Data Suggest Disney 401(k) Members Back Eisner Critics

In an embarrassment for Walt Disney Co. Chief Executive Michael Eisner, data released Monday showed that more than 7 in 10 shares held in the company’s employee retirement plan sided last month with dissidents seeking to oust him.

According to the results -- whose significance Disney challenged, noting that few employees actually cast votes -- 72.5% of the 28.6 million shares in Disney’s 401(k) plan were withheld from Eisner’s reelection as a director during the annual meeting in Philadelphia. The percentage was sharply higher than the 45% of all shares cast that were withheld in a protest vote that marked a stinging public rebuke for the Disney chief.

Former directors Roy E. Disney and Stanley P. Gold, who are leading a campaign to oust Eisner and made the numbers public Monday, called the results “a meaningful barometer of employee dissatisfaction.” They questioned “how Mr. Eisner can do what needs to be done at this company without the support of the company’s employees.”

Disney executives said the results failed to show widespread employee discontent with Eisner because the data suggested that fewer than 6,000 of the company’s 112,000 employees voted. In fact, Disney said, only 9,400 out of the 36,000 participants in the 401(k) plan cast ballots. Of those 36,000, about 22,500 are active employees. The rest are retirees and other former workers.

Given that proportion, Disney said, the number of current workers voting may have totaled fewer than 6,000, and the way they voted shares remains unknown. The company noted that the voting and withholding of shares by 401(k) trustee Fidelity Investments was conducted under rules that assume every participant voted. So, because 72.5% of those shares that were voted went against Eisner, Fidelity withheld that same percentage for the entire 28.6 million shares, voting the rest for Eisner.

Disney in a statement accused the dissidents of “another blatant distortion and manipulation of data in an attempt to continue to mislead Disney shareholders.”

Paul Hodgson at Corporate Library, which specializes in corporate governance issues, said the results didn’t provide a real gauge of employee support for Eisner. But Patrick McGurn, senior vice president at voting advisor Institutional Shareholder Services, said the results were nonetheless a slap in the face because corporate managers usually assume employees are in their camp.

“Even if it’s a limited turnout, it’s a limited turnout of what should be their core constituency,” McGurn said.

McGurn -- whose organization urged shareholders to withhold votes from Eisner -- said the results may reflect widespread shareholder restlessness in corporate America.

“There’s no automatic knee-jerk support these days,” he said.

Of the 401(k) shares, 63.7% were withheld from Chairman George Mitchell, whom Roy Disney and Gold also had targeted.

The dissidents accused the company of trying to put a good spin on the results, arguing that “it would be hard to argue that these results are not statistically valid.”

Roy Disney and Gold launched the no-confidence vote referendum against Eisner as part of a larger push to pressure company directors to oust him. They say he has mismanaged the company, putting its future at risk.

Disney’s board has been sticking by Eisner, contending that he is turning the company around, pointing to an improved stock price and earnings.