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Disney Stockholders Protest Eisner Reign

Posted on: Wednesday, 3 March 2004, 06:00 CST

Walt Disney Co. chairman and CEO Michael Eisner was handed a stinging rebuke Wednesday as shareholders withheld 43 percent of their votes for his re-election to the board.

Eisner ran unopposed, and so was re-elected, but the vote triggered calls for his resignation from the company he has led for 20 years.

It also renewed an unsolicited bid for Disney from cable television giant Comcast Corp., which asked to meet immediately with Disney's independent directors to discuss its offer.

"We think that a signal has been sent loudly and strongly to the Disney board and the Disney management that the shareholders continue to believe they haven't properly represented shareholders' interests in a variety of ways. One is the way they handled the Comcast proposal," said David Cohen, Comcast executive vice president.

Comcast said it would not sweeten the offer, originally valued at $54 billion. "The ball, we think, is very much going to be in Disney's court," Cohen said.

The result of the vote was announced at the end of a nearly five-hour shareholders meeting marked by cheers and standing ovations for former board members Stanley Gold and Roy E. Disney, who have waged a bitter three-month campaign to oust Eisner.

The two hailed the vote and said it was a clear indication that Eisner should go.

The nation's largest public pension fund, which withheld its 9.9 million votes from Eisner, also called Wednesday for his resignation.

"This discontent is too wide and way too deep in the marketplace, and it has led us to believe that Eisner should go and the board should get quickly to work on planning for an orderly transition," said Sean Harrigan, president of the board of administration of the California Public Employees Retirement System.

Shareholders, following the advice of Roy Disney and Gold, also withheld more than 20 percent of their votes from three other board members: George Mitchell, Judith Estrin and John Bryson.

Disney's newly elected board met right after the shareholder meeting adjourned.

The board must now interpret the depth of shareholder dissatisfaction with Eisner. It could do nothing, separate the positions of chairman and chief executive or fire Eisner.

"They've got to do something," said Tom Wolzien, a media analyst at Sanford C. Bernstein & Co., said of Disney's newly elected board.

Wolzien said the independent board members have to consider whether they could be sued by shareholders if they do not take strong action based on the vote.

Analysts said the most likely result would be for the board to keep Eisner as chief executive and name a new board chairman, a move that would placate most of the pension funds that withheld votes from Eisner and allow the board time to plan for a successor.

"It's less disruptive for the company to keep Eisner in the CEO role and bring in a chairman," said Janna Sampson, co-manager of the AmSouth Select Equity Fund and director of Portfolio Management at Oakbrook Investments.

The board also may do nothing on the premise that a majority of shareholders voted for Eisner.

"Acting upon a minority opinion sets kind of a dangerous precedent," Sampson said. "It's uncharted waters."

Eisner, who chaired the meeting, showed little emotion, even as Gold and Roy Disney took the stage and called for his firing.

His voice a bit hoarse, Eisner briefly defended himself and his fellow managers, saying he enjoyed an "excellent relationship" with the dissident board members until they disagreed with his handling of the company after the Sept. 11 terrorist attacks.

"Stanley felt we weren't listening," Eisner said. "We felt we were listening and not agreeing."

"I love this company," Eisner said. "The board loves this company. And we are all passionate about the output of this company."

Eisner acknowledged that the performance of Disney's ABC network was "disappointing," but he also told shareholders that Disney has "the management skills and creative talent to continue its growth path."

Gold and Disney went slightly over the 15 minutes they were allotted at the meeting to present their case against Eisner, saying it was not sufficient for the company simply to split the roles of chairman and CEO.

"Michael Eisner must leave now," Gold said. "We see today's meeting as a first step toward saving the company. ... We are seeking real and meaningful change."

Eisner defended his management team: "The criticisms you have just heard are fundamentally wrong," he said to applause. "I believe you have just heard rhetoric from our critics that frankly replaces reason. It's a disservice to cast members as well as shareholders."

Shareholders nearly emptied the hall during nearly three hours of presentations from Disney executives designed to show the strength of the company's operations and management team.

Shares of Disney fell 11 cents to $26.65 Wednesday on the New York Stock Exchange.

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AP Business Writers Seth Sutel and Rachel Beck in New York contributed to this report.

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On the Net:

Roy Disney and Stanley Gold protest site: http://www.savedisney.com

Walt Disney Co.: http://www.disney.com

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