Roy Disney resigns, asks Eisner to step down

[Aaron]

**raises hand me

 

[BoyRaisin2]

Well, he did bring about the resurgence of Disney in 1984...I'd strand him in a vast wheatfield.

 

[Phantom]

Stanley Gold left today (Monday), also.

 

[Fozzie Bear]

I still believe that Katzenberger left to join and help create Dreamworks SKG based on problems with Michael Eisner (and Eisner's possible threats against him, which is why he also won't discuss what really went on to cause him to leave); and I believe that the 'sudden death' of Frank Wells has some tie to Eisner (like he initiated it to happen), though I have no evidence of this--just my own conspiracy theories (to which there is no theory).

I also wonder how this effects the Hensons discussing using Disney as a distributor?
http://www.muppetcentral.com/news/2003/111903.shtml

 

[BoyRaisin2]

Stanley Gold left today (Monday), also.

Letter from Stanley P. Gold to the Disney Company Board of Directors

To the Board of Directors of the Walt Disney Company:

It is with regret that I resign effective immediately from the Board of Directors of the Walt Disney Company and second Roy Disney's call for the removal of Michael Eisner as Chairman and C.E.O. I am proud of my more than 15 years of service and my role in reshaping the Company in 1984 by bringing Frank Wells and Michael Eisner to the Company. I do, however, lament that my efforts over the past three years to implement needed changes has only succeeded in creating an insular Board of Directors serving as a bulwark to shield management from criticism and accountability. At this time, I believe there is little that I can achieve by working from within to refocus the Company. I hope that my resignation will serve as a catalyst for change at Disney.

The most recent evidence of the drive for insularity is reflected in the Governance Committee's determination that Roy Disney should no longer serve on the Board, ostensibly because Roy had surpassed the expected retirement age established by the Board's Corporate Governance Guidelines. In fact, these very rules regarding age, by their terms, only apply to non-management directors, not to Roy, who, as the Committee knows, has been deemed a management director. The Committee's decision and George Mitchell's defense of it yesterday are clearly disingenuous. The real reason for the Committee's action is that Roy has become more pointed and vocal in his criticism of Michael Eisner and this Board. This is yet another attempt by this Board to squelch dissent by hiding behind the veil of "good governance." What a curious result.

Roy has devoted a lifetime to Disney as both an employee and Director. He has served with renewed vigor during these times of malaise, disappointment and instability at the Company, trying to maintain the morale of employees, focusing on the magic that makes Disney special and attacking bonuses to the CEO and increased compensation for Board members while the Company falters and shareholder value erodes. He and his family have a very large financial stake in the Company. Unlike Messrs. Watson and Murphy who have asked to be replaced, Roy has sought even more involvement only to be told that his input in animation will continue to be minimized and that his role as a Director is no longer welcome. This Board has become an enabler to entrenched management and, in so doing, is not effectively discharging its duties to the shareholders. This conduct has resulted in yet another valuable human asset of the Company slipping away. Within the last year this Board will have managed to cull from its ranks Andrea Van de Kamp and now Roy, two of the staunchest critics of Michael Eisner and the Company's poor performance. I cannot sit idly by as this Board continues to ignore and disenfranchise those who raise questions about the performance of management.

As this Board knows, during my tenure I have tried to be an active, engaged Director. I believe a board should not merely rubber stamp decisions of senior management. I decided in August of 2002 that it was not enough just to express my views in the limited time set aside for our infrequent Board meetings. I therefore began a series of written communications to the Board regarding the Company, its management and the Board. I wrote to express my disagreement and growing concern with management, its policies and the effectiveness of the Board. I focused on the failed initiatives of the Company over the past five or six years and admonished the Board for not actively engaging in serious discussions regarding the Company's flawed plans and management's unmet projections and unfulfilled promises. In particular, I have urged the Board to concentrate on the Company's "poor performance, lack of credibility and accountability and poor capital allocation." In an effort to get Directors to seriously assess management's 5-year strategic plan (a plan that is only discussed with this Board, but not submitted for Board approval), I wrote to the Board to detail the Company's unsatisfactory financial performance for the past several years and to suggest a process, a so-called Diagnostic Review, designed to give the non-management directors the tools necessary to evaluate performance and establish a comprehensive framework and baseline from which the Board could be active partners in developing plans to maximize the value of Disney's existing assets and businesses. That approach was opposed by management and then, not surprisingly, rejected by the Board. The Board and its Chairman even criticized me for putting on paper these serious questions about fundamental matters.

I believe the Board's adoption of its Corporate Governance Guidelines was yet another example of this Board's commitment to image over substance. Among other things, those Guidelines were carefully crafted to stifle dissent while allowing those supportive of senior management to continue business as usual. This was apparent when the Board applied its Guidelines to conclude that I was not "independent" despite the fact that I frequently challenged management at Board meetings and criticized both the Board's and the Company's performance. That decision was initially based on my daughter's employment in a non- executive position at Disney and, then, after that reason became insufficient under the new NYSE Governance Guidelines, because of my association with Roy. This resulted in my further isolation as I was no longer permitted to serve on the Governance and Nominating Committee or the Compensation Committee. On the other hand, John Bryson was deemed "independent" and appointed Chairman of the Nominating and Governance Committee despite the fact that his wife is an executive officer at Lifetime Entertainment Television, a 50% owned subsidiary of Disney, where she earned in excess of $1 million in total compensation in fiscal 2001. In addition, Senator Mitchell was appointed Presiding Director, despite having been recently employed as a Company consultant and notwithstanding that the law firm of which he was chairman received in excess of $1 million for legal services on behalf of the Company in fiscal 2001.

At the time the Company's new Corporate Governance Guidelines were being considered, I also urged the Board to separate the positions of Chairman of the Board and CEO. This separation would empower the Board and help establish its independence and oversight role. Not only did the Board reject that initiative, the Board failed to give the newly established Presiding Director any real substantive powers.

Continuing through March of this year I wrote to express my concerns regarding the financial performance of the Company and the repeated failures of management to achieve its forecasts. I urged this Board to feel a sense of urgency in dealing with the issues of leadership, performance, operations and accountability. Those efforts failed. Instead, Mr. Eisner was awarded a bonus of $5 million in Disney shares by the Compensation Committee despite objections by Roy and me. I believe that bonuses for senior management must be tied to performance; by that measure, no bonus was warranted.

In a similar vein, I recently wrote to express my objection to the Compensation and Governance Committee's joint recommendation that fees paid to Disney Directors be increased dramatically, that stock grants to Directors be substituted for options (and thereby render meaningless the requirement that Directors own $100,000 in Disney shares) and that greater compensation be paid to the Presiding Director. Raises for the Disney Directors at this time are inappropriate based on my assessment of the Company's performance. I objected to the increase for the Presiding Director on the grounds that it did not reflect a reasonable payment for the only slightly increased duties. Finally, I could not make sense of a share ownership requirement for Directors that would be satisfied by a direct issuance from the Company at the same time Directors' cash compensation was being increased.

It is clear to me that this Board is unwilling to tackle the difficult issues I believe this Company continues to face -- management failures and accountability for those failures, operational deficiencies, imprudent capital allocations, the cannibalization of certain Company icons for short-term gain, the enormous loss of creative talent over the last years, the absence of succession planning and the lack of strategic focus. Instead, the Board seems determined to devote its time and energies to adopting policies that focus not on substance, but on process and, in reality, only serve to muzzle and isolate those Directors who recognize that their role is to be active participants in shaping the Company and planning for executive succession. Further, this Board isolates those Directors who believe that Michael Eisner (when measured by the dismal results over the last 7 years) is not up to the challenge. Perhaps acting independently, from outside the Boardroom, not hamstrung by a recently enacted Board policy barring Board members from communicating with shareholders and the media, I can have greater success in shaping the policies, practices and operations of Disney than I had as a member of the Board.

In accordance with Item 6 of Form 8-K and Item 7 of Schedule 14A, I request that you disclose this letter and that you file a copy of this letter as an exhibit to a Company Form 8-K.

Very truly yours,

Stanley P. Gold

--Posted December 1, 2003
Source: Stanley P. Gold

 

[Fozzie Bear]

Very wordy, but I can see why he's ticked-off. There's nothing like working hard toward a goal and have it knocked down like that.

 

[sarah_yzma]

So, legally, can Eisner be removed before his contract is up??

 

[Fozzie Bear]

Yeah, if forced and voted out by the board.

 

[Phantom]

No one will stand up to him, though.

 

[BoyRaisin2]

From Jim Hill Media:

Are Roy and Stanley making a Rainbow Connection?

First Steve Jobs and John Lasseter. Now the Henson family? Jim Hill has news about who else Roy Disney and Stanley Gold have reportedly recruited to help out with their bid to oust Michael Eisner. Plus a further update on what's supposedly going on in the boardroom.

It's Day 3 of Roy and Stanley's "Oust Eisner" campaign. And -- so far anyway -- the folks on Wall Street don't seem all that impressed.

Don't believe me? Here's a quick sampling of what some investment analysts have to say about the situation:

"Eisner's not likely to go anywhere soon," or so says Oppenheimer and Co. analyst Peter Mirksy.

"I don't expect (Disney and Gold's campaign) to have much of an impact," sniffed Loop Capital markets analyst David Martell.

"They might have found a more receptive audience 18 months ago," said Janna Sampson -- a portfolio manager at Oakbrook Investments -- as she dismissed Roy and Stanley's efforts to recruit Disney stockholders to take part in their "Get Mike to Take a Hike" program.

So why is it that -- given that the internet community has been so galvanized by all this talk of ousting Eisner -- that Wall Street seems to have greeted this revolutionary idea with a shrug?

Because ... well ... let's be blunt here, people: There aren't really all that many investment analysts out there that are truly enthusiastic about the notion of Michael Eisner staying on as head of the Walt Disney Company through September 2006. But -- then again -- investment analysts are (by their very nature) a fairly cautious bunch. They don't like taking risks.

So while Wall Street is at least willing to listen to what Roy and Stanley have to say, these folks then go pick up their copies of the "Wall Street Journal" and see that the price of Disney's stock is up 39% from last year. And the studio's current crop of movies seem to be doing well at the box office. And ABC's ratings have gradually improved over the past three months.

Which is why investment analysts -- while they really have no fondness for Eisner -- are reluctant to rock the boat. I mean, what if the guy that Roy and Stanley bring in to replace Michael actually does a worse job of running the Mouse House than Eisner did? Right now, Wall Street is fairly optimistic about how the Walt Disney Company will do in 2004.

And Roy Disney and Stanley Gold realize this. Which why they're trying to play down the recent gains in Disney's stock price and all the talk about how attendance levels are up at the corporation's stateside theme parks. Instead, Roy and Stanley are trying to make Michael Eisner himself the issue.

As in: Think about how much better the Walt Disney Company would be -- how much more successful this corporation might be -- if Michael Eisner weren't still running the show.

This is the lynch pin of Disney and Gold's Pixar stratagem. I.E. Due to his personal conflict with Steve Jobs, Michael Eisner is preventing Walt Disney Studios from closing a contract extension deal with Pixar Animation Studios.

But just yesterday, I got a peek at another page of Roy and Stanley's playbook. And -- to be honest -- I was both thrilled and surprised to hear about what else these guys reportedly have up their sleeves.

What am I talking about? Well, do you recall Monday's story -- "Did Roy Jump the Gun?" -- where I talked about how Michael Eisner had been embarrassed by the fact that he hadn't be able to close the Jim Henson Company acquisition deal early year. Well, it appears that Kermit and Co. may soon be causing Michael even more discomfort.

According to several well-placed sources that I spoke with at the Jim Henson Company yesterday, Disney and Gold have supposedly been meeting quietly with members of the Henson family for months now. It's even been suggested that Roy and Stanley may have played a part in the family's decision to suddenly buy back the Jim Henson Company this past May, rather than allow the Muppets to be sold off to Mickey.

"So what's the point of Walt's nephew and Stanley Gold inserting themselves into the Disney/Henson negotiations?" you ask. Patience, Grasshopper. All will be explained shortly.

Okay, now how many of you recall the story in "Variety" last month which stated that the Jim Henson Company was actively looking for a partner? Some media conglomerate with fairly deep pockets and a great distribution system that could help Henson out with its film, TV and home video projects.

Well, Disney was one of the companies mentioned in this article. And -- according to the folks that I spoke with at Henson yesterday -- Disney and Gold (or their representatives) have supposedly been met quietly with the Henson family over the past few weeks.

"And what's the purpose of all this cloak and dagger stuff," you ask? Well, the Walt Disney Company is reportedly looking to get into a long term production deal with the Jim Henson Company -- with the Mouse releasing and promoting a wide variety of movies, videos and TV shows that the Frog produces.

Furthermore, should the above arrangement prove to be pleasant, professional and financially beneficial to both corporations, the door might once again swing open for acquisition. As in: The Henson family would allegedly agree to sell the Jim Henson Company -- lock, stock and Fozzie Bear-el -- to the Walt Disney Company.

So what's the catch? The Henson family will supposedly only agree to the above arrangement IF Michael Eisner is out as head of the Walt Disney Company.

You see the strategy that's emerging here? "Michael Eisner can't get Steve Jobs to agree to a Pixar contract extension. But Roy Disney -- who's a friend of John Lasseter -- can." And "Michael Eisner missed out on closing a deal to acquire the Jim Henson Company (again) in May. But the Henson family is willing once more to do business with the Walt Disney Company ... provided that Michael Eisner is out of the picture."

This is really an ingenious strategy on Roy and Stanley's part, don't you think? Getting Disney shareholders to overlook the modest gains that the corporation has made over the past year by pointing out how much better the Walt Disney Company could theoretically be doing if Michael Eisner weren't in the hot seat.

So what's Michael Eisner's response to all this? He's still letting the members of Disney's board do most of the talking for him. Though -- as has been pointed out to me by numerous JHM readers -- these guys aren't really mounting all that spirited a defense of the Mouse House's Big Cheese:

So says Nome de Plume:

Take a closer look at those messages that Disney's Board of Directors have been issuing to the media on Eisner's behalf. Notice how careful the language they're using is. How tepid it sounds. These guys are just going through the motions, Jim. Doing what they have to to keep Michael happy. But nothing more than that.

Maybe Disney's Board of Directors really do have an Eisner exit strategy in place. And Mitchell and Co. are actually working in tandem with Disney and Gold to pull a pincer maneuver from without and within. Til the pressure gets so great that Disney's CEO has no choice but to resign.

But if this is really the case ... why didn't Disney's Board of Directors just leave their original Eisner exit strategy in place? Just allow Michael to somewhat gracefully announce that he'd be retiring of his own volition in September 2004 and then let Disney's CEO ride off into the sunset.

"The Poet" (who finally checked in again this afternoon -- hurrah!) offered up these intriguing answers to the above query:

Supposedly, not one of Disney's Board of Directors actually trust Michael Eisner right about now. Their worry is that -- after Roy Disney, Ray Watson and Thomas Murphy were forced to resign this week (in accordance with the corporation's new governance, which insist that all directors must now retire from the board when they reach 72 years of age) -- Michael might replace these corporate officers with three new directors who would be much more sympathetic to Eisner's plight. Which means that Michael might be then be able to weasel out of his previous arrangement. Which would allow Eisner to stay on as the head of the Walt Disney Company 'til the end of his contract -- which is September of 2006.

So -- by making a co-ordinated effort now (with Roy and Stanley on the outside and Mitchell and Co. on the inside) -- Eisner wouldn't have any wiggle room. And -- provided that enough public pressure could be brought to bear -- Michael could conceivably be forced out of his CEO position at the Walt Disney Company well ahead of September 2004.

"The Poet" also went on to say that Disney's Board of Directors is said to be uncomfortable with the size of the "golden parachute" that Eisner is insisting on receiving. The figure that's reportedly being bandied about isn't quite a billion. But "The Poet" suggests that it could be well north of $500 million.

In this post-Richard Grasso / NYSE scandal era (where CEOs are regularly being taken to task by the media for excessive compensation and bonuses), Disney's Board of Directors is reportedly worried that -- should the news break about how much the Mouse is supposed to pay Michael in order to get him to move along -- that it could be another PR disaster for the corporation.

More importantly, given the enormous amount of money that we're allegedly talking about here (which is said to be more than the amount that Mickey paid out to Jeffrey Katzenberg and Mike Ovitz combined), Disney stockholders could conceivably rise up in revolt. Which might result in the Board of Directors getting released from their extra-cushy jobs as officers of the Disney corporation.

So -- with this grisly possibility rolling around in the back of their minds -- Disney's Board of Directors supposedly began exploring more affordable options. Like the possibility that -- if there were a loud enough public outcry -- they could possibly embarrass Michael Eisner into exiting earlier, under his own power. Which (hopefully) would result in the corporation having to offer a smaller financial "parting gift" to the company's soon-to-be-former CEO.

You see what I'm saying here, folks? The stuff that's made it out into the mainstream media to date. It's all just the tip of the iceberg. All the players aren't out on stage yet. The real drama now is being played out behind-the-scenes. As Roy and Stanley quietly and carefully recruit allies for their cause and Eisner weighs his options. And -- all the while -- Disney's Board of Directors continue to say that they're standing firmly behind the corpoartion's CEO ... when what Mitchell and Co. are really supposedly up to is looking for an opportune time to push Eisner out a window.

You know -- according to this friend I have in Vegas -- the current odds on Michael Eisner being out of the Walt Disney Company by January 2004 are 3 to 1. Me personally? I'm not sure that things are going to move quite that quickly. I'm pretty certain that Michael is going to wage a pretty tough campaign to hang onto his job.

But even so -- were all the stuff that we've discussed in today's JHM article to actually come to light (with Pixar allegedly only agreeing to sign a contract extension with Disney if Eisner is gone, the Jim Henson Company supposedly only agreeing to a long term production deal with the Mouse if Michael's out of the picture, plus Roy and Stanley reportedly working in tandem with Mitchell and Co.) -- it's really hard to see how Eisner's actually going to be able to hang on.

Hmmmn ... maybe now might be a good time to call Vegas and see if I can't get in on some of that Eisner exit action?