Giant Shake-Up at Media Giant The Walt Disney Company

RELATED WEBSITES: Walt Disney Company || ABCNEWS | | ABC7 | Business News
RELATED ABC7LA ARTICLES: Disney Board Questions Roy Disney & Stanley Gold | Disney/Comcast Merger | Disney Earnings

(NOTE: Each link opens in a new window)
2nd, 2003
Stanley Gold, a key ally of former Walt Disney Co. vice chairman Roy E. Disney, resigned from the media conglomerate's board Monday, becoming the second vocal opponent of chairman and chief executive Michael Eisner to quit the board in two days.

Gold issued a long rebuke to Eisner and the board, seconding complaints made Sunday by Roy Disney and further criticizing the board as being a rubber stamp to senior management.

Gold also repeated Roy Disney's calls for Eisner to resign.

The two former board members told The Associated Press on Monday they will speak with large shareholders, financial analysts and the public for the first time to air the company's problems.

"I think I have a better chance of persuading people on the outside to bring pressure on the board," Gold said.

He accused the board of being too cozy with Eisner, despite the departure of several key Eisner allies over the past year and the addition of new, independent directors.

"At the end of the day there was no hope of doing anything," Gold said. "They are all solid in Michael's pocket."

Gold said it was too early to decide whether he and Roy Disney would mount a formal challenge by seeking allies among large shareholders who could force a proxy fight.

"Our job is to talk to people and to educate them," Gold said. "This company has huge potential. It has a wonderful history and a wonderful future. But it has lost its creativity. It has no leadership in Michael Eisner."

Roy Disney said his main concern was the value the company offered to customers as well as shareholders.

"Our aim is to try to get the company back in a position to be the leader it has been in the past," Disney said in an interview.

The nephew of company co-founder Walt Disney said he has become increasingly dismayed by rides at Disney theme parks that don't work, rising prices being paid by consumers for Disney products and movies that carry more objectionable content.

"It's all about my name on it," Roy Disney said. "I'd like to see the product represent what I believe the name stands for."

Roy Disney, 73, stepped down from the board of directors on Sunday and resigned as chairman of Walt Disney Animation, calling on Eisner, 61, to resign.

"It is my sincere belief that it is you that should be leaving and not me," he wrote to Eisner.

But the two resignations may have little immediate impact on the company, which has shown progress fueled by improvements at its movie studio, ABC Television network and even at its theme parks, which are gradually recovering from a worldwide tourism slump.

"Unless they can really offer details that are truly private in nature, I don't think whatever they will say will mean new information for most institutional investors," said Paul Kim, senior media analyst at Tradition Asiel Securities.

Kim said Gold and Roy Disney's complaints may be valid in the long term, but that Eisner has had to focus more on boosting the company's share price, which has meant cutting costs and not spending millions of dollars on new theme park rides or television programming.

"From Mr. Eisner's standpoint, he had to listen to what investors wanted now and I think he did," Kim said.

Gold's resignation comes as Disney's board begins two days of meetings in New York.

The board is scheduled to discuss the report of its governance and nominating committee, which recommended that Roy Disney and two other directors not be renominated because they exceed the company's mandatory retirement age of 72.

Gold, 60, played a key role along with Roy Disney in 1984 to save the company from a takeover and to install Eisner as chairman. He heads Shamrock Holdings, which manages Roy Disney's investments.

But Gold's role has been diminished over the past two years as he has become more of a critic of Eisner. Last year, the board adopted new corporate governance guidelines that removed Gold's status as an independent investor and cut his influence.

Board member George Mitchell, the former U.S. senator from Maine, said in a statement Sunday that the governance and nominating committee recently informed Roy Disney that the age-limit rule instituted last year should apply.

"It is unfortunate that the committee's judgment to apply these unanimously adopted governance rules has become an occasion to raise again criticisms of the direction of the company, and calls for change of management, that have been previously rejected by the board," Mitchell wrote.

Financial analysts said before news of Gold's resignation that Roy Disney's comments would probably not have a long-term effect on the company because they come at a time when its fortunes are on the rise.

"This is unpleasant for everybody," said Harold Vogel of Vogel Capital Management in New York. "But as long as the company's stock price stays up, as long as the trends are on the mend, there's no reason to believe there would be anything different."

Most analysts surveyed by Thomson First Call expect Disney to increase its earnings in 2004 by 30 percent to 86 cents per share and by another 18 percent to $1.02 per share in 2005. The company's theme parks have seen slight improvements as tourism increases and its troubled ABC Television network has seen some rise in ratings and advertising revenue.

Shares of Disney were up 5 cents to $23.14 in late afternoon trading Monday on the New York Stock Exchange.

Roy Disney is the last family member active in the company, founded in the 1920s by his uncle Walt and his father, Roy O. Disney.

In January, the board announced three other resignations in an attempt to shrink the board to a more manageable size.

One of those directors was another Eisner critic, Andrea Van de Kamp.

While the board's actions since January eliminate four directors known to be Eisner allies and add several new independent members, they also effectively rid the board of all known opposition to Eisner and his management team.

NOTE: The Walt Disney Company is the parent company of KABC-TV.