Disney Dissidents Vow a Fight If Eisner Isn't Ousted by 2005

September 14, 2004; Page B13

Michael Eisner's announcement of his planned retirement as chief executive of Walt Disney Co. in 2006 won him just a weekend's worth of peace from his most persistent critics.

Roy E. Disney and Stanley Gold, dissident ex-directors who quit the Disney board last year, issued a letter saying they would run an alternate slate of potential Disney directors if the board doesn't oust Mr. Eisner by the company's 2005 annual meeting next spring.

Mr. Eisner said late last week that he wouldn't seek a new contract as CEO at the end of his current deal in September 2006. Messrs. Disney and Gold earlier this year led a campaign to oust Mr. Eisner, which culminated in 45% of the shares voted at Disney's last annual meeting opposing Mr. Eisner's re-election to the board. Mr. Eisner was stripped of the company's chairmanship at that time.

In their new letter, sent to Disney's nonemployee directors, the Disney dissidents pledged to continue their campaign to oust Mr. Eisner unless the board quickly signals that it will hire a search firm and replace Mr. Eisner by next spring.

By announcing his 2006 plans now, Mr. Eisner may have been attempting to disarm future attacks on his leadership, and at the same time minimize any chance that he might lose his job by other means before then. He may not have been able to persuade the board to give him another contract even if he had wanted one.

Now, the Disney dissidents have signaled that they don't plan to let him off the hook. They already had been promising some sort of alternate board slate even before Mr. Eisner's announcement, and the question is whether they will be able to drum up support for their cause at a time when Mr. Eisner already has pledged to take himself out of the picture.

Mr. Gold said in an interview that he isn't sure whether he will run a full or partial slate of directors, but added that he would present no fewer than "five or six" alternatives. "It's time for you to do your job," he said of the current board, "and if you don't do your job, I'm going to run people to replace you."

He was emphatic that Disney needs an outsider because, in his view, no one currently at the company is qualified for the job. Mr. Gold wouldn't name any of the directors who he says have agreed to run on the dissident slate.

Disney declined to comment on the letter.

The dissidents are in large part taking advantage of the fact that Mr. Eisner last week refused to say whether he would in 2006 seek to hold onto his board seat, or try to regain the chairmanship after exiting as CEO. In their letter, Messrs. Gold and Disney accused Mr. Eisner of trying to "hold the company hostage for two more years -- and perhaps longer." They suggested that Mr. Eisner's real agenda is to install Disney President Robert Iger as chief executive, so that Mr. Eisner could become chairman again.

The dissidents called for the Disney board to immediately hire an "independent executive recruiting firm" to hire a new leader, and to at the same time ensure that Mr. Eisner leaves the company as both CEO and board member at the end of that search.

As usual, much may come down to Disney's performance. "If growth is going to stagnate again as it has numerous times over the last seven or eight years," said Fulcrum Global Partners analyst Richard Greenfield, then the critics may get renewed traction. But their attacks would be blunted by continued earnings momentum; Disney this year is poised to post 50% earnings growth.

Disney has a board meeting scheduled for next week, and the situation illustrates how thorny Mr. Eisner's planned two-year transition period could be. Executive-search firms began sounding out Disney board members about landing the CEO search when Mr. Eisner's troubles with shareholders deepened earlier this year. Those feelers apparently fell on deaf ears.

In the wake of the Eisner announcement and dissidents' threatened proxy fight, however, that could change soon. Disney directors could emerge from next week's board meeting saying, "Even though it's two years, we can't wait that long" -- and launch their outside search within 90 days, a recruiter suggests.

A key wild card is Disney's relationship with big public-employee pension funds that opposed Mr. Eisner in the shareholder revolt earlier this year. Some of those funds have been working behind the scenes with Disney about submitting candidates for a board opening. The funds are keen to maintain the dialogue. So they are unlikely to publicly support the threatened proxy fight unless their negotiations with the company fall through. If the latter happens, however, they could again join forces with Messrs. Disney and Gold.

Write to Bruce Orwall at bruce.orwall@wsj.com and Joann S. Lublin at joann.lublin@wsj.com