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War of words erupts at disney Original Source Link: (May no longer be active)
http://www.usatoday.com/money/media/2003-12-01-disney-words_x.htmhttp://www.usatoday.com/money/media/2003-12-01-disney-words_x.htm
War of words erupts at Walt Disney
By Michael McCarthy, USA TODAY
NEW YORK — Is CEO Michael Eisner part of the solution or part of the problem at Walt Disney (DIS)? And what's the likely impact of Roy E. Disney, the last active family heir, quitting the board and launching a public jeremiad against Eisner?
By Bob Child, AP, 2002
Those are questions facing the company board here on the second day of their meeting, following the extraordinary brawl that's broken out between Roy E. Disney, 73 — nephew of founder Walt and son of co-founder Roy O. Disney — and Eisner, 61, who's ruled the Magic Kingdom for nearly 20 years, since Roy E. Disney recruited him.
The house of mouse was far from the happiest place on Earth Monday as a second director in as many days quit and publicly called for Eisner's resignation. Stanley Gold, a longtime ally and business partner of Roy E. Disney, stepped down just a day after Roy E. Disney went public with a scathing resignation letter and rebuke of Eisner.
Even after a recent deal to sell off roughly 40% of his shares, Roy E. Disney controls about 1% of the stock, personally or through his Shamrock Holdings company.
Gold, who oversees Shamrock, says he and Roy E. Disney will lead an outsiders campaign to oust Eisner, whose contract runs through 2006. He assailed Disney Co.'s board as a rubber stamp for management.
"We will try to talk to shareholders and the public about the real potential this company has, and how much it's underperforming, in the hope they put pressure on the board to find a new CEO," Gold told USA TODAY.
Looking ahead, some parts of Disney Co. — including theme parks, Disney stores and networks ABC and ESPN — might be better off broken up, Gold says. "There are parts that would benefit as stand-alone parts."
But he believes Disney Co. should remain independent, despite recent reports that cite Comcast as a possible buyer. "There's no reason to sell this company," Gold says. "What's needed is creative leadership — and a board that holds management accountable."
Meanwhile, Roy E. Disney told CNBC's Business Center on Monday that Eisner recently stopped him from meeting with John Lassiter, the creative force of animation studio Pixar that co-produced hits Finding Nemo and Toy Story. Disney is negotiating with Pixar chief Steve Jobs to renew their deal. Having Pixar ally with another studio would be a major blow. "I was asked, not so politely, to stay out of that," Roy E. Disney says.
He called for Eisner's replacement by a "younger, more enthusiastic" management team. "It's time for new blood," he says.
The independent board members of Disney Co. slammed Roy E. Disney and Gold for their "destructive course" in a statement on Monday: "It is a disservice to shareholders and to employees that the company faces this distraction at a time when its performance is improving."
Roy E. Disney and Gold led an unsuccessful board revolt against Eisner last fall. Roy E. Disney previously left the board in 1984, before he helped recruit Eisner and the late Frank Wells.
Now freed of company positions that muzzled them from talking, Gold promises they will dish on festering tensions inside Disney Co. "We will not go away. We will be persistent," he says.
The latest round started when Roy E. Disney learned he would be ousted from the board he first joined in 1967. He delivered a three-page resignation letter to Eisner on Sunday, ticking off seven complaints in highly personal terms. Among them: Eisner's "micromanagement" style, a "brain drain" of talent on his watch, his "consistent refusal" to set a succession plan and the perception that Disney Co. has become a "rapacious, soul-less" conglomerate "always looking for the quick buck."
The firm countered with a statement by board member and former senator George Mitchell Sunday saying Roy E. Disney's departure was due to a mandatory retirement age for board members of 72, a rule adopted as part of a governance reform effort. Mitchell said two other directors were not re-nominated: Raymond Watson, 76, and Thomas Murphy, 77.
Disney Co. has been on the rebound this year. The company reported its net profit more than doubled for the fiscal fourth quarter ended Sept. 30 to $415 million, or 20 cents a share, from $175 million, or 9 cents, last year. While Disney Co. shares dropped to less than $14 in 2002 from their 2000 highs of more than $43, the stock is up more than 40% this year. In a positive sign for Disney Co., Wall Street did not react to the war of words. Shares closed at $23.17 on Monday, up 8 cents, and not far off their 52-week high of $23.80.
"The timing of this is in Eisner's favor. Results are on the upswing, ABC is stabilizing, and film has had the best six months in its history," says media analyst Michael Gallant of CIBC World Markets. "The time to do this was 18 months ago when the results were depressed and there were a lot more corporate governance issues."
One expert warns that the company has problems no matter who runs it, such as mature theme park assets still being hammered by the travel decline. "The board should be asking: 'What can revive this company?' " says Pascal Volle of Mercer Management Consulting. "I have difficulty seeing the strategy over the next 10 years for growing this company."
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