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Disney Suit Moves Forward

Jun 13, 2005  •  Post A Comment

A Delaware judge has ruled that a lawsuit challenging the appointment of Robert Iger to CEO of The Walt Disney Co. will go forward and begin in August, said Roy Disney and Stanley Gold, dissident shareholders who filed the claim against the media giant.

The ruling, which Mr. Disney and Mr. Gold announced last week, rejected a request by Disney officials that the suit be dismissed.

What impact the lawsuit could have on Mr. Iger as he moves toward taking the CEO post is unclear. Tracy Murdoch O’Such, a managing partner with the Ray & Berndtson executive search firm in New York, noted that because the battle between Disney and the dissidents has been so protracted that this latest news only adds to what “for me is becoming white noise.”

However, Ms. O’Such did say that should Mr. Disney and Mr. Gold prevail, and should Disney be forced to repeat its search for a CEO, potential candidates may opt to steer clear of the company. “Executives might not be interested [the second time around],” she said.

Mr. Disney and Mr. Gold filed a lawsuit against Disney and its directors in May alleging that the process by which Mr. Iger was selected to replace outgoing Chief Executive Michael Eisner was not aboveboard. Among the claims made was that Disney’s board did not conduct an executive search with an open mind and that the board effectively settled on Mr. Iger early on in the process and was simply going through the motions without giving “full consideration” to external candidates.

The dissident shareholders have asked the court to void the 2005 election of Disney’s board and to order Disney to hold another election for directors only after the company has disclosed completely how it selected Mr. Iger, who is expected to assume the CEO title in October.

The suit is part of an ongoing battle between Disney and Mr. Disney and Mr. Gold, who last year played a key role in removing Mr. Eisner as chairman amid years of weak performance. Since then, however, Disney has been on an upswing, posting strong profit gains and staging a significant ratings comeback at its ABC television network.