Disney Chief Takes A Hit

Disney chairman and chief executive Michael Eisner addresses shareholders at their annual meeting in Philadelphia Wednesday, March 3, 2004. (AP Photo/Tim Shaffer, POOL)
Responding to the ire of Disney shareholders, the media giant stripped CEO Michael Eisner of his chairman's title — a move some feel is unlikely to quell grumbles from the large number who voted to withhold their support for the embattled leader.

The Walt Disney Co.'s board voted unanimously Wednesday to sever the roles of chairman and chief executive, naming director George Mitchell as non-executive chairman. Eisner is keeping his job as CEO, and the board reiterated its approval for his leadership and the company's strategy.

Yet the change in management structure came only hours after a stunning number of Disney shareholders — 43 percent — did not support Eisner's re-election to the board.

Although the action curbs Eisner's previous control over Disney and addresses the concerns of corporate governance groups that had called for the change, it won't satisfy the company's most vocal critics.

Those include ex-board members Stanley Gold and Roy E. Disney, who have waged a three-month campaign to persuade shareholders to oust Eisner. The men have vowed to continue their fight.

In an interview with ABC on Wednesday, Eisner, 61, acknowledged the vote against him: "I do not belittle a large withhold vote." He also portrayed the jobs split as the result of wider reforms in corporate America.

"We should have been considering, and getting our company into contemporary governance and we did it today. We heard our shareholders who seemed to be interested in that, so we went ahead and did it," he said.

"And there are obviously certain people that are not happy with me personally, I guess," Eisner added.

Mitchell, a former senator from Maine, may also prove to be a controversial choice. Shareholders withheld 24 percent of their votes from his re-election Wednesday — the second highest total after Eisner.

Mitchell has been criticized by Gold and Roy Disney as being too close to Eisner and not independent enough because his law firm had worked for Disney in the past.

Shareholders, following the advice of Roy Disney and Gold, also withheld more than 20 percent of their votes from two other board members.

In its statement, the board said it understood that investors were concerned about more than just the issue of separating the chairman and CEO positions.

"We are aware that some voted for an immediate change in management and in the board," the statement said. "However, taking all these factors into account, we believe the action we have taken today is in the best long-term interest of the shareholders of the company."

Institutional Shareholder Services, a proxy advisory firm that had recommended its large investor clients withhold their votes from Eisner, said the Disney board's change was welcome, but insufficient.

"If the Disney board believes this is the silver bullet to fix all the problems, they are sort of mistaken," said Cheryl Gustitus, an ISS spokeswoman. "The level of the vote makes it clear that investors have a lot of more on their minds than just the splitting of the position."

One of the key opponents of Eisner was the California Public Employee Retirement System, or CalPERS, which holds 9.9 million shares in the company.

CalPERS said it had "lost confidence in Mr. Eisner's strategic vision and leadership in creating shareholder value in the company."

Analysts had said that in the face of the votes, Disney's board either had to split the chairman and CEO jobs, do nothing, or fire Eisner, who has served as Disney's chairman and CEO since 1984. His contract expires in 2006.

According to the Chicago Tribune, Eisner made about $7.3 million in cash and stock last year.

Besides its theme parks in California, Florida, Tokyo and Paris and its multiple movie studios (Touchstone Pictures, Hollywood Pictures, Miramax Films and Dimension Films), Disney owns a cruise line, ABC, ESPN, Buena Vista television, Hyperion Books,

Among other things, Disney is troubled by ratings that are way off for ABC, the animation division failing to produce more hits, hugely successful Pixar animation ending its partnership with the company, Disney parks being accused of declining quality and Comcast launching a hostile takeover.

Eisner is targeted for personnel decisions that proved embarrassing and expensive. His severance package for Michael Ovitz, the president he hired and fired in just over a year, was an estimated $140 million. Disney exec Jeffrey Katzenberg, whom Eisner called a little midget, got a $250 million settlement, reports CBS News Correspondent Jerry Bowen.

From a high of $42.50 a share in April 2000, Disney stock — along with much of the market — has ridden a rollercoaster to close at $26.65 a share Wednesday.

Eisner, who chaired the meeting, showed little emotion, even as Gold and Roy Disney took the stage — an event marked by cheers and standing ovations — to call for his firing.

Eisner briefly defended himself and his fellow managers, saying he enjoyed an "excellent relationship" with the dissident board members until they disagreed with his handling of the company after the Sept. 11, 2001 terrorist attacks.

"I love this company," Eisner said. "The board loves this company. And we are all passionate about the output of this company."

Eisner acknowledged that the performance of Disney's ABC TV network was "disappointing," but he also told shareholders that Disney has "the management skills and creative talent to continue its growth path."