Dissidents Want Eisner Out Soon

Sep 20, 2004  •  Post A Comment

A regularly scheduled board meeting of The Walt Disney Co.’s directors on Sept. 20 could provide some clues as to just how nasty the push to oust CEO Michael Eisner before his planned retirement in 2006 could become in the months ahead.

Former board members and dissident shareholders Roy Disney and Stanley Gold, in a letter sent last week to independent directors, demanded that the board immediately hire an executive recruiting firm to conduct a search for Mr. Eisner’s replacement, and that a successor be named by the time the company holds its annual meeting next year.

The request comes as a growing number of shareholders express concern over the timetable Mr. Eisner has set for his departure from the media giant. Mr. Eisner, 62, two weeks ago told the Disney board that he would not seek a renewal of his employment contract when it expires in September 2006.

While Mr. Eisner’s move was designed to quell calls from restive shareholders for a leadership change, his announcement has had the reverse effect, all but renewing calls that had subsided over the summer for Mr. Eisner to be replaced as soon as possible.

At issue is whether Mr. Eisner truly intends to leave the company even if he’s no longer serving as CEO. In the days since Mr. Eisner told the board of his intentions, speculation has erupted that he might leave the executive suite but try to hold a seat on the board-something that would be unacceptable to many of the shareholders unhappy with his leadership.

Citing what they characterized as a carefully worded letter of resignation, Mr. Disney and Mr. Gold in their letter to independent board members called Mr. Eisner’s decision not to renew his employment contract “mere window dressing. What he has really proposed is a scheme to arrogate the authority of the board and maintain the status quo at the company’s expense.”

Mr. Disney and Mr. Gold suggested that while Mr. Eisner would relinquish his CEO title, he might ask the board to “install him as chairman” and name Disney President and Chief Operating Officer Robert Iger as CEO-effectively replicating the hierarchical structure that exists today between Mr. Eisner and Mr. Iger. Mr. Eisner thus far has not made such a suggestion, though he has fully endorsed Mr. Iger as a suitable replacement for the CEO post. He has said nothing about his spot on the board.

Even less vociferous opponents of Mr. Eisner are expressing some concern about the lame-duck status he created by announcing his retirement plans two years before they take place.

“It is not clear to us how a two-year lame duck CEO will benefit shareholders, and [Mr. Eisner’s] continued presence on the board would prevent the company from the clean break that is needed to restore investor confidence,” said Sean Harrigan, president of the California Public Employees’ Retirement System, in a statement last week.

That leaves a lot of eyes focusing on what the board might do at this regularly scheduled meeting.

Board Fails to Quiet Protests

George Mitchell, Disney’s nonexecutive chairman, said in a statement that the board is “fully aware of the importance” of its work and promised “to engage in a careful and thoughtful decision-making process.”

But that isn’t likely to quiet the protests. Some critics have charged that the Disney board is beholden to Mr. Eisner and won’t be quick to push him out of the company.

The entire imbroglio focuses on Mr. Eisner’s leadership during the latter years of what has been a 20-year career as Disney’s top executive. While he is widely credited with growing the company into the powerhouse it is today, he has also received knocks for an autocratic management style and his inability to turn around a languishing ABC.

Shareholder dissatisfaction reached a crescendo last March when Mr. Eisner received a 45 percent no-confidence vote from shareholders. The board responded by stripping him of his chairman title, which many unhappy shareholders dismissed as a half-measure.