Back in August, Wall Street analysts were wondering what to make of Roy Disney’s decision to sell off 40% of his Walt Disney Company holdings. Did this mean that Roy had grown tired of battling with Michael Eisner? That Walt’s nephew was just going to float off on his yacht? Go hide in his castle in Ireland and just let Uncle Mikey do whatever he wanted with Disney’s Magical Kingdom?
Well, judging by Carla Baranauckas’ story in today’s “New York Times,” I guess the other shoe has finally dropped.
Clearly, this is the first salvo in what could be a pretty brutal campaign to remove Disney’s current CEO from power. Now where this gets interesting is that — while Roy’s taking this battle to the street, publicly calling Michael Eisner out, so to speak — there’s been a much quieter campaign reportedly going on behind the scenes. With various members of Disney’s board of directors allegedly asking Eisner to step down for the good of the corporation.
And — if what my sources are telling me is true — Uncle Mikey had already supposedly agreed to an exit strategy. Which would have allowed Disney’s CEO to step down gracefully in September of 2004. Which would have been the 20th anniversary of Eisner’s arrival at the Walt Disney Company.
But now that Roy’s made his “Eisner Must Resign Now!” effort public, Disney’s board members are concerned that — in order to save face with his friends in Hollywood — Michael may now decide to dig in his heels. Attempt to hang around for the full length of his contract with the Walt Disney Company. Which doesn’t actually expire ’til 2006.
So — all in all — I’d expect that all us Disneyana fans in for some pretty exciting times ahead. That the next few weeks (or months) will be full of stories about Roy and Michael’s battle for the heart and soul of the Walt Disney Company.
But first … Let’s talk about the deal that Disney’s board of directors ALMOST pulled off here. The one where Michael Eisner would have relinquished control of the Walt Disney Company by September 2004.
So how did this particular story fall in my lap? Actually, it came in response to my November 20th article, “Why Disney Really Gave Up the ‘Ghosts’.”
In that story, an unnamed Wall Street analyst suggested that the real reason that Michael Eisner had been so aggressively downsizing Disney Feature Animation and getting the Disney Store retail chain ready for sale was that Uncle Michael might be thinking about selling off the entire Walt Disney Company to the highest bidder. That particular part of the article prompted this note from someone deep inside the Team Disney Burbank building. Who wrote to say:
Dear Mr. Hill –
I enjoyed your “A Few Good Ghosts” article earlier this week. But please don’t concern yourself with whether or not Michael Eisner is trying to sell off the Walt Disney Company, Jim. I can assure you that Disney’s board of directors already has a plan in place that will prevent Michael from doing something as stupid like that.
So please feel free to reassure your readers that the Walt Disney Company is NOT up for sale. The corporation is safe and sound, while Eisner stands on shaky ground.
That was a poem, wasn’t it? How fun.
You have to admit that was one pretty intriguing note. Something that sounded pretty darned definitive about what was actually going on with Disney’s board of directors. So naturally I immediately fired off a reply to this person we’ll now call “The Poet.”
10 or 15 e-mails later (Plus a number of phone calls that I made in order to verify this individual’s identity) made a believer out of me. “The Poet” really did seem to have the inside scoop when it came to what was really going on with Michael Eisner these days. Which is why I feel fairly confident about sharing the following story with you this morning.
In a nutshell, what has happened is this: Back in October of 2002, Michael Eisner supposedly had a pretty rancorous meeting with Disney’s board of directors. The financial press back then was full of stories about how the board had reportedly challenged Michael’s leadership of the Walt Disney Company, repeatedly questioning him about what his future plans were for the Mouse House.
At this fateful meeting, Eisner reportedly mounted a very spirited defense to these attacks. But according to “The Poet”:
This was the meeting that convinced most of the members of the board that Michael Eisner’s top priority wasn’t running the Walt Disney Company anymore. But — rather — insuring his own survival. That Michael would do whatever he had to to hang onto the top slot at the Mouse House. Even if it meant clipping Stanley Gold’s wings and/or pushing Andrea Van de Camp off the board. Anything that could to firm up his position, Eisner did.
Michael’s tactics evidently included lots of diversions. Projects that he deliberately put into operation with the hope that the financial press would respond favorably to them. Take — for example — Disney’s well-publicized efforts earlier this year to buy the Jim Henson Company. Uncle Michael was so desperate at that point to get some positive press going about himself and his management style that Eisner hoped — by finally buying the Muppets some 12 years after the Mouse’s attorneys had initially screwed up the Disney/Henson merger deal — that the media would lionize him once more.
So desperate was Eisner to get some good buzz going about his stewardship of the Mouse Factory that Michael actually bragged about the still-pending Henson deal at Disney’s annual stockholders meeting this past March in Denver, CO. This was the meeting where — when he was asked about the Muppets acquisition that — Eisner replied that “I would not be surprised to hear that there would be an announcement soon. I wouldn’t be surprised that the Walt Disney Co. would be finally culminating years of romance.”
Of course, when Disney’s attempt to acquire Henson fell through in May of this year, Eisner wound up with egg on his face. Which is why Michael then put pressure on Disney’s attorneys to close the deal with Pixar. To do whatever they had to come to terms with Steve Jobs and extend the Mouse’s contract with this CG animation studio. With the hope that this news would finally make Wall Street like the Walt Disney Company (and — by proxy — Michael Eisner himself) once more.
According to “The Poet,” it was this behavior that reportedly really alarmed Disney’s board of directors:
This is all that Eisner’s about these days, Jim. Pleasing Wall Street analysts. Never mind about long range planning or making smart choices for the company’s future. All Michael’s interested in doing is meeting those quarterly earnings projections. Doing whatever he has to to make sure that Disney matches those numbers.
So Eisner was ready to give away the store in order to hang onto Pixar. Even agreeing to give Steve Jobs Disney’s choicest release dates — the May / just-out-of-school slot as well as the Thanksgiving long holiday opening slot — if that would keep Pixar from wandering off the farm.
Of course, by putting terms and conditions like this on the table, Michael would effectively be hobbling Disney Feature Animation forever. That Eisner would even suggest something like this truly alarmed a lot of people at the studio. They brought their concerns to the board. Which is why the board then decided to act.
Which is why — sometime this past summer — members of Disney’s board of directors reportedly met with Michael Eisner and asked him for the good of the corporation to consider stepping down. It took a lot of convincing, but Eisner eventually allegedly agreed. But not without setting some conditions of his own.
First and foremost, Eisner will be the one who gets to decide when and where he exits. Though all parties involved here supposedly agreed that September of 2004 (What with that month being the 20th anniversary of Michael’s arrival at the Walt Disney Company) would be a very good time for Eisner to formally announce that he will be stepping down from his position as the Big Cheese, Michael still got to stage his own exit.
And just how long might this exit have taken? Well, given that Eisner’s still officially under contract to the Walt Disney Company ’til 2006, it’s conceivable that he could have hung on as long as the Spring of 2005. Why wait ’til then? “The Poet” explained that:
Eisner’s desperate to go out on a high note, Jim. Which is why he may try to hang on ’til the start of “Disney’s Golden Celebration.” So that he can go on one final trip around the globe as the head of the world’s most powerful media company. That he stand in the spotlight for one last time as part of the kick-off of Disneyland’s 50th anniversary celebration. Do a victory lap as Disney’s CEO, so to speak.
Of course, with the hope that they’ll actually be able to convince Eisner to exit much earlier than that, Disney’s board of directors have reportedly put together an incentive package for Michael that would truly boggle your mind, folks. A golden parachute so grandiose that it makes the monies that the Mouse paid out to former Disney president Michael Ovitz and former Disney studio head Jeffrey Katzenberg seem like chump change.
Mind you, “The Poet” wouldn’t share with me the exact amount of Eisner’s incentive package. All that they’d say was “It is an appropriate amount, given the 20 years that Michael’s spent on the job plus the explosive growth that the Disney corporation underwent during Eisner’s tenure.”
Nor would “The Poet” share any information about Michael’s successor. Other than to say: “The board’s candidate ISN’T Robert Iger. Mind you, Robert’s very highly thought of by board members. But it’s felt that the only way to put Disney on the right course once more is bring someone in from the outside. Someone that both Wall Street and the entertainment industry respects.”
And who might this be? “The Poet” (out of fear that — if this particular bit of news broke prematurely — the person in question might be scared off and opt not to take the top spot at Disney) wouldn’t say. Though he (or she) did offer up some fairly broad hints:
The board’s top candidate for Disney’s new CEO has been to Burbank several times over the past six months and has met quietly with members of the board.
Though nothing’s officially on paper yet, there’s reportedly already a handshake deal in place for this person to succeed Michael Eisner.
Of course, now that Roy’s taken his effort to unseat Eisner public … Who knows what’s going to happen next? According to my most recent e-mail from “The Poet”:
Everything’s up in the air right now. Everyone’s worried that Eisner’s going to dig in his heels now. Do whatever he has to discredit Roy. Bring up his age, his (alleged) drinking problem. Remind people that Roy’s role at Disney Feature Animation was largely a ceremonial one. How weeks and months at a time could go by without Walt’s nephew ever setting foot in the studio.
This could get really ugly, Jim. But what’s really scary to me is the likelihood that Eisner will now back out of his previous agreement with the board. Not step down by September 2004, but now try to hang on for the full length of his contract. Can you imagine this soap opera dragging on ’til 2006?
Me personally, I think the more pressing question is: Given that Roy’s reportedly has had little to no contact with Disney’s board of directors since August, could it be that Walt’s nephew was actually unaware that an effort was already under to oust Eisner? Or is this is a carefully coordinated maneuver, with Walt’s nephew working from the outside and Disney’s board of directors working from the inside to speed along Michael’s exit?
Or could it be that the very idea of Michael Eisner hanging on for even another 10 months, doing even more damage to Disney Feature Animation, just grew intolerable to Roy? Which why he had to move now.
By the way, for those of you who’d like to read the unedited version of what Roy Disney had to say to Michael Eisner in his resignation letter, I’ve attached a copy of the letter (which “The Poet” just this second forwarded to me) below:
Mr. Michael D. Eisner, Chairman
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521Dear Michael:
It is with deep sadness and regret that I send you this letter of resignation from the Walt Disney Company, both as Chairman of the Feature Animation Division and as Vice Chairman of the Board of Directors.
You well know that you and I have had serious differences of opinion about the direction and style of management in the Company in recent years. For whatever reason, you have driven a wedge between me and those I work with even to the extent of requiring some of my associates to report my conversations and activities back to you. I find this intolerable.
Finally, you discussed with the Nominating Committee of the Board of Directors its decision to leave my name off the slate of directors to be elected in the coming year, effectively muzzling my voice on the board — much as you did with Andrea Van de Kamp last year.
Michael, I believe your conduct has resulted from my clear and unambiguous statements to you and to the Board of Directors that after 19 years at the helm you are no longer the best person to run the Walt Disney Company. You had a very successful first 10-plus years at the company in partnership with Frank Wells, for which I salute you. But, since Frank’s untimely death in 1994m, the Company has lost its focus, its creative energy, and its heritage.
As I have said, and as Stanley Gold has documented in letters to you and other members of the Board, this Company, under your leadership has failed during the last seven years in many ways:
1. The failure to bring back ABC Prime Time from the ratings abyss it has been in for years and your inability to program successfully the ABC Family Channel. Both of these failures have had, and I believe will continue to have, significant adverse impact on shareholder value.
2. Your consistent micro-management of everyone around you with the resulting loss of morale throughout the Company.
3. The timidity of your investments in our theme park business. At Disney’s California Adventure, Paris and now in Hong Kong, you have tried to build parks “on the cheap” and they show it and the attendance figures reflect it.
4. The perception by all of our stakeholders — consumers, investors, employees, distributors and suppliers — that the company is rapacious, soul-less, and always looking for the “quick buck” rather than long-term value which is leading to a loss of public trust.
5. The creative brain drain of the last several years, which is real and continuing, and damages our Company with the loss of every talented employee.
6. Your failure to establish and build constructive relationships with creative partners, especially Pixar, Miramax, and the cable companies distributing our products.
7. Your consistent refusal to establish a clear succession plan.
In conclusion, Michael, it is my sincere belief that it is you who should be leaving and not me. Accordingly, I once again call for your resignation or retirement. The Walt Disney Company deserves fresh, energetic leadership at this challenging time in its history just as it did in 1984 when I headed a restructuring which resulted in your recruitment to the Company.
I have and will always have an enormous allegiance and respect for this Company, founded by my uncle, Walt, and father, Roy, and to our faithful employees and loyal stockholders. I don’t know if you and the other directors can comprehend how painful it is for me and the extended Disney family to arrive at this decision.
In accordance with Item 6 of Form S-K and Item 7 of Schedule 14A, I request that you disclose this letter and that you file a copy of this letter as an exhibit to a Company Form 8-K.
With sincere regret,
(signed) Roy E. Disney
cc: Board of Directors
Your thoughts?