For those who have been rejoicing over the recent changes in the Chairman's position at the Disney Company, read the following article. Yes, the people have spoken, but Mr Sloan has very eloquently communicated what I have been trying to say since the vote was announced...nothing has changed! What the Board and Michael Eisner have done amounts to nothing more than a collective "thumb nosing" at the stock holders of the company...
Splitting Chairs
Separating the jobs of chairman and CEO is not the answer to Disney's woes
by Allan Sloan, Newsweek
March 6 - One of Americas great fantasies is that all we have to do to make problems go away is to adopt a new magical practice. Top corporate leaders are acting badly? Separate the jobs of chairman and chief executive officer, and CEOs will instantly become a class act instead of a crass act. You dont have to change the substance, just the form.
Last week, for instance, the board of Walt Disney Co. trotted out its miracle cure for the problem of Michael Eisner. Instead of firing Eisner or publicly rebuking him or (God forbid) reducing his pay and perks, the board changed his job. Henceforth, hell be just the CEO. Former Sen. George Mitchell, previously the lead director, became chairman. That puts him in charge of running the board and setting long-term strategy, jobs for which he has no experience and no visible qualifications. It leaves Eisner, notorious for micro-managing and being a buttinsky, free to continue running day-to-day operations and doing what hes been doing.
Anyone who thinks this switch will solve Disneys problems is on a trip to Fantasyland. Nothing against Mitchell, but hes been on Disneys board since 1995, so hes not exactly a new broom. Besdies, hes almost as tainted by shareholder repudiation as Eisner is. Mitchell got a 24 percent no vote, which looks good only in comparison with Eisners 43 percent.
Sure, you can look at Eisners vote as being 57 percent yes. If youve been raised on the principle of "majority rules," Eisners 57 percent is a landslide and Mitchells 76 percent is a mega-landslide. But this isnt a democracy, its corporate America. Expectations are different. Corporate board elections are more like an Iraqi referendum under Saddam Hussein than Bush versus Gore. Corporate directors who run unopposed, like Eisner and Mitchell did, routinely get at least 95 percent of the votes cast. A 10 percent no is a serious reproach. Get 24 or 43 percent no, and you start dusting off your resume.
Steve Case, chairman of AOL Time Warner, didnt even wait around to do that last year. Seeing that he was likely to get a no-confidence vote in the 20 percent range, he stepped down as chairman months before the stockholder meeting. He was right: he got a 22 percent no vote, a stunning rebuke. To Cases credit, he had the class to be ashamed of such high negatives. Yet the Disney board, in the face of a 24 percent no vote for Mitchell, names him chairman. And proclaims it reform.
Its fine for a company to voluntarily separate the roles of chairman and chief executive. Bill Gates and Michael Dell have done that at Microsoft and Dell, respectively. If they think the company is better served by splitting the top jobs, who can doubt them? But expecting all companies to do that in the name of good governance is silly. One size fits all doesnt work any better in governance than in shoes. Theres no evidence that separation makes things better. But it sure makes things more expensive: stockholders have to shell out two pay-and-perks packages instead of one. Rules are all well and good. But do you think that the Mitchell-Eisner duo will run Disney better than Jack Welch ran General Electric when he was served as both chairman and CEO? Somehow, I doubt it.
It comes down to people. In the end, bad or weak executives and board members will do the wrong thing, good executives and board members will do the right thing. Sure, you need laws and structures. But character and courage and a strong moral compass are far more important.
