Eisner Situation Raises Question of Firms’ No. 2s
At Team Disney headquarters, the Burbank building whimsically held aloft by the Seven Dwarfs, people once used the term Disney magic to describe the successful working partnership between Chairman Michael D. Eisner and President Frank G. Wells. Now that their spell has been broken--with Wells’ death in a helicopter crash in April and Eisner temporarily sidelined by quadruple bypass surgery--it’s the sleight of hand behind the scenes that everyone is focusing on.
Although Disney remains one of Corporate America’s great Cinderella stories, analysts say in hindsight that Eisner may have created a void when he built the entertainment conglomerate itself faster than he did its management ranks. Annual revenue at Disney grew from $2 billion to $8 billion over the last decade, but without anywhere near the same kind of rise in its support staff.
At the company, which is legendary for its workaholic culture, executives privately complain that Eisner is much more inclined to add to their existing responsibilities--as he did when he dispersed Wells’ duties among them--than to restructure management or bring in new executives.
Disney formally denies there is a manpower crisis. Eisner, 52, in typical nose-to-the-grindstone fashion, spent the early part of Monday dictating instructions to key executives from his hospital bed at Cedars-Sinai Medical Center.
Analysts and people close to Disney’s board say Eisner will be pressured to change his ways when he returns to work. But they also stress that Disney’s management structure is far from unique. Many entertainment conglomerates, not to mention many of the biggest public companies in general, spin on the finger of a single chief executive.
“These companies are run by unique and strong individuals,” said entertainment analyst Jeffrey Logsdon of the Seidler Cos. in Los Angeles. “The very thing that drives most of these guys to the top keeps them from having somebody with the same skills in a secondary spot.”
News Corp. Chairman Rupert Murdoch, for one, has never had a clear heir apparent. That’s sparked increasing concern recently as Murdoch has taken on responsibility for running Fox Inc., the high-profile division that includes 20th Century Fox and the Fox TV network.
In Murdoch’s case, it may come down to the all-in-the-family syndrome. Sources say the 63-year-old executive has left the No. 2 spot vacant because he’s grooming one of his children to eventually succeed him. Should something happen to him in the interim, people close to Murdoch predict, his wife, Anna, would temporarily take over the vast company.
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At Time Warner Inc., the world’s largest entertainment company, Chairman Gerald R. Levin also works without a net.
Levin, who inherited the chief executive’s job when Steven J. Ross died 20 months ago, faces a different problem than Murdoch. With so many strong division heads, sources say, the Time Warner chief would face a mutiny if he singled out one to be president.
Other companies with succession problems include the three major networks and cable giant Tele-Communications Inc.
Viacom Inc., though, has a strong No. 2 man in Frank Biondi. The same goes for MCA, where Sidney J. Sheinberg has worked under Lew R. Wasserman for decades.
The succession issue has taken on added urgency at Disney because of the unforeseeable nature of recent events. Wells’ death and Eisner’s illness three months later delivered a shocking one-two punch to a company known for having one of the industry’s most stable management teams.
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“They had all the necessary ingredients to run Disney,” said one source. “Michael and Frank always understood how it worked, and Frank wasn’t waiting for Michael to retire.”
Sources close to Eisner agree that he never warmed to the idea of sharing power after Wells’ death, even with an executive as capable as studio Chairman Jeffrey Katzenberg in the wings. Eisner is also said to be resistant to the idea of bringing in too many new senior executives. The Disney chairman frequently talks about the value of trust and is known to rely heavily on his wife, Jane, for counsel.
With Disney’s announcement that Eisner is recuperating quickly, Wall Street gave the company a nod of confidence on the first day of trading since his surgery. Disney stock closed up 25 cents at $42 on the New York Stock Exchange. A spokesman said Eisner had no history of heart trouble. But outsiders were skeptical that such a problem could go undetected, because chief executives of publicly traded companies routinely undergo physical exams.
In recent appearances, Eisner looked as robust as ever. But some analysts believe Disney has grown far too big for one person to manage--particularly someone like Eisner, who’s more hands-on than executives such as Levin.
In the last few months alone, Eisner has been on the front lines of a battle to win approval for a controversial historical theme park in Virginia, supervising efforts to rescue Euro Disney and helping to launch the Broadway version of “Beauty and the Beast.”
“This is a very busy time for the company,” said Harold Vogel, an entertainment analyst with Merrill Lynch in New York. “What Eisner needs is a coordinator--and someone to put the long-term strategy” into action.
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Working retreat: Viacom Chairman Sumner Redstone and Tele-Communications Inc. Chief Executive John Malone used a Sun Valley, Ida., investment seminar hosted by Allen & Co. last week as an excuse to sit down and iron out some differences.
“We did have some very friendly, constructive talks in Sun Valley,” Redstone said. He refused to provide specific details, but Viacom and Liberty Media are believed to be weighing a variety of deals as part of an effort to settle Viacom’s antitrust suit against TCI and its affiliate, Liberty Media.
One discussion centers on a merger of their Encore and Showtime pay TV services. Liberty is also one of the finalists in the bidding for Viacom’s Madison Square Garden properties, which include the New York Rangers and New York Knicks. Viacom is in the second round of auctioning off the Garden, which it acquired in its purchase of Paramount Communications. Sources said the bidders include Canadian brewer John Labatt Ltd. and Nike.
Times staff writer Kathryn Harris contributed to this column.
