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I want to believe, I really do.

I want to believe that Roy Disney can pull off another miracle, and once again save the Disney Company from itself. I'm having a little trouble.


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Three weeks ago, as news broke that Roy and long-time accomplice Stanley Gold had resigned from Disney's board, I received countless e-mail pointing to my “prophetic” article of two years ago, “All the Wrong Moves.”

Gregory, webmaster of DisneyInformer.com, wrote:

“Wow! Just wanted to say you hit the nail on the head with that one. Sadly, it's coming true. Hope this doesn't mean Disney is done for, with Roy resigning being the beginning of the end.”

In the article, I noted striking similarities between the current state of the company and the stagnation of Disney circa 1984. As I concluded, “It's time to right the ship immediately or—if Roy is truly a man of his convictions—expect another resignation letter soon.”

True, while the company's creative missteps parallel those of 20 years ago, the odds are much greater against Roy pulling off a second coup. Here's why this will be a much more difficult battle than the War of '84:

1. The Timing

My initial call for action was 29 months ago, when Disney's stock price was trending down (in the high $20s and falling fast), as opposed to today's inching upward (albeit, to the low $20s). The company—on paper, at least—was in a more precipitous position.

Roy's departure from the board at that time would have been much more shocking and disruptive. Instead, he remained silent, giving outsiders the impression that he supported the decisions of the last two years.

In reality, as Roy's dissatisfaction surfaced internally, Eisner was laying the groundwork for his ouster. First, new corporate governance rules were adopted suggesting directors not be reelected at age 72. Roy was 71 at the time. Then, management tried to shelter Roy from the decisions at Feature Animation, the division he headed. They tried to humiliate Roy and the rest of Feature Animation by taking a $74 million pre-tax write-down on Treasure Planet days after its release, then tried to sabotage Brother Bear by releasing it on a Saturday in the middle of autumn.

Consequently, some see Roy's departure—coming days before he was sure to be asked to leave—as little more than symbolic.

2. The Climate

The corporate business climate of 2004 is quite different than that of 1984. Twenty years ago, corporate upheavals like that at Disney typically were instigated by heartless takeover artists intent on manipulating the stock price for short-term gain. They had no concern for the fate of a company's employees, customers, products, heritage and future.

Alas, these stock price-obsessed outsiders are now on the inside—running the companies. Living quarter to quarter, obsessing over quick fixes, is Standard Operating Procedure. Roy will have a much tougher time convincing the investment community that there's anything wrong with Eisner's diminishing Disney's long-term value for short-term gains.

3. The Dilution

Those major investors will also be more difficult to contact, in part due to the staggering number of shares. In 1984, before all the stock splits and acquisitions, there were 37.8 million outstanding shares. Today, there are more than 2 billion.

Consequently, the power of each share is vastly diluted. In 1984, Roy owned 5 percent of the company. Today, the 17.3 million shares he controls represent less than 1 percent of the company. The only individual with close to that number? Eisner.

In 1984, a mere handful of individual shareholders held nearly 40 percent of the company's outstanding stock. And several—Roy, the Bass Brothers—were in it for the long-term.

Today, the vast majority of Disney's shares are held by institutional investors and mutual fund owners, which possess billions of shares of hundreds of different companies. Disney's largest stockholders, Barclays Bank, State Street Corp., FMR Corp. and Citigroup, each own about 3 percent of Disney's outstanding shares, which represent only a small fraction of their own overall holdings.

4. The Sell-Off

No one is stockpiling DIS. With so many shares outstanding, no individual is likely to acquire a controlling interest in the company. Roy is doing the opposite. While he stockpiled Disney shares in 1984, he recently has been paring down his own holdings. A few months ago, he agreed to sell 7.5 million shares—40 percent of his holdings—although he retains voting rights on them for five years. Still, the way the deal was structured, Roy comes out looking more like he's hedging his bets than like he's digging in his heels.

5. The Age

Roy was 54 going into the last fight and, presumably, a lot more motivated. He was held in low regard by prior management and had yet to make a name for himself. He's now 73 and is roundly recognized as the executive who salvaged Feature Animation from the scrap heap.

Coincidentally, when Roy's father was 73 he was preparing to retire—and then brother Walt died. Would the Florida Project continue? Would the company even survive? The elder Roy postponed his retirement. He spent the next five years cementing the legacy of the Disney name and securing the continuation of the company. He made sure Walt Disney World opened on time—and died two months later.

Perhaps Roy sees this present day campaign as his final five-year contribution to preserving the family business. Lest he be remembered most for recruiting Eisner, the man he now blames for destroying the company.

6. The Name

In 1984, being part of the Disney family counted for something. Disney was a company that cherished its past. Everything it sold banked on the goodwill of the Disney name. So, when Roy resigned from the board the first time, management was mortified and begged him to return. This time around, I'd wager there was relief and celebration.

Nowadays, the company sees the Disney name only as something they can exploit. They admit the “words of Walt” make a cute book of quotes—but you can't run a business by them.

7. The Opponent

The disdain for Disney traditions starts at the top. At least in 1984 Roy and Disney management had basically the same goal—to protect and improve the company—just different ideas how to achieve that goal. Roy and Team Disney 2004 have diametrically opposed goals—his, to protect and improve; theirs, evidently, to consolidate and squeeze.

Eisner is also more firmly entrenched than his predecessor, Ron Miller. Eisner's in his 20th year at the helm, has already overseen one glorious turn-around, and had a proven track record before Disney. He's a more forceful personality who can say the right things to Wall Street. Plus, he's a fighter.

Miller had been c.e.o. for little more than a year, had inherited an organization in the midst of a 10-year slump, and had worked for no one else but Disney.

In 1984, Miller and chairman Ray Watson were consumed with saving the company. Eisner is consumed with saving his job.

8. The Board

Twenty years ago, Disney's board of directors was a diverse, sometimes contentious collection. They knew they had problems and were ready to act—even if that meant booting the chief executive.

Eisner's boards have been among the weakest corporate America has ever known. They unanimously elected his hand-picked cronies, while Eisner systematically rid the company of executives with more seniority than him.

Ironically, the age limit regulation was adopted to make management more accountable to the board; in practice, it will eliminate management's main critics. With the loss of Roy, Gold and soon, due to the age limit, Ray Watson, the director with the most seniority will be Eisner.

Remember, Roy was able to recruit Eisner in the first place only after he and his allies were brought back on the board. That won't be happening this time.

9. The People

So, Roy's power with the investment community has been diminished and his tie to the board severed. What's left?

As Gold wrote me, “There is a lot that all of us can do, even if we don't own millions of shares. The Walt Disney Co. is an institution that is important to all of us; it is more than for-profit business; it's an American institution. Initially, you can have your friends and supporters register their letters of support, addressed to either roydisney@savedisney.com or stanley gold@savedisney.com. While this Web site is in the planning stages, it would be helpful to us to have the names and e-mail addresses of individual supporters so that we can efficiently get back to them with news and plans as we develop them.”

Public sentiment didn't seem to play a large role in 1984. But if Roy is serious about taking this fight to the streets, it's going to take time and energy. He's got to keep up the heat. Yet after the resignations and early rounds of name-calling, things are starting to die down. Roy will need to stay in the news.

Of course, the most telegenic image—short of toddlers in princess attire chaining themselves to Disneyland's Main Gate—would be a massive display of outrage at the company's shareholders meeting. Unfortunately, it's going on seven years since Disney held an annual meeting in Southern California, inviting an onslaught of picketing activists and tough questions from angry shareholders.

According to Disney's investor relations department, a time and a place for the 2004 meet could be announced by the end of the year. Two things you can bank on, though: First, the late winter session will be held in some remote location to reduce access by angry shareholders and coverage by the media. Second, Eisner will find some flimsy justification for the site ("No, no, we selected Fargo because 2004 is the 50th anniversary of The Vanishing Prairie, which was partly filmed in Canada, which borders North Dakota...").

10. The Prize

No matter what, Disney emerges from this mess damaged goods. The cautious management style of the 1970s and early 1980s—sworn to protect the company's image and heritage—depressed the stock price in the short-term, but created pent-up demand for its successors to unleash.

Current day management is emptying the vaults and prostituting the company's heritage. The company's next leaders will arrive to discover not a trove of underexposed characters and films, underutilized employees, and undeveloped acreage, but stacks of IOUs.

Don't misunderstand me. I am fully behind Roy's efforts to improve the Walt Disney Company for the long-term. I'll publicize his every plea for assistance, sign all the petitions, and march down Main Street. I just hope it's not too little, too late.



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(Send an email to David Koenig)

David Koenig is the senior editor of the 80-year-old business journal, The Merchant Magazine.

After receiving his degree in journalism from California State University, Fullerton (aka Cal State Disneyland), he began years of research for his first book, Mouse Tales: A Behind-the-Ears Look at Disneyland (1994), which he followed with Mouse Under Glass: Secrets of Disney Animation & Theme Parks (1997, revised 2001) and More Mouse Tales: A Closer Peek Backstage at Disneyland (1999) (All titles published by Bonaventure Press).

He lives in Aliso Viejo, California, with his lovely wife, Laura, their wonderful son, Zachary, and their adorable daughter, Rebecca.