With the pressure mounting on Walt Disney Co. Chairman and CEO Michael Eisner to step down, the question of succession looms larger than ever. Disney President and Chief Operating Officer Robert Iger would seem to be a logical candidate to replace the embattled chief executive, yet neither Wall Street nor most in the entertainment industry appear to consider him a serious front-runner.
As Disney holds its annual meeting this week in Philadelphia, with pressure for change building from several directions, Mr. Iger’s future becomes a question of vital importance.
Based on the corporate organizational chart alone, there is no question that Mr. Iger is the No. 2 executive at the media giant. Even his critics agree that he is an articulate, poised and skilled operations executive with a deep knowledge of Disney’s far-flung operations. In recent months he has taken on a higher profile as the company’s front man while the besieged Mr. Eisner fights to keep his job in the face of swelling opposition.
However, as Disney’s board tackles the issue of Mr. Eisner’s succession head-on, scheduling a meeting for April to discuss, among other things, the top eight to 10 executives who report to Mr. Eisner, and ostensibly their viability as candidates for the top spot, there is a growing sense among Wall Street analysts, investors, executive recruiters and former co-workers that Mr. Iger isn’t likely to find his name on the short list of possible replacements.
Why isn’t Mr. Iger seen as a viable successor? Some suggest that Mr. Eisner, a well-documented micromanager, is to blame: Because Mr. Eisner insists on controlling every aspect of the operations, Mr. Iger has not been given enough opportunity to show that he, too, can lead the company.
Others say Mr. Iger, familiar with Mr. Eisner’s loathing of executives who try to steal the spotlight from him, has willingly taken a low profile as a way to ensure job security. Another explanation is that Mr. Iger lacks that so-called “X” factor that executives need to be successful as CEO of a major media company.
Efforts to Oust Eisner
Even as Disney begins to show signs of a recovery, with the company posting fiscal first-quarter gains in its cable networks and studio business and declaring that its struggling theme-park business has turned the corner, Mr. Iger is rarely named as the executive behind the improving financial results. However, he is always included as one of those to blame for the ongoing ratings problems at the ABC Network.
Disney officials would not comment on Mr. Iger and declined to make him available for an interview.
“Bob Iger is very personable and knowledgeable, but he isn’t multidimensional,” said a recruiter who places Hollywood executives. “Iger is not what I would call an `in’ member of creative Hollywood. He’s still an outsider.”
(The subject of Mr. Iger and his future proved to be sensitive for many of the people contacted for this story, several of whom feared reprisals by Disney executives should they go on the record.)
The perception that Mr. Iger lacks the skills needed to lead a media company raises a lot of questions about who ultimately will replace Mr. Eisner, whose current contract doesn’t expires in 2006.
While succession has long been an issue-Mr. Eisner has said he has his recommended replacement named in a sealed envelope in his desk-it has taken on even greater importance in recent weeks amid plans by a growing number of disgruntled shareholders to withhold their votes to re-elect Mr. Eisner to the board. The annual meeting is shaping up as a showdown between restive investors and current Disney management.
Once a long-shot campaign orchestrated by former board members Roy Disney and Stanley Gold, who resigned their seats in November after a falling-out with Mr. Eisner, the effort to oust the Disney chairman has been gathering momentum. In recent weeks state pension funds from California, New York, New Jersey, Connecticut, Massachusetts, Virginia and Oregon have indicated that they will withhold their support for Mr. Eisner. Influential shareholder advisory firms such as Institutional Shareholder Services and Glass, Lewis & Co. are urging their clients, who in theory collectively account for 50 percent of Disney’s outstanding shares, to do the same. If even 20 percent or 30 percent vote no on Mr. Eisner, it could be such an embarrassment that he will resign or the board will be forced to make changes. And that could quickly put the spotlight on Mr. Iger.
Adding to the tension, the shareholder fight comes at a delicate time for Disney, which is fending off a hostile takeover bid from Comcast. The cable giant could use the investor dissent to its advantage in its quest to acquire control of the media company. Coincidentally, Disney’s meeting is being held in the city that is headquarters to Comcast.
Disney’s board is already stepping up its efforts to formalize the succession process. George Mitchell, presiding director of the Disney board, said last week that the board already held a pair of meetings to discuss Disney’s next CEO, and will follow those with the board meeting scheduled for next month.
“The board, in the nine years that I’ve served on it, has regularly discussed succession,” Mr. Mitchell said during a conference call with financial analysis firm Glass Lewis. “What we’ve attempted to do in the past year is to make it more formal, more structured and more intensive.”
Respected Hard Worker
What that might portend for Mr. Iger’s future remains anyone’s guess. A magna cum laude graduate of Ithaca College, Mr. Iger, who turned 53 in February, started at ABC in 1974 as a studio supervisor, moved to ABC Sports and rose up the corporate ladder to become president of ABC Entertainment in 1989. He was promoted to president of the ABC Television Network Group in 1993 and was elevated to president and chief operating officer of ABC a year later, overseeing a network that was No. 1 at the time.
After ABC became part of Disney in 1996, Mr. Iger continued his ascension, becoming chairman of the ABC Group and president of Walt Disney International, overseeing the establishment of the Disney brand worldwide and consolidating the international operations under a single umbrella.
In 2000 he was named to his current post. In fiscal year 2003 Mr. Iger earned nearly $6.9 million in total remuneration, a 22 percent jump from the previous year.
By nearly all accounts, Mr. Iger is well regarded on Wall Street and in Hollywood, a hard worker who puts in long hours, does his homework and has a history of letting people work with a certain amount of freedom. The highest praise he receives from outsiders seems to relate to his days at ABC when it was owned by Capital Cities.
“During the Cap Cities days, he was a terrific leader,” said one person who worked with him. “He has an outstanding brain and work ethic. I just don’t think he has been able to purposely show any ambition [in his current job]. It begs the question whether the perception out there is Bob’s fault or Michael Eisner’s.”
Since he joined Disney management, however, the general view has been that any hope that Mr. Iger might have had to further expand his leadership skills was dashed by Mr. Eisner’s management style. Observers even note that his familiarity with network television, and ABC in particular, has proved ineffective under Disney ownership, as the network continues to struggle with a programming-by-committee approach that extends all the way up to Mr. Eisner. “[Mr. Eisner] doesn’t let [Mr. Iger] get out and develop what he’s doing,” said a longtime Wall Street analyst. “He’s probably very good, but we don’t know.”
Added another Wall Street analyst: “He has been exposed to several of Disney’s divisions and he may be perfectly capable, but Michael Eisner has kept him from the Street so he has no visibility.”
That could be a problem should Mr. Eisner be pushed out. Unlike other Hollywood executives, Mr. Iger has never been given the opportunity to distinguish himself as Mr. Eisner’s No. 2, and thus lacks the types of
relationships needed to be a successful studio chief, several industry sources said.
Mr. Eisner’s style of managing is a central issue for Mr. Disney, the former board member leading the anti-Eisner revolt. “In my view, Mr. Eisner’s overbearing style and intrusive micromanagement of everyone around him has undermined morale throughout the company and led to an exodus of creative talent from Disney,” he said on his SaveDisney.com Web site.
This so-called “brain drain” at Disney might also be an explanation behind Mr. Iger’s seemingly low profile as a leader. Some have suggested that all these years of watching high-flying executives who have tangled with Mr. Eisner either quit or get pushed out has given Mr. Iger a keen sense of what it takes to remain in Mr. Eisner’s good graces.
“It’s thin ice out there in CEO territory, and there’s no way Bob wants to step out on thin ice,” said the former colleague.