PHILADELPHIA -- Michael D. Eisner was toppled from his position as chairman of Walt Disney Co. Wednesday night when the company's board responded to an extraordinary shareholder protest by naming former Maine Sen. George Mitchell to the position.
Eisner, who ran the company single-handedly for the last 20 years, will continue as chief executive officer but will report to Mitchell and the board.
The action came at the end of a frenetic day in which holders of 43 percent of Walt Disney Co. withheld their votes at the company's annual meeting, opposing Eisner's re-election as chairman.
Never before in American corporate history has a successful company been hit with such a groundswell of shareholder dissatisfaction.
While the Disney directors voted unanimously to make Mitchell chairman, they voiced their continuing approval of Eisner's management and the company's strategy. They described Mitchell's newly-created position as "non-executive."
The board's decision to keep Eisner at the helm as chief executive is not likely to satisfy vociferous critics who have pursued an aggressive campaign to have him fired.
Two former directors of the company, Roy E. Disney, a nephew of founder Walt Disney and his ally, Stanley P. Gold, have argued that Eisner's departure is essential.
The shareholders' vote "has sent a clear and very undeniable message that Michael Eisner must go. ... We think the shareholders have spoken," Gold said late Wednesday.
Mitchell, the new chairman, is already a suspect figure in the eyes of Roy Disney and Gold, who view him as too close to Eisner.
Yeterday, shareholders acting on the suggestion of Roy Disney and Gold, withheld more than 20 percent of their votes from Mitchell and two other board members considered friendly to Eisner: Judith Estrin and John Bryson.
"This is a referendum on real governance in corporate America," Gold said amid a whir of flashbulbs about an hour after the meeting ended.
T. Rowe Price Associates Inc., a Baltimore-based mutual fund company, refused to vote its 19.3 million Disney shares as a protest against management. It was one of a dozen major institutional investors that decided to withhold support from Eisner.
"Our view is that there have been a number of recurring issues over the years involving the performance of the company, involving corporate governance issues, involving executive turnover questions that basically call into question much of what the company has been stating in terms of its performance," Brian C. Rogers, the company's chief investment officer and head of the T. Rowe Price Equity Income Fund, said last week.
A Price spokesman declined further comment Wednesday, saying the vote spoke for itself.
In a statement released after its move to name Mitchell chairman, the board said: "We are aware that some voted for an immediate change in management and in the board. Howver ... we believe the action we have taken today is in the best long- term interest of the shareholders of the company."
"Our belief in the company's strategy, financial results over the last several quarters, and the level of earnings and improved returns we expect going forward make us confident that results will validate our judgment on the quality of our management team," the board statement said.
After the earlier shareholders' vote, Comcast Corp., which last month proposed a $66 billion takeover of Disney, urged the company to reconsider its offer.
"Today's unprecedented withhold vote by Disney's shareholders sends a powerful message that Disney's board and management need to focus more on shareholder interest," said Comcast spokeswoman D'Arcy Rudnay.
"Consistent with this focus, Disney's independent directors should immediately meet with Comcast so we can directly present our full and generous offer and the benefits of the merger."
The board responded tartly to that suggestion in its late evening statement, saying it "does not believe today's reiteration by Comcast of its previous proposal, which we rejected as inadequate, would lead to a transaction beneficial to Disney shareholders."
Earlier Wednesday, Eisner took aim at his critics and they at him during a 5 1/2 -hour meeting, punctuated by cheers, ovations and occasional outbursts.
In a raspy voice that at times broke, the 61-year-old Disney chief defended his management of the company to about 3,000 shareholders who packed the cavernous convention center.
He told them that Disney is on a "sustainable upswing" with its stock up nearly 60 percent since a year ago and earnings per share up 56 percent over the same time. He said the company hasn't lost its creative edge, that it is proud of ABC despite its poor performance, and that Disney's board is seasoned, independent and not one he controls.
He also defended the decision to sever the partnership with Pixar Animation Studios and Steven Jobs, which resulted in blockbuster movies such as "Toy Story" and "Finding Nemo."
"In short, our message to you is simple, your company has the management skill and the creative talent to continue its growth path," Eisner said. "The company is in good hands. I love this company. The board loves this company."
But Eisner acknowledged that he couldn't guarantee results. "No matter how diligent we are in implementing our vision ... success is never guaranteed," he said.
Roy Disney and Gold painted a sharply different picture in brief talks they were allowed to make during the meeting.
"Michael Eisner must leave now," Gold told the shareholders, who erupted in cheers. "We see today's meeting as a first step in reforming the company, in our words, literally saving Disney."
Gold criticized Eisner for the company's poor performance over the last 10 years, for his big salaries, for dominating the board and for failing to nurture talent. He said directors have lost their souls and have buckled to Eisner's wishes.
"While we, the shareholders, watched the value of our equity decline, Michael Eisner has never had a bad year," Gold said. "Things will be different after today. From today on, the Disney board can't pretend that they have a great management team producing superior results."
Roy Disney complained that the company's name and image have suffered under Eisner's leadership.
"We need to be get back to thinking of it as a name that needs to be prized and enhanced," Roy Disney said. "What kind of change do we need to make? We need to install a new management team," he told a roaring crowd.
Eisner thanked the former directors, but shot back: "I believe you just heard rhetoric from our critics that frankly replaces reason."
He called Roy Disney and Gold's complaints "fundamentally wrong."
The day-long showdown took on a circus atmosphere at times.
Inside the convention center, shareholders were waiting in line as early as 6 a.m.. Later, they were greeted by Snow White, Mickey Mouse and Minnie Mouse while listening to popular Disney theme songs.
Outside, a Minnie Mouse knockoff passed out bright pink fliers accusing Disney of operating "sweatshops of misery" in Bangladesh and China while Christian Action Network members handed out packages denouncing lewd behavior at some of Disney's theme parks.
About 150 reporters from around the world swarmed the meeting.
More than 771 million shares were voted to withhold support from Eisner while just over 1 billion votes were cast supporting him.
After the meeting some shareholders said they weren't surprised that Eisner had so much opposition.
"I definitely think that he is the problem," said Chris Harrower, 45, an executive at Choo Choo Barn, a tourist destination in Strasburg, Pa.
"He does not have the management style ... to return Disney to profitability and to return the magic," said James Shuster, 50, who lives in Pittsgrove, N.J, and is a logistics manager at the Department of the Navy.Copyright © 2015, Los Angeles Times