Disney Shareholder Meeting
Mark contemplates the various chess moves from recent
events
Wednesday, March 10, 2004
by Mark Goldhaber, staff writer
[A quick note from Mark: I know that I promised some of you a
really cool George McGinnis piece today in person or via email, but I
needed some more time to talk about what happened in Philadelphia last
week. Don't worry, there will be a great two-parter from George, and it's
now currently scheduled to be published here on April 14 and April 30.]
In this column, I emphasize the “View” part of my “World
View” because I am still coming down from the excitement of the events
of last week, and I'm trying to make sense of exactly what has happened
here. It has been a circus of the grandest proportions surrounding the
greatest entertainment company on Earth, and I need to talk this out.
So this time the column is going to be more conversational, as I'm thinking
this out as I type.
It was really an eventful couple of days, or about 40 hours for me, from
the time I left my home in upstate New York early Tuesday morning for
Philadelphia until I got home late Wednesday night. A four-hour-plus drive
each way, two Save Disney press conferences, the Save Disney rally, the
stockholder meeting (a.k.a. “A Long Day's Journey into Night”),
late nights, early mornings, and lots of interaction with other media
types. And lots of writing.
How long has this been going on?
Now that the events in Philadelphia are over, I am trying to figure out
“what just happened here.” It is a lot more than it seems on
the surface. It's not just Roy and Stan saying, “Well, we tried to
make change from the inside and it didn't work, so we resigned to try
from the outside.”
I think that this feud has been simmering for a long time.
I think that this feud has been simmering for a long time. For example,
a few years back, Roy asked Michael whether he could put his son Patrick
on the board to ensure continuity of Disney family involvement in the
company. Michael shot him down, yet put his favorite architect, Robert
A. M. Stern (who designed a number of beautiful hotels for Disney in Orlando
and Paris) on the board.
At one point, the board included the principal of the school that Eisner's
kids went to, the president of the university that his son went to, Eisner's
personal attorney, Stern (while he was doing work for the company), and
George Mitchell (while he has receiving compensation for consulting services
to the company). And I believe that they were all considered independent
directors, with the possible exception of Stern.
And let's also not forget that Stanley Gold was removed from the Compensation
Committee that he chaired in the term immediately following the one in
which the committee had decided that Michael Eisner had not earned any
bonus that year. If you remember, that next year is the year that Judith
Estrin is accused of consulting with Michael Eisner's personal attorney
(and Disney board member) Irwin Russell before deciding on a pay package.
Was there a bigger conflict between Michael and Stanley long before that?
And if there were no hard feelings involved, then why—even in jest—did
Roy state at the Philadelphia rally “I used to say that if we had
enough rifles, this could be over real quick,” and after a quick
“careful” from Stan, add, “But I didn't say that.”
So there's been bad blood for a while.
How far back does it go? Who started it? What's the full story? I really
don't know yet. If anybody out there has the inside scoop, please let
me know.
Some of the points above have been published on the Save Disney and Jim
Hill Media Web sites, and other places, but I don't think that all of
this has been put together in one place before. Jim Hill mentioned on
March 3 that Roy and Stan were recruiting people for the Save Disney team
three weeks before they resigned from the board. But there's also a rumor
that the campaign was funded by part of the money from Roy's “forward
prepaid variable contract” sale of 40 percent of his stock holdings
last August that allowed him to keep voting rights while getting money
now for the stock.
Was the forced resignation a result of a discovery by the company
that Roy was going to try to launch this campaign?
Was this planned that far back? Were Roy and Stan planning this past
spring, lining up the finances last summer, and recruiting last fall—and
it only seemed that their hand was forced by Roy's forced resignation?
Was the forced resignation a result of a discovery by the company that
Roy was going to try to launch this campaign? Does any of that matter
at this point?
He's not bad, he just doesn't play well with others
Michael Eisner worked well with Frank Wells. Michael was free to come
up with all the creative ideas that he wanted and Frank could say, “No
Michael, we can't do that, we're Disney,” and he could keep Michael
in check a way that no one has been able to since.
When Frank Wells died in 1994, Michael decided to try to take on both
creative and business leadership of the company, to the detriment of his
ability to do either one well. First off, he had nobody who could tell
him “no” that he would listen to. Second, after Frank's death
and Michael's subsequent heart attack, it almost seemed as if Michael
had lost his muse.
And suddenly, decisions weren't making sense anymore. Buying baseball
and hockey teams. Buying Cap Cities/ABC. Turning Disney into something
that it wasn't, and shouldn't be, to my mind.
And so now we have this entertainment behemoth created by Michael Eisner,
whose performance is sadly behind the performance of the “boutique”
entertainment company that it was in 1994. And Michael has lost control
of that behemoth. Now we get to find out whether Michael is most concerned
with what's best for the company or what's best for Michael.
It's not that Michael Eisner doesn't have good ideas. He's a very
creative person. He wouldn't be running the company if he wasn't. However,
he sometimes doesn't understand that if something is a good or interesting
idea, that doesn't necessarily make it right for any given company.
It's not that Michael Eisner doesn't have good ideas. He's a very creative
person. He wouldn't be running the company if he wasn't. However, he sometimes
doesn't understand that if something is a good or interesting idea, that
doesn't necessarily make it right for any given company.
For example, if a company that specialized in publishing literary magazines
decided to start a line of celebrity gossip tabloids, the people that
came to rely on the company for its reputation for literary excellence
would start to question their faith in the company, regardless of the
quality or literary value of the tabloids. It would undermine what everyone
expects them to be and everyone appreciates them for being.
In the same way, initiatives such as the ill-advised foray into lower-quality,
direct-to-video sequels, the flooding of the market with cheaper merchandise,
and the over-merchandising at the parks lead to the loss of the premium
that people put on the Disney name.
As a co-worker of mine put it on his first—and he swears, only—trip
to Walt Disney World, “Every time I turned around, they had their
hands in my back pocket reaching for my wallet.” Not exactly the
image that Disney used to have. The long-term value of the name “Disney”
is diminished, and people can no longer instinctively respond to knowing
what “Disney” means because the brand is so diluted and so tarnished.
The long-term value of the name “Disney” is diminished,
and people can no longer instinctively respond to knowing what “Disney”
means because the brand is so diluted and so tarnished.
In the second half of his tenure, Michael has tried to improve profitability
the business school way. He cut costs in order to squeeze the margins.
This totally disregards the method that made Disney a unique company in
the first place. Yes, Walt did try to save money here and there, but not
where it would affect guests. He would keep Disneyland offices sparse
and small, putting the money into the park instead, figuring that the
executives should be walking the park, anyway. Walt wouldn't let financial
constraints get in the way of an idea that he knew was right. More
than once, he mortgaged his house and borrowed against his life insurance
policies, whether for the creation of Snow White or the creation
of Disneyland. More than once, the company was on the verge of bankruptcy.
Yet, because the money was put into a project of quality, it would attract
the people, and the money would come back many times over.
Meet the new boss, same as the old boss
To have a man who received a 43 percent no-confidence vote from shareholders
remain as CEO of the company and to appoint as chairman a man who received
a 24 percent no-confidence vote (which is still more than it took to get
Steve Case bounced from AOL Time Warner) seems a bit ridiculous on the
surface. If you say that you're going to address the situation by changing
your governance and create a new chairman of the board, don't make it
a chairman that the shareholders have no confidence in. That's just plain
ridiculous.
But remember, Michael has a reputation from never backing down from any
challenge to his authority. If he plans on staying and “this will
all blow over”—if this is a planned permanent solution—then
the company is in deep, deep trouble.
I'll continue to follow this story.
Thoughts, questions, or comments? Contact Mark here.
This column represents the personal opinions of Mark Goldhaber, and
does not necessarily represent any positions taken by MousePlanet, Inc.
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Mark is a veteran of many trips to Walt Disney World starting in 1972, with a few Disneyland trips also under his belt. He is also a Disney stockholder and a Disney Vacation Club member who collects Disney sericels, books, clothing, and just about any other thing with The Mouse on it that he can lay his hands on. Between visiting WDW, planning trips for himself and others, fantasizing about trips to WDW, and reading everything he can about Walt Disney and his legacy, there's not much time left for anything other than family time, but he's perfectly happy with that. Mark is a computer geek working for the State of New York. He lives in the suburbs outside Albany, New York, with his wife and son. Click here to contact Mark. 
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