Roy Disney Quits, Urges Eisner to Resign for Good of Company
With a volley of harsh words, Roy Disney on Sunday quit the board of the company founded by his uncle, Walt Disney, and called for the resignation of Chairman Michael Eisner, saying the entertainment conglomerate had “lost its focus, its creative energy, and its heritage.”
Disney told Eisner in a three-page letter that “you are no longer the best person to run the Walt Disney Co.” The 73-year-old vice chairman accused Eisner of maneuvering to have the board’s nominating committee leave his name off the slate of directors that will be elected in the coming year -- “effectively muzzling my voice.”
In perhaps his sharpest rebuke, Disney said that Eisner’s leadership had led to a widely held perception of the company as “rapacious, soul-less, and always looking for the ‘quick buck’ rather than long-term value which is leading to a loss of public trust.”
The letter, addressed to Eisner, was delivered to Walt Disney Co.'s Burbank headquarters and Eisner’s apartment in Manhattan in advance of a company board meeting there Tuesday.
Eisner declined to comment. But board member George J. Mitchell, the former U.S. Senate majority leader, said in a statement that the directors were simply enforcing new Disney governance rules requiring board members to retire when they reach 72.
“It is unfortunate that the committee’s judgment to apply these unanimously adopted governance rules has become an occasion to raise again criticisms of the direction of the company, and calls for change of management, that have been previously rejected by the board,” said Mitchell, the board’s presiding member.
Two other long-serving board members -- Ray Watson, 76, a former chairman of the board, and Thomas Murphy, 77, the former chief executive of Capital Cities/ABC -- also have been asked to step down. Both men have been strong supporters of Eisner.
Disney, son of company co-founder Roy O. Disney, also announced that he was quitting his job as chairman of the company’s bedrock animation division, which he helped build during the heyday of the 1990s.
Disney, the company’s second-largest individual shareholder behind Eisner, recently announced plans to sell as much as 43% of his stake. For nearly a decade, he was a major Eisner backer. During the last three years, however, tensions between the men have escalated as the company’s stock price and earnings have been sluggish.
Disney and his chief lieutenant, Stanley Gold, emerged as vocal critics on a board of directors that has been supportive and forgiving of Eisner. Last year, Gold and Disney unsuccessfully tried to orchestrate Eisner’s ouster.
On Sunday, Gold said of his colleague’s resignation: “This is indeed a sad day for the Walt Disney Co., its employees and its shareholders.” Disney is the last board member with ties to the founding family.
Although the company’s problems are well known, Roy Disney’s recitation was remarkable in its tone and content, exposing the severity of his professional and personal rift with Eisner. The situation had deteriorated to a point where Disney accused his adversary in the letter of requiring associates “to report my conversations and activities back to you. I find this intolerable.”
Disney said that under Eisner’s leadership, the company’s finances and reputation had been damaged in seven critical areas, from the faltering fortunes of its ABC television network and its theme parks to “your consistent micro-management of everyone around you with the resulting loss of morale throughout this Company.”
Disney also was critical of Eisner for his “consistent refusal to establish a clear succession plan.” The 61-year-old executive has been chairman since 1984.
The fact that there is no clear successor in the wings is one reason some analysts believe Eisner has been able to keep a strong hold on his job -- despite the departure of numerous top executives -- and do not believe Roy Disney’s resignation will lead to any substantial management changes. Disney’s departure could further strengthen Eisner’s grip because it leaves only Gold as an outspoken critic on the board.
“I’m not sure how seriously investors are going to take Roy Disney’s resignation,” said Jordan Rohan, an analyst at SoundView Technology Group. “I’m certainly willing to give Eisner the benefit of the doubt.”
The timing of Roy Disney’s resignation surprised some analysts and investors, who noted that the company’s financial performance has improved in the last year, especially in the studio division, which had a string of box-office hits this summer. Disney’s stock, which closed at $23.09 on the New York Stock Exchange on Friday, is up nearly 42% this year.
“Disney has blocked and tackled pretty well against an economy that has fallen off a cliff,” said David Miller, an analyst with Sanders Morris Harris in Los Angeles.
In recent months, Eisner and his company also have taken steps to change the long-held perception that the directors are beholden to Eisner. Among other things, the company has named more independent directors and cut the size of its 17-member board to 11, after the retirement of the three directors.
But Roy Disney’s resignation could fuel those still-lingering perceptions, especially coming after the departure of board member Andrea Van de Kamp earlier this year. She accused Eisner of forcing her out because of her increasingly stern criticisms of his management. Eisner has said she was removed because the board was being reduced in size, not because of her views.
Roy Disney’s resignation is reminiscent of actions he took nearly 20 years ago that helped lead to the last major shake-up at the company. Disney resigned from the board in protest over the company’s management.
But he and Gold, along with such heavyweight investors as the Bass family of Texas, engineered a boardroom coup that brought in Eisner from Paramount Pictures. Arriving with him was former Warner Bros. executive Frank Wells, who would become Disney’s president. In the process, Walt Disney’s son-in-law, Ron Miller, was pushed out.
With Roy Disney invited back as a director, Eisner and Wells led one of the biggest corporate turnarounds in history in a successful partnership that ended when Wells died in a helicopter crash in 1994.
Roy Disney’s influence, although muted in the boardroom, resonated elsewhere in the organization ranks. He was widely seen as the protector of Disney’s family traditions, and was particularly revered by artists, who credit him with helping to revive the company’s animation division, which had fallen on hard times.
One of his offices on the Disney lot sat in the center of a room built to resemble the cap Mickey Mouse wore as the sorcerer’s apprentice in Disney’s “Fantasia.”
Today, however, it is unlikely Roy Disney would have the kind of firepower he enjoyed in 1984 if he were to push for Eisner’s exit.
All told, his family holds about $600 million worth of company stock. Although sizable, that would not be enough to mount a major challenge, given Disney’s market capitalization of nearly $50 billion.
The resignation capped nearly two years of frustrations that had been building as relations between Eisner and Roy Disney chilled.
Disney nearly quit the board in protest several times over the last two years, according to sources close to the executive, and he has kept draft resignation letters in his files.
In recent months, Eisner and Roy Disney have communicated mostly via telephone or through e-mail. In addition, Disney spends considerable time away from the studio at a castle he owns in Ireland or sailing, one of his chief passions.
Disney has complained to confidants that he was being marginalized by Eisner on company business and that Eisner would demand to know about any conversations employees had with him. Disney scheduled clandestine meetings with executives, swearing them to secrecy.
In early November, those sources said, Disney learned that the board’s four-member nominating committee, led by Edison International Chairman John Bryson, was planning to leave his name off the slate of directors scheduled to be elected at the company’s next annual meeting.
Disney met with Bryson and was told that the committee wanted him to abide by the company’s governance rules that set 72 as the retirement age for all directors except those who have served as CEO. Bryson, through an Edison spokesman, declined to comment.
Sources said Disney told Bryson he believed that the committee had the flexibility to waive the requirement -- especially since he was a member of the Disney family -- and that he would not abide by the request to retire.
He also voiced his concerns about what he believes are the company’s declining fortunes. He told his inner circle: “It’s not about me, it’s about the company.”
Bryson promised to take it up with the committee, which also included La Opinion President Monica C. Lozano, Packet Design Chief Executive Judy Estrin and Northwest Airlines Corp. Chairman Gary L. Wilson.
In the meantime, Disney held a series of impromptu meetings with close friends and advisors in his offices and through phone calls. They debated such issues as whether he might be able to change the company as a director, as well as the emotional fallout from severing the Disney family from the company it built.
But Disney, sources familiar with the events said, decided he’d had enough and chose to pull the trigger on his resignation before hearing back from Bryson. He drafted a letter but held off so he could consult his wife Patty, as well as Gold and two longtime business associates at his Shamrock Holdings investment group.
Tensions have been building between Roy Disney and Eisner as far back as Wells’ death, which left Eisner solely in control of the company. Wells was long credited with tempering Eisner and allowing him to leverage his creativity while still maintaining corporate discipline and teamwork.
Still, Disney and Eisner managed to work together through several major setbacks, including the resignation and lawsuit brought by former studio chief Jeffrey Katzenberg, in which Disney paid more than $250 million, and the ill-fated hiring by Eisner of agent Michael Ovitz as the company president.
Roy Disney also persuaded Eisner to let him make his pet animation project, “Fantasia 2000,” although Eisner’s fingerprints are on the film in a segment featuring Donald Duck and the music “Pomp and Circumstance,” inspired when Eisner heard it played at one of his sons’ high school graduation ceremonies.
Just a week ago, Disney received a pin from the company for 50 years of service.
In his letter to Eisner, Disney let the chairman know how he felt. “I don’t know if you and other directors can comprehend how painful it is for me and the extended Disney family to arrive at this decision.”
Times staff writer Meg James contributed to this report.
(Begin Text of Infobox)
Roy Disney’s Letter of Resignation
ROY EDWARD DISNEY
November 30, 2003
Mr. Michael D. Eisner, Chairman
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
It is with deep sadness and regret that I send you this letter of resignation from the Walt Disney Company, both as Chairman of the Feature Animation Division and as Vice Chairman of the Board of Directors.
You well know that you and I have had serious differences of opinion about the direction and style of management in the Company in recent years. For whatever reason, you have driven a wedge between me and those I work with even to the extent of requiring some of my associates to report my conversations and activities back to you. I find this intolerable.
Finally, you discussed with the Nominating Committee of the Board of Directors its decision to leave my name off the slate of directors to be elected in the coming year, effectively muzzling my voice on the Board -- much as you did with Andrea Van de Kamp last year.
Michael, I believe your conduct has resulted from my clear and unambiguous statements to you and the Board of Directors that after 19 years at the helm you are no longer the best person to run the Walt Disney Company. You had a very successful first 10-plus years at the Company in partnership with Frank Wells, for which I salute you. But, since Frank’s untimely death in 1994, the Company has lost its focus, its creative energy, and its heritage.
As I have said, and as Stanley Gold has documented in letters to you and other members of the Board, this Company, under your leadership, has failed during the last seven years in many ways:
1. The failure to bring back ABC Prime Time from the ratings abyss it has been in for years and your inability to program successfully the ABC Family Channel. Both of these failures have had, and I believe, will continue to have, significant adverse impact on shareholder value.
2. Your consistent micro-management of everyone around you with the resulting loss of morale throughout this Company.
3. The timidity of your investments in our theme park business. At Disney’s California Adventure, Paris, and now in Hong Kong, you have tried to build parks “on the cheap” and they show it, and the attendance figures reflect it.
4. The perception by all of our stakeholders -- consumers, investors, employees, distributors and suppliers -- that the Company is rapacious, soul-less, and always looking for the “quick buck” rather than the long-term value which is leading to a loss of public trust.
5. The creative brain drain of the last several years, which is real and continuing, and damages our Company with the loss of every talented employee.
6. Your failure to establish and build constructive relationships with creative partners, especially Pixar, Miramax, and the cable companies distributing our products.
7. Your consistent refusal to establish a clear succession plan.
In conclusion, Michael, it is my sincere belief that it is you who should be leaving and not me. Accordingly, I once again call for your resignation or retirement. The Walt Disney Company deserves fresh, energetic leadership at this challenging time in its history just as it did in 1984 when I headed a restructuring which resulted in your recruitment to the Company.
I have and will always have an enormous allegiance and respect for this Company, founded by my uncle, Walt, and father, Roy, and to our faithful employees and loyal stockholders. I don’t know if you and other directors can comprehend how painful it is for me and the extended Disney family to arrive at this decision.
In accordance with Item 6 of Form 8-K and Item 7 of Schedule 14A, I request that you disclose this letter and that you file a copy of this letter as an exhibit to a Company Form 8-K.
With sincere regret,
Roy E. Disney
cc: Board of Directors