As Disney Loses Steam, Insider Loses Patience
By LAURA M. HOLSON
(New York Times, August 18, 2002)
BEVERLY HILLS, Calif.
THERE are few things Stanley P. Gold seems uncomfortable talking about. But on Thursday morning, over breakfast at his stately home not far from Rodeo Drive, he fidgeted when pressed to explain his dissatisfaction with Michael D. Eisner, chairman of the Walt Disney Company.
Under Mr. Eisner, Disney's share price hit a historical high of $43.63 in April 2000. Since then, however, Mr. Gold, who runs Shamrock Holdings, the investment arm of the Disney family, has watched Disney's value plummet nearly 65 percent, and along with it much of the family fortune. Now, with a turnaround for the company expected to be at least a year or two away, Mr. Gold, who also serves on the Disney board, is at the center of a power struggle that threatens to shake up the corporate suite.
"The family owes a great debt of gratitude to Michael for what he has done," Mr. Gold said, picking at a bowl of blueberries and cantaloupe. "But my goal is to try to get the Disney Company to perform at a level of efficiency it hasn't seen for a number of years, given its fine assets."
Mr. Gold, 59, a feisty lawyer who speaks in rapid-fire bursts, has long been a supporter of Mr. Eisner and was instrumental in helping him land the job of chairman and chief executive 18 years ago. But in recent weeks, Mr. Gold and a longtime friend and fellow board member, Roy E. Disney, a nephew of the late Walt Disney and owner of 17.5 million shares, have become outspoken in their criticism of Mr. Eisner.
In many ways, their stirring is reminiscent of the boardroom showdown in 1984 in which Mr. Gold helped oust Disney's sleepy management and replace it with Mr. Eisner, a victory Mr. Gold celebrated by buying license plates that read "10-3," the board's final vote on the issue.
Friends and colleagues of Mr. Gold say he is demanding that Mr. Eisner, who turned around the Disney brand in the 1980's but has stumbled in recent years, be held accountable for the company's poor showing and more responsive to the concerns of shareholders (read: the Disney family) and the board.
In contrast, Mr. Eisner, now 60, has in recent years increasingly — and at times quite publicly — blamed others, including former executives, stock analysts and journalists, for Disney's travails during his tenure.
Both sides have much at stake. Roy Disney is one of the three largest individual shareholders, along with the Bass family and Mr. Eisner, who added $10 million worth of shares to his holdings last week.
The renewed activism of Mr. Gold is typical of how he, the son of a wholesale liquor salesman, who has made a career out of forcing managers to either clean up their acts or pack their bags, runs the Disney family investment interests.
"You have to remember, the Disney name is on the front door, and that is what Stanley and Roy are concerned about," said R. Rudolph Reinfrank, a managing general partner at Clarity Partners, who worked with Mr. Gold at Shamrock in the 1980's. "Stanley's interest is driven by his relationship with Roy as well as looking out for the shareholders."
Aside from his one remark, Mr. Gold declined to discuss the Walt Disney Company, his relationship with Mr. Eisner or the recent boardroom turmoil. And even Hollywood insiders cannot handicap whether he and Mr. Disney can pressure Mr. Eisner to follow through on his promise to come up with a succession plan or turn around the ailing ABC network, whose ratings have slid.
Mr. Gold has been representing Roy Disney's interests since becoming chief executive of Shamrock Holdings when it was founded in 1978, after practicing law for 18 years at a boutique firm in Los Angeles. The men met in the early 1970's, Mr. Gold said, when he helped Mr. Disney buy a ranch in Oregon, and they became friends.
"Politically, we are opposites," said Mr. Gold, a liberal Democrat. Stylistically, they are different, too. Friends say Mr. Gold is a street fighter with an outsized ego who delights in provoking debate, while the more patrician Mr. Disney tends to be more quiet and reserved.
"But philosophically we are the same," said Mr. Gold, who has a photograph of Mr. Disney and his wife, Patty Disney, on the desk in his study, one of several well-appointed rooms stuffed with modern paintings and knickknacks from Mr. Gold's travels. "He knows enormous amounts of things about science, sailing, mechanical stuff — things I want to know about. He does crossword puzzles in ink." The Disneys also share Mr. Gold's passion for travel off the beaten track. Several years ago, Mr. Gold and his wife, Ilene, vacationed with the Disneys in Uzbekistan.
ON Mr. Gold's watch, the fortune of Roy Disney and his four children was diversified. Shamrock Group is a merchant bank with 15 investment professionals who work in several divisions. There are three main ones: a real estate unit; Shamrock Capital Advisors, an investment manager; and Shamrock Holdings, the investment portfolio of the Disney family. There are also some private equity funds and partnerships.
Industry executives estimate that Shamrock, which began with a $2 million investment, has about $1.7 billion under management, 75 percent of which belongs to the Disney family. Shamrock uses the Disney family stock, among other forms of capital, as collateral for loans to invest in other businesses.
Mr. Gold is often described as a takeover strategist, someone who buys a stake in a troubled company, then spends months or years pressuring management to shore up the business, with the hope of selling it for a profit.
The designation makes him bristle, particularly because it evokes the image of the swashbuckling 1980's-style corporate raiders who broke up companies solely to line their own pockets. But he conceded: "I'm persistent. I never go away when I have the right argument. I won't be bullied. I would tell you I am rational and, I am not complaining about my life, but because of my idiosyncrasies people call me a cowboy. But I don't see myself that way. I simply want my questions answered."
He is quiet for a moment, then asks in a flash of self-consciousness, "Have I been too defensive?"
Shamrock typically spends $25 million to $50 million on an investment, Mr. Gold said, and it invests both in the United States and abroad. But for the last 13 years, Shamrock has been buying stakes in companies in Israel, a place where he sees opportunity despite the current turmoil.
So far, Mr. Gold has invested about $800 million there, making Shamrock one of Israel's largest private foreign investors. "We made a point to get to know the political leadership, educators and businessmen before investing there," said Clifford A. Miller, senior consultant of Shamrock Capital Advisors, who works closely with Mr. Gold.
Mr. Gold, who is Jewish and a large charitable donor to Jewish and other causes, says he counts Israel's former prime minister, Ehud Barak, among his friends.
One of Shamrock's most successful investments was Koor Industries, Israel's leading industrial conglomerate, which makes products from chemicals to plates. In 1995, Shamrock acquired a 22.5 percent stake in Koor for about $150 million.
"It must have had 25 different operating companies," Mr. Gold said. "I don't know of any management alive who can manage all those divisions."
Mr. Gold encouraged Koor to sell or spin off several divisions and, in 1997, Shamrock said it sold its interest for about $256 million.
SHAMROCK also tried a $2.6 billion leveraged buyout of Polaroid in 1988. The effort failed, but Shamrock netted a tidy $40 million when it sold the shares it had been accumulating.
Shamrock has also had some notable failures. In 1991, Trefoil Capital Investors, an investment fund it runs, paid $100 million for a controlling stake in L.A. Gear, the athletic shoe company that in 1990 was No. 3 in the United States behind Nike and Reebok International, but had fallen on hard times.
Mr. Gold said he replaced the management (he himself became chief executive of L.A. Gear in 1992), trimmed the inventory and product lines and sharply cut costs. But by 1997, with sales still faltering and the company almost bankrupt, Trefoil got out, losing an estimated $15 million, according to industry executives.
"That was nobody's fault but mine," Mr. Gold said. "I knew I was catching a falling knife." (L.A. Gear went bankrupt, but the brand still exists and is sold in specialty stores, according to Mr. Gold.)
Shamrock also lost an estimated $10 million on a stake in the Grand Union supermarket chain. "We had too much debt for a low-margin business," Mr. Gold said. The chain, like L.A. Gear, filed for bankruptcy protection.
THOSE high-profile gaffes have left some investors in Los Angeles wondering how Shamrock has fared in the recent market meltdown. For one, Disney's shrinking share price has made it harder to borrow against the family's stake to make more investments. Already, Shamrock has experienced one margin call, but a person close to the company said the family did not want to sell Disney stock.
"I would be foolish to tell you that a low stock price would not impact what we buy," said Mr. Gold, who declined to comment about the margin call. "But it is manageable." Besides, he added, sounding a little defensive again, "we have also had low-profile gains."
Born in 1942 in South Central Los Angeles, Mr. Gold graduated from the University of California at Los Angeles with a degree in political science in 1964. He received a law degree from the University of Southern California three years later, and on Friday was named chairman of the board of trustees. He married Ilene in 1964, and was a lawyer at Gang, Tyre, Ramer & Brown for 18 years before joining Shamrock.
Mr. Gold can be alternately charming and combative if a listener fails to comprehend a point quickly. On this Thursday morning at his home in Beverly Hills, the walls lined with brightly colored paintings by the likes of Raoul Dufy, he answers his own telephone with a curt "hello." He beams as he points out a fanciful drawing on his wall, an outsized slice of strawberry cheesecake floating on the East River by Claes Oldenburg, or a baseball in his collection signed by Babe Ruth.
"I like whimsical things," he said. Mr. Gold also likes vintage Porsches, and he has a garage full of them — just past the pool and wide lawn.
But his most recent hobby — something he picked up three years ago — is racing Porsches. "I think trying things you are not good at is a way to keep you active and young," Mr. Gold said. He stroked a nascent beard on his chin and laughed, explaining that a fellow driver suggested a goatee might help him drive as quickly as his younger peers.
One thing Mr. Gold is struggling with these days is why Disney continues to fare poorly.
People close to the Disney family say Mr. Gold and Mr. Disney have voiced their concerns privately since earlier this year. Such messages were often delivered by Mr. Gold, one former Disney executive said. But if Mr. Disney had a problem with the Disney brand, perhaps whether to continue licensing Disney characters to hot-dog makers, he would tell Mr. Eisner directly, the executive said. "Roy always won those arguments," he added.
But it was not until two weeks ago, when Disney announced that fourth-quarter earnings would be lower than expected because of lackluster attendance at theme parks and a slower-than-anticipated economy, that terse words were exchanged. Wall Street punished Disney's stock, which hit an eight-year low in the days after the announcement. The news came on the heels of a June board meeting at which Mr. Eisner presented a five-year growth plan that some board members found disappointing, said a person close to the board.
Aside from the theme parks, and whether international visitors return to the American ones anytime soon, ABC remains Disney's biggest problem. If its fall season fails to attract more viewers — and advertisers — Mr. Eisner will have to answer to the board.
Mr. Gold and Mr. Disney have faced tough times before. Back in 1984, Disney's board was split over who it thought should succeed Ron Miller, Walt Disney's son-in-law, who was being ousted as chief executive. One side heavily favored the more corporate Dennis Stanfill, a former investment banker who was head of 20th Century Fox.
The other camp, which included Mr. Gold and Mr. Disney, wanted Mr. Eisner and another film executive, Frank G. Wells, who became Disney's president and later died in a helicopter crash. Mr. Gold fiercely lobbied the other board members, and Mr. Eisner, who was then Hollywood's golden boy, won.
Mr. Eisner remains cordial with Mr. Gold and Mr. Disney, but he knows how formidable a foe he has in each. Friends of Mr. Eisner say, however, that he, too, has keen survival skills.
In other words, stay tuned.
By LAURA M. HOLSON
(New York Times, August 18, 2002)
BEVERLY HILLS, Calif.
THERE are few things Stanley P. Gold seems uncomfortable talking about. But on Thursday morning, over breakfast at his stately home not far from Rodeo Drive, he fidgeted when pressed to explain his dissatisfaction with Michael D. Eisner, chairman of the Walt Disney Company.
Under Mr. Eisner, Disney's share price hit a historical high of $43.63 in April 2000. Since then, however, Mr. Gold, who runs Shamrock Holdings, the investment arm of the Disney family, has watched Disney's value plummet nearly 65 percent, and along with it much of the family fortune. Now, with a turnaround for the company expected to be at least a year or two away, Mr. Gold, who also serves on the Disney board, is at the center of a power struggle that threatens to shake up the corporate suite.
"The family owes a great debt of gratitude to Michael for what he has done," Mr. Gold said, picking at a bowl of blueberries and cantaloupe. "But my goal is to try to get the Disney Company to perform at a level of efficiency it hasn't seen for a number of years, given its fine assets."
Mr. Gold, 59, a feisty lawyer who speaks in rapid-fire bursts, has long been a supporter of Mr. Eisner and was instrumental in helping him land the job of chairman and chief executive 18 years ago. But in recent weeks, Mr. Gold and a longtime friend and fellow board member, Roy E. Disney, a nephew of the late Walt Disney and owner of 17.5 million shares, have become outspoken in their criticism of Mr. Eisner.
In many ways, their stirring is reminiscent of the boardroom showdown in 1984 in which Mr. Gold helped oust Disney's sleepy management and replace it with Mr. Eisner, a victory Mr. Gold celebrated by buying license plates that read "10-3," the board's final vote on the issue.
Friends and colleagues of Mr. Gold say he is demanding that Mr. Eisner, who turned around the Disney brand in the 1980's but has stumbled in recent years, be held accountable for the company's poor showing and more responsive to the concerns of shareholders (read: the Disney family) and the board.
In contrast, Mr. Eisner, now 60, has in recent years increasingly — and at times quite publicly — blamed others, including former executives, stock analysts and journalists, for Disney's travails during his tenure.
Both sides have much at stake. Roy Disney is one of the three largest individual shareholders, along with the Bass family and Mr. Eisner, who added $10 million worth of shares to his holdings last week.
The renewed activism of Mr. Gold is typical of how he, the son of a wholesale liquor salesman, who has made a career out of forcing managers to either clean up their acts or pack their bags, runs the Disney family investment interests.
"You have to remember, the Disney name is on the front door, and that is what Stanley and Roy are concerned about," said R. Rudolph Reinfrank, a managing general partner at Clarity Partners, who worked with Mr. Gold at Shamrock in the 1980's. "Stanley's interest is driven by his relationship with Roy as well as looking out for the shareholders."
Aside from his one remark, Mr. Gold declined to discuss the Walt Disney Company, his relationship with Mr. Eisner or the recent boardroom turmoil. And even Hollywood insiders cannot handicap whether he and Mr. Disney can pressure Mr. Eisner to follow through on his promise to come up with a succession plan or turn around the ailing ABC network, whose ratings have slid.
Mr. Gold has been representing Roy Disney's interests since becoming chief executive of Shamrock Holdings when it was founded in 1978, after practicing law for 18 years at a boutique firm in Los Angeles. The men met in the early 1970's, Mr. Gold said, when he helped Mr. Disney buy a ranch in Oregon, and they became friends.
"Politically, we are opposites," said Mr. Gold, a liberal Democrat. Stylistically, they are different, too. Friends say Mr. Gold is a street fighter with an outsized ego who delights in provoking debate, while the more patrician Mr. Disney tends to be more quiet and reserved.
"But philosophically we are the same," said Mr. Gold, who has a photograph of Mr. Disney and his wife, Patty Disney, on the desk in his study, one of several well-appointed rooms stuffed with modern paintings and knickknacks from Mr. Gold's travels. "He knows enormous amounts of things about science, sailing, mechanical stuff — things I want to know about. He does crossword puzzles in ink." The Disneys also share Mr. Gold's passion for travel off the beaten track. Several years ago, Mr. Gold and his wife, Ilene, vacationed with the Disneys in Uzbekistan.
ON Mr. Gold's watch, the fortune of Roy Disney and his four children was diversified. Shamrock Group is a merchant bank with 15 investment professionals who work in several divisions. There are three main ones: a real estate unit; Shamrock Capital Advisors, an investment manager; and Shamrock Holdings, the investment portfolio of the Disney family. There are also some private equity funds and partnerships.
Industry executives estimate that Shamrock, which began with a $2 million investment, has about $1.7 billion under management, 75 percent of which belongs to the Disney family. Shamrock uses the Disney family stock, among other forms of capital, as collateral for loans to invest in other businesses.
Mr. Gold is often described as a takeover strategist, someone who buys a stake in a troubled company, then spends months or years pressuring management to shore up the business, with the hope of selling it for a profit.
The designation makes him bristle, particularly because it evokes the image of the swashbuckling 1980's-style corporate raiders who broke up companies solely to line their own pockets. But he conceded: "I'm persistent. I never go away when I have the right argument. I won't be bullied. I would tell you I am rational and, I am not complaining about my life, but because of my idiosyncrasies people call me a cowboy. But I don't see myself that way. I simply want my questions answered."
He is quiet for a moment, then asks in a flash of self-consciousness, "Have I been too defensive?"
Shamrock typically spends $25 million to $50 million on an investment, Mr. Gold said, and it invests both in the United States and abroad. But for the last 13 years, Shamrock has been buying stakes in companies in Israel, a place where he sees opportunity despite the current turmoil.
So far, Mr. Gold has invested about $800 million there, making Shamrock one of Israel's largest private foreign investors. "We made a point to get to know the political leadership, educators and businessmen before investing there," said Clifford A. Miller, senior consultant of Shamrock Capital Advisors, who works closely with Mr. Gold.
Mr. Gold, who is Jewish and a large charitable donor to Jewish and other causes, says he counts Israel's former prime minister, Ehud Barak, among his friends.
One of Shamrock's most successful investments was Koor Industries, Israel's leading industrial conglomerate, which makes products from chemicals to plates. In 1995, Shamrock acquired a 22.5 percent stake in Koor for about $150 million.
"It must have had 25 different operating companies," Mr. Gold said. "I don't know of any management alive who can manage all those divisions."
Mr. Gold encouraged Koor to sell or spin off several divisions and, in 1997, Shamrock said it sold its interest for about $256 million.
SHAMROCK also tried a $2.6 billion leveraged buyout of Polaroid in 1988. The effort failed, but Shamrock netted a tidy $40 million when it sold the shares it had been accumulating.
Shamrock has also had some notable failures. In 1991, Trefoil Capital Investors, an investment fund it runs, paid $100 million for a controlling stake in L.A. Gear, the athletic shoe company that in 1990 was No. 3 in the United States behind Nike and Reebok International, but had fallen on hard times.
Mr. Gold said he replaced the management (he himself became chief executive of L.A. Gear in 1992), trimmed the inventory and product lines and sharply cut costs. But by 1997, with sales still faltering and the company almost bankrupt, Trefoil got out, losing an estimated $15 million, according to industry executives.
"That was nobody's fault but mine," Mr. Gold said. "I knew I was catching a falling knife." (L.A. Gear went bankrupt, but the brand still exists and is sold in specialty stores, according to Mr. Gold.)
Shamrock also lost an estimated $10 million on a stake in the Grand Union supermarket chain. "We had too much debt for a low-margin business," Mr. Gold said. The chain, like L.A. Gear, filed for bankruptcy protection.
THOSE high-profile gaffes have left some investors in Los Angeles wondering how Shamrock has fared in the recent market meltdown. For one, Disney's shrinking share price has made it harder to borrow against the family's stake to make more investments. Already, Shamrock has experienced one margin call, but a person close to the company said the family did not want to sell Disney stock.
"I would be foolish to tell you that a low stock price would not impact what we buy," said Mr. Gold, who declined to comment about the margin call. "But it is manageable." Besides, he added, sounding a little defensive again, "we have also had low-profile gains."
Born in 1942 in South Central Los Angeles, Mr. Gold graduated from the University of California at Los Angeles with a degree in political science in 1964. He received a law degree from the University of Southern California three years later, and on Friday was named chairman of the board of trustees. He married Ilene in 1964, and was a lawyer at Gang, Tyre, Ramer & Brown for 18 years before joining Shamrock.
Mr. Gold can be alternately charming and combative if a listener fails to comprehend a point quickly. On this Thursday morning at his home in Beverly Hills, the walls lined with brightly colored paintings by the likes of Raoul Dufy, he answers his own telephone with a curt "hello." He beams as he points out a fanciful drawing on his wall, an outsized slice of strawberry cheesecake floating on the East River by Claes Oldenburg, or a baseball in his collection signed by Babe Ruth.
"I like whimsical things," he said. Mr. Gold also likes vintage Porsches, and he has a garage full of them — just past the pool and wide lawn.
But his most recent hobby — something he picked up three years ago — is racing Porsches. "I think trying things you are not good at is a way to keep you active and young," Mr. Gold said. He stroked a nascent beard on his chin and laughed, explaining that a fellow driver suggested a goatee might help him drive as quickly as his younger peers.
One thing Mr. Gold is struggling with these days is why Disney continues to fare poorly.
People close to the Disney family say Mr. Gold and Mr. Disney have voiced their concerns privately since earlier this year. Such messages were often delivered by Mr. Gold, one former Disney executive said. But if Mr. Disney had a problem with the Disney brand, perhaps whether to continue licensing Disney characters to hot-dog makers, he would tell Mr. Eisner directly, the executive said. "Roy always won those arguments," he added.
But it was not until two weeks ago, when Disney announced that fourth-quarter earnings would be lower than expected because of lackluster attendance at theme parks and a slower-than-anticipated economy, that terse words were exchanged. Wall Street punished Disney's stock, which hit an eight-year low in the days after the announcement. The news came on the heels of a June board meeting at which Mr. Eisner presented a five-year growth plan that some board members found disappointing, said a person close to the board.
Aside from the theme parks, and whether international visitors return to the American ones anytime soon, ABC remains Disney's biggest problem. If its fall season fails to attract more viewers — and advertisers — Mr. Eisner will have to answer to the board.
Mr. Gold and Mr. Disney have faced tough times before. Back in 1984, Disney's board was split over who it thought should succeed Ron Miller, Walt Disney's son-in-law, who was being ousted as chief executive. One side heavily favored the more corporate Dennis Stanfill, a former investment banker who was head of 20th Century Fox.
The other camp, which included Mr. Gold and Mr. Disney, wanted Mr. Eisner and another film executive, Frank G. Wells, who became Disney's president and later died in a helicopter crash. Mr. Gold fiercely lobbied the other board members, and Mr. Eisner, who was then Hollywood's golden boy, won.
Mr. Eisner remains cordial with Mr. Gold and Mr. Disney, but he knows how formidable a foe he has in each. Friends of Mr. Eisner say, however, that he, too, has keen survival skills.
In other words, stay tuned.