Up Front
Edited by Sheridan Prasso
Talk Show
"Venezuela now overshadows the threat from Iraq." --Phil Flynn, a senior energy trader at Alaron Trading in Chicago, speaking of the potential for oil-supply disruptions
BOARD GAMES
Disney: More Insiders at the Castle
When BusinessWeek tallied its list of the best and worst boards (Oct. 7), it counted Walt Disney's (DIS) among the "most improved," citing recent governance changes. But if we had known then some things we know now, Disney might not have fared so well.
In its annual report filed on Dec. 4, Disney revealed that in 2002, while CEO Michael Eisner was promoting a good-governance agenda, the company maintained undisclosed ties to five directors, including two independents. That brings to 11 the number of directors on the 17-member board with company ties, five of whom it considers insiders.
Among the revelations: In 2002, Walt Disney paid $623,782 to a private company for use of a plane by Vice-Chairman Roy Disney. The company, Air Shamrock, is owned by the Disney family and a holding company run by director Stanley Gold. What's more, Walt Disney disclosed that in 1997 it had pledged $25 million to the Performing Arts Center of Los Angeles County to build the Walt Disney Concert Hall and has donated $20 million so far. The chairman and CEO of the arts center? "Independent" director Andrea Van de Kamp, who joined the board the year after Disney pledged the cash.
Responding on Disney's behalf, its governance adviser, Ira Millstein, says the board should be applauded for making the disclosures, which in most cases were not required. "As long as you tell everybody what you're doing, that's good governance," he says. That's something for Disney shareholders to decide.
By Louis Lavelle
BANKRUPTCY BRIEFS
At United, a Lock on Stock Sales
When Enron went bust, some of the loudest cries came from employees barred from selling their stock. Today, it's workers at United Airlines (UAL) who are howling.
A day after UAL filed for Chapter 11, United won a court order that blocks large shareholders from unloading stock. The manager of United's 401(k) program, Aon Fiduciary Counselors, beat the cutoff: It got rid of all 12.7 million UAL shares it had held for employees. But 75,000 workers and retirees with shares in United's employee stock ownership plan are stuck. The ESOP manager, State Street Bank & Trust, sold 24.1 million UAL shares ahead of the filing but still owns 32.5 million. On Dec. 17, State Street went to court to get the no-sale order lifted--and lost.
United insists it isn't trying to hurt anyone. Instead, it says it's protecting federal tax breaks worth $1.4 billion. How's that? Under the tax code, the breaks would be voided if any big shareholder sells out.
By Michael Arndt
ESTATE TAXES
Look Who Says "Soak the Rich"
The progressive-tax crowd has an unlikely champion: the father of the world's wealthiest man. Attorney William Gates Sr. recently chaired a committee aimed at improving Washington State's tax code. The finding: Shift the burden more to the wealthy by reducing property and sales taxes and imposing state income tax. "The current structure is really unsatisfactory," Gates told the legislature on Dec. 3.
And that's just his opening act. Gates père hits the book circuit soon to promote his upcoming treatise on preserving the estate tax, Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes. "There is something fundamentally American about the notion that what people do with their lives is more important than the station of birth," he writes. Otherwise, he argues, we could develop a permanent aristocracy.
What does Gates's son think? "I certainly agree," he says. Gates won't reveal estate plans, except to say that "the vast majority" will go to his foundation. Even if he left only 1% of assets to his three children, they would still get $500 million each.
By Jay Greene
THE BIG PICTURE
The 2002 News Quiz
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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