Disney Critics End Threat to Offer Slate of Directors

The two men who led a shareholder rebellion against Walt Disney Co. Chief Executive Michael Eisner have made a tentative peace with the company’s board.

Former Disney directors Roy E. Disney and Stanley P. Gold on Friday withdrew their repeated threat to put up a rival slate of directors at the company’s annual meeting in spring 2005.

In a letter to the Disney board, the two men said they were encouraged by its pledge to conduct a “thorough and bona fide search” to select a new CEO by June 2005.

Eisner has pledged to step down when his contract expires in September 2006, though he is expected to leave when his successor is installed.

“We are assuming that the board will continue to act in good faith to fulfill the promises it made to Disney stockholders over the course of the last nine months,” said Gold and Disney, whose letter was released on the last day that they could have nominated a rival slate.

The action comes a year after the two men launched a bitter fight to oust Eisner from the helm of Disney, which he has led for two decades. In March, shareholders delivered a stunning 45% vote of no confidence against Eisner, who was subsequently stripped of his chairman’s title.

Then in September, Disney and Gold vowed to wage a proxy fight with “unrelenting vigor” unless the board hired an executive recruiting firm to find a replacement for Eisner as CEO by the 2005 annual meeting.

Later that month, the board said Eisner’s successor would be chosen by June -- several months after the meeting. In October, it hired executive search firm Heidrick & Struggles.

This week, the board also elected former Estee Lauder CEO Fred Langhammer as an independent director. In their letter, Disney and Gold said they hoped Langhammer would bring a “fresh perspective and independent voice to the Disney boardroom.”

Disney and Gold, however, expressed disappointment that the board apparently rejected three independent board candidates that had been proposed by a coalition of pension funds. Those candidates, whom Disney and Gold had endorsed publicly, included TV mogul Haim Saban and former Securities and Exchange Commission Chairman Richard Breeden.

“After last year’s shareholder revolt,” they wrote, “we had hoped this year the board would be more receptive to input from concerned stockholders.”

Friday’s announcement was widely expected. Gold and Disney already had declared a cease-fire of sorts in September when they praised the board for its “leadership and independence.”

And few expected the two would be able to muster enough support among investors for a rival slate, given the board’s actions and Disney’s improved results. Disney saw record cash flows this year and this week announced a 14% increase in its annual dividend.

“They’ve been getting a lot of ‘atta boys’ from people but probably not a lot of pledges of support” for a proxy fight, said Patrick McGurn, senior vice president of Institutional Shareholder Services.

Anthony Valencia, an analyst with TCW Group, agreed: “Basically, they got what they wanted so there’s not a lot of point in going forward” with a rival slate.