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We'll Battle On, Say Disney Investors

This excerpt is from an open source article and is not necessarily the opinion of

Furious investors in Walt Disney said yesterday the company had not gone far enough by stripping its long-standing boss Michael Eisner of his chairmanship after the company's raucous annual meeting in Philadelphia.

Disney said it would split the chairman and chief executive roles at a subsequent board meeting late on Wednesday. Mr Eisner will stay chief executive while presiding director George Mitchell is to become non-executive chairman.

At the end of the annual meeting it was announced that 43% of shareholders had withheld their votes for Mr Eisner's re-election to the board. It was believed to be the biggest no-confidence vote at an American company and reflected growing disenchantment over years of financial underperformance.

Brad Pacheco, a spokesman for Calpers, the Californian state pension manager, said the fund would continue to press Disney for change. "They have not gone far enough. We still believe that Eisner has to step down. Splitting the roles was a consolation, but our primary concern is that Eisner is still there."

A spokesman for Institutional Shareholder Services, the influential pension fund adviser, was equally blunt.

"If they think that is going to be the end, they are kidding themselves. The level of the vote makes it clear that investors have a lot more on their minds than just splitting the position."

In a statement, Disney said the board remained unanimous in its support of Mr Eisner. It expressed confidence in the strategic direction of the company, and again rejected the $60bn (£33bn) hostile bid by the cable firm Comcast three weeks ago.

The choice of Mr Mitchell as chairman further antagonised investors. The former senator is one of Mr Eisner's closest allies and his law firm has done work for Disney, raising questions about his independence.

He was another target of the dissident shareholders and former board members Roy Disney and Stanley Gold, who led the campaign for Mr Eisner's removal. About 24% of investors withheld their votes for Mr Mitchell's re-election.

"We were extremely disappointed to see George Mitchell named chairman," said Cynthia Richson, a corporate governance officer at the Ohio Public Employees Retirement System, which withheld its 4.7m shares. "We've spent a great deal of time with Disney talking over our concerns about his independence and the fact he was on the board during some bad acquisitions and the Michael Ovitz debacle. It's really shocking."

Prudential Securities said in a note that "maintaining Eisner as the chief executive and making someone like George Mitchell the chairman may be viewed as no change at all".

In an interview with the Disney-owned network, ABC, Mr Eisner said he intended to serve out the remainder of his contract, which runs until 2006. He said by splitting the two jobs "we heard our shareholders, who seemed to be interested in that". He later conceded: "There are obviously certain people not happy with me personally, I guess."

Mr Eisner had maintained during the annual meeting that Disney was on the right track. He said he was "thrilled" at the 60% rise in Disney's share price over the past year and referred to the "dramatic" and "sustainable" upswing in performance. He pointed to a forecast 30% earnings growth this year and double-digit growth through to 2007. "I love this company. I am passionate about the output," he said.

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