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Disney shakeup secures Eisner's job
NewsTeam | CBS [MarketWatch] | POSTED: 12.01.03 @18:18
Company chief seen gaining power after departures. Board members Roy Disney and Stanley Gold accomplished the opposite of what they had hoped in falling on their swords in a bid to oust Walt Disney Chairman and CEO Michael Eisner.
That's the view from Wall Street and corporate-governance experts who say Gold and Disney, in just resigning as directors, consolidated Eisner's power on the board by removing his two most vocal critics.
To many corporate watchers, Eisner's power base appears solid once again, since many remaining directors have past ties to him and the company. They include former U.S. Sen. George Mitchell, who once served as a consultant to Disney, and Edison International CEO John Bryson, whose wife is an executive for Lifetime Entertainment Television, which is 50 percent owned by Disney.
Another, Reveta Bowers, head of the Center for Early Education, once schooled Eisner's children. Eisner contributed to Georgetown University, where board member Father Leo J. Donovan is president. Director Robert A.M. Stern has done architectural work for Eisner.
Eisner is under contract through September 2006, when he'll be 64. His departure is now unlikely before then, unless the entertainment giant hits the skids, analysts said.
"This underscores the point that Eisner's not likely to go anywhere soon," Oppenheimer & Co. analyst Peter Mirsky said.
An about face
Yet due to the dissidents' departure, Eisner's recent efforts to soothe critics of Disney's corporate-governance practices may be undone.
BusinessWeek's annual report on the best and worst corporate boards in America gave the entertainment giant (DIS: news, chart, profile) high marks earlier this year for improving its image.
Disney had repeatedly ranked near bottom in corporate governance among major U.S. firms after large payouts to Eisner and other executives. A series of initiatives undertaken in the past two years resulted in BusinessWeek's higher ranking this year.
"It looked good then. But we weren't counting on Mr. Eisner," said Louis Lavelle, BusinessWeek's editor on management issues. "I think the bloom is off the rose with Disney and corporate governance."
Lavelle said it was unclear whether the magazine would reconsider its evaluation of Disney's corporate governance practices. Lavelle was critical of Eisner's tactics in this case, noting he previously declared Gold to be an inside director and took him off several corporate committees late last year. He suggested Eisner was now paying lip service to governance rules.
"He's showing people a little roadmap on circumventing corporate governance," Lavelle said.
Change agents neutralized
Still, there is something to be said for the departures of Roy Disney and Gold, said Robert Mittelstaedt, vice dean of executive education at the University of Pennsylvania's Wharton School of Management.
"It at least poses the question of what's going on," Mittelstaedt said. "The question of whether Eisner's the right guy to run the company keeps coming up."
The likelihood that it will result in change, however, is minimal, he added. Gold's resignation Monday means Roy Disney, who stepped down Sunday, has no support in the boardroom, Mittelstaedt said.
Roy Disney announced his departure Sunday as it appeared he would be removed due to a mandatory retirement age. Gold, his partner in the investment firm Shamrock Holdings, followed shortly after with his own resignation announcement.
Gold and Disney had grown increasingly critical of the direction Eisner was taking in running the company. That came to a head when the two issued scathing letters criticizing Eisner's strategy and tactics.
Gold's letter took Eisner to task for forcing Disney and two other board members - Thomas Murphy and Raymond Watson - to resign because they reached the mandatory retirement age.
Gold said Roy Disney was exempt from the rule because he is an insider director, and accused the company of "yet another attempt by this board to squelch dissent by hiding behind the veil of 'good governance."
Perish the thought
In response, Disney called Gold's allegations "untrue and unwarranted."
"It is a disservice to shareholders and to employees that the company faces this distraction at a time when its performance is improving as a result of growth plans and initiatives being implemented by management with board approval," the company's statement said.
Close attention will be paid to how Disney handles the replacement of departing board members. Since there are four board members leaving -- Disney, Gold, Watson and Murphy -- the company is likely to replace at least some of them. It may choose, however, to simply pare down the size of its board, which has been large by corporate governance standards.
And while the episode may be an unsightly public relations blemish for Disney, it's unlikely to affect the company's operations.
"I don't expect it to have much of an impact," said analyst David Martell of Loop Capital Markets. "The company is doing better. I would say the outlook appears to be improving in a number of the businesses."
Russ Britt is the Los Angeles Bureau Chief for CBS.MarketWatch.com.
http://www.alwayson-network.com/comments.php?id=1853_0_7_0_C
Disney shakeup secures Eisner's job
NewsTeam | CBS [MarketWatch] | POSTED: 12.01.03 @18:18
Company chief seen gaining power after departures. Board members Roy Disney and Stanley Gold accomplished the opposite of what they had hoped in falling on their swords in a bid to oust Walt Disney Chairman and CEO Michael Eisner.
That's the view from Wall Street and corporate-governance experts who say Gold and Disney, in just resigning as directors, consolidated Eisner's power on the board by removing his two most vocal critics.
To many corporate watchers, Eisner's power base appears solid once again, since many remaining directors have past ties to him and the company. They include former U.S. Sen. George Mitchell, who once served as a consultant to Disney, and Edison International CEO John Bryson, whose wife is an executive for Lifetime Entertainment Television, which is 50 percent owned by Disney.
Another, Reveta Bowers, head of the Center for Early Education, once schooled Eisner's children. Eisner contributed to Georgetown University, where board member Father Leo J. Donovan is president. Director Robert A.M. Stern has done architectural work for Eisner.
Eisner is under contract through September 2006, when he'll be 64. His departure is now unlikely before then, unless the entertainment giant hits the skids, analysts said.
"This underscores the point that Eisner's not likely to go anywhere soon," Oppenheimer & Co. analyst Peter Mirsky said.
An about face
Yet due to the dissidents' departure, Eisner's recent efforts to soothe critics of Disney's corporate-governance practices may be undone.
BusinessWeek's annual report on the best and worst corporate boards in America gave the entertainment giant (DIS: news, chart, profile) high marks earlier this year for improving its image.
Disney had repeatedly ranked near bottom in corporate governance among major U.S. firms after large payouts to Eisner and other executives. A series of initiatives undertaken in the past two years resulted in BusinessWeek's higher ranking this year.
"It looked good then. But we weren't counting on Mr. Eisner," said Louis Lavelle, BusinessWeek's editor on management issues. "I think the bloom is off the rose with Disney and corporate governance."
Lavelle said it was unclear whether the magazine would reconsider its evaluation of Disney's corporate governance practices. Lavelle was critical of Eisner's tactics in this case, noting he previously declared Gold to be an inside director and took him off several corporate committees late last year. He suggested Eisner was now paying lip service to governance rules.
"He's showing people a little roadmap on circumventing corporate governance," Lavelle said.
Change agents neutralized
Still, there is something to be said for the departures of Roy Disney and Gold, said Robert Mittelstaedt, vice dean of executive education at the University of Pennsylvania's Wharton School of Management.
"It at least poses the question of what's going on," Mittelstaedt said. "The question of whether Eisner's the right guy to run the company keeps coming up."
The likelihood that it will result in change, however, is minimal, he added. Gold's resignation Monday means Roy Disney, who stepped down Sunday, has no support in the boardroom, Mittelstaedt said.
Roy Disney announced his departure Sunday as it appeared he would be removed due to a mandatory retirement age. Gold, his partner in the investment firm Shamrock Holdings, followed shortly after with his own resignation announcement.
Gold and Disney had grown increasingly critical of the direction Eisner was taking in running the company. That came to a head when the two issued scathing letters criticizing Eisner's strategy and tactics.
Gold's letter took Eisner to task for forcing Disney and two other board members - Thomas Murphy and Raymond Watson - to resign because they reached the mandatory retirement age.
Gold said Roy Disney was exempt from the rule because he is an insider director, and accused the company of "yet another attempt by this board to squelch dissent by hiding behind the veil of 'good governance."
Perish the thought
In response, Disney called Gold's allegations "untrue and unwarranted."
"It is a disservice to shareholders and to employees that the company faces this distraction at a time when its performance is improving as a result of growth plans and initiatives being implemented by management with board approval," the company's statement said.
Close attention will be paid to how Disney handles the replacement of departing board members. Since there are four board members leaving -- Disney, Gold, Watson and Murphy -- the company is likely to replace at least some of them. It may choose, however, to simply pare down the size of its board, which has been large by corporate governance standards.
And while the episode may be an unsightly public relations blemish for Disney, it's unlikely to affect the company's operations.
"I don't expect it to have much of an impact," said analyst David Martell of Loop Capital Markets. "The company is doing better. I would say the outlook appears to be improving in a number of the businesses."
Russ Britt is the Los Angeles Bureau Chief for CBS.MarketWatch.com.
