Increasingly isolated in his corporate redoubt, Michael Eisner must be contemplating the strategy to pursue when you've got a reputation as a cold, imperious leader with an uneven track record, a host of alienated ex-associates and a well-financed opponent determined to place your management style and fiscal stewardship under the microscope.
He could seek advice from the last Californian who waged a survival battle from the same position. Then again, things didn't turn out too well for Gray Davis.
To say that the Walt Disney Co. chairman faces a political problem as daunting as Davis' is perhaps to be unfair to Davis. The former governor was arguably the victim of external economic forces, compounded by his unappealing personality. But Eisner's personality defects have been a major contributor to the long-term ailments that have now made his company the target of a takeover bid from Comcast Corp.
Most of these defects have been endlessly masticated by observers in the film industry and the press. Eisner's reluctance to delegate authority, much less to set a date for his own retirement after two decades at the helm and to groom a successor, has driven off enough talented executives to fill the corporate dining rooms at entertainment conglomerates all over town. His taste for adolescent infighting has led him into a series of embarrassing public feuds, and it doesn't say much for his judgment that he seems to lose most of them -- at a huge cost to the company.
In recent years, Eisner's Disney has ceded its domination of its core businesses to others. Children's entertainment is now identified as much with Viacom Inc.'s Nickelodeon as with Disney. The company has kept its position atop the filmed animation business largely by renting the creativity of its soon-to-be ex-partner Pixar Animation Studios. Its theme parks have lost their reputation as spotless and safe family havens. (On Wednesday, a Disney employee at its Orlando, Fla., theme park was killed when he was run over by a float.)
In an ideal world, a responsible board of directors would have long since hooked a leash to a chief executive who performed this way. But rather than function as a useful counterweight, the Disney board has generally behaved like the House of Peers in the Gilbert & Sullivan song, which "did nothing in particular, and did it very well." (Except that the Disney board hasn't even done nothing very well.)
The board granted Eisner lavish bonuses in years when Disney stock rose, and withheld them when it fell, but it seemed to devote scant consideration to whether he was building long-term value for the company. Add up the numbers, and you find that Eisner collected a total of $30 million in cash bonuses from 1996 through 2002, a period in which the stock rose an average of 2% a year.
A Willful Despot
If the board seems cowed, that might be because Eisner has ruled it like a willful despot, evicting those who challenged his authority and often, according to some sources, seeing them out the door with a foul-mouthed valedictory.
The latest to depart were Roy E. Disney, Walt's nephew, and his business partner Stanley P. Gold. They were more or less forced off the board this year, they contend, because they had begun to challenge Eisner on everything from his meddling in creative matters to his outsized compensation. Rather than go quietly, they promptly set about trying to attract enough institutional and private backers to unseat Eisner over the next year or so. Comcast has stolen a march on Roy Disney and Gold, but its spotlight on Eisner is sure to get investors' attention a lot faster than they could have by themselves.
Eisner's defense is almost certain to revolve around the recent surge in Disney's fortunes. The company's performance lately has been gratifying, as far as it goes. In the 18-month period through the end of 2003, the stock advanced by about 25% (bringing it to the point where it traded seven years earlier). On Wednesday, just as the toner was drying on Comcast's press releases, Disney announced a $688-million profit for its first quarter, well ahead of the most generous Wall Street estimates.
But no one delving beneath the surface of the recent results can be too sanguine about Disney's future prospects. The earnings of its film studio tripled in the last quarter compared with a year earlier, largely on the strength of record sales of the DVDs for "Finding Nemo," "The Lion King" and "Pirates of the Caribbean." The first two of these were monster hits that will be hard to replicate under even the best circumstances, and the last a very solid hit. Without commensurate successes, the financial figures for the same quarter a year from now could look ugly by comparison.
