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Alex Stroup, Editor

Disney Peace

The Walt Disney Company and Save Disney come to terms

Thursday, July 14, 2004
by Mark Goldhaber, staff writer

Late Friday afternoon, the Walt Disney Company and Roy E. Disney and Stanley Gold released a one-paragraph statement that basically amounted to a declaration of peace in the almost two-year Disney War. So now that the war is over, what happened? Who “won” and who “lost,” or were there indeed any winners or losers? Let's start by looking at the agreement itself, and with who made what concessions.

Who gave up what

Roy Disney and Stanley Gold arguably made the most concessions in this agreement. They have agreed to dismiss all pending lawsuits against the company. They have also agreed not to run a rival slate of directors or submit shareholder resolutions before the 2011 annual shareholder meeting. And, what may bother them most in light of their continued attacks on Michael Eisner and Robert Iger, they “expressed confidence in Mr. Iger's leadership, and as Mr. Eisner retires after 21 years with the Company, they acknowledge his contribution to the Company over the years.”

What did the company give up? Not much, really. They have appointed Roy Disney to a largely ceremonial position as Director Emeritus and named him as a consultant. They have reaffirmed their commitment to following the Corporate Governance Guidelines. And they have “noted Mr. Disney's long time devotion to the Company and welcomed the reestablishment of a relationship with him and his family.”

Who got what

So what did each side come away with? The company got rid of a constant distraction and a bad public relations situation with the Disney fan community. They are now able to proceed with the transition from Michael Eisner to Robert Iger without the threat of lawsuits or proxy battles hanging over their heads. And, although Roy Disney is a consultant to the company, they don't have to listen to him if they don't want to.

What did Roy Disney and Stanley Gold come away with? Not much. While Roy has a figurehead position and a consultancy, he only has the amount of credibility that the company is willing to give him. They were able to stop the hemorrhaging of money that they had been throwing at Save Disney in what had become an increasingly futile struggle. In fact, Stanley Gold apparently got nothing in this latest agreement.

Why and how did they come to agreement

No news has been forthcoming from inside the offices of the two parties, but it seems likely that Roy has wanted to call an end to this for some time and end his exile from the company co-founded by his father. With the current lawsuit a long shot to succeed in its bid to void the election of directors from the 2005 shareholder meeting and the selection of Robert Iger as CEO-elect one month later, the Save Disney duo were hanging on by their fingernails in their bid to remain any significance on the company's radar screen. If the lawsuit failed, as seemed likely, the only remaining course of action available to the former directors would have been to run an alternative slate of directors at the 2006 annual meeting. With the current progress of the company, it is highly unlikely that the institutional shareholders would have sided with the duo, as they did at the 2004 annual meeting.

The major force in the reconciliation, however, was most likely Robert Iger himself. In his four months as CEO-elect, Iger has already begun to put his stamp on the company, reorganizing the strategic planning function and drastically reducing the micromanaging that had been going on in the company. He has constantly promoted the company's employees as its greatest asset, and is winning over converts inside and outside the company. His negotiation and team-building skills have helped to ease the transition of Harvey and Bob Weinstein out of Miramax, restarted talks with Pixar and personally began the friendly overtures to Roy Disney. It was most likely these actions that won over Disney and Gold to believe that perhaps Iger would not perform his duties in the mold of Michael Eisner.

A post-mortem on Save Disney

So now that the Save Disney fight has ended with a whimper, does that mean that the campaign was ineffective? Not in the least. Let's take a look at all that Roy and Stan accomplished.

Galvanizing the troops –The combination of the grass-roots Web site and appeals directly to the major institutional shareholders and shareholder advisory services created a huge groundswell movement and validated Save Disney's position that the Walt Disney Company did, in fact, need saving.

The end of Chairman Eisner – After the shocking 45.1 percent no-confidence vote in Michael Eisner at the 2004 annual meeting, the company responded by asking Eisner to step down as chairman and later permanently separated the Chairman and CEO positions.

The end of CEO Eisner – Six months after being stripped of his chairman title, Michael Eisner announced that he would retire at the end of his current contract, in September 2006. The possibility of Save Disney starting a proxy contest at the 2005 shareholder meeting evaporated as institutional investors decided that the fact that Eisner had committed to leaving was enough for them, for the time being.

The restructuring of bonus formulas for executive management – One of Save Disney's contentions was that bonuses were given out based on formulas that were not publicly disseminated, and that they were largely unearned. Shortly after Eisner's resignation announcement, the Disney board announced changes to use pre-published, more responsible metrics in determining executive bonuses.

Eisner's “victory lap” is cut short – The Disney board, perhaps feeling empowered by Eisner's lame duck status, forced an agreement on the outgoing CEO that he would not only retire a year earlier than he had intended, but also extracted a written promise from him that he would step down from the Disney board and not seek to remain with the company in any capacity.

It seems that, while Save Disney acted like the month of March - coming in like a lion and going out like a lamb - they did have a major positive effect on the company, and they leave a strong legacy of shareholder activism.

What's next

The players in this drama will move on. The question is, what will they move on to?

Michael Eisner will get to complete his “victory lap,” albeit a now-abridged one. He will get to preside over Disneyland's 50th birthday party and the grand opening of Hong Kong Disneyland, and shortly after that will ride off into the sunset to do whatever he will do in retirement.

Roy Disney will start by sailing his beloved racing yacht Pyewacket in his 15th and final trans-Pacific yacht race. He will attempt to use his “super maxi class” canting-keel MaxZ86 yacht to break the event record that he set in 1999. Due to the timing of the race, the Disney scion will miss the celebration on Sunday at Disneyland. The family will be represented by Walt's daughter and Roy's cousin, Diane Disney Miller. Upon his return, Roy will attempt to make his consultancy relevant and worthwhile for all parties.

Stanley Gold will return to running Shamrock Holdings, the investment company responsible for managing the investments of Roy Disney and his family. What, if any, role he will have related to The Walt Disney Company is unknown. With the dissolution of Save Disney, it will be interesting to watch the ongoing relationship between Roy Disney and Stanley Gold.

Freed of concern about the “family conflict,” Robert Iger can now concentrate on remolding the Walt Disney Company into a more empowered organization, encouraging teamwork, and continuing the momentum that he has been building. There's a lot of work left to do and many problems that still need addressing, the animation studio being one of the most obvious. Perhaps the consultancy of Roy Disney will provide fruit in that area and help to revitalize what was once the only part of the company.

Moving forward with Iger

With the distraction of Roy Disney (and Michael Eisner) fading away, it is now up to Robert Iger to run the company and gather support from the institutional investors, the Disney fan community and the employees of the company. So far, he seems to be gaining support in all camps.

I'm going to give the last word to M. Bell, an ABC employee whose e-mail to me first ran in a MousePlanet mailbag back on June 2:

I have known Bob Iger off and on since 1978 when I first was employed at ABC as a videotape editor. All I can tell you is on a personal level he is the same person now as he was then-bright, thoughtful, funny and the right person with the right experience to be running this rather large company. There is not anyone at Disney or outside of Disney who comes close to his experience. When you talk to him you know he “gets it.” He even mentioned to me recently about an experience he had recently finding out by himself on the streets of China the ease he had buying bootlegged Disney videos. So he is a hands-on guy. Granted, I may be slightly influenced in my feelings as I work for ABC and have known Bob somewhat. But let me tell you from a workforce employee. He is the right person for the job. My money is on him hands down.

Thoughts, questions, or comments? Contact Mark here.


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