Is two years too long?
Walt Disney Co. will find out as it searches for a new leader to replace Chief Executive Michael Eisner, who announced plans Friday to retire -- but not until his contract expires in September 2006.
Management experts note that most retiring CEOs take three to nine months to tie up loose ends and train a successor before hitting the exits. Longer transitions, they say, can be chaotic and disorienting.
"Generally, when you have a CEO transitioning out, it creates a great deal of uncertainty about the strategy and approach of the company," said Bill Simon, an executive recruiter at Korn/Ferry International, a Century City-based headhunting firm.
That could be particularly problematic for Disney, which has just started to rebound after a prolonged stock slump and months of turmoil marked by a failed takeover bid from cable giant Comcast Corp. and a shareholder revolt to unseat Eisner.
Two years with a lame duck CEO "puts everything on hold and could lead to paralysis," said Robert Fulmer, a distinguished visiting professor of strategy at Pepperdine University. "It's a bad move."
To be sure, not all extended departures are considered troublesome.
Some companies may have so many promising internal candidates for the top job that it's helpful to have a couple of years to identify the best in the pack.
That's the case at Disney rival Viacom Inc., where CEO Sumner Redstone announced in June that he would step down within two years. At the time, he made clear that his successor would be either of his two lieutenants: Tom Freston, who built the company's cable empire, or Leslie Moonves, who is credited with turning around Viacom's broadcast network, CBS.
In other cases, top-performing companies want a long goodbye so that they can pay proper tribute to a celebrated CEO. Jack Welch, for instance, announced in November 1999 that he would retire as head of General Electric Co., and two years passed before his replacement took charge.
After Jeffrey Immelt was named Welch's successor, the losers of the internal bake-off left to become CEOs of other Fortune 500 companies.
"GE has a world-class succession plan, but at Disney, there's not a pipeline full of candidates to create a horse race," Fulmer said. "Eisner got rid of everyone who would have been a potential successor."
Among the top executives who have left Disney over the years after clashing with Eisner or chafing under his controlling style: DreamWorks principal Jeffrey Katzenberg; Steve Burke, now chief operating officer of Comcast; and Steve Bornstein, now a senior executive with the National Football League.
Fulmer pointed out that Disney has had a history of rocky transitions at the top, recalling the caretaker CEOs who followed founder Walt Disney and preceded Eisner.
The changing of the guard this time promises to be no less difficult.
Some observers suggested that there is no obvious internal candidate to succeed Eisner, despite the chief executive's recent remarks that Disney President Robert Iger was his "preferred choice."
Said one executive recruiter, "When the successor comes internally, you need 60 days, not two years."
Meanwhile, it's not clear that there's a well-developed list of outside candidates, either.
"In a typical well-run succession plan, the candidates are known years in advance," said Jay Conger, senior researcher at the Center for Effective Organizations at USC.
"Eisner is more unusual. He's a long-standing CEO who has kept succession an open question."
That, in turn, has set off speculation in Hollywood about who could wind up in Eisner's chair.
Among the names being bandied about are Comcast's Burke; Viacom's Moonves and Freston; Pixar Animation Studios Chairman and Apple Computer Inc. founder Steve Jobs; News Corp. Chief Operating Officer Peter Chernin; Yahoo Inc.'s CEO, Terry Semel; and EBay Inc. CEO Meg Whitman.
Industry executives speculated that Eisner might have been forced to announce his retirement because the board was having trouble persuading outside candidates to join the company and smooth the transition to new leadership.
Sources say that after Eisner was stripped of his chairman's title in March, following a 45% no-confidence vote by shareholders, board members put out feelers to potential successors. But some were wary of taking on a role at Disney as long as Eisner was still in power.
After all, how could anyone be assured of real authority with Eisner failing to set a retirement date?
Now that he has done so, the question becomes: Just what kind of leader does Disney need next?
Some say three factors will be most important. The company must tap someone who can revitalize its dominance in children's entertainment; someone with turnaround experience who can put Disney's foundering ABC broadcasting network back on track; and a technological visionary who can lead the company into the wireless future.
"The perfect candidate would have all three criteria," said one management consultant, "but two of the three wouldn't be bad."
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By the numbers
Michael Eisner became chief executive of Walt Disney Co. in September 1984. Counting some of the changes:
1: Cruise line launched
2: Sports teams bought or formed
3: Disney presidents who served under Eisner
7: New theme parks
70: Cable networks launched or bought worldwide
800: Movies made
28,000: Employees in 1984
117,000: Employees in 2004
$1.7 billion: Revenue in 1984
$27 billion: Revenue in 2003
$1.23: Stock price in September 1984 (adjusted for stock splits)
$23.16: Stock price Friday
Sources: Company reports, Bloomberg News, Times research