Michael Eisner probably won’t lose his job at the annual Walt Disney Company shareholders meeting this week in Philadelphia but his foes intend to make sure he at least feels nervous about the possibility.
Ex-board members Roy Disney and Stanley Gold hope on Wednesday to persuade at least 20% of shareholders to withhold their approval for Eisner and three other board members. The company is preparing for a dissenting vote as high as 30%.
After 20 years with Disney, Eisner has lost favour with some large and influential institutional investors. The dissension started with a three-month campaign by Roy Disney and Gold and snowballed after an unsolicited takeover bid by cable giant Comcast and the collapse of talks with Pixar Animation Studios to extend their lucrative Disney partnership.
Eisner’s re-election to the board is not in doubt because he is running unopposed. But the board, which will convene immediately following the shareholder meeting, will be faced with deciphering the message behind the votes.
It will have a number of alternatives, including asking the 61-year-old Eisner to step down. However, the board has expressed unanimous support for Eisner and the company’s current strategic direction.
More likely, the board will separate the positions of chairperson and chief executive — something it has been unwilling to do in the past despite calls from influential proxy advisory firms and pension funds.
Institutional Shareholder Services, a proxy adviser group whose clients represents about 30% of Disney shares, said its opposition to Eisner was based in large part on the need for separate chairperson and chief executive roles to ensure a more independent board.
”If there were ever a case for separating the roles of chairman and CEO, this company is the poster child,” the ISS analysis said.
Still, that move is unlikely to satisfy Disney’s harshest critics, especially if Eisner remains in charge of the media giant, which operates theme parks and a film studio as well as television networks such as ABC and ESPN.
And depending on the percentage of votes cast against Eisner and the board, Comcast may be emboldened to renew its unsolicited bid for Disney. Last month’s bid originally was valued at $54-billion.
Disney’s board rejected the offer as too low, several days after Disney’s rising stock price reduced the value of Comcast’s offer by more than $5-billion.
Disney has been waging its own fight, emphasizing its recent positive financial performance; the stock price rose 43% in 2003 and the company expects double-digit earnings growth through 2007.
In newspapers around the United States this past Friday, Disney took out full-page colour ads insisting: ”Our future is in good hands. Our momentum is real and growing. Our legacy inspires all we do.”
The ads featured photos of Disney characters, including the newest addition: Kermit the Frog. Disney bought the Muppet characters in February.
In their resignation letters last fall, Roy Disney and Gold complained the company had lost its creative spark and strayed from its heritage in the last 10 years of Eisner’s management. Disney had surrendered its leadership in animation, was suffering from sinking ratings at its ABC Television network and was building theme parks ”on the cheap,” the two said.
The pair also cited the poor performance of the stock since 1995.
This past week, the California Public Employee Retirement System, the nation’s largest public pension fund, said it would withhold its support from Eisner and some board members. A handful of other large funds, including those from New York state, North Carolina, New Jersey and Connecticut, have said they will not support Eisner’s re-election.
The funds cited different reasons for their actions, including Eisner’s handling of the hiring and firing of longtime friend Michael Ovitz as Disney’s president.
Ovitz left the company in 1996 with a severance package worth more than $100-million after a contentious and unproductive tenure of only 18 months. A shareholder lawsuit is pending against Disney’s board, alleging it abandoned its fiduciary duty in the matter.
But many mutual funds and other institutional shareholders are expected to support Eisner. New York City’s pension fund voted its 7,6-million shares in favour of Eisner, who, fund executives said, ”remains the best choice to ensure the continued growth and success of this company.”
For his part, Eisner has remained focussed on touting the company’s recent financial and creative performance.
In a recent interview on the CNN programme Larry King Live, Eisner said he was surprised at Roy Disney’s objections but added: ”this will go away, I believe”.
”I am confident in the end of this I will still have three great children, a great wife and the Disney company will prevail,” Eisner said.
”Whether I will be running the Disney company or not is up to our board, up to my health and up to my continuing enthusiasm, all of which as of this moment are there.” – Sapa-AP