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Disney's dissidents demanding Eisner's early exit

By Alex Armitage
Bloomberg News

Roy Edward Disney, the nephew of Walt Disney

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Roy Disney and Gold demanded in a letter to the board that it hire an executive search firm to find a new CEO and require Eisner to leave the company after the search is completed. Eisner said Friday he would retire in September 2006.

Roy Disney and Gold have been seeking to oust Eisner since last year, when the two stepped down from the board and begin a public campaign to remove the CEO. Eisner relinquished his chairman's post to former U.S. Sen. George Mitchell, also a Disney director, after investors withheld 45 percent of shares voted for Eisner's re-election to the board.

"It is intolerable for Michael Eisner to continue to hold the company hostage for two more years — and perhaps longer," the two dissidents said in the letter. "While Eisner's announcement at first blush looks like a major change, it is in truth mere window dressing."

Responding to the letter, Mitchell said in an e-mailed statement that the entire board is aware of the importance of succession planning and the responsibilities they bear to Disney's shareholders to engage in a careful decision-making progress.

	Stanley Gold, president and CEO of Shamrock Holdings

Roy Disney holds 17.3 million Disney shares, making him the 18th-largest Disney shareholder. Eisner holds 14 million Disney shares, ranking him as the 26th-largest shareholder.

Roy Disney and Gold said they will support any Disney directors who want Eisner to leave the company before its annual meeting next year. Choosing a successor to Eisner could be accomplished before the 2005 meeting, they said. They said they would propose an alternative slate of directors if the current members "continue to support drift, delay and decay."

"We haven't made the decision whether it's a full slate, or what's called a short slate, Gold said in an interview. "If it's a short slate, it will be five or six" proposed directors. "I'm certainly going to watch the performance of this board," he said.

Disney's directors, including Eisner, the longest-serving chief executive among companies in the Dow Jones industrial average, are scheduled to meet Sept. 20.

Eisner's decision and announcement to step down in 2006 was the right thing to do because it gives the board plenty of time to find a successor, said Joel Koblentz, a partner at executive search firm Morgan Howard.

The board "doesn't have to sit there. They can turn around and say, 'Michael, we're happy to pay you what we owe you, but we've decided on XYZ' as CEO," Koblentz said in an interview.

Roy Disney and Gold said the Disney board has to face up to its responsibility and exercise its fiduciary duties. The two have said the board hasn't held Eisner responsible for mismanaging the company. "I've been trying to reach out to this board for three years, over and over again," Gold said. "What needs to be done now is for the board to do its job. It needs to act."

Some investors, including Sarat Sethi of Douglas C. Lane & Associates in New York, which owns 713,000 Disney shares among $1.3 billion in assets, said Roy Disney and Gold's efforts might be a challenge. "Things don't turn on a dime," Sethi said. "It's hard when you have a CEO who has been there for so many years to just disengage."

Sethi said it might take six months to a year to find the next CEO of Disney.

Eisner's suggestion in some press reports that he be installed as chairman after he relinquishes the CEO title is contrary to the best corporate governance practices, Roy Disney and Gold said.

Eisner's succession plan is "for a company led by Michael Eisner and his obedient lieutenant, Bob Iger, to be handed over to Michael Eisner and Bob Iger," Roy Disney and Gold said. Iger is Disney's president and chief operating officer and a candidate to succeed Eisner as chief executive.

Roy Disney and Gold wrote in their letter that no one with the "skill, experience, dynamism and creativity" needed to lead Disney will take the job if Eisner remains as CEO or takes the position as chairman again.

"They cannot get a world-class CEO unless Eisner is out of the building," Gold said. "They need to face up to that issue and go do it. ... "

Copyright © 2004 The Seattle Times Company

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