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One Year Later,.Disney Attempts Smoother Ride
By MERISSA MARR
Staff Reporter of THE WALL STREET JOURNAL
February 7, 2005
At an analyst meeting in Orlando, Fla. last week, Walt Disney Co. Chief Executive Michael Eisner compared the company's recent comeback to its emergence from the "dark hour" it faced in the 1940s during World War II.
There is no doubt that Disney is a year removed from a war of its own: the twin threats of a shareholder revolt and unsolicited takeover offer that roiled the company in early 2004. With Disney's 2005 annual meeting scheduled in Minneapolis this Friday, the question is: can the company sustain the fragile peace that has been established since last year's raucous meeting in Philadelphia?
The answer will depend on Disney's ability to navigate a string of interlocking events that are on the horizon. At the top of the list is the race to succeed Mr. Eisner, who has agreed to step down as CEO by the end of his contract in 2006. Central to that are the prospects of Disney President Robert Iger, Mr. Eisner's choice for the job.
Then there are questions about the durability of the financial and corporate governance improvements; the future plans of dissident ex-directors Roy E. Disney and Stanley Gold; and the intentions of Mr. Eisner himself.
Investors largely have been applauding Disney's turnaround efforts, coming off a year in which net income increased 85%. But with so much on the plate, some investors and corporate governance experts say that the company still has a lot left to prove.
"There are some key events on the horizon and I don't think it's the appropriate time for shareholders to let down their guard," says Greg Taxin, chief executive of proxy advisory firm Glass Lewis & Co. "It's not time to give the board a passing grade, it's still time to be evaluating."
At this time last year, Mr. Eisner was facing the fight of his life: shareholders wanted the 20-year veteran out; cable giant Comcast Corp. was knocking at Disney's door with an unsolicited takeover offer; and trouble spots like the company's ABC television network were still hounding the company's performance. At the annual meeting in Philadelphia, shareholders issued a historic rebuke of Mr. Eisner's leadership, with 45% of the shares voted withholding support for his re-election to the Disney board.
A year down the line, the picture has changed dramatically. Mr. Eisner has ceded his chairmanship and promised to step down as CEO. The well-timed recovery also has gone a long way to restoring calm. "They have essentially done what they promised to do," says Patrick McGurn, executive vice president of Institutional Shareholder Services, a proxy advisor that came out against Mr. Eisner last year.
But if this year's annual meeting will be quieter, there is still plenty of intrigue lurking around the corner, including the succession race. People close to the board say that it has been winnowing down a list of possible candidates for some time now, and it will begin reaching out to external candidates soon.
The focal point of the succession process so far has been Mr. Iger, who has been campaigning for the CEO's job and will get to use the annual meeting as his last public platform before the board starts contacting outsiders. Mr. Iger has done an impressive job of charming Wall Street to date; just a year ago he wasn't even on the succession radar.
But Mr. Iger represents a tricky choice for the board. His early emergence as a leading candidate is causing some critics to conclude that Disney's succession process was a sham all along. His appointment would almost certainly bring a new round of attacks from Mr. Gold and Mr. Disney, who led last year's revolt but have been quiet in the weeks leading up to this year's meeting.
Naming Mr. Iger also would raise questions about what if any future role Mr. Eisner wants at the company. The selection of an external candidate would almost certainly result in Mr. Eisner leaving next summer. But with Mr. Iger, who has been pushed by Mr. Eisner, the door could be kicked open for Mr. Eisner to seek the company's chairmanship again or maintain another role -- all developments that would bring the critics out of the woodwork again. Mr. Eisner could not immediately be reached for comment.
Mr. Eisner also may come under fire from other corners. One instance could be the publication of James B. Stewart's book "Disney War," which has attracted intense interest in the media business. The circulation in Hollywood of an early manuscript has prompted the publisher,Viacom Inc.'s Simon & Schuster, to move its publication forward by two weeks, to Feb. 22.
While the book paints a somewhat unflattering portrait of the inner workings of Disney, some people in Hollywood are watching more closely to see whether its depiction of Mr. Iger can be seized upon as evidence that he should not get the job.
Some investors appear more tolerant of a possible transitory role for Mr. Eisner, but many believe it wouldn't be in Disney's best interest to keep him around. "I find it hard to believe that a truly arms-length board would want Mr. Eisner's services for anything," says Richard H. Moore, state treasurer for North Carolina, whose pension fund owns 3.3 million Disney shares. "He'd bring too much baggage."
Ultimately, the challenge for the company isn't to lose sight of its financial recovery, especially in light of tough comparisons this year. One of the keys will be keeping ABC's nascent comeback, driven by hits like "Desperate Housewives" and "Lost," on track. Another factor that could rock the boat: the renegotiation of its NFL deal. How Disney fares in animation is also crucial; while the future of its relationship with Pixar Animation Studios still hangs in the balance, Disney has been highlighting its own animation efforts of late.
Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved.
By MERISSA MARR
Staff Reporter of THE WALL STREET JOURNAL
February 7, 2005
At an analyst meeting in Orlando, Fla. last week, Walt Disney Co. Chief Executive Michael Eisner compared the company's recent comeback to its emergence from the "dark hour" it faced in the 1940s during World War II.
There is no doubt that Disney is a year removed from a war of its own: the twin threats of a shareholder revolt and unsolicited takeover offer that roiled the company in early 2004. With Disney's 2005 annual meeting scheduled in Minneapolis this Friday, the question is: can the company sustain the fragile peace that has been established since last year's raucous meeting in Philadelphia?
The answer will depend on Disney's ability to navigate a string of interlocking events that are on the horizon. At the top of the list is the race to succeed Mr. Eisner, who has agreed to step down as CEO by the end of his contract in 2006. Central to that are the prospects of Disney President Robert Iger, Mr. Eisner's choice for the job.
Then there are questions about the durability of the financial and corporate governance improvements; the future plans of dissident ex-directors Roy E. Disney and Stanley Gold; and the intentions of Mr. Eisner himself.
Investors largely have been applauding Disney's turnaround efforts, coming off a year in which net income increased 85%. But with so much on the plate, some investors and corporate governance experts say that the company still has a lot left to prove.
"There are some key events on the horizon and I don't think it's the appropriate time for shareholders to let down their guard," says Greg Taxin, chief executive of proxy advisory firm Glass Lewis & Co. "It's not time to give the board a passing grade, it's still time to be evaluating."
At this time last year, Mr. Eisner was facing the fight of his life: shareholders wanted the 20-year veteran out; cable giant Comcast Corp. was knocking at Disney's door with an unsolicited takeover offer; and trouble spots like the company's ABC television network were still hounding the company's performance. At the annual meeting in Philadelphia, shareholders issued a historic rebuke of Mr. Eisner's leadership, with 45% of the shares voted withholding support for his re-election to the Disney board.
A year down the line, the picture has changed dramatically. Mr. Eisner has ceded his chairmanship and promised to step down as CEO. The well-timed recovery also has gone a long way to restoring calm. "They have essentially done what they promised to do," says Patrick McGurn, executive vice president of Institutional Shareholder Services, a proxy advisor that came out against Mr. Eisner last year.
But if this year's annual meeting will be quieter, there is still plenty of intrigue lurking around the corner, including the succession race. People close to the board say that it has been winnowing down a list of possible candidates for some time now, and it will begin reaching out to external candidates soon.
The focal point of the succession process so far has been Mr. Iger, who has been campaigning for the CEO's job and will get to use the annual meeting as his last public platform before the board starts contacting outsiders. Mr. Iger has done an impressive job of charming Wall Street to date; just a year ago he wasn't even on the succession radar.
But Mr. Iger represents a tricky choice for the board. His early emergence as a leading candidate is causing some critics to conclude that Disney's succession process was a sham all along. His appointment would almost certainly bring a new round of attacks from Mr. Gold and Mr. Disney, who led last year's revolt but have been quiet in the weeks leading up to this year's meeting.
Naming Mr. Iger also would raise questions about what if any future role Mr. Eisner wants at the company. The selection of an external candidate would almost certainly result in Mr. Eisner leaving next summer. But with Mr. Iger, who has been pushed by Mr. Eisner, the door could be kicked open for Mr. Eisner to seek the company's chairmanship again or maintain another role -- all developments that would bring the critics out of the woodwork again. Mr. Eisner could not immediately be reached for comment.
Mr. Eisner also may come under fire from other corners. One instance could be the publication of James B. Stewart's book "Disney War," which has attracted intense interest in the media business. The circulation in Hollywood of an early manuscript has prompted the publisher,Viacom Inc.'s Simon & Schuster, to move its publication forward by two weeks, to Feb. 22.
While the book paints a somewhat unflattering portrait of the inner workings of Disney, some people in Hollywood are watching more closely to see whether its depiction of Mr. Iger can be seized upon as evidence that he should not get the job.
Some investors appear more tolerant of a possible transitory role for Mr. Eisner, but many believe it wouldn't be in Disney's best interest to keep him around. "I find it hard to believe that a truly arms-length board would want Mr. Eisner's services for anything," says Richard H. Moore, state treasurer for North Carolina, whose pension fund owns 3.3 million Disney shares. "He'd bring too much baggage."
Ultimately, the challenge for the company isn't to lose sight of its financial recovery, especially in light of tough comparisons this year. One of the keys will be keeping ABC's nascent comeback, driven by hits like "Desperate Housewives" and "Lost," on track. Another factor that could rock the boat: the renegotiation of its NFL deal. How Disney fares in animation is also crucial; while the future of its relationship with Pixar Animation Studios still hangs in the balance, Disney has been highlighting its own animation efforts of late.
Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved.
