Iger Likely to Become Eisner’s No. 2 at Disney

Robert Iger’s elevation from head of the ABC network to second-in-command at Walt Disney Co. is imminent, as pressure continues to mount on Disney Chairman Michael Eisner amid lagging earnings and continuing executive defections.

Sources close to the situation said that the promotion could even follow a board meeting on Monday, although they cautioned that the situation is highly fluid and that Eisner could still change his mind as he has in the past about his executive lineup.

Disney is expected to announce its earnings early next week, and some insiders believe that ABC’s improving results give Eisner the perfect opportunity to make the move. They said that Iger, 48, can be lauded for turning the network around by cutting costs and boosting revenue, thanks in part to the game show hit “Who Wants to Be a Millionaire.”

But sources cautioned that Eisner is having difficulties sorting out the sticky problem of which executives will report to whom. Some top executives are likely to resist reporting to Iger, reminiscent of the problem Eisner faced when he named Michael Ovitz as president in 1995 in an ill-fated experiment that lasted a little more than a year. In that case, Eisner’s senior staff flatly refused to report to Ovitz, and division heads often ignored him.

One option being considered to appease executives is reviving a plan to name an “office of the chairman” that would include top executives who would report to Eisner, sources said. Executives likely to be named to that group include Vice Chairman Sanford Litvack, who is Eisner’s de facto No. 2, strategic planning Chief Peter Murphy and Chief Financial Officer Thomas Staggs.

A Disney spokeswoman declined to comment.

Eisner, in the past, and as recently as last week, has denied that he needs immediate help at the top. But he is clearly under more pressure than ever as the company’s earnings have lagged and, until recent weeks, its stock has performed poorly.

Another recent catalyst is said to be the proposed merger of American Online with Disney rival Time Warner Inc. earlier this month. The merger plan raised questions about Disney’s Internet strategy, even as its stocks rose as investors speculated that Disney could be a candidate for a merger as well.

The departure last week of Disney’s studio chief, Joe Roth, to form his own company reinforced Wall Street’s concerns over Eisner’s inability to retain top executive talent. Roth is one of a number of top executives to leave in the past few years.

Suspicions that Iger might be rising in the ranks arose at Disney earlier this week when the ABC executive’s furniture was moved into Roth’s office less than 24 hours after the former studio head’s belongings were moved out.

In the wake of Roth’s departure and Disney’s soft earnings, people close to the board said last week that some directors have been pressuring Eisner to bring more “executive firepower” into the top corporate ranks, which are relatively thin given the company’s size.

Some directors are known to have even suggested recruiting a high-powered executive or two from outside the company. They also said then that Eisner has recently acknowledged that he may need more executive help.

Eisner, however, denied in an interview last week that he’s said he may need help, adding that there are no plans to bring in more executives. “There’s been no talk of that. Absolutely and completely unequivocal,” he told The Times.

Sources said Eisner doesn’t want any promotion to be perceived as anointing Iger as his heir apparent, although they acknowledged that Hollywood and Wall Street will inevitably draw that conclusion. They said the risk is if Iger is perceived as Eisner’s choice, other talented senior executives may leave, believing they have no shot at the top job. Eisner still is under contract with Disney until 2006.

Iger, whose title is ABC group chairman, was clearly positioned as the front-runner for the No. 2 job nearly one year ago when Eisner handed him additional responsibilities overseeing Disney’s international operations.

Iger, who is married to CNN anchor Willow Bay, joined Disney when the company bought Capital Cities/ABC in 1996, and has developed a good working relationship with Eisner. Speculation about his promotion to the job began two years ago when it became clear that Iger would be relocating to Disney’s Burbank headquarters when ABC’s new building is completed on the studio lot.

Roth’s departure removes one problem Eisner has faced in promoting Iger. Roth was probably Iger’s chief rival internally, and would have likely resisted having to report through him.

Roth’s leaving raised the ongoing issue of an executive drain at Disney.

Analysts and others believe that Disney has suffered too many executive defections, although Disney executives point out that many of them have left because they were offered opportunities to run and own companies, or because they were fired for poor performance.

Disney’s earnings have been suffering largely from problems in its consumer products and video group.