DizBiz: Our Story So Far

First published February 18, 2003

By C. W. Oberleitner

C. W. Oberleitner returns after a brief stint with a stent to tell the tale of two Michaels. Join him as he answers the question on the minds of Disney watchers everywhere: Where the heck are we and how the heck did we get here?

Ever since last fall's meetings with various members of the investment community Walt Disney Company CEO Michael Eisner has appeared to be turning his image as an effective leader -- if not his company's stock price -- around. For the past several months the nation's press has dropped the word "beleaguered", as in beleaguered Disney CEO Michael Eisner, from his title.

Mr. Eisner successfully weathered the bad news brought on by the disappointing box office results for Treasure Planet. He emerged unscathed by the revelation that the Securities and Exchange Commission had begun an investigation for what the New York Post referred to as:

"the cozy relationship among four directors who put their relatives in key jobs within the Disney empire."

And just a few short weeks ago a beaming Michael Eisner hosted what most participants called a cheerful and upbeat earnings conference call with investments analysts.

Like a proud father Eisner told analysts the company was responding favorably to the programs and initiatives he and his management team had put in place over the past few years. He said that Disney's earnings were better than expected in many areas, so much so that they were able to off set the anticipated losses caused by Treasure Planet. He went on to say that visitors -- especially the highly coveted overseas ones -- were returning to the U.S. parks and resorts. Even while admitting there were still a few underperforming areas within the company he remained upbeat.

More importantly for Mr. Eisner, during the weeks that followed the conference call from Burbank to Wall Street there was nothing but good news and good press for WDC. The company's stock price rose. It came close to its target price of $21 before slipping back to the mid teens amid fears of the effects on the economy of increased terrorism and possible war with Iraq.

Only a few of Eisner's harshest critics tried to pull a dark cloud from the silver lining that was the company's latest earnings report. Most of those were to be found on the web. Even the most creative among them did not seem to be able to reduce the glow from Michael's sunny new place of respect in the financial arena. They needn't have tried so hard.

That Was Then This Is Now

Last Saturday, February 15, on the front page of the business section of the Los Angeles Times a story appeared concerning the departure of WDC board member Andrea Van de Kamp. Contrary to earlier reports that Ms. Van de Kamp was voluntarily leaving the board as part of its new reorganization The Times, quoting a confidential memo it had obtained to the Disney board's governance committee, reported that Ms. Van de Kamp accused Eisner of "bullying and character assassination" to force her off the board and out of his way.

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The image of happy, beaming Michael was gone and back was the dour beleaguered Michael of past several years. In her memo Ms. Van de Kamp confirms every Disney critic's worst fear about Eisner's temperament as Mouse House CEO.

Michael has requested that I contact him should I wish to call any of you – he wants to know with whom I'm speaking.

His tactic with me was threatening and bullying.

After I initiated a call to Michael, we did have a lunch and he indicated at that time that anyone that wasn't with him at the September [board] meeting should be off the board.

The behavior that Michael demonstrated . . . gives the appearance that rubber-stamping Michael's decisions is an unwritten prerequisite for continued board membership.

Separately, I have struggled with how to appropriately respond to what I shall refer to as a 'character assassination' that took place in Michael's office on Monday morning [Jan. 20].

Disney board member Ray Watson was quoted as saying:

It was unfortunate that that memo was written, I think it's very unfair to Michael.

Fair or not fans of and investors in The Walt Disney Company find themselves right back where they've been for the better part of the last four years, in the middle of a huge corporate melodrama. A drama that offers more Sturm und Drang than it does the promise of a favorable outcome.

The Times may have been trying to do Disney a favor by running the story the Saturday before The Presidents Day holiday. Saturday's run of the paper is typically among the lowest of its seven daily editions. Stock markets are closed and most of this country's business press, along with Disney watchers of all types, would be out making the most of a three-day weekend. In the days before the Internet this might have been a good way to bury a story like this.

But there is an Internet. And, because there is this story isn't going to go away anytime soon. It is about to become another chapter in the ongoing saga of Michael Eisner's tenure as CEO of The Walt Disney Company. By itself it isn't likely to bring Mr. Eisner down. What it is more likely to do is open a door to more drama within the executive wing of the company.

Let The Games Begin

In a scene reminiscent of John Taylor's Storming the Magic Kingdom: Wall Street, the Raiders and the Battle for Disney what happens most often in corporate dramas such as this is fairly simple. Over the course of the next several weeks, the press may find itself privy to all manner of assorted Disney corporate documents, never intended for public consumption. If any of them goes just a bit to far -- whether intentionally or not -- and manages to step on the toes of some of the powerful people involved a war of denials, accusations and counter denials and accusations will most likely ensue.

If you are a fan of corporate melodrama you will no doubt be pleased if things turn out this way. If you're not a fan of such things you can only hope that all the parties involved realize the only way to win this game is not to play. And, if you're a fan of Disney history you may recall that all of this is very reminiscent of the way Mr. Eisner first came to power at The Walt Disney Company.

Regardless of what happens next one thing is abundantly clear. Somebody's feelings have already been hurt. And that person or those persons want to see Michael Eisner returned to being on the defensive and therefore vulnerable.

What, you thought The Los Angeles Times hacked into the Disney board's corporate e-Mail for their copy of Ms. Van de Kamps' memo? It doesn't work that way. In fact that would have been downright illegal. No, someone had to supply The Times with a copy of her memo and in all likelihood it was not Ms. Van de Kamp.

For corporate intrigue such as this to be received credibly the wronged party -- that would be Ms. Van de Kamp -- has to be, like Caesar's wife, beyond reproach. Otherwise she would come off more like Lady Macbeth and the whole thing would be deemed not worthy of news coverage as prestigious as that to be found in The Los Angeles Times.

But who within the company could have a motive to embarrass the CEO in this way and risk raising the ire of investment analysts? Who indeed.

Last December when Michael Eisner made the announcement that the company anticipated losses due to Treasure Planet's poor performance and the SEC investigation of four of its board members he forgot to mention one thing. As the New York Post reported:

Eisner himself divulged the corporate nepotism months ago to the SEC - primarily to neutralize the four outside directors who had been heading a board revolt to oust him.

Mr. Eisner still faces opposition and criticism from remaining board members Roy E. Disney and Stanley P. Gold. Mr. Gold is among those members currently under investigation. His daughter earned over $80,000 while employed in Disney's Consumer Products Division. He lead an earlier revolt that saw the board adopting a measure that would bar management from at least two meetings a year.

Roy E. Disney, Walt's nephew, remains a vocal Eisner critic. It has been reported that Mr. Disney is so dissatisfied with the way things have been managed at Disney Animation that he was publicly overheard saying he plans to return to an "active" role in that division's management.

The investment community has frequently accused the Disney board of being in Eisner's pocket. This is often cited as one of the principal factors keeping down the value of Disney stock. What is truly ironic about all of this is that comes at a time when Mr. Eisner was receiving favorable press for his efforts to reform Disney's corporate governance. Now it would appear that Mr. Eisner has gone out of his way to prove these accusations correct.

C'ya real soon!