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Roy Disney Quits, Urges Eisner to Resign for Good of Company

December 01, 2003|James Bates and Richard Verrier | Times Staff Writers

With a volley of harsh words, Roy Disney on Sunday quit the board of the company founded by his uncle, Walt Disney, and called for the resignation of Chairman Michael Eisner, saying the entertainment conglomerate had "lost its focus, its creative energy, and its heritage."

Disney told Eisner in a three-page letter that "you are no longer the best person to run the Walt Disney Co." The 73-year-old vice chairman accused Eisner of maneuvering to have the board's nominating committee leave his name off the slate of directors that will be elected in the coming year -- "effectively muzzling my voice."

In perhaps his sharpest rebuke, Disney said that Eisner's leadership had led to a widely held perception of the company as "rapacious, soul-less, and always looking for the 'quick buck' rather than long-term value which is leading to a loss of public trust."

The letter, addressed to Eisner, was delivered to Walt Disney Co.'s Burbank headquarters and Eisner's apartment in Manhattan in advance of a company board meeting there Tuesday.

Eisner declined to comment. But board member George J. Mitchell, the former U.S. Senate majority leader, said in a statement that the directors were simply enforcing new Disney governance rules requiring board members to retire when they reach 72.

"It is unfortunate that the committee's judgment to apply these unanimously adopted governance rules has become an occasion to raise again criticisms of the direction of the company, and calls for change of management, that have been previously rejected by the board," said Mitchell, the board's presiding member.

Two other long-serving board members -- Ray Watson, 76, a former chairman of the board, and Thomas Murphy, 77, the former chief executive of Capital Cities/ABC -- also have been asked to step down. Both men have been strong supporters of Eisner.

Disney, son of company co-founder Roy O. Disney, also announced that he was quitting his job as chairman of the company's bedrock animation division, which he helped build during the heyday of the 1990s.

Disney, the company's second-largest individual shareholder behind Eisner, recently announced plans to sell as much as 43% of his stake. For nearly a decade, he was a major Eisner backer. During the last three years, however, tensions between the men have escalated as the company's stock price and earnings have been sluggish.

Disney and his chief lieutenant, Stanley Gold, emerged as vocal critics on a board of directors that has been supportive and forgiving of Eisner. Last year, Gold and Disney unsuccessfully tried to orchestrate Eisner's ouster.

On Sunday, Gold said of his colleague's resignation: "This is indeed a sad day for the Walt Disney Co., its employees and its shareholders." Disney is the last board member with ties to the founding family.

Although the company's problems are well known, Roy Disney's recitation was remarkable in its tone and content, exposing the severity of his professional and personal rift with Eisner. The situation had deteriorated to a point where Disney accused his adversary in the letter of requiring associates "to report my conversations and activities back to you. I find this intolerable."

Disney said that under Eisner's leadership, the company's finances and reputation had been damaged in seven critical areas, from the faltering fortunes of its ABC television network and its theme parks to "your consistent micro-management of everyone around you with the resulting loss of morale throughout this Company."

Disney also was critical of Eisner for his "consistent refusal to establish a clear succession plan." The 61-year-old executive has been chairman since 1984.

The fact that there is no clear successor in the wings is one reason some analysts believe Eisner has been able to keep a strong hold on his job -- despite the departure of numerous top executives -- and do not believe Roy Disney's resignation will lead to any substantial management changes. Disney's departure could further strengthen Eisner's grip because it leaves only Gold as an outspoken critic on the board.

"I'm not sure how seriously investors are going to take Roy Disney's resignation," said Jordan Rohan, an analyst at SoundView Technology Group. "I'm certainly willing to give Eisner the benefit of the doubt."

The timing of Roy Disney's resignation surprised some analysts and investors, who noted that the company's financial performance has improved in the last year, especially in the studio division, which had a string of box-office hits this summer. Disney's stock, which closed at $23.09 on the New York Stock Exchange on Friday, is up nearly 42% this year.

"Disney has blocked and tackled pretty well against an economy that has fallen off a cliff," said David Miller, an analyst with Sanders Morris Harris in Los Angeles.

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