The Walt Disney CompanyUnder more normal circumstances, the Orpheum Theater in Phoenix would briefly replace Disneyland tomorrow as Disney‘s “happiest place on earth.” The company’s stock is trading around an all time high as shareholders prepare to convene there for their annual meeting. But attendees instead are girding for a fight over resolutions that could shape the way Disney’s run, especially after Bob Iger steps down in June 2016. Many shareholders support a movement sweeping corporate America to democratize governance policies, giving the people who ostensibly own a company more flexibility to check the power of CEOs and directors. Disney infuriated them in 2011 by agreeing to make Iger chairman as well as CEO, which critics say puts him in charge of the team that’s supposed to judge his performance. And the company further enraged shareholder rights advocates recently when it gave Iger a 20.3% raise with a package for fiscal 2012 worth $40M — even though 43% of Disney shareholders opposed management in the federally mandated say-on-pay advisory vote at last year’s annual meeting.

That set the stage for tomorrow: California teachers’ fund CalPERS, and proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis, are among the groups asking shareholders to oppose Disney in the say-on-pay vote. They also support two shareholder resolutions that Disney opposes. One would enable some stock owners to nominate candidates for the board — an idea that’ll be raised at several companies this year. The second urges the board to amend the company’s governance guidelines to prevent a CEO after Iger from also serving as chairman, except under brief and unusual circumstances.

Critics say Disney’s recent efforts to empower and enrich Iger revive bitter memories from a decade ago when BusinessWeek and others regularly slapped Disney with failing grades for corporate governance: Michael Eisner was both chairman and CEO and reported to a rubber-stamp board that included his personal attorney, the principal of his kids’ elementary school, and Disney’s architect. Giving Iger so much power “brings the potential for Disney to return to a time of imperial CEO leadership, unaccountable CEO compensation and lackluster company performance,” Connecticut state Treasurer Denise Nappier says.

Iger’s latest reported compensation package fueled critics’ fears that directors preferred to please the CEO/chairman instead of the shareholders who elected them. Even though a majority of Disney votes last year supported management on the say-on-pay resolution, there were substantially more “no” votes than in 2011 when 23% voted thumbs down. The opposition also was remarkable when you consider that it put Disney among just 6% of large public companies whose say-on-pay resolutions passed with less than 70% approval — and close to joining the 2.6% that failed — according to executive compensation consulting firm Semler Brossy.

Disney’s proxy acknowledges that last year’s vote “fell below our expectations” and says that it responded by changing some of its compensation policies. But its basic argument is that Iger deserves to be treated well because he’s the wizard behind the company’s magical financial performance. “The facts are irrefutable,” the company says. “Disney delivered record net income, revenue and earnings per share and exceptional shareholder returns in fiscal 2012. Total shareholder return for the year was 76.3%, compared to 30.2% for the S&P 500.” It adds that since he took over in 2005 the company’s performance “has been nothing short of spectacular” with a total shareholder return of 139% — well ahead of the S&P 500’s return of 36%, and 15% growth in diluted EPS on a compounded basis.

Critics say that the company misses the point: The problem is that Iger’s contract doesn’t sufficiently tie pay to performance. He benefits when Disney does well. But if it doesn’t, the deal still “guarantees a target pay opportunity of $30 million,” ISS says. Shareholder rights advocates say that the high totals are based on a skewed view of the marketplace. For example, Disney partly benchmarked Iger’s pay against execs at family-run media companies. They’re famous for their outsized compensation. But virtually nobody believes that Disney has to fear that any amount of money would persuade Iger to go work for Brian Roberts at Comcast, Rupert Murdoch at News Corp, or Sumner Redstone at Viacom or CBS. All told, the board’s eagerness to please Iger is ”somewhat surprising for a company preparing for the CEO’s succession in a few years,” ISS says. It also resulted in a package that was out of whack by Disney’s own executive pay standards. Iger’s compensation was 6.4 times larger than the median for the company’s four other top executives, way above the level (3 times) that triggers alarm bells among shareholder rights advocates.

The friction over Disney’s policies toward Iger could energize investors to support two shareholder resolutions. Hermes Equity Ownership Services urges the board to allow an investor group that has held 3% of the company’s stock continuously for three years to nominate candidates for up to 20% of the board. It’s a modest reform: Only six groups would be able to take advantage of it (the Steven P. Jobs Trust and institutional investors State Street Global Advisors, The Vanguard Group, Fidelity Management & Research, BlackRock Fund Advisors, and MFS Investment Management).

Even so, Disney asks investors to reject the change, calling it “a solution for a problem that does not exist.” It “ignores the effective voice shareholders already have” at a board that’s overwhelmingly composed of people who are independent of management. Disney also warns that a more democratic system might add a director who could “create tensions that disrupt the effective functioning of the Board, particularly if the Director advocates for narrow interests that are not shared by all shareholders.” Disney singles out labor union and public pension funds as “special interests” that might serve as a burr under the board’s saddle.

Connecticut’s retirement funds put up another resolution calling for the board to keep the chairman and CEO jobs separate after Iger’s contract expires except under “extraordinary circumstances” lasting no more than six months. Glass Lewis approves, saying that a CEO/chairman combo “concentrates too much oversight in a single person and inhibits the independent oversight intended to be provided by the board on behalf of shareholders.” But Disney says a change would replace “the current, clear and workable standard” with “a vague and unworkable standard.” Besides, the underlying presumption that the board erred in giving Iger so much power “is unfounded.”

We’ll see whether Iger and his colleagues prevail in Phoenix this week. But if they do, their victory likely will be short-lived. The shareholder rights movement is gaining momentum. And at some point Disney will have to directly explain why investors should be content with their limited ability to shape company affairs, instead of counting on the stock price to keep everyone happy.

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