Disney's Eisner Rebuked in Shareholder Vote

P H I L A D E L P H I A, March 3, 2004 -- Despite a shareholder revolt that led him to lose the chairmanship of The Walt Disney Co., Michael Eisner vows that he will stay on as CEO through the end of his term in 2006.

"My intention is definitely to serve that term out to its completion," Eisner told Nightline's Ted Koppel in his first interview after the Disney board voted to split his dual job title of chairman and chief executive, which he had held for 20 years.

The board made former Sen. George Mitchell, a member of Disney's board, the company's new chairman, effective immediately.

The directors voted unanimously for Mitchell, a former U.S. senator from Maine, but in a statement reiterated their approval of Eisner's management and the company's strategy.

Earlier today, 43 percent of shareholders who voted at the company's annual meeting withheld their support for Eisner. The number of shares withheld was higher than many had been expecting, and represented a victory for shareholder activists Stanley Gold and Roy E. Disney, former board members who have been leading a shareholder revolt against Eisner.

The duo called the shareholders' vote "unprecedented in American corporatehistory" and called again for the board to oust Eisner. "After today's mandate, the board can no longer ignore the will of its shareholders," they said in a statement after the result of the vote was announced.

Eisner was running for re-election unopposed, so his job was not in immediate danger. He told Nightline Disney and Gold created "a groundswell with their rhetoric" among the shareholders, but said the Disney board was not swayed by the two men's arguments.

Disney and Gold had earlier said they would not be satisfied if Eisner lost just one of his titles.

The shareholders' vote also sparked renewed interest by Comcast Corp., the nation's largest cable company. It called on the board to reconsider its $49 billion all-stock takeover bid, which was rejected earlier as too low. Comcast did not raise its offer, and the Disney board reiterated that it was inadequate and would not benefit shareholders.

"It's not going to happen because their proposal is the exact same proposal they already offered us, which our board rejected," Eisner told Nightline.

Earlier at the annual meeting with thousands of shareholders at the Philadelphia Convention Center, Eisner defended his 20-year record to those anxious to hear him outline management's plan for continued earnings and stock growth. "I love this company," he said. "The board loves thiscompany. And we are all passionate about the output of thiscompany."

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

"Michael Eisner must leave now," Gold told the shareholders. "We see today'smeeting as a first step toward saving the company … We areseeking real and meaningful change."

Eisner acknowledged that the performance at Disney's ABC networkwas "disappointing," but he also told the shareholders thatDisney has "the management skills and creative talent to continueits growth path."

He had previewed his pitch to shareholders in an interview published today in the Washington Post.

Eisner told the newspaper Disney is in "fabulous shape." He said that that despite 9/11 and the build-up to war with Iraq, "we maintained a good balance sheet, we slimmed down, we kept the spirits up inside the company. We managed through crisis."

In fact, the company's fortunes have improved over the past year. After several years of decline, the stock price and earnings are rebounding, climbing back to levels seen in the late 1990s.

For the men behind the very public campaign to oust Eisner, the improvements of the past year are unimpressive. Roy Disney and Gold have campaigned for Eisner's resignation since they both quit the board late last year. Disney is the nephew of the company's founder and Gold is his financial adviser.

The two men have said they are unhappy with the company's return for shareholders and place the blame squarely with Eisner. Gold recently told ABCNEWS that "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."

This is the message the pair brought to the overflowing crowd of shareholders who gathered at the "Save Disney" counter-meeting held Tuesday across the street from where the Disney company is holding its official meeting today.

Gold and Roy Disney asked shareholders to vote to "withhold" on the Eisner nomination as a signal to the board that it is time for a change at the top. They were counting on the support of more than 16 large pension funds, which own a substantial amount of Disney stock, and were hoping to get at least 30 percent voting "withhold."

But Tuesday's "Save Disney" meeting thrown by Gold and Disney was for the individual investor. Some of the hundreds of people who lined up outside the Loew's Hotel to get into the meeting were lured to the meeting because of a shared belief that it is time for change. Others came out of curiosity.

Karen George, of Harrisburg, Pa., said the Web site SaveDisney.com piqued her curiosity and when she found out the annual meeting was in her backyard she had to come. George said a substantial percentage of her personal investments are in Disney stock. She attended the "Save Disney" meeting, listened to what the two men had to say, but gave Eisner a chance to state his case before casting her vote.

Roxanne Grzetich, who traveled to Philadelphia from Joliet, Ill., with her husband, Dave, has been a Disney shareholder since 1983.

"I have 100 percent of my investments in Disney stock," said Grzetich, "and this is the first time in 21 years I am worried about it."

She told ABCNEWS that the company does not seem to be going in the right direction, saying "the pixie dust doesn't have the sparkle anymore." Grzetich said she and her husband travel to Disney World 10 times a year and they are most concerned about the condition of the theme parks, which she described as "shabby." She said she has cast her vote, but declined to share her decision.

Florence Haight and her daughter, Dana, from North Branch, N.J., said they are big fans of the Disney company, but agree that the company is not living up to its potential.

"Eisner should be out," said Florence, who voted "withhold" on Eisner's re-election.

Disney is the parent company of ABCNEWS.com.

ABCNEWS' Ramona Schindelheim contributed to this report