Disney Chief Eisner’s Stock Windfall: a Condemnation

I want to answer James Flanigan’s question of what’s wrong with Michael Eisner’s $197-million reward for his work at Disney in his column “Who Cheers Eisner’s Payout? Disney Shareholders” (Dec. 6).

Giving Eisner this vast amount was wrong because it was probably unnecessary and because it is not the most socially beneficial use of the money.

Although we do not know how Eisner’s contract negotiations proceeded in 1984, it is reasonable to suppose that others--and probably even Eisner himself--could possibly have been induced to do the job for less.

For example, suppose that he had instead been offered half-a-million dollars for every 10% rise in Disney’s revenue, or $1 million for every doubling of earnings, or $2 million for every doubling of Disney stock value over the general rise of the stock market. These deals would still have provided him with plenty of incentive, but would have paid him only $5 million or so--a savings of $190 million.

This kind of excessive giveaway may have just resulted from Disney’s carelessness in negotiating the contract, not from any demand by Eisner for his services.

Another part of the problem is the inadequate competition for top jobs. At every level up through the organization, potential competitors are screened out, only one is chosen--so that you wind up with very few people with the experience needed to qualify for the highest position. Thus, without competition, these select few can practically name their own price.

The solution must be to restructure, open up and increase vertical mobility within companies so that many more people can achieve their potential and drive executive salaries down by competing against each other at the top.

Another reason Eisner’s compensation was excessive is that so much of Disney’s gain in value may not have been due to Eisner’s hard work or genius, but due to mere luck in timing. He “expanded theme parks (and) financed them adroitly,” etc. This may have made Disney a lot of money in the false prosperity of the 1980s, but Eisner’s reward for any such long-range projects should be delayed until it is known whether the gamble pays off in the long run.

Finally, the reason the massive giveaway is so outrageous is because the world’s main problem is poverty, and this excess sort of tells the poor to go to hell--we don’t give a damn. Ten thousand unemployed people could have been given good jobs for that kind of money. Fifteen thousand homeless people could have been put to work building houses and apartments that they could then have afforded to rent. Or they could have been employed in making movies or improving those theme parks or in many other worthwhile endeavors.

And what will Eisner do with his windfall? He could lend it to the government, which would use it to build more worthless military weapons, or he could speculate in real estate, stocks or artworks, in which case the money would circulate meaninglessly among the very rich and very few.

Meanwhile, the poor can eat their hearts out.

ROGER SKUTT

Granada Hills