Disney’s Flat Fiscal Performance Cuts Eisner’s Bonus in Half

The good news for Walt Disney Co. Chief Executive Michael D. Eisner is that he reaped a staggering $576 million during the company’s most recent fiscal year.

Now the bad news: His bonus was cut nearly in half because the company, by his own admission, had a flat year.

In a disclosure that underscores the often baffling quirks of executive compensation, Eisner, as expected, posted a record annual take for an executive. Nearly all of his compensation in the fiscal year ended Sept. 30 came from a previously disclosed exercising of accumulated stock options in December 1997 that gave him $569.8 million.

Eisner’s discretionary bonus for the year, however, was cut 49%, to $5 million, according to Disney’s proxy statement. Eisner also made $764,423 in salary.

Separately, Eisner, in his annual letter to shareholders, took the unusual step of specifically criticizing the performance of Disney’s live-action movie unit, saying “we’re glad fiscal ’98 is over in this area.”

Eisner said that “in too many instances, profit did not materialize from the revenue achieved by our films. Stated more bluntly, either the films and marketing cost too much or the audience rejected our ideas.”

Some recent expensive live-action flops from Disney include “Holy Man” and “Beloved.”

But Eisner quickly added that the latest fiscal year “has started off like gangbusters for our movie division” with such hits as “The Waterboy,” “Enemy of the State” and the computer-animated feature “A Bug’s Life” from Disney and Pixar Inc.

Movie chief Joe Roth, whose contract is up this year, said he isn’t bothered by Eisner’s comments, which he said reflect troubles mostly in the early part of 1998.

“We had a rough first half of last year,” Roth said. “Most of the terrific things happened after that.”

Overall, Disney had the highest film market share for 1998 among Hollywood’s studios. Its live-action summer hit “Armageddon” was the only film released last year that grossed more than $200 million domestically.

Eisner’s letter is dated before the release of “Mighty Joe Young,” a film heavy with special effects that flopped at the box office.

On Wednesday, entertainment analyst Jill S. Krutick of Salomon Smith Barney Inc. lowered her profit estimates for Disney, citing as one reason a likely write-off on “Mighty Joe Young,” which she estimates cost $100 million.

Eisner also said in his letter that “we could be getting close” to the time when Disney develops a theme park in China, something that has been rumored for years.

Disney’s stock, usually one of Hollywood’s strongest performers, has lagged. It is down nearly 30% from its high of last May.

Even though most blue-chip stocks soared on Wednesday, Disney shares inched up only 38 cents to close at $30.94 on the New York Stock Exchange.

Eisner blamed part of Disney’s flat year on new investments that the company hopes will pay off in the future, including the Disney Cruise Line, Disney’s Animal Kingdom, investments in the Internet, several ESPN projects and the refurbishment of Edison International Field in Anaheim.

Eisner also announced the retirement of two longtime directors, a move that should help defuse long-standing criticism that the company’s board is overloaded with insiders.

Former Chief Executive Card Walker and former theme park chief Richard Nunis will leave the board. Earlier, Disney named two outsiders, Sotheby’s West Coast Chairman Andrea Van de Kamp and Judith L. Estrin, chief technology officer at Cisco Systems Inc., to its board.