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Eisner Still in Charge

Feb 14, 2005  •  Post A Comment

A year after The Walt Disney Co. CEO Michael Eisner was publicly embarrassed during a bruising battle with shareholders over his leadership of the media giant, it was clear during last Friday’s annual meeting in Minneapolis that he has regained control of the company he has led for more than 20 years.

Mr. Eisner was overwhelmingly re-elected to serve on Disney’s board. Only 8.6 percent of the votes cast withheld their support for him to serve another year as a Disney director. It was quite a switch from 11 months ago, when the controversial executive received a 45 percent no-confidence vote from shareholders-the highest on record for any CEO of a public company-and ended up being stripped of his chairman’ title.

Overall, Disney’s 12-member board was re-elected by more than 92 percent of the votes cast, in what turned out to be a fairly uneventful meeting despite the overhang of continued controversy about Mr. Eisner’s leadership and the company’s closely watched search for Mr. Eisner’s replacement. Mr. Eisner announced in September that he will not renew his contract when it expires in September 2006.

There were indications last week that Disney’s annual meeting might be turning into a repeat of 2004, as a number of shareholders who led the anti-Eisner fight last year-including former Disney board members Roy Disney and Stanley Gold and the California Public Employees’ Retirement System-again said they would withhold support for Mr. Eisner.

At the same time, book publisher Simon & Schuster began releasing copies of author James B. Stewart’s highly anticipated book “DisneyWar” ahead of last week’s meeting, which once again put the spotlight on Mr. Eisner’s tumultuous management of Disney, and again raised questions about his No. 2, Disney President and Chief Operating Officer Robert Iger, who has been considered a leading candidate to replace Mr. Eisner. (The book was initially scheduled to debut in early March, but the white-hot buzz surrounding its contents compelled the Viacom-owned publisher to move up the release date.)

However, in the end, neither the book nor the subject of disaffected shareholders came up during the nearly three-hour meeting, which also saw the approval of a new stock-incentive plan for executives.

But that doesn’t mean questions about Mr. Eisner’s and Mr. Iger’s leadership aren’t still being raised. At least in Hollywood, Mr. Stewart’s book is stirring up old controversies about Disney management and raising anew questions about whether Mr. Iger is necessarily the right man to replace Mr. Eisner.

While most of the stories told in the book aren’t new, they re-emerge at a particularly sensitive time for Mr. Iger. The stories, according to several executive recruiters, have the potential to dash his hopes of being chosen as the next CEO if shareholders see the book as more evidence that Disney’s executive suite needs sweeping change.

“Disney in the past year has had so much negative news, so when something like this comes along it’s damaging at a time of acute levels of sensitivity,” said one executive recruiter, who predicted that the book would have a negative impact on Mr. Iger’s chances.

The timing could not be worse. Long criticized as an aloof executive who operated in the shadow of the controlling Mr. Eisner, Mr. Iger finally began to demonstrate his own personality in recent months, taking advantage of Mr. Eisner’s hobbled reputation to show shareholders and Wall Street analysts that he is capable of leading Disney.

The move largely worked: Analysts gave Mr. Iger praise for his presentations to investors in recent months.

“He has done a very good job in terms of positioning himself” as a potential CEO, said Harold Vogel, CEO of Vogel Capital Management.

However, some executive recruiters worry that Mr. Iger’s progress could be undermined by the book. In addition, some suggested that Mr. Eisner’s endorsement of Mr. Iger as his successor could be undermined by what Mr. Eisner said about Mr. Iger in the book. What’s more, most recruiters say that they prefer to recommend candidates who don’t grab headlines the way Mr. Iger has in recent days.

“Very frankly, I think the board will recognize they are much better served in bringing in a much better candidate,” said executive recruiter Brad Marks of Brad Marks International. “I think the book speeds this process through.”

A Disney spokesman issued a statement: “We remain focused on excellent results, performance and a bright future, not on a one-sided depiction of past events largely told through the eyes of those with a clear bias and personal agendas.” Mr. Iger was not made available for comment.

Eisner’s Reservations

The book features several comments by Mr. Eisner that illustrate his concern that Mr. Iger isn’t up to the task of running either ABC or Disney. In one instance, shortly after Michael Ovitz was named president and COO in 1995, he and Mr. Eisner reviewed a list that Mr. Eisner had drawn up of executives he considered problems. The list included Mr. Iger’s name.

A year later, asked who he might choose as a successor, Mr. Eisner said in a letter to two board members that he “might pick Bob Iger,” but included a list of Mr. Iger’s shortcomingsand assertions that Mr. Iger “is not an enlightened or brilliantly creative man, but with a strong board, he absolutely could do the job.”

The book characterizes Mr. Iger as having shortcomings as a strategic thinker as well, with him taking a pass on producing hit series “CSI” for CBS because he lacked interest in producing programming for other networks-a tactical error, given the series has evolved into a very lucrative franchise.

Whether the book will influence the board’s selection of an Eisner successor remains an open question. Nonexecutive Chairman George Mitchell said at Friday’s meeting that Disney directors consider the search for a new CEO their “most important task” and they are committed to “engag[ing] in a through, careful and reasoned process.”

Mr. Mitchell said the board is conducting interviews of both internal and external candidates and that it remains on track to identify a successor by its June deadline.