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3/4/2004

Eisner loses Disney chair

The Washington Post

PHILADELPHIA — The Walt Disney Co. board stripped embattled chief Michael D. Eisner of his chairman’s title Wednesday night in response to a shareholder rebellion that become one of the biggest expressions of no-confidence in an executive in recent corporate history.

Beginning immediately, Eisner will serve only as Disney’s chief executive, limiting his duties to day-to-day oversight of the entertainment giant. Company directors, following Wednesday’s lively shareholders meeting here, created the position of chairman of the board and installed George J. Mitchell, the board’s presiding director.

Eisner has been the target of a ouster campaign by former directors Roy E. Disney and Stanley P. Gold, who said that Eisner has done too little too late to revive the company’s lagging performance and that his power has gone largely unchecked by a captive board of directors.

The campaign culminated with 43 percent of Disney shareholders withholding their vote for Eisner’s re-election to the board of directors, a result announced at Wednesday’s meeting. The board said its decision to split Eisner’s job was done while “mindful of the shareholder vote.”

Before the company announced it would split Eisner’s job, Roy Disney and Gold said they would not be satisfied by such a solution, saying they will “not be happy until Michael Eisner is out of this company,” a possibility the board quashed Wednesday night.

“While making this change in governance, the board remains unanimous in its support of the company’s management team and of Michael Eisner,” Disney said in a statement.

The company added: “That is not to say that we view the vote as limited to governance issues alone. We are aware that some voted for an immediate change in management and in the board. However, taking all of these factors into account, we believe the action we have taken today is in the best long-term interest of the shareholders of the company.”

Of the nearly 1.8 billion shares voted, holders of nearly 772 million shares withheld their votes from Eisner, effectively sending the message that they wanted the 20-year Disney chief to give up power.

“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,” the company said. “In particular, there was substantial focus on the question of whether the chair and CEO functions at the company should be split.”

The company acknowledges that it is only now climbing out of the recession and the terrorist-related tourism slump that crippled its finances. It now predicts double-digit earnings growth through 2007.

The move by Disney’s board Wednesday night also ends speculation about who would succeed Eisner if he were forced out altogether.

Wednesday’s no-confidence vote could have lasting impact for the Disney board.

A pending Securities and Exchange Commission proposal allows major shareholders to run alternate board candidates if 35 percent of votes were withheld from company-backed candidates in the previous year. If made retroactive, the SEC proposal could mean that Disney-backed board candidates would face competition from shareholder candidates next year.

Comcast Corp., which has made an unsolicited $56 billion bid for Disney that the board has rejected, regarded Wednesday’s vote as an opening to talk to the entertainment giant. “Disney’s independent directors should immediately meet with Comcast so we can directly present our full and generous proposal and the benefits of the merger,” said spokeswoman D’Arcy Rudnay.

In its statement Wednesday night, Disney said Comcast’s “reiteration” of its offer would not benefit shareholders. The Disney board rejected Comcast’s bid as too low.

During Wednesday’s meeting, Eisner was asked by a shareholder if he had considered buying Comcast.

“Yes,” Eisner said, “but then when I woke up, my wife told me I was dreaming.”

Gold and Roy Disney agree that the Comcast bid is too low and would prefer to see Disney remain independent. However, Gold said, the Disney board should seriously evaluate any bid that could be in the shareholders’ interest.