Eisner Role in Exec Search Is Criticized

Dissident Walt Disney Co. shareholders Roy E. Disney and Stanley P. Gold alleged Thursday that company directors planned to let Chief Executive Michael Eisner sit in on interviews with his potential successors, making a “mockery” of the job search.

In an open letter to Disney’s board, the two said that Eisner’s involvement would discourage candidates from applying, steering the search toward his personal choice, Disney President Robert Iger.

Disney spokeswoman Zenia Mucha denied that Eisner would participate in interviews with all candidates, but did not elaborate.

Disney and Gold “have been consistently wrong in the past,” Mucha said. “This is a perpetuation of a campaign of distortion aimed at advancing their own personal agenda.”

A source close to the company said the board had discussed allowing Eisner to be present during interviews because he was a director with deep knowledge of the company. Another source said that although Eisner would have a role in the search, candidates would have the option of interviewing without him present.

In an interview, Gold said any involvement by Eisner was unacceptable because candidates would be reluctant to criticize Disney’s management.

“You can’t have an open interview process with Michael in the room,” Gold said. “It surprises me that they would be so brazen and corrupt in their process.”

Charles Elson, a corporate governance expert at the University of Delaware, agreed.

“I don’t think it’s a good idea to have a CEO sit in on interviews because it puts a chilling effect on the candidate’s candor in his evaluation of the business,” Elson said.

The letter marks a shift for Disney and Gold, who have kept a low profile during the search.

Gold and Disney quit the company’s board in protest in late 2003, saying Eisner was mismanaging the company. They launched a campaign that last year culminated in a 45% protest vote against his reelection to the board.

The two have toned down their criticisms after the board said it would seek a replacement by June. Eisner’s contract expires in September 2006.

But in recent weeks their frustration has been mounting. Although directors hired executive recruiting firm Heidrick & Struggles, they complain that the board is dragging its feet.

In the letter, Gold and Disney also demanded that the board investigate allegations that senior Disney management covered up missteps surrounding the company’s $5.3-billion acquisition of Fox Family cable channel -- renamed ABC Family -- from News Corp. and children’s-TV producer Haim Saban.

The faulty financial projections and flawed strategy behind the acquisition was chronicled in a Los Angeles Times story last year.

Disney and Gold called on the board to investigate allegations in the new book “DisneyWar” that Eisner and Iger hid from directors a plan to take a $2-billion write-down that would save $400 million in taxes. The book alleges that Iger instructed executives to boost ABC Family’s projections to mask woes.

Disney’s Mucha denied the allegations. Sources close to Disney said that directors were extensively briefed about ABC Family’s performance. After considering taking the write-off, they said, managers concluded the action wasn’t viable.