After a 20-year run marked by triumphs and turbulence, Michael Eisner said Friday that he would leave his position as chief executive of Walt Disney Co. in September 2006, when his contract expires.
Eisner’s decision followed a year in which he was forced to confront relentless criticisms from investors, former board members and others who accused him of mismanaging the famed Burbank entertainment company and driving down its value. In March, at the company’s annual meeting, Eisner suffered a stinging rebuke when shareholders withheld 45% of their votes for his reelection to the board.
The erosion of Eisner’s reputation stood in sharp contrast to his earlier years at the company’s helm, when he earned praise for orchestrating one of the most successful turnarounds in corporate history. Under Eisner, the company grew from $1.7 billion in revenue in 1984 to $30 billion today, boasting such successes as the film “The Lion King,” the TV series “Home Improvement” and the ESPN sports empire.
In an interview Friday, Eisner, 62, said the criticisms played no role in his decision to set a departure date, which he called “an easy decision.”
“I decided I was not going to be CEO forever,” Eisner said.
Industry insiders speculated that Eisner’s move may have been preemptive, giving him a chance to announce the departure, without the embarrassment of being pushed to do so by his bosses on the board, who have publicly supported him. A source close to the company said the board was not expected to renew Eisner’s contract and had not decided whether to cut him loose even sooner, should a successor be found before 2006.
In a formal letter to directors, delivered late Thursday and first reported in the Wall Street Journal, Eisner promised a transition that would be “expeditious, efficient, and smooth and easy.”
Writing in his usual chatty way, he described his tenure as a “fantastic Disney ride” and told board members: “We must not forget that we are always singing and dancing ‘for our supper.’ ” He closed with the advertising slogan his wife, Jane, coined in 1986: “I’m going to Disneyland!”
Although Eisner had been conferring with her about his decision to leave, he kept top Disney executives in the dark. Studio chief Dick Cook learned of the decision secondhand when he received a phone call from one of his executives Friday morning.
Now comes what will surely be one of the most closely watched executive beauty pageants in recent Hollywood history.
Chairman George J. Mitchell will head the search. In a statement, he said directors “will continue to pursue its ongoing deliberative process regarding succession even as Michael continues to lead the company to achieve its goals.”
Disney has long been the premier name in children’s entertainment, and experts said the opportunity to lead such a well-known company -- and potentially get rich by boosting the company’s stock price -- would be tempting.
“This is a great opportunity for any executive to really make a demonstrative impact on one of the world’s great family brands, as well as to enrich shareholders,” said Bill Simon, head of the media and entertainment practice for executive recruiter Korn/Ferry International.
Eisner has said his choice for the job is his second in command, President Robert Iger, an executive whose profile is rising but who continues to draw mixed reviews on Wall Street, in part because of his inability to revive the company’s fourth-place ABC television network.
“My advice to the board is that it absolutely should be someone with either entertainment or media experience and they know how strongly I feel about Bob,” Eisner said.
Numerous other names have been tossed into the mix. They include Yahoo Inc. Chief Executive Terry Semel, Time Warner Inc. entertainment and network chief Jeffrey Bewkes and News Corp. Chief Operating Officer Peter Chernin.
Eisner’s announcement Friday was welcomed by many on Wall Street. Some analysts have said that the uncertainty and conflict over the company’s leadership has hurt Disney’s stock among investors who put a premium on executive suite stability.
Investors also were buoyed by the prospect that Eisner’s departure may lead to renewed contract talks with Pixar Animation Studios, which helped Disney reap hundreds of millions of dollars with such hits as “Toy Story” and “Finding Nemo.” Those talks collapsed in large part because of bad blood that had developed between Eisner and Pixar chief Steve Jobs.
Disney shares showed little reaction to Eisner’s announcement. The stock inched up 30 cents to $23.16 on the New York Stock Exchange. Before a 43% surge last year, Disney shares had fallen for five straight calendar years.
Some investors said Eisner’s decision to announce his departure so far in advance could add new complications, making it harder to find a replacement with Eisner’s long shadow still cast over the company.
“It is not clear to us how a two-year lame duck CEO will benefit share owners,” said Sean Harrigan, president of the California Public Employees’ Retirement System.
But others expressed relief that Eisner had finally publicly come to terms with his eventual departure.
“It lifts a cloud hovering over the future of the company,” said Diane Disney Miller, daughter of company namesake Walt Disney. “This had been the biggest bone of contention.”
Some management experts said two years was not an unusual transition period if there were no front-running inside candidates, meaning that a replacement would have to learn the business from top to bottom. In Eisner’s case, the time might be most beneficial to him personally.
“It gives him time to make major strides in returning some of the luster to his legacy with a clock of accountability ticking loudly,” said Jeffrey Sonnenfeld, associate dean at the Yale School of Management.
For his part, Eisner said that “two years to me feels like the right amount of time to finish what we’ve started to do.” He added: “I’m going to be as active as I’ve been to make sure the company is on the [right] strategic direction.”
As it stands, Eisner’s legacy is mixed. Long considered one of Hollywood’s most creative executives, Eisner was hired in 1984 as such corporate raiders as Saul Steinberg and Irwin Jacobs threatened to engulf the company. He was teamed with President Frank Wells, whose button-down style and even temperament were considered an ideal complement to the creative Eisner. Together, they again made Disney one of the most potent entertainment powerhouses.
The reviving of Disney’s animation unit and an expansion of its theme park business brought in billions of dollars in profit. Disney launched a series of successful Broadway musicals and acquired the critically acclaimed Miramax Films.
Along the way, Eisner became one of the nation’s wealthiest CEOs, with a net worth listed by Forbes at $630 million. His 14 million Disney shares make him the company’s largest individual stockholder. He also became a celebrity himself as host of “The Magical World of Disney” on Sunday nights.
In 1994, Wells died in a helicopter crash, setting in motion a series of crises during the next 10 years, including a bitter public split with film chief Jeffrey Katzenberg. Eisner’s hiring of super-agent Michael Ovitz as president unraveled after 14 months, with Ovitz reaping $109.3 million in severance.
Critics also accused Eisner of running the company autocratically, failing to nurture and retain many talented executives who flourished in new jobs.
This year, cable company Comcast Corp. made an unsolicited $54-billion offer for the company. Although unsuccessful, the bid underscored the company’s vulnerability under Eisner, critics said.
It is unclear whether Eisner’s two harshest critics, former directors Roy E. Disney and Stanley P. Gold, will call off their attacks now that their adversary has said he plans to leave. The two had been expected to nominate an alternative slate of directors at the company’s annual meeting next year. They declined to comment Friday.
Both men have made Eisner’s departure the cornerstone of their campaign, although they have also criticized directors such as Mitchell for being too beholden to Eisner.
But shareholder advisors said they believed Eisner now had blunted any proxy fight because he probably wouldn’t be the kind of lightning rod he was this last year.
“Disney without Michael Eisner in the proxy fight is like ‘Pirates of the Caribbean’ without Johnny Depp,” said Patrick McGurn, senior vice president with Institutional Shareholder Services, a proxy advisory firm that withheld its support for Eisner’s reelection to the board. “It still may be entertainment, but it’s not going to attract the same attention.”
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A look at key moments during Michael Eisner’s reign at the top.
1984: Roy E. Disney, Walt Disney’s nephew, recruits Eisner as chief executive and chairman of Walt Disney Productions and recruits Frank Wells as president.
1986: Walt Disney Productions is renamed Walt Disney Co.
1991: Disney releases “Beauty and the Beast,” which is nominated for a best picture Oscar.
1992: The National Hockey League awards Disney a franchise for the Mighty Ducks. Euro Disney opens; it is one of seven theme parks developed under Eisner.
1993: Disney buys independent movie powerhouse Miramax Films.
1994: Wells is killed in a helicopter crash, leaving Eisner without his closest strategic partner. That same year, Disney releases the hit film “The Lion King.” Film studio chief Jeffrey Katzenberg resigns after he is passed over as Wells’ replacement.
1995: Eisner negotiates purchase of Capital Cities/ABC and hires former super-agent Michael Ovitz as Disney president. Disney releases Pixar Animation Studios’ “Toy Story,” which takes in $361.5 million in worldwide ticket sales.
1996: Ovitz leaves the company with a controversial severance package, eventually reaping $109.3 million, a sum currently being contested in court by angry shareholders. Also that year, Disney becomes a partner in the Anaheim Angels’ Major League Baseball team, later acquiring the entire franchise.
1997: Disney and Pixar announce a deal to make five additional films together.
1999: Katzenberg settles his breach-of-contract lawsuit against Disney for an estimated $275 million.
2001: Disney buys a cable channel, ABC Family, and California Adventure opens. Both ventures struggle, along with the company’s stock price, which takes an even bigger hit after the Sept. 11 terrorist attacks.
2003: It’s a record year at the box office. The company sells the Angels. Board members Roy Disney and Stanley P. Gold resign as they call for Eisner’s ouster, claiming the company is on a downward spiral.
January: Pixar abruptly ends negotiations for renewing its contract with Disney; clashes with Eisner are blamed.
February: Cable operator Comcast launches an unsolicited, and ultimately unsuccessful, bid to buy Disney.
March: Shareholders withhold 45% of their votes from Eisner’s reelection to the board. He loses his job as chairman.
April: “The Alamo” and other Disney films are box-office disappointments.
May: Disney’s second-quarter profit rises 71%.
Friday: Eisner announces that he will retire as chief executive when his contract expires in 2006.
Sources: Associated Press, Reuters, Bloomberg News, Walt Disney Co.