News

Roy Disney Resigns, Rips Eisner

12/01/2003 5:47 AM Eastern

The Walt Disney Co. vice chairman Roy Disney abruptly resigned Nov. 30 from the media giant founded by his father and uncle, using the opportunity to blast current chairman and CEO Michael Eisner.

Roy Disney was expected to resign as a result of new corporate-governance rules at the media giant that required directors to retire at age 72. He is 73.

Disney’s board had left Roy Disney’s name off the slate of directors to be nominated in a two-day board meeting that was scheduled to start Monday, along with the names of longtime Eisner supporters Raymond Watson (76) and Thomas Murphy (77).

But in a letter to Eisner dated Nov. 30, Roy Disney said it should be Eisner who steps down, and not him.

"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 Co.," Roy Disney said in the letter.

He went on to criticize Eisner’s micromanagement, which, he claimed, has harmed company morale; Eisner’s failure to turn around the ABC network; and the perception that under Eisner’s leadership, Disney "is rapacious, soulless, and always looking for the ‘quick buck’ rather than long-term value, which is leading to a loss of public trust."

Roy Disney also wrote that Eisner has "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."

In a prepared statement, former Sen. George Mitchell (D-Maine), presiding director of Disney’s board, said Roy Disney had been informed of the board’s decision that its mandatory age requirements applied to him, as well as to Watson and Murphy.

"It is unfortunate that the committee’s judgment to apply these unanimously adopted governance rules has become an occasion to raise again criticisms of the direction of the company and calls for change of management that have been previously rejected by the board," Mitchell said.

Roy Disney -- nephew of Disney cofounder Walt Disney and son of cofounder Roy O. Disney -- was one of a team that recruited Eisner to take the helm in 1984.

Eisner, who had headed up Paramount Pictures, came on board with former Warner Bros. vice chairman Frank Wells that year and swiftly took action to turn the company around. After Wells died in a helicopter crash in 1994, Disney’s fortunes waned, and Eisner has largely been blamed for the decline.

Although Disney has gone through some rough times -- its stock hit eight-year lows in 2002 -- the company has been gaining ground lately. Its stock is up about 42% this year and Disney appears to be turning the corner after major cost-cutting moves were implemented last year.

In its fiscal fourth quarter ended Sept. 30, revenue increased 5% to $7.01 billion and operating income was up 15%. Net income more than doubled in the period to $415 million (20 cents per share) from $175 million (9 cents) in the prior year, based largely on strong showings from its film and cable-television units.

Whether Roy Disney will have much influence in ousting Eisner remains to be seen. According to its last proxy statement, Roy Disney holds about 17.3 million Disney shares, or less than 1% of total shares outstanding.

"While the tension between Mr. Disney and Mr. Eisner is not an entirely new issue, we believe that if nothing else, the resignation could act as a catalyst for change at the executive level and, at a minimum, this is a major distraction for company management and the board of directors," Merrill Lynch & Co. media analyst Jessica Reif Cohen wrote in a research note.

Disney stock rose 8 cents per share Monday to $23.17 each.

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