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Disney Board Endorses Steps to Turn Company Around

Media: At a closely watched meeting, two members are added to the company's governance committee in an attempt to boost investor confidence.

September 25, 2002|RICHARD VERRIER and JAMES BATES | TIMES STAFF WRITER

After an unusually pointed five-hour board meeting Tuesday, Walt Disney Co. directors unanimously approved a series of measures aimed at turning around the entertainment giant and restoring investor confidence.

The vote followed what sources described as a blunt meeting during which Chief Executive Michael Eisner was repeatedly questioned about whether he could meet a series of financial targets, especially over the next year. Eisner is encountering mounting pressure from shareholders and a small but influential group of directors to boost Disney's sagging earnings and stock price. Chief among them are Vice Chairman Roy E. Disney and his chief lieutenant, Stanley P. Gold.

Despite the disquiet among some directors, Tuesday's vote on a long-range strategy for each Disney division suggests that, for now, Eisner still enjoys the board's backing. Although directors had been expected to raise the issue of a succession plan for Eisner, the company would not comment on whether the subject was addressed. A spokesmen for Roy Disney and Gold also declined to comment.

While details of the much-anticipated meeting at Disney's Burbank headquarters remained mostly under wraps, sources close to the board said Eisner and President Robert Iger presented a detailed plan to rejuvenate the company's divisions, including the ABC television network. The executives outlined plans to develop shows beyond the current season, a key concern of the board.

The current season that started this week is seen as something of a watershed for ABC and Eisner's management. The network's prime-time viewership plunged more than 20% last season.

In addition, Disney executives presented a plan to broaden ongoing companywide cost-cutting efforts amid the soft economy that has especially hurt Disney's theme park business. Disney has already squeezed $500 million in cost savings in the last year.

As expected, the board also discussed ongoing efforts to revamp its corporate governance to address long-standing criticisms from shareholders that the board is unwilling to challenge Eisner.

"Disney has been living on borrowed time with this issue," said media analyst David Miller of Sanders Morris Harris Group. "Now that it's fashionable to talk about corporate governance issues, the folks at Disney know what they have to do and to their credit they're doing it."

Among the specifics announced Tuesday was a decision to add two existing board members to its governance committee, Judith Estrin, chief of the technology company Packet Design, and Monica Lozano, president of Spanish-language newspaper La Opinion, and electing former U.S. Sen. George Mitchell to co-chair the committee with Gold.

Disney has vowed to shrink its board from 16 members to possibly as few as 12 and redefine what constitutes an "independent" director. Several long-serving board members may step down as a result of the changes, including Oscar-winning actor Sidney Poitier.

"Today, we furthered our commitment to ensure that Disney remains among the most progressive boards in America on governance issues," Eisner said.

Disney's stock closed at $14.75, down 32 cents on the New York Stock Exchange, before the company's announcement.

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