Disney's Eisner loses chairman role after big protest
(Agencies)
Updated: 2004-03-04 12:51

Embattled Walt Disney Co. Chief Executive Michael Eisner on Wednesday was stripped of his role as chairman, but kept his position as chief executive even after 43 percent of shareholders voted against him in an unprecedented protest.

Convening in Philadelphia after a stormy annual meeting, Disney's board said it had elected former US Senator George Mitchell as the company's chairman. It said 61-year-old Eisner had its unanimous backing as Disney's top executive after a shareholder vote widely seen as a rebuke to his leadership.

The vote sent shockwaves through corporate America and marked the strongest such protest against an incumbent chief executive ever, signalling Disney's concession was unlikely to satisfy shareholders campaigning for Eisner's removal.

Calpers, the nation's largest public pension fund, said the "stunning" result of the vote showed the depth of investor frustration with Eisner.

"This discontent is too wide and way too deep in the marketplace, and it has led us to believe that Eisner should go," said Sean Harrigan, president of the board of administration of Calpers, or the California Public Employees Retirement System.

Disney's board said that while it recognized that some shareholders were calling for Eisner's ouster, it was confident that the entertainment conglomerate's financial results would validate its support of management and current strategy.

"While there appear to have been a number of different forces at work in the shareholder vote, a significant message conveyed in the vote was in the area of governance," Disney's board said in a statement. "In particular, there was substantial focus on whether the chair and CEO functions at the company should be split."

Two former Disney directors, Stanley Gold and Roy Disney, who first touched off the shareholder insurgency last year, said they would continue their fight until the board ousted Eisner, whose contract ends in 2006.

Gold had earlier said that Mitchell, who had been Disney's lead outside director, was not fit to serve as chairman after 24 percent of shareholders voted against him.

BOARDROOM SHOCKWAVES

Eisner has been criticized over Disney's longer-term stock performance, low ratings at the company's struggling ABC network and what detractors see as his mishandling of a now-scuttled movie distribution deal with Pixar Animation Studios Inc.

Comcast Corp., the nation's largest cable operator, called on Disney's independent directors to open talks on its $49 billion, all-stock takeover offer.

But Disney's board late Wednesday once again rebuffed that offer as insufficient, while saying it would review "any reasonable proposal."

More than 20 percent of shareholders who voted also opposed Judith Estrin and John Bryson, two other directors targeted by Gold and Disney.

All Disney candidates were guaranteed election since there were no other rivals running.

The vote against Eisner passed the 35 percent threshold of a Securities and Exchange Commission proposal that, if approved, would open the way for dissidents to run their own candidates on the Disney ballot at next year's meeting.

TOO LITTLE, TOO LATE?

Analysts had expected Disney would strip the chairmanship from Eisner, but many doubted that step would be enough to placate investors now.

"No, no, no. That to me would be just a cosmetic or technical response. This in my mind goes much deeper," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "It's got to be a management change one way or the other."

Alan Hevesi, the New York State Comptroller who had called for Eisner to leave, said in a statement that the vote marked a "wake-up call" for Disney management.

Pat McGurn, spokesman for Institutional Shareholder Services, the influential adviser which stoked opposition to Eisner, said splitting the CEO and chairman roles at Disney would only mark a first step toward reform.

"If they think that is going to be the end, they are kidding themselves," he said.

Disney shares closed off 11 cents at $26.65 on the New York Stock Exchange.