UPDATE 3-Disney investors reject say-on-pay; quiz on China

* "Say on pay" proposal wins just 39 pct support

* Director Steve Jobs did not appear (Adds shareholder, Disney comments, details from meeting)

OAKLAND, Calif., March 10 - Walt Disney Co shareholders rejected a proposal that would have given them say on executive pay packages, with some investors appearing to favor the idea that the board of directors alone should negotiate executive contracts.

Investors at Disney's annual meeting grilled Chief Executive Officer Bob Iger on issues ranging from a long-touted plan to bring its signature Disneyland theme park to China to the company's acquisition plans.

The meeting at the Paramount Theater in Oakland, California -- chosen because directors toured nearby Pixar on Monday -- was a more low-key affair than past events, which usually have a festival atmosphere with live entertainment, life-sized cartoon characters and shareholders wearing Disney regalia.

Analysts say shareholders may have rejected the pay proposal partly for fear of rocking the boat. Disney management had called it "too blunt an instrument" for dealing with complex executive compensation.

Instead, investors granted management leeway to expand the number of shares that can be granted to a single person.

"I don't think Disney's problems have anything to do with the management team," argued Caris & Co analyst David Miller.

Investors may be thinking "What if the vote goes through and Bob Iger and Tom Staggs throw up their hands and say forget it?" Miller said. "The last thing Disney or any other company that has seen its share price drop 50 percent or more needs is turmoil in management."

Timothy Smith of Walden Asset Management, which sponsored the proposal, said support by fellow shareholders -- at 39 percent including abstentions -- was "remarkably strong."

"There is a huge number of investors who just vote for management on any type of resolution," Smith told Reuters.

Shareholder Dwight Morgan felt it was up to directors to negotiate executives' contracts. "We put the board members in place to do that job and I think we should live with their suggestions," he said to applause, as the pay proposal and another barring death benefits for executives' families were discussed at the meeting.

Chairman John Pepper said the board agrees that "having a shareholder vote on executive compensation may have value ... in some circumstances but it is our considered view that the circumstances at Disney do not merit it."

SLOW BOAT TO CHINA

Multinational corporations from Intel Corp to Hewlett Packard Co have broached the possibility of so-called say-on-pay initiatives that give investors a chance to influence executive packages, amid growing calls from Kazakhstan to Great Britain for remuneration curbs.

Corporate governance experts say such measures help shore up investor trust and increase shareholder participation. But other business analysts argue such structures benefit activist shareholders who may not have the corporation's best interests at heart.

Disney shareholders also gave their blessing to two company-sponsored amendments to its executive compensation plans. The amendments allow Disney to increase the number of shares available for granting to a single person.

Shareholders also reelected the company's 12 directors by a wide margin.

Apple Chief Executive and Disney director and shareholder Steve Jobs, taking a six-month medical leave of absence, was not present at Tuesday's gathering, despite widespread Internet reports he had made his first public appearance since announcing his hiatus.

Shareholders quizzed Iger about his plans for a theme park in Shanghai. Disney has signed a framework agreement with local government to kick off such a project, and said in January it intended to submit a proper plan for the park.

The firm now runs a theme park in Hong Kong that has been criticized for yielding meager returns.

"To the extent that the Chinese people will continue to work on it with us, we will continue to pursue it," Iger said.

Iger declined to comment on whether Disney was interested in buying the SeaWorld marine parks or more television stations but said he was aware of buying opportunities in the market.

Pepper told Reuters after the meeting that "Disney has access to capital if it had the right investment to make."

"We can make investments," Pepper said. "The key is to find the right one this environment. You wouldn't go after anything unless it was really good."

Disney on Tuesday launched a website mainly for adult collectors of Disneyana, featuring news and a blog about the company, historical retrospectives and a collectibles store.

Disney shares jumped 6.5 percent on Tuesday, as the broader market rallied about 6 percent.