Stalking a Wily Prey at Disney

http://www.businessweek.com/bwdaily/dnflash/dec2003/nf2003122_5238_db035.htm

Stalking a Wily Prey at Disney

By shooting for CEO Michael Eisner, Disney ex-board members Stan Gold and Roy Disney are taking on a crafty player who has lots of allies

It seems like déjà vu all over again, in the words of Yogi Berra. Just as he did in 1984, Roy E. Disney, whose Uncle Walt started the fabled company that bears his name, has resigned from the Walt Disney's (DIS ) board and called for a change in leadership. Roy Disney's Nov. 30 departure was followed the next day by the resignation of his financial adviser, Stanley P. Gold, who was equally scathing in his attack on Disney management following his departure.

Back in 1984, Roy Disney and Gold launched a takeover battle to win control of the company, which they did with the help of the Bass family of Fort Worth, Tex. The difference is that now the two are trying to unseat CEO Michael Eisner, the very man they brought in to straighten out the Mouse House in 1984. Gold, who masterminded the takeover effort, considers Eisner just as ineffective a leader as the folks he succeeded. "[Under Eisner] you have a lack of leadership, assets that continue to underperform, a loss of creative abilities, and ineffective management," Gold told BusinessWeek Online.

BAD TIMING. How Gold intends to give Eisner the boot is still a little unclear. He says he'll make the rounds to institutional investors to stir them up -- something he couldn't do while a board member. "There's a sense of anger among the shareholders and the employees of this company who have watched this great company run into the ground," says Gold. Within hours submitting his resignation, Gold says he received more than 100 e-mails from Disney employees. "They all say 'we're with you. Go get him,'" says Gold. As for large shareholders, Gold isn't disclosing whether any have responded to his call for Eisner's departure.

The uprising against Eisner, Gold wrote in his resignation letter, has been building for the last three years, but Gold's attempt to force change from within "has only succeeded in creating an insular board of directors serving as a bulwark to shield management from criticism and accountability." The final straw, says Gold, came when the board refused Roy Disney's request to stay on after his 72nd birthday. While board rules have an age limit of 72 for directors, it's less clear whether corporate governance regulations allows the board to waive the requirement for "nonmanagement directors," including Roy Disney, who currently heads the animation unit.

The entertainment giant issued a statement from its independent board members that Gold had misrepresented the age guidelines and that "Mr. Gold and Mr. Disney voted in favor of the very retirement rules to which they now object and which apply to 'all directors.'"

LOST IT? This very public spat couldn't come at a worse time for Disney, which looks to be in the early stages of recovering from its seven-year slump (see BW Online, 11/30/03, "Renovating This Old Mouse"). In late November, it reported a 3% hike in net income, to $1.7 billion, on revenues of $27.1 billion. That still leaves earnings at roughly 1998 levels. The stock is trading at around $23 -- up by 43% this year but well below

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