Roy Disney quits Disney, says Eisner should go

[JCVaughn]

From Drudge -
http://www.drudgereport.com/flash1.htm




ROY DISNEY RESIGNS; CALLS ON EISNER TO STEP ASIDE
Sun Nov 30 2003 16:32:17 ET

Walt Disney Co. Vice Chairman Roy E. Disney submitted his resignation from the company board on Sunday and called for Disney Chairman and CEO Michael Eisner to step down from his own positions, the WALL STREET JOURNAL is reporting.

Disney, nephew to the late Walt Disney, sent Eisner a three-page letter severely criticizing his leadership during the past seven years:

'It is my sincere belief that it is you who should be leaving and not me,... Accordingly, I once again call for your resignation or retirement.'

WSJ reporter Bruce Orwall writes that in his letter Disney said that Eisner deserved credit for a successful first decade after taking the helm at Disney in 1984. But he then detailed seven areas in which he said Mr. Eisner has failed the company in the past seven years.

The list of complaints included everything from the performance of the struggling ABC broadcast networks and Disney theme parks to Mr. Eisner's reputation for "micro-management of everyone around you."

The resignation comes in advance of a Disney board meeting this week. Mr. Disney's letter seems to indicate that the Disney board's nominating committee had decided to leave his name off the slate of directors to be elected for the coming year. Mr. Disney also indicated that he would also resign from his position as chairman of Disney feature animation.

A Disney spokeswoman initially declined to comment.

DEVELOPING HARD...

[JCVaughn]

From the FINANCIAL TIMES
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1069493604425&p=1012571727088

By Christopher Parkes in Los Angeles and Peter Thal Larsen in New York
Published: November 30 2003 23:14
Last Updated: November 30 2003 23:26

Roy Disney resigned as vice-chairman of the Walt Disney entertainment group on Sunday and called for Michael Eisner, chairman and chief executive, to follow suit, bringing to a head a conflict that has been brewing for a decade.  

"It is my sincere belief that it is you who should be leaving and not me," he said in a bitter letter that criticised Mr Eisner's performance and style on seven counts.

The departure and open hostility of Mr Disney, nephew of Walt and still a substantial shareholder, are likely to reignite the debate about its direction.

It marks the end of a relationship that dates back to 1984, when Mr Eisner was appointed to rescue the company from break-up raiders, and which has been increasingly antagonistic.

The letter detailed criticisms that Mr Disney had offered privately and had been repeated in writing to Mr Eisner from Stanley Gold, a board member, and head of Mr Disney's private investment group, Shamrock Holdings.

It said that the company, under Mr Eisner's leadership, had "failed during the last seven years in many ways".  

It had failed to bring the ABC network's primetime schedule "back from the abyss", he wrote.

Attacking the "timidity" of group investments in its key theme parks in California, Paris and the resort under construction in Hong Kong, he said "you have tried to build parks on the cheap and they show it and the attendance figures reflect it".

Under his control, the company was seen by virtually everyone associated with it as "rapacious, soulless, and always looking for the quick buck rather than long-term value, which is leading to a loss of public trust".

Also included in his catalogue of complaints were the "creative brain drain", which he described as "real and continuing", and which was especially trying for Mr Disney who, as chairman of the feature animation division, has seen his empire whittled down by heavy lay-offs.

Mr Eisner had also failed to build constructive relationships with its successful Miramax film subsidiary, and Pixar, the computer animation company responsible for most of the Disney-branded hit cartoons in recent years.

Mr Disney also referred to the chairman's consistent refusal to establish a clear succession plan, and accused him of eroding morale across the company with his "consistent micro-management of everyone around you".

Mr Disney, who could not be reached for comment, has been a consistent critic of the way the group has been run, especially since 1994, and played a leading internal role in pressing for the implementation of recent moves to improve corporate governance.

In the past two years, an enlarged board nd other measures have quieted most external criticism.

[JCVaughn]

From CBS Marketwatch
http://cbs.marketwatch.com/news/story.asp?guid=%7B8A9737EE%2DA92C%2D46AB%2DA69F%2DEF1C8EE05681%7D&siteid=mktw

LOS ANGELES (CBS.MW) -- Roy E. Disney, vice chairman of the Walt Disney Co. and nephew of the company's founder, resigned from its board of directors Sunday and said Chairman Michael Eisner should resign as well, according to media reports.

A story in Sunday's online edition of the Wall Street Journal cited a lengthy letter in which Roy Disney criticized Eisner's leadership.

The Journal quoted Disney as writing to Eisner: "It is my sincere belief that it is you who should be leaving and not me."

Disney (DIS: news, chart, profile) representatives were unavailable for comment on the report Sunday evening.

Disney's board of directors is scheduled to meet this week. The Journal report stated Roy Disney's letter seemed to indicate that the board's nominating committee had decided to leave his name off the slate of directors to be elected for the coming year.

The Associated Press reported Disney's resignation may be a pre-emptive move to avoid being forced off the board. The board's governance and nominating committee has decided not to recommend Disney for another term because he is over the mandated retirement age of 72, the company said Sunday.

The full board is scheduled to meet Monday and Tuesday in New York; board membership is on the meeting agenda.

Disney has been increasingly critical of Eisner's leadership and has called for his resignation before, a move that was rejected by the board.

The company has been under fire since its stock plummeted from its all-time high in the low 40s in the late 1990s and the early part of this decade, to as low as the midteens -- a level it held as recently as March. Disney has struggled to overcome the effects that the Sept. 11, 2001 terrorist attacks have had on its theme park business.

But the biggest concern has been Disney's management of its ABC Television Network, which has languished at the bottom of the ratings among the four major broadcast networks for nearly three years running.

ABC was heavily criticized for hanging much of its prime-time schedule on "Who Wants To Be A Millionaire" -- hugely popular in 2000 but an also-ran a year later -- and for failing to complement that with scripted television. ABC still is trying to climb out of the hole it dug for itself with that strategy.

Disney's ratings have been climbing slowly, but it has yet to pull itself up from fourth place.

Roy Disney's call for Eisner's resignation is not the first time the company's chairman has come under fire. For a decade after he took over as Disney chairman in 1984, the company thrived. But the accidental death of President Frank Wells, and the subsequent resignation of studio chief Jeffrey Katzenberg turned the spotlight on Eisner, who was seen by many as concentrating corporate power in his own hands.

Under pressure to create a line of succession after undergoing open-heart surgery, Eisner in 1995 named superagent Michael Ovitz as his second-in-command. That experiment went awry as Ovitz was deemed an ill fit for the company, and his multimillion-dollar severance package ruffled the feathers of Disney shareholders and board members.

Disney is the last family member to be active in the company. He previouslyresigned from the board in 1984 to launch a stock battle for the company,which was then headed by Ron Miller, Walt's son-in-law.

Disney also indicated that he would also resign from his position aschairman of Disney's feature animation division, the Journal reported.

Disney's animation division has been cut drastically, forcing the company to lean heavily on its partnership with Pixar (PIXR: news, chart, profile) and its expertise in three-dimensional computer animation for box-office success. Pixar-Disney films are on a long winning streak -- capped by this year's box-office king, "Finding Nemo" -- but the partnership is set to expire in 2005 with no renewal of the two companies' pact in sight.

The division's own two-dimensional, hand-drawn films have struggled at the box office while costs remain high. Films such as "The Emperor's New Groove" and "Treasure Planet" have put a damper on Disney's profit machine.

Disney shares added 1 cent on Friday to close at $23.09.

[JCVaughn]

Mr. Michael D. Eisner, Chairman

The Walt Disney Company

500 South Buena Vista Street

Burbank, CA 91521

Dear Michael,

It is with deep sadness and regret that I send you this letter of resignation from the Walt Disney Company, both as Chairman of the Feature Animation Division and as Vice Chairman of the Board of Directors.

You well know that you and I have had serious differences of opinion about the direction and style of management in the Company in recent years. For whatever reason, you have driven a wedge between me and those I work with even to the extent of requiring some of my associates to report my conversations and activities back to you. I find this intolerable.

Finally, you discussed with the Nominating Committee of the Board of Directors its decision to leave my name off the slate of directors to be elected in the coming year, effectively muzzling my voice on the Board -- much as you did with Andrea Van de Kamp last year.

Michael, I believe your conduct has resulted from my clear and unambiguous statements to you and the Board of Directors that after 19 years at the helm you are no longer the best person to run the Walt Disney Company. You had a very successful first 10-plus years at the Company in partnership with Frank Wells, for which I salute you. But, since Frank's untimely death in 1994, the Company has lost its focus, its creative energy, and its heritage.

As I have said, and as Stanley Gold has documented in letters to you and other members of the Board, this Company, under your leadership, has failed during the last seven years in many ways:

The failure to bring back ABC Prime Time from the ratings abyss it has been in for years and your inability to program successfully the ABC Family Channel. Both of these failures have had, and I believe, will continue to have, significant adverse impact on shareholder value.
Your consistent micro-management of everyone around you with the resulting loss of morale throughout this Company.
The timidity of your investments in our theme park business. At Disney's California Adventure, Paris, and now in Hong Kong, you have tried to build parks "on the cheap" and they show it, and the attendance figures reflect it.
The perception by all of our stakeholders - consumers, investors, employees, distributors and suppliers - that the Company is rapacious, soul-less, and always looking for the "quick buck" rather than the long-term value which is leading to a loss of public trust.
The creative brain drain of the last several years, which is real and continuing, and damages our Company with the loss of every talented employee.
Your failure to establish and build constructive relationships with creative partners, especially Pixar, Miramax, and the cable companies distributing our products.
Your consistent refusal to establish a clear succession plan.
In conclusion, Michael, it is my sincere belief that it is you who should be leaving and not me. Accordingly, I once again call for your resignation or retirement. The Walt Disney Company deserves fresh, energetic leadership at this challenging time in its history just as it did in 1984 when I headed a restructuring which resulted in your recruitment to the Company.

I have and will always have an enormous allegiance and respect for this Company, founded by my uncle, Walt, and father, Roy, and to our faithful employees and loyal stockholders. I don't know if you and other directors can comprehend how painful it is for me and the extended Disney family to arrive at this decision.

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.

With sincere regret,

Roy E. Disney

cc: Board of Directors

[JCVaughn]

Dec. 1, 2003

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 Co. and second Roy Disney's call for the removal of Michael Eisner as chairman and chief executive. 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 nonmanagement 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 [Sunday] 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 five-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 nonmanagement 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.

-- continued in next post --

[JCVaughn]

-- continued from previous post --

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 nonexecutive 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 seven 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

[JCVaughn]

LOS ANGELES (Reuters) -- Roy Disney's rebellion against the management of Walt Disney Co. (DIS) has found fertile ground among small shareholders and average "folks,"' the former director said on Wednesday.

However, three days after resigning in protest from the Disney board and vowing to bring down Chief Executive and Chairman Michael Eisner, Roy Disney did not offer a specific plan when asked what would convince institutional shareholders to back him.

"There is a kind of a groundswell out there," Disney said, describing an outpouring of support from small investors and employees at the company, where he was the last founding family member in senior management.

"The response from folks is astonishing. I am absolutely boggled by it,"' he said.

Roy Disney and ally, Stanley Gold, recruited Eisner in 1984 but have fallen out with him in recent years. In a letter to some Disney employees on Wednesday, Roy Disney said, "Michael Eisner has lost sight of the vision upon which this company was founded."

Roy Disney and Gold resigned from the board this week after a nominating committee decided to force Roy Disney into retirement. Disney, who stepped down as vice-chairman of the board and head of animation, said departing was painful, but in some ways a relief given the atmosphere at work.

"It was like the mafia. You couldn't say 'good morning' without somebody saying you are talking out of turn," Disney said, arguing that the current board squelched dissent.

CONCERN OVER THEME PARKS

Eisner, he argues, has not invested in theme parks as he should, and the board of directors was ineffective.

"The upkeep down in Disneyland is sickening,"' he said, adding that the company under Eisner had built  "half a park" but charged full-park prices at California Adventure, the theme park opened next to Disneyland in Southern California.

The park opened to mediocre reviews in 2001, but the company has added a number of new attractions that have proved popular, especially with younger children.

In the Wednesday letter, made available to Reuters, Disney added that under Eisner "the focus has shifted to the chase for a quick buck."

Eisner has not commented, but the independent members of the board in a statement have said that they had discussed and deliberated on all the issues Gold, in particular, had raised and had rejected the recommendation to change management.

The directors called the rebellion a "destructive course" for employees and shareholders.

Some Wall Street investors and analysts have said that the company needs new ways to grow, but a number of fund managers have said that the open rebellion, which has been simmering for more than a year, was too late, with Disney stock rising.

One former critic of management said Roy Disney did not have a chance to succeed. "He's howling in the wind -- the stock's up and now there are two voices (of dissent) who have left," said Herbert Denton, president of Providence Capital, which pushed Eisner last year to improve operating performance. Denton said he no longer owned Disney shares.

Roy Disney referred to average folks, however, such as smaller investors who had held Disney for years or decades. "I think they are the ones who will be the most vociferous" in support, he said.

Disney said he wanted to "present the idea that there is a better future." He and Gold say it is too early to talk specifics.

Disney concluded that those who said he could not succeed reminded him of doubters in 1984, when he resigned from the board to force a change in management. Six months later he succeeded in getting Eisner named CEO and chairman.

"The things that need to happen tend to happen," he said.

© 2003 Reuters
http://news.moneycentral.msn.com/breaking/breakingnewsarticle.asp?feed=OBR&Date=20031203&ID=3164989

[orcafresh]

Every night after hearing of these two gentlemen and the stance they've taken in resigning from Disney. I've done just as Walt Disney suggested each Sunday evening, as I was growing up.

"When you wish upon a star."

My wish would be to see Roy Disney and Stan Gold place their knowledge, money, and talent connections in the hands of Platinum Studios.

One can dream...