland, and continued strength in our studio, which had seven major theatrical releases that grossed over $500 million in worldwide box office. This performance led to increases in segment operating income of 7%,

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adjusted EPS of 14% and after-tax free cash flow of 3%, in each case adjusted for compensation purposes as described below. The adjusted return on invested capital declined 10 basis points, reflecting the significant capital investments designed to promote future growth.

Additional detail regarding fiscal 2018 performance is set forth in the proxy statement summary beginning on page 1. Based on these results, the weighted financial performance factor was 139% in fiscal 2018 compared to a factor of 100% in fiscal 2017.

The following chart shows actual performance in fiscal 2018 with respect to each of these measures relative to prior year performance and the ranges established at the beginning of the fiscal year and the resulting performance factor used in calculating the aggregate financial performance goal multiple. (Dollars in millions except per share amounts)

CHART

In comparing actual performance for fiscal 2018 to the performance ranges, the Compensation Committee adjusted for the impacts of: recurring and non-recurring tax-reform benefits recorded in fiscal 2018, gains on the sale of real estate and property rights, restructuring and impairment charges, a one-time $1,000 employee bonus, expenses related to the 21CF Acquisition, expenses related to content development for direct-to-consumer streaming services, and foregone revenue from content licensing attributable to the revised distribution strategy.

In addition, the Committee determined that, because cumulative adjusted operating income for the five years ending September 29, 2018 was less than $76.01 billion, the condition for Mr. Iger to receive any of the $60 million performance-based retention award made in October 2014 had not been met, and Mr. Iger was not entitled to any of that award.

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Individual Compensation Decisions

The following table summarizes annual compensation decisions made by the Committee with respect to each of the named executive officers. The Committee established the salary and performance-based bonus target multiple of salary for each of the named executive officers early in the fiscal year (except as noted below). The final bonus award was calculated after the fiscal year ended using the financial performance factor of 139% described above and the other performance factors determined by the Committee described below applied to the target bonus opportunity for that executive.

        Salary

Performance-Based Bonus

Equity Awards
                                                                 

 

 

 

 

 

 

Fiscal Year
End 2018
Annual Salary





 

 

 

 

Target



Financial
Performance
Factor1





Other
Performance
Factor2





Award
Amount




 

 

 

 

Value



Target
Performance
Units3





Time-
Based
Units3





Options3



 
    Robert A. Iger     $3,000,000       $12,000,000   139%   175%   $18,000,000       $17,282,621   74,126

  295,237    
                               
    Alan N. Braverman       $1,611,950           $3,223,900   139%   166%   $4,750,000           $4,000,084     9,871   10,755   57,113    
  Christine M. McCarthy     $1,800,000 4     $3,600,000   139%   166%   $5,300,000       $4,500,064     11,105

12,099   64,252    
                               
    M. Jayne Parker       $1,004,250           $1,405,950   139%   173%   $2,100,000           $3,250,127     8,020   8,739   46,405    
  Zenia B. Mucha     $1,161,840 4     $1,452,300   139%   133%   $2,000,000       $2,115,177     5,220

5,687   30,199    
                               
    Kevin A. Mayer       $1,800,000 5         $3,600,000   139%   166%   $5,300,000           $4,500,064   11,105   12,099   64,252    
1
Multiplied by 70% of the target amount.
2
Multiplied by 30% of the target amount.
3
The number of restricted stock units and options was calculated from the value of the award as described in the table on pages 23 to 24.
4
Pursuant to revisions to salary adopted after the end of the fiscal year and retroactive to the end of the fiscal year.
5
Pursuant to new employment agreement in March 2018.

The compensation set forth above and described below differs from the total compensation reported in the Summary Compensation Table as follows:

The compensation set forth above does not include the change in pension value and nonqualified deferred compensation earnings as the change in pension value does not reflect decisions made by the Committee during the fiscal year.
The compensation set forth above does not include perquisites and benefits and other compensation as these items are generally determined by contract and do not reflect decisions made by the Committee during the fiscal year.
The compensation set forth above does not include the special equity award made to Mr. Iger in connection with the extension of his employment agreement in December 2017 because that compensation was specifically tied to the extension of his employment agreement and does not constitute annual compensation.

The Committee's determination on each of these matters was based on the recommendation of Mr. Iger (except in the case of his own compensation), the parameters established by the executive's employment agreement and the factors described below. In determining the appropriate other performance factor for individual executives, the Committee and Mr. Iger take into consideration that the named executive officers operate as a team in contributing to success across the Company. In addition, in determining equity awards, the Committee considered its overall long-term incentive guidelines for all executives, which, in the context of the competitive market for executive talent, attempt to balance the benefits of incentive compensation tied to performance of the Company's common stock with the dilutive effect of equity compensation awards.

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Mr. Iger

    Salary       Mr. Iger's 2018 annual salary rate increased from $2.5 million to $3.0 million in connection with the extension of his employment agreement in December 2017 to reflect the challenges the Committee expected Mr. Iger to navigate in connection with the completion and integration of the 21CF Acquisition.    
    Performance-
based Bonus
      Target Bonus
Mr. Iger's fiscal 2018 target bonus amount was unchanged from fiscal 2017 and is equal to the amount provided for in his employment agreement.

Other Performance Factor
The Committee applied a factor of 175% with respect to other performance factors for Mr. Iger in fiscal 2018 compared to a factor of 189% in fiscal 2017. In fiscal 2018, Mr. Iger provided outstanding leadership in achieving improvements in financial performance while continuing to position the Company for future growth, highlighted by the pending acquisition of 21st Century Fox, the development of a direct-to-consumer strategy and the related reorganization of the Company. Other key accomplishments during the year included:

Outstanding Studio performance with seven films generating over $500 million in global box office sales, including four films over $1 billion in sales. The successful slate included Avengers: Infinity War, Black Panther, Coco, Incredibles 2, Star Wars: The Last Jedi, Solo, Thor: Ragnarok, and Ant-Man and The Wasp.

Successful launch of ESPN+, the first product in support of our critical direct-to-consumer strategy.

Record operating results at Parks & Resorts, while opening Toy Story Land at Shanghai Disney Resort and Walt Disney World, and construction of Star Wars: Galaxy's Edge at Disneyland and Walt Disney World.

The naming of Disney as one of the "Most Reputable Companies" by Forbes, one of the world's "Most Admired Companies" by Fortune and one of the "World's Most Respected Companies" by Barron's. Disney was also recognized as one of the "World's Best Employers" by Forbes and one of the "Best Places to Launch a Career" by BusinessWeek. Forbes ranked Disney as first among the "World's Best Regarded Companies".

   
    Equity Award Value       The Committee left the value of Mr. Iger's annual equity award approximately equal to the value of his fiscal 2017 award.    

Mr. Braverman

    Salary       The Committee increased Mr. Braverman's 2018 salary by 3% to reflect changes in the market for executive talent and his continued outstanding performance.    
    Performance-
based Bonus
      Target Bonus
Mr. Braverman's target bonus for fiscal 2018 is equal to two times his fiscal year end salary, as set forth in his employment agreement as in effect at the time of the award.

Other Performance Factor
The Committee applied a factor of 166% with respect to other performance factors for Mr. Braverman in fiscal 2018 compared to a factor of 150% in fiscal 2017. The determination this year reflected Mr. Iger's recommendation and Mr. Braverman's accomplishments during the year, which included:

Oversight of legal strategy of the acquisition of 21st Century Fox, including the responsibility for managing the antitrust and other regulatory clearances.

Continued leadership of the Company's legal positions on significant litigation matters, transactions and regulatory developments.

Oversight of the Company's governmental affairs and public policy positions on both a domestic and global level, which included providing leadership in developing the Company's position with regard to regulatory matters.

Continued promotion of diversity of hiring in the legal department and promotion of the department's pro bono legal program, each of which resulted in industry recognition.

   
    Equity Award
Value
      The equity award value for Mr. Braverman is equal to 2.5 times his fiscal year end salary.    

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Ms. McCarthy

    Salary       The Committee increased Ms. McCarthy's 2018 salary by 3% to reflect changes in the market for executive talent and her continued outstanding performance and increased her salary an additional $255,000 effective September 2018 to reflect increased responsibility she assumed during the year.    
    Performance-
based Bonus
      Target Bonus
Ms. McCarthy's target bonus for fiscal 2018 is equal to two times her fiscal year end salary, as set forth in her employment agreement pursuant to revisions to the employment agreement adopted after the end of the fiscal year and retroactive to the end of the fiscal year.

Other Performance Factor
The Committee applied a factor of 166% with respect to other performance factors for Ms. McCarthy in fiscal 2018 compared to a factor of 150% in fiscal 2017. The determination this year reflected Mr. Iger's recommendation and Ms. McCarthy's accomplishments during the year, which included:

Oversight of execution of financing for key business initiatives, including the acquisition of 21st Century Fox.

Maintenance and promotion of Disney's financial and capital markets strength, including successful debt offerings, structured long-term financings and achievement of favorable interest rates.

Leadership of the financial reorganization of the Company, which included building a financial plan under the new business segment structure.

Active oversight of corporate real estate projects, including completion of several notable projects.

   
    Equity Award
Value
      The annual equity award value for Ms. McCarthy is equal to 2.5 times her fiscal year end salary.    

Ms. Parker

    Salary       The Committee increased Ms. Parker's 2018 salary by 3% to reflect changes in the market for executive talent and her continued outstanding performance.    
    Performance-
based Bonus
      Target Bonus
Ms. Parker's target bonus for fiscal 2018 is equal to 1.4 times her fiscal year end salary, as set forth in her employment agreement.

Other Performance Factor
The Committee applied a factor of 173% with respect to other performance factors for Ms. Parker in fiscal 2018 compared to a factor of 150% in fiscal 2017. The determination this year reflected Mr. Iger's recommendation and Ms. Parker's accomplishments during the year, which included:

Leadership of the strategy for human resources relating to the 21st Century Fox acquisition by developing and implementing a support model with dedicated resources and project management plans to ensure successful integration.

Support of the implementation of the reorganization of the Company's business segments, including a global technology restructuring.

Enhancement of employee experience through a variety of initiatives, including Disney Aspire, a new employee education program available to over 80,000 U.S. hourly employees.

Continued development of world-class talent through an executive assessment process for developing senior executive candidates.

Leadership through multiple natural disasters and employee emergency events and continued integration of strong global security and intellectual property protection practices in response to a heightened security environment worldwide.

   
    Equity Award
Value
      The equity award value for Ms. Parker is equal to 3.2 times her fiscal year end salary.    
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Ms. Mucha

    Salary       Base salary for Ms. Mucha was set at $1,161,840 for fiscal 2018, effective September 27, 2018, reflecting the market for executive talent and her outstanding performance in the role.    
    Performance-
based Bonus
      Target Bonus
Ms. Mucha's target bonus for fiscal 2018 is equal to 1.25 times her fiscal year end salary, as set forth in her employment agreement pursuant to revisions to the employment agreement adopted after the end of the fiscal year and retroactive to the end of the fiscal year.

Other Performance Factor
The Committee applied a factor of 133% with respect to other performance factors for Ms. Mucha in fiscal 2018. The determination this year reflected Mr. Iger's recommendation and Ms. Mucha's accomplishments during the year, which included:

Enhancing the reputation of the Disney brand worldwide through leadership of global communications for the Company and all its business units.

Support of the communication strategy for several strategic initiatives, including the acquisition of 21st Century Fox and the reorganization of the Company's business segments.

Execution of strategic communication plans in support of launch of the Company's direct-to-consumer business, including the launch of ESPN+.

Continued development of Disney's array of social media platforms and digital communications vehicles to reach the Company's audience directly.

   
    Equity Award
Value
      The equity award value for Ms. Mucha is equal to 1.8 times her fiscal year end salary.    

Mr. Mayer

    Salary       The Committee increased Mr. Mayer's 2018 salary by 3% to reflect changes in the market for executive talent and his continued outstanding performance and increased his salary an additional $255,000 in March 2018 in connection with his new employment agreement to reflect the increased responsibility and complexity of his new position.    
    Performance-
based Bonus
      Target Bonus
Mr. Mayer's target bonus for fiscal 2018 is equal to two times his fiscal year end salary, as set forth in his employment agreement.

Other Performance Factor
The Committee applied a factor of 166% with respect to other performance factors for Mr. Mayer in fiscal 2018 compared to a factor of 150% in fiscal 2017. The determination this year reflected Mr. Iger's recommendation and Mr. Mayer's accomplishments during the year, which included:

Management of the Company's strategic acquisition of 21st Century Fox.

Continued development of Disney's content distribution strategy, including the integration of BAMTech, launch of ESPN+ and development of Disney+ product.

Leadership of the restructuring of the Company into new business segments, designed to maximize the long-term financial contribution of the Company's direct-to-consumer initiatives and the integration of 21st Century Fox.

Leadership of a global technology restructuring, aligning the Company-wide operating model to the new business segments.

   
    Equity Award
Value
      The annual equity award value for Mr. Mayer is equal to 2.5 times his fiscal year end salary.    

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Compensation Committee Report

The Compensation Committee has:

(1)
reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management; and
(2)
based on this review and discussion, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's proxy statement relating to the 2019 Annual Meeting of shareholders.

Members of the Compensation Committee

Mary T. Barra
Maria Elena Lagomasino
Aylwin B. Lewis (Chair)

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Compensation Tables

Fiscal 2018 Summary Compensation Table

The following table provides information concerning the total compensation earned in fiscal 2016, fiscal 2017 (except for Ms. Mucha, who was not a named executive officer in those years) and fiscal 2018 by the chief executive officer, the chief financial officer, three other persons serving as executive officers at the end of fiscal 2018 who were the most highly compensated executive officers of the Company in fiscal 2018, and Mr. Mayer, who served as an executive officer during part of the fiscal year. These six officers are referred to as the named executive officers or NEOs in this proxy statement. Information regarding the amounts in each column follows the table.

  Name and Principal Position


Fiscal
Year


Salary
Stock
Awards1


Option
Awards






Non-Equity
Incentive
Plan
Compensation











Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings2









All Other
Compensation


Total
 
    Robert A. Iger   2018   $2,875,000   $35,352,327   $8,270,976   $18,000,000     $1,146,911   $65,645,214    
                   
  Chairman and Chief Executive   2017   2,500,000   8,984,191   8,298,322   15,200,000     1,301,167   36,283,680    
                   
  Officer   2016   2,500,000   8,828,117   8,454,674   20,000,000   $2,893,778   1,205,827   43,882,396    
                   
    Alan N. Braverman     2018   1,600,213   2,400,080   1,600,004     4,750,000         69,233   10,419,530    
    Senior Executive Vice President,     2017   1,565,000   1,878,142   1,252,020     3,600,000     56,359     95,938   8,447,459    
    General Counsel and Secretary     2016   1,549,000   1,878,037   1,252,040     5,440,000     931,443     68,431   11,118,951    
    Christine M. McCarthy   2018   1,533,750   2,700,063   1,800,001   5,300,000   434,539   71,397   11,839,750    
                   
  Senior Executive Vice President   2017   1,323,077   1,950,118   1,300,000   3,450,000   852,787   70,600   8,946,582    
                   
  and Chief Financial Officer   2016   1,287,692   1,950,106   1,300,058   4,520,000   1,104,131   36,523   10,198,510    
                   
    M. Jayne Parker     2018   996,938   1,950,105   1,300,022     2,100,000     380,524     80,456   6,808,045    
    Senior Executive Vice President and     2017   851,154   1,320,171   880,020     1,570,000     392,107     77,112   5,090,564    
    Chief Human Resources Officer     2016   826,385   1,320,122   880,052     1,815,000     711,775     51,060   5,604,394    
    Zenia B. Mucha   2018   961,150   1,269,161   846,016   2,000,000     24,452   5,100,779    
                   
    Senior Executive Vice President and                                    
    Chief Communications Officer                                    
                   
    Kevin A. Mayer     2018   1,674,000   2,700,063   1,800,001     5,300,000     62,466     83,846   11,620,376    
    Chairman, Direct to Consumer     2017   1,323,077   1,950,118   1,300,000     3,450,000     333,928     77,495   8,434,618    
    and International--3     2016   1,287,692   1,950,106   1,300,058     4,520,000     1,031,418     36,075   10,125,349    
1
Under applicable accounting rules, that portion of the stock award to Mr. Iger made in connection with the extension of his employment agreement on December 13, 2017 conditioned on the completion of the 21CF Acquisition is assigned no value in the table because, when granted, the acquisition remained contingent on obtaining the needed shareholder and regulatory approvals. The stock awards for each fiscal year in the table include awards subject to performance conditions that were valued based on the probability that performance targets will be achieved. Assuming the highest level of performance conditions are achieved and, with respect to the award conditioned on completion of the 21CF Acquisition, assuming completion of the acquisition, the grant date stock award values of all performance-based units outstanding at the end of the fiscal year would be as follows:

 

Fiscal Year



Mr. Iger

Mr. Braverman

Ms. McCarthy

Ms. Parker

Ms. Mucha

Mr. Mayer
 

 

2018

  $ 149,639,748   $2,852,152   $3,208,650   $ 2,317,405   $ 1,508,227   $ 3,208,650    

 

2017

    12,447,500     2,240,131     2,325,983     1,574,625