Posted on 02/11/2004 3:30:48 AM PST by Liz
ORLANDO, Fla., Feb. 10 - By all outward appearances Michael D. Eisner, the chief executive of the Walt Disney Company, is perfectly secure in his job, having consolidated his power in beating back a board revolt led by a nephew of Walt Disney, the company co-founder.
Yet as research analysts gather here at Disney World for a two-day investment conference starting Wednesday, Mr. Eisner is campaigning as furiously and aggressively to deride dissidents and sweet-talk investors as he ever has in his nearly 20 years at the helm. In the last six weeks, Mr. Eisner has met with more than 40 institutional investors, analysts and corporate governance experts in an attempt to quiet any criticism of his company's performance and his managerial style.
On Monday, the company released a letter to shareholders attacking the motives of Walt Disney's nephew, Roy E. Disney, and another former board member, Stanley P. Gold, who have embarked on a cross-country campaign to push for Mr. Eisner's resignation or retirement.
Full-page color ads featuring a smiling Mickey Mouse are running this week in The New York Times, The Los Angeles Times and USA Today. And the analysts here are getting the star treatment, including helicopter rides over the park in a twin-engine chopper and also a cocktail party and private dinner with Mr. Eisner and his management team.
For Mr. Eisner, the campaign serves to blunt any perception of vulnerability, particularly given that the company's financial performance is expected to continue improving in the coming year and that the stock price has outperformed market indexes. Mr. Eisner is also upset by what he sees as a betrayal by Mr. Disney and Mr. Gold, according to people who have talked to him.
"His take on Stanley and Roy is that this is personal,'' said Patrick McGurn, special counsel for Institutional Shareholder Services, a research organization that advises shareholders on how to vote on proxy issues. "They are mad at him and the board and are seeking vengeance."
Mr. Disney and Mr. Gold have argued that Disney has lost its creative spark in the last 10 years, particularly in its animation division. Mr. Eisner's combative style, they add, has forced several talented executives to leave and led to the recent nasty split with Steven P. Jobs and Pixar, ending the companies' partnership after 13 years and hits like "Finding Nemo'' and "Toy Story.''
As Mr. Disney and Mr. Gold make the rounds of institutional investors, their public tactics have taken on a personal edge. They are selling "Disappointed" T-shirts (in Disney-inspired type) on their savedisney.com Web site. To help ferry disgruntled shareholders to the company's annual meeting in Philadelphia on March 3, they have arranged for travel discounts. And they plan to distribute bumper stickers with the message, "Goodbye Michael Bring Back Roy. "
That approach helps explain the decision of Mr. Eisner and Disney to respond in kind. "Do not be misled," the board wrote in the letter to shareholders, warning that Mr. Disney and Mr. Gold were putting "their own interests ahead of yours." Among other criticisms, the letter stated that the two former board members voted to approve, and in some cases championed "the very business decisions they now condemn." One of those was the acquisition of Fox Family Worldwide in 2001 for $3 billion in cash and $2.2 billion in debt. (In a rebuttal letter, Mr. Disney and Mr. Gold said they had agreed to the investment based on faulty financial projections from management.)
Mr. Eisner declined to comment for this article. But Tom Staggs, Disney's chief financial officer, said that the company was visiting investors as a defensive move. "Certainly right now, when there are people spreading misinformation and a negative story, it is incumbent upon us to be in front of shareholders about the facts," Mr. Staggs said. "We've had a significant number of changes to the board and board processes and we don't feel we've done a good job getting that understood as we could have."
Major changes undertaken in the last few months include ensuring that independent board members are truly independent and reducing the size of the board. But Mr. Eisner is still surrounded by board members considered very much on his side, like George J. Mitchell, the presiding director and former senator.
After attempts by Mr. Disney and Mr. Gold to change the company from within were parried by Mr. Eisner, the two men left the board in November so they could publicly agitate for Mr. Eisner's departure. Their short-term goal is to get 35 percent of Disney's shareholders to withhold votes for Mr. Eisner and three other directors next month. Under an S.E.C. proposal released last October, reaching that threshold could force Disney to include alternate board candidates suggested by major shareholders the next year.
While investors and analysts say it is unlikely that the 35 percent level will be reached, a smaller number could still show palpable investor discontent with Mr. Eisner.
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Roy E. Disney and Michael D. Eisner during the rededication of the Magic Kingdom at Disney World in 1996.
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