Disneys Stumbles Lighten Eisners Paycheck


The Walt Disney Co. chairman and CEO Michael Eisner's
paycheck was a little lighter last year, reflecting a new bonus structure for top
executives at the company and Disney's poor stock performance.

Earlier this year, Disney amended its executive-bonus
policy to follow a formula based on the company's compound annual growth rate above a
certain level. Bonuses in the past had been based on one or more of several criteria,
including net income, return on equity, return on assets or earnings per share.

According to a proxy statement filed with the Securities
and Exchange Commission last week, Disney's executive-compensation committee
determined that its targets had not been met and, therefore, no annual bonuses would be

In fiscal-year 1999, Disney's net income was down 42
percent to $1.3 billion, or 62 cents per share, on revenue of $23.4 billion, a 2 percent

Disney's stock, once one of the highfliers on Wall
Street, reflected the troubles, gaining only 3 percent in fiscal 1999 after showing a 6
percent decline in fiscal 1998.

Eisner lost out on a $5 million bonus -- the amount he
received in 1998 -- but he held onto his base salary of $750,000. Eisner's 1998 bonus
was about one-half of his 1997 bonus of $9.9 million.

Vice chairman Roy Disney's 1998 bonus was $410,000,
vice chairman Sanford Litvack's was $1.1 million and executive vice president of
public affairs John Cooke's was $300,000.

Only executive vice president and general counsel Louis
Meisinger received a bonus for fiscal-year 1999 -- $350,000 -- for "extraordinary
services to the company unrelated to the performance target," according to the proxy

But Eisner made up for the lack of a bonus with his stock
options. According to the company's recent proxy statement, Eisner exercised options
on nearly 2 million shares, worth almost $50 million in 1999. Eisner also has unexercised
options for another 24 million shares, worth $68.4 million.

Disney shares are beginning to rebound, and they gained
about 4 percent early last week after a favorable report from Morgan Stanley Dean Witter
& Co. analyst Rich Bilotti.

Bilotti upped his rating of Disney to
"outperform" from "neutral." The gain came during a massive sell-off
on Wall Street, where the Dow Jones Industrial Index -- of which Disney is a component --
plummeted nearly 250 points.

"We believe that Disney is headed in the right
direction," Bilotti wrote in the report. "The strategic changes that the company
is making should produce a turnaround in the operating-income growth rate."

Bilotti also praised the turnaround at Disney's ABC
Inc. division, the box-office success of Toy Story 2, growth at its theme parks and
the earnings potential of its ESPN cable network.

As a result, Bilotti wrote that he expects Disney to
increase operating earnings in 1999 to between 70 cents and 72 cents per share. He also
set a 2000 price target of $36 to $40 per share.

Disney shares closed at $31.69 Jan. 4, up from $29.88 Jan.
3. The rally continued into Jan. 5, when Disney stock was trading at $32.63 in the