Roy Disney/Stan Gold response to Eisner announced step down

[manning]

Roy E. Disney
Stanley P. Gold

4444 Lakeside Drive
Burbank, CA 91505

September 13, 2004

Mr. John Bryson
Mr. John Chen
Ms. Judith Estrin
Mr. Alwyn Lewis
Ms. Monica Lozano
Mr. Robert Matschullat
Mr. George Mitchell
Father Leo O'Donovan
Mr. Gary Wilson

Ladies and Gentlemen:

For each of you the upcoming September 20 Board meeting will be a moment of truth - one in which you will have the opportunity to exercise your fiduciary duties and demonstrate your commitment to serving the best interests of The Walt Disney Company and its stockholders.

Michael Eisner's announcement that he intends to remain CEO for the next two years forces you to make a critical decision. Will you choose to let the Company drift for two more years - allowing the pall Mr. Eisner has cast to continue to drive the most talented and creative people away from Disney, erode the morale of current employees, and prevent the Company from attracting the strong, dynamic, and creative leader it needs? Or will you reject Mr. Eisner's brazen attempt to usurp your responsibilities as directors by stage-managing the appointment of his anointed successor and instead tangibly show your commitment to best corporate practices by immediately initiating an expeditious and broad search for a world-class CEO?

We understand and appreciate the difficult position in which Mr. Eisner has once again placed you. As those instrumental in bringing both Michael Eisner and Frank Wells to Disney in 1984, we know how close some of you are to him personally. But there is no acceptable solution that includes Mr. Eisner's continued leadership at Disney for the next two years - let alone any longer than that. Regardless of whether he serves in a diminished capacity during the next two years as a "lame duck" or continues to manage the Company, the changes necessary to restore Disney's luster will simply not be made.

As former Disney directors, major stockholders, and individuals with a longtime passion and commitment to the Company, we believe it is intolerable for Michael Eisner to continue to hold the Company hostage for two more years - and perhaps longer. As recently pointed out by the Los Angeles Times, "Management experts note that most retiring CEO's take three to nine months to tie up loose ends and train a successor before hitting the exits. Longer transitions, they say, can be chaotic and disorienting." In the case of Disney, where management turmoil has enveloped the Company for years, dragging out succession planning for another two years would be catastrophic. Disney cannot compete effectively in the constantly changing and evolving entertainment and media industry if it is frozen in place. Stockholders will continue to see the value of their investment languish, just as the price of Disney's shares has over the past seven years.

While Mr. Eisner's announcement at first blush looks like a major change, it is in truth mere window dressing. What he has really proposed is a scheme to arrogate the authority of the Board and maintain the status quo at the Company's expense.

Press accounts suggest that Mr. Eisner intends to ask you to install him as chairman after he relinquishes the CEO title. In other words, his "succession plan" is for a company led by Michael Eisner and his obedient lieutenant, Bob Iger, to be handed over to . . . Michael Eisner and Bob Iger. Do you really think that this result will be tolerated by stockholders or will satisfy anyone that you have carried out your responsibilities? Any arrangement that permits Mr. Eisner to remain as Chairman after relinquishing his position as CEO is contrary to best governance practices. Disney stockholders deserve exemplary governance from their directors.

In effect, Mr. Eisner has challenged each of you to exercise the power delegated to you by stockholders. His preemptive announcement of his favored candidate to serve as CEO once again demonstrates his disregard for the proper responsibilities of the Board to make such vital decisions. In his view, the Board's role is merely to rubber stamp his unilateral decisions, to provide cover for his real agenda.

Your course is clear. We ask you to immediately engage an independent executive recruiting firm to conduct a worldwide search for a strong visionary leader capable of guiding this Company as it faces the challenges ahead. Because we believe that no one with the skill, experience, dynamism and creativity needed to lead Disney will take the job if Mr. Eisner remains as CEO or chairman, we ask you to concurrently announce that Michael Eisner will retire as CEO and as a director at the conclusion of that search. If you make it clear that Mr. Eisner is leaving the Company and the Board, we have no doubt that a number of excellent candidates will beat a path to your door. In that case, choosing a successor could be accomplished prior to the 2005 Annual Meeting of Disney stockholders. This is more than five months away, surely enough time for a proactive Board to get the job done.

The actions this Board needs to take are straightforward. Once again, Mr. Eisner has placed his personal ambitions ahead of the interests of the Disney stockholders; in so doing he has hijacked your duties as directors. The only question is whether you have the courage to confront Mr. Eisner. More than six months have passed since the stockholders cast their resounding vote of no confidence in Mr. Eisner and this Board. During those six months, you, the non-employee directors, have done little or nothing to restore that confidence. For the good of the Company, it is time for this Board to demonstrate its independence. Bringing in a new CEO - and doing so quickly - is the first step in restoring the vibrancy of this Company. It will allow the Company to strengthen and broaden its management team and rebuild the morale of Cast Members. It will allow the Company to attract top talent and begin to repair the damaged relationships with Disney's creative partners.

We intend to make it clear - to our fellow stockholders, to Disney Cast Members and to other Disney constituencies - that we will strongly support Directors who want to move Disney forward by requiring Mr. Eisner to leave as CEO and as a Director no later than the 2005 Annual Meeting and who are committed to the Board conducting an immediate search for a new CEO. By the same token, we will oppose with unrelenting vigor Directors who continue to support drift, delay, and decay. Should the Board not take the actions proposed above - immediately engaging an independent executive recruiting firm to conduct a worldwide search for a talented CEO and concurrently announcing that Michael Eisner will leave the Company at the conclusion of that search - we intend to take our case directly to our fellow stockholders and propose an alternate slate of directors committed to moving the Company forward aggressively.

You have the authority and the responsibility to manage Mr. Eisner's succession. In so doing, we urge you to put first and foremost the interest of the Company stockholders, Cast Members, and the millions of people who love Disney. The spotlight is now on each of you. Disney stockholders and Cast Members deserve to know where you stand after this important Board meeting. We await your response.

Yours very truly,

Roy E. Disney Stanley P. Gold

 

[manning]

EISNER'S LONG GOODBYE
For Dissident Shareholders, Muted Cheering



By Richard Verrier, LA Times Staff Writer


The dissidents have declared victory — sort of.

Michael Eisner's announcement that he intends to step down as Walt Disney Co.'s chief executive in two years was sweet news Friday for many disgruntled shareholders who are unhappy with his stewardship of the Burbank entertainment giant.

"Mr. Eisner and the Disney board heard our cry," said Barbara Hafer, treasurer for the state of Pennsylvania, whose public pension funds hold about 2.5 million Disney shares. "I do think it's a victory."

Yet in many ways, the celebration was muted.

Eisner's most outspoken critics — former Disney directors Roy E. Disney and Stanley P. Gold — declined to comment Friday. The two led a shareholder revolt against Eisner this year that culminated in a 45% no-confidence vote being cast against him at the company's annual meeting.

After that, the Disney board stripped Eisner of his chairman's title, but it continued to express confidence in him as chief executive.

Although Eisner has agreed to give up the CEO post as well, he has done so on his own terms: He says he'll head for the exit when his contract expires in September 2006.

That's not quick enough for North Carolina Treasurer Richard Moore. He said Eisner's schedule doesn't remove concerns that pension funds have about the company's day-to-day management and its long-term financial prospects.

"Two years is a long time for Eisner to stay around," said Moore, whose funds hold 3.1 million Disney shares. "What we want to see is a real succession plan in place, transparency in the pay packages for the CEO and robust earnings.

"If we don't see those things," he added, "investors shouldn't take any pressure off the Disney board."

Some of the nation's leading pension funds played a pivotal role in this year's shareholder rebellion. Fund officials from five states met with Disney's board in May to press the company for improved performance and a succession plan.

On Friday, a few pension fund officials said Eisner's decision raises as many questions as it answers.

"It's not like we're jumping for joy in Columbus," said Cynthia Richson, corporate governance officer of the Ohio Public Employees Retirement System. "We don't have enough information…. Is Mr. Eisner going to try to come back as chairman of the board?"

For his part, Eisner hasn't indicated whether he would seek to remain a director after his tenure as CEO ends.

That doesn't sit well with the California Public Employees' Retirement System, which owns 9 million Disney shares.

In a statement, CalPERS President Sean Harrigan called on Eisner to resign as a director when his time as CEO runs out. Eisner's "continued presence on the board," he said, "would prevent the company from the clean break that is needed to restore investor confidence."

 

[Chuck S]

Actually, two years gives the board time to carefully consider options and alternatives, and then replace Mr. Eisner. Corporate America rarely moves quickly on these decisions. Better to have someone you "know" for two years than replace them in a hurry with someone who could be even worse or has so little experience with "Disney" as a philosophy that even more drastic and detrimental money saving changes are proposed.

 

[crusader]

We ask you to immediately engage an independent executive recruiting firm to conduct a worldwide search for a strong visionary leader capable of guiding this Company as it faces the challenges ahead.

How much is this going to cost?

If you make it clear that Mr. Eisner is leaving the Company and the Board, we have no doubt that a number of excellent candidates will beat a path to your door.

Then why waste money on an executive search?

Eisner publicly announced he's leaving and has already resigned from the Board. Sounds pretty clear to me. Where'd everybody go?

Something's not right here.

Press accounts suggest that Mr. Eisner intends to ask you to install him as chairman after he relinquishes the CEO title.

I wonder who floated this little gem.

 

[manning]

You have to understand corporate politics. NOTHING is black and white. Everything is gray. Often a dark gray!!

Don't be naive. This isn't over yet.

Read the LA article and Roy and Stans responses again. They know what's going on. They have to. They all live in that corporate world!!

Some corporate struggles can make a power play in Russia look tame!!

 

[Sarangel]

Here is an interesting disection of both Eisner's letter and the one by Stan & Roy by Kevin Yee @ MiceAge.com.

Sarangel

 

[crusader]

manning -

The only reason it wouldn't be over right now is because somebody wants something they don't have.

That's why we have these articles to read.

 

[DWatWDW]

Originally posted by Chuck S
Actually, two years gives the board time to carefully consider options and alternatives, and then replace Mr. Eisner. Corporate America rarely moves quickly on these decisions. Better to have someone you "know" for two years than replace them in a hurry with someone who could be even worse or has so little experience with "Disney" as a philosophy that even more drastic and detrimental money saving changes are proposed.

NPR had a segment on this, where they interviewed several Wall Street analysts who thought this was odd. They thought up to 90 days is normal, and said 2 years is a long time for a transition.

 

[Chuck S]

Originally posted by DWatWDW
NPR had a segment on this, where they interviewed several Wall Street analysts who thought this was odd. They thought up to 90 days is normal, and said 2 years is a long time for a transition.

Well, I suppose ME could have waited until 90 days from the expiration of his contract to say he would not renew it. He does have 2 years left on a legal contract that would have to be paid, whether he resigned immediately or leaves in 2 years. Why should the company pay for 2 CEO salaries at the same time?

 

[DC7800]

Originally posted by Chuck S
He does have 2 years left on a legal contract that would have to be paid, whether he resigned immediately or leaves in 2 years. Why should the company pay for 2 CEO salaries at the same time?

Because it would be cheaper to pay two CEO's than it would to permit Eisner to cointinue to mismanage the company for another 24 months. The money wanted only up to now on ill-advised ventures (go.com, Fox Family, etc.) is example enough. Can you imagine how many more such mistakes Mike can potentially make in two years? Again, buying him out at any price would be less expensive (besides, his early departure should help the stock price; a monetary incentive to boot him now).

 

[raidermatt]

Nobody is saying this is a normal situation, so there's no point in defending it as such.

Yes, Eisner has 2 years left on his contract, and if it were as simple as that, there would be no reason for him to have made the announcement now. Disney does not need two years to find a replacement.

So those who are saying there is a lot more going on here are right on the money. The only question is what.

I've heard a theory that Eisner really is in trouble, and is trying to make sure he lasts the two years left on his contract. Its even been suggested that a reason for the Pixar thing dragging on so long is that they will only re-up if they are assured Eisner will definitely be gone at the end of his contract, and this announcement is a way to grease those wheels.

In other words, Eisner just doesn't have the pull he did, and needed to do this in order to get Pixar on board, which would go a long way towards preserving the rest of his term.

If that theory is correct, we should look for a new Pixar/Disney deal within the next few months.

I'm not sure I'm buying that, but it can't be written off either.

It could be as simple as he's trying to head-off the next attempt by Roy/Stan to oust him, which should include an alternate slate of directors. Why put the company through the turmoil of a board change when Eisner has agreed to leave in less than a year and a half (which is how long it would be by the time the next board meeting rolls around).

The idea that Eisner would be made Chairman at the end of his contract, with Iger as CEO is not exactly comforting.

I don't pretend to know what exactly is going on. But I am pretty sure that the biggest factor behind Eisner's actions is likely self-preservation. The long term good of the Walt Disney Company is unfortunately not at the top of the list. For him, that isn't about making sure he has enough dough to put the grandkids through college, or even avoiding having to pawn the yacht. Its about how he's viewed, his legacy if you will, and its about power and winning.

And he's pretty good at it.

 

[Chuck S]

Originally posted by raidermatt
. The long term good of the Walt Disney Company is unfortunately not at the top of the list.

Agreed. Unfortunately, I don't think it is at the top of Roy and Stan's list either.

 

[raidermatt]

I think its at least closer to the top on their list. My problem with them, and I don't pretend to be the first to say this, is they apparently underestimated Eisner's grip on the Board and his ability to simply hang around.

I guess you could make a case that no reasonable person would expect him to hang around after a 45% no vote. Especially when the next highest that I know of was Steve Case at around 22%, and he ended up resigning.

But Roy/Stan apparently either didn't realize how determined he was, or just simply ran out of bullets. Either way, a disappointment.

 

[manning]

For each of you the upcoming September 20 Board meeting will be a moment of truth - one in which you will have the opportunity to exercise your fiduciary duties and demonstrate your commitment to serving the best interests of The Walt Disney Company and its stockholders.

Bingo, the ball has been thrown into the laps of the directors!! The spotlight is now on them.

Stanley has also set a timeline and expressed what is expected of the board. And pointed out the potential consequences they face. In other words everyone has been brought into play.

Told you Stanley was good.

Good catch Sarangel. This is about the best analysis I have seen!!

 

[jimmytammy]

Sounds like its time to find out if the Directors are truly puppets or not. For the Disney Co., its shareholders and its fans, I hope no strings are attached so tight they cant be cut. Snip, snip snip I say.

 

[DisneyKidds]

Unfortunately, I don't think it is at the top of Roy and Stan's list either.

I understand Eisner's wealth based, self-preservation agenda and desire to hang on to the end of his contract to protect his ego and his bank account. I'm not entirely sure what you think Roy and Stanley's agenda is. Last I heard they weren't interested in the top job. If they aren't out for the job and the power, what would be at the top of their list? I think they are much more interested in what's best for Disney than Eisner is.

I like the letter. It is a powerful challenge to the board........one that will probably be ignored. Two years is much more time than would be needed to find a successor, but I bet Eisner holds on until then.

 

[dcentity2000]

Disney and Gold are not presenting a solution, they are complicating a problem. Those of you who believe that they have the answer should question why it has not been the spearhead of their campaign and most of all why they are not in power now.

The stronger man won the struggle and at the end of the day power is much of what leadership is. Creativity just doesn't suffice; anyone looking for a text book example of this should look up the histories of Acorn Computers and Be PLC, both computer orientated companies with vastly superior products that failed due to a lack of ruthless power behind them. They are now ghosts on the pages of the past.

If Roy and Stan are turned to for the answer, they'd better have a damn good one, because quite frankly, I have stuff all faith in a couple of drop outs. They'd better improve fast.



Rich::

 

[Chuck S]

Originally posted by DisneyKidds
I'm not entirely sure what you think Roy and Stanley's agenda is.

Based on their responss to the Comcast takeover bid, it could be to sell the company to the highest bidder, take the $$$ and run, then let the company succeed or fail, and they really won't care which.

 

[manning]

The stronger man won the struggle and at the end of the day power is much of what leadership is.

Not true grasshopper. Your still young and in time will learn. Power is not leadership. Just pay attention to what is happening. Some of the past world leaders (your Winston Curchill is one) where not liked but where respected for their leadership.

 

[crusader]

The board will hold firm and not give in to Roy and Stan who have clearly demonstrated with thier softball remarks to the Comcast campaign and their lack of vision how desperate they were to court the wrong suitors.

What's that saying about strange bedfellows? When your main cause is personal and for Roy and Stan that's exactly what it is, Disney's board is wise to watch their backs - anybody could move in here under false pretense, and that has nothing to do with saving disney.