For Dissident Shareholders, Muted Cheering

The dissidents have declared victory -- sort of.

Michael Eisner’s announcement that he intends to step down as Walt Disney Co.’s chief executive in two years was sweet news Friday for many disgruntled shareholders who are unhappy with his stewardship of the Burbank entertainment giant.

“Mr. Eisner and the Disney board heard our cry,” said Barbara Hafer, treasurer for the state of Pennsylvania, whose public pension funds hold about 2.5 million Disney shares. “I do think it’s a victory.”

Yet in many ways, the celebration was muted.

Eisner’s most outspoken critics -- former Disney directors Roy E. Disney and Stanley P. Gold -- declined to comment Friday. The two led a shareholder revolt against Eisner this year that culminated in a 45% no-confidence vote being cast against him at the company’s annual meeting.

After that, the Disney board stripped Eisner of his chairman’s title, but it continued to express confidence in him as chief executive.

Although Eisner has agreed to give up the CEO post as well, he has done so on his own terms: He says he’ll head for the exit when his contract expires in September 2006.

That’s not quick enough for North Carolina Treasurer Richard Moore. He said Eisner’s schedule doesn’t remove concerns that pension funds have about the company’s day-to-day management and its long-term financial prospects.

“Two years is a long time for Eisner to stay around,” said Moore, whose funds hold 3.1 million Disney shares. “What we want to see is a real succession plan in place, transparency in the pay packages for the CEO and robust earnings.

“If we don’t see those things,” he added, “investors shouldn’t take any pressure off the Disney board.”

Some of the nation’s leading pension funds played a pivotal role in this year’s shareholder rebellion. Fund officials from five states met with Disney’s board in May to press the company for improved performance and a succession plan.

On Friday, a few pension fund officials said Eisner’s decision raises as many questions as it answers.

“It’s not like we’re jumping for joy in Columbus,” said Cynthia Richson, corporate governance officer of the Ohio Public Employees Retirement System. “We don’t have enough information.... Is Mr. Eisner going to try to come back as chairman of the board?”

For his part, Eisner hasn’t indicated whether he would seek to remain a director after his tenure as CEO ends.

That doesn’t sit well with the California Public Employees’ Retirement System, which owns 9 million Disney shares.

In a statement, CalPERS President Sean Harrigan called on Eisner to resign as a director when his time as CEO runs out. Eisner’s “continued presence on the board,” he said, “would prevent the company from the clean break that is needed to restore investor confidence.”

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Bloomberg News was used in compiling this report.