Vincent Laforet/ The New York Times
Roy E. Disney and Stanley P. Gold, former Disney directors, are leading a campaign to oust Michael D. Eisner, its chief executive. But a merger struggle may overshadow the efforts of the two men.
Posted on 02/20/2004 1:41:05 AM PST by Liz
Vincent Laforet/ The New York Times
Roy E. Disney and Stanley P. Gold, former Disney directors, are leading a campaign to oust Michael D. Eisner, its chief executive. But a merger struggle may overshadow the efforts of the two men.
LOS ANGELES, Feb. 19 - As the Walt Disney Company's crucial annual meeting draws closer, the campaign over the future of the company, including an effort to oust Michael D. Eisner, its chief executive, is generating enough heat to rival the presidential race.
Disney's president, Robert A. Iger, who rarely gives interviews, said on CNBC on Thursday that despite last week's unsolicited offer from the Comcast Corporation, there was no "for sale" sign on his company's door. Mr. Eisner is scheduled to appear on "Larry King Live" on Friday and will visit investors on a sweep through Northern California next week.
And in an interview at the offices of The New York Times on Thursday, only days after speaking at Harvard Business School, Stanley P. Gold, a former Disney board member who has been calling for Mr. Eisner's ouster, said that given a choice between a merger with Comcast or a company with Mr. Eisner at the helm, he would choose the merger. He added, however, that his first preference would be for an independent Disney under new management.
Mr. Gold and Roy E. Disney, another former director and the nephew of the company's founder, want shareholders to withhold their votes from Mr. Eisner in the coming board election, which will be at the annual meeting on March 3.
But for many who follow Disney, the grass-roots campaign by Mr. Gold and Mr. Disney has taken a back seat to what many believe is the real corporate struggle for control of Disney, one that is being played out on Wall Street trading desks and in the corner suites of bankers and lawyers schooled in mergers and acquisitions.
Disney, in recent days, has taken a multipronged approach in defense of what many have called poor management. Not only has the company attacked Mr. Disney and Mr. Gold in letters to shareholders signed by the board, but it also announced this week a spate of deals by which Disney executives hope to show that the company can create shareholder value on its own.
On Thursday, after a yearlong and at times bitter negotiation, Disney's ESPN reached a long-term agreement with Cox Communications to distribute and carry the ESPN channels on its cable systems. Two days earlier, Disney agreed to buy two of the Jim Henson Company's best-known properties, the Muppets and the Bear in the Big Blue House.
"My sense is that the Comcast offer has taken the spotlight off the withhold vote," said Sarah B. Teslik, executive director of the Council of Institutional Investors, an advisory group for shareholders. "Disney's problems could well be resolved the way Wall Street always seems to resolve these things, with performance or a change in the management with a merger or a takeover."
That, of course, has not deterred Mr. Gold and Mr. Disney. But in recent days some investors and corporate governance experts have begun to question the strategy of the former directors, who approved many of the decisions they now protest.
"They were on the board when all this happened," said Nell Minow, director of the Corporate Library, a nonprofit agency that monitors corporate governance practices. "Disney management is lucky in its enemies."
For example, Mr. Gold has widely criticized Mr. Eisner for sparring with Jeffrey Katzenberg, the former studio chief, but Mr. Disney also did not get along with the executive.
Mr. Gold and Mr. Disney have both attacked the company for its lack of creativity. But Mr. Disney not only was chairman of feature animation but also championed "Treasure Planet," a 2002 film on which Disney lost more than $50 million.
Mr. Gold acknowledged that Mr. Disney and Mr. Katzenberg had clashed. And of the main character in "Treasure Planet," Mr. Disney said, "I hated that kid" and said the filmmakers had not made changes he suggested.
Disney, in the meantime, seems to be gaining ground with investors who are focused on what Disney is worth, at what price it can be sold and who can buy it.
Mr. Eisner has specifically remained in the background, said one executive, leaving the board to communicate with shareholders so that the battle with Mr. Gold and Mr. Disney does not appear personal - even though several Disney executives agree that it is.
The company also is marshaling its financial defenses in the wake of the rejected Comcast offer, focusing their message to shareholders on what they are doing to create value without a merger partner.
One example is the Cox-ESPN deal. George Bodenheimer, president of ESPN and ABC Sports, said the agreement, which surprised analysts, who were not expecting it so soon, was not driven by the recent bid from Comcast. "It is not a factor," he said.
A spokesman for Cox said ESPN agreed to an average increase in fees of 7 percent a year over the next nine years, far less than the 20 percent increase Cox has paid annually over the last five years. (The fees will be higher in earlier years and then decrease, the spokesman said.)
To be sure, the campaigning and spin-doctoring are not likely to stop as long as there are more votes to get before March 3.
"We haven't made up our minds yet," said Cynthia Richson, the corporate governance officer for the Ohio Public Employees Retirement System, a Disney shareholder. "It seems like every day there is an unexpected twist, isn't there?"
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