Disney's Eisner Faces Shareholder Vote

Will Michael Eisner have to turn over the keys to the Kingdom? That is topic "A" on Wall Street this week.

The chairman and CEO of The Walt Disney Company is at the center of a very public campaign by two former Disney board members to have him ousted from the job he's held since 1984.

Roy Disney, the founder's nephew, and his financial adviser Stanley Gold are asking that shareholders "withhold" their vote on Eisner for reelection as chairman of the board when they meet at the company's annual meeting Wednesday in Philadelphia. Eisner is running unopposed.

At a news conference today, Gold said, "We are not going away until Mr. Eisner is gone. Next week, next month, next year, we are here as long as it takes."

Ever since the two men resigned from the board in December, the rhetoric has become louder.

Some Disney executives have painted it as a personal vendetta against Eisner, but Roy Disney disagrees.

"I'm doing my damnedest to keep it from being personal. It is time for Eisner to leave," Roy Disney said during today's news conference.

In the past week, the backlash hit a fever pitch as the pair picked up at least partial support from some very powerful institutional investors. The influential Institutional Shareholders Services, which advises one third of all the pension funds that invest in Disney stock, recommended that its clients withhold their votes for Eisner.

ISS said in its report: "We recommend a withhold vote against Mr. Eisner as a signal that real boardroom change needs to continue and separation of the powers of CEO and Chairman are needed. … At the end of the day, all roads lead back to Eisner. … If there were ever a case for separating the roles of Chairman and CEO, this company is the poster child."

A number of ISS's large pension fund clients have publicly stated that they will follow the recommendation. Some inside the Disney company say they would not be surprised to see the withhold votes come in at around 30 percent. However, they believe it would only signal shareholders' desire to separate the roles of chairman and CEO, and not signal a loss of confidence in the company's management.

On Monday, company spokesperson Zenia Mucha said, "Disney's record of building value is indisputable, as evidenced by the nearly 60 percent increase in stock price in the past year. Disney management and the Board believe Disney is a well-managed company with world-class governance that is on track for earnings growth from continuing operations in excess of 30 percent this year and has well laid out its key long-term strategies for achieving attractive double-digit earnings growth through 2007."

In fact, the company, which owns ABCNEWS, has just come off of a very successful quarter and the stock is trading at a 52-week high. But, while the company's earnings and stock prices have improved, they are still at late-1990s levels.

Gold told ABCNEWS that merely separating the jobs of chairman and CEO "won't satisfy" him and it is time for Eisner to go. "Over the last seven or eight years he has underperformed. He chases away creative people. He has no strategic vision and the stock has languished," said Gold.

At this point, no one expects the withhold votes to add up to more than 30 percent when the result is announced on Wednesday. Even if they do, the board would not be compelled to take any action, whether it is to separate the dual position Eisner now holds or to ask him to leave. However, Wall Street analysts and corporate governance experts said the board runs the risk of looking like it is ignoring the shareholders.