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Behind the Peace: A Look at the end of the Disney War

Published July 11, 2005

By C. W. Oberleitner

Last May we joined our readers in theorizing that the lawsuit brought by Roy E. Disney and Stanley Gold against the Walt Disney Company and its board of directors would never see the light of day. Well, we were right—but even we didn't foresee an end to this bitter, two-year struggle and the prospect of Roy Disney, Robert Iger, and Michael Eisner standing shoulder to shoulder in front of the Team Disney building in Burbank in a show of corporate unity.

Back Story

Bob Iger has been a busy man. Ever since being tapped by the Walt Disney Company's board of directors to replace outgoing CEO Michael Eisner, he's seemingly been working around the clock mending fences, and doing everything he can to restore the luster to the Disney brand. And nowhere has he put in more time and energy than in his efforts to end the nearly two-year old conflict and struggle with former director Roy E. Disney.

For months, the dapper 54-year old CEO designate has been speaking and meeting with Disney staffers, past and present, in and around Burbank with ties to Walt's nephew in an attempt to open up a dialog aimed at bridging the gap between Roy and the company whose name he shares.

Last Friday, Iger's hard work paid off and his initiatives came to fruition. In a joint statement released by the Walt Disney Company, Roy Disney and his business partner Stanley P. Gold announced that they had agreed to put aside the differences that have characterized their relationship over the past several years. Roy Disney was made a director emeritus, an honorary position, and consultant to the company. In exchange, he and Gold agreed not to run a rival slate of directors or submit shareholder resolutions for the next five years.

It wasn't all smooth sailing.

Early on in the process, Iger was advised, both from within the company and by friends of Roy Disney, to make every effort to find some way for Roy to once again be a part of, even if only ceremoniously, the company. The coming 50^th anniversary of Disneyland on July 17 of this year was seen as a perfect way for Roy to ease his way back into a relationship with the company founded and built by his father and uncle.

Through third-party intermediaries, Roy Disney was approached with the idea of taking part in the ceremonies being planned to commemorate Disneyland's golden anniversary. One idea even called for the 75 year-old Disney, who bears a striking resemblance to his uncle, to reenact Walt Disney's original dedication of the park. At precisely the same moment that the elder Disney first read Disneyland's dedication, Roy would have stepped up to a microphone in Town Square, exactly as his uncle did on July 17, 1955, and repeated those now famous words, "For all who come to this happy place: Welcome. Disneyland is your land…"

According to sources familiar with the story, Roy Disney was initially amenable to the idea of accepting what he perceived to be a personal invitation from Iger to join the festivities surrounding Disneyland's 50^th birthday—so much so, that he attempted to contact Iger personally to discuss the ways in which he might participate, only to be told that it would not be possible for him to speak directly with the new CEO.

Close associates said that Roy Disney was "very upset" at being rebuffed by Iger's gatekeepers. There were no further attempts to include Roy Disney in the Disneyland celebrations.

No one seems to know what Iger's reaction to Roy Disney's treatment by Disney Company staffers was. In any event, he didn't have long to think about it.

While there appears to be no direct connection between the two events, shortly after being brushed off by Iger's office, Roy Disney joined Stanley Gold in filing a lawsuit that sought, among other things, to overturn this year's election of Disney Company directors and hold new elections, at which Disney and Gold would put up their own slate of directors.

According to those who know both Iger and Roy Disney, Iger was undaunted and sought out the advice of those who knew Roy Disney well. He was advised to "find a more meaningful way" of bringing Roy back into the company and, presumably, deal with him directly and not pass him off to aides and assistants. While this was going on, the Disney Company lost its motion to have the Disney/Gold lawsuit dismissed. A trail date of August 10 was set.

Four of the Disney Company's directors were not named in the Disney/Gold lawsuit. Around Hollywood, it has been widely rumored that these same four directors have also been actively counseling Iger to "find a way to end the Disney War."

All of the company's non-executive directors were said to be anxious about the idea of yet another public trial at which, even if the company prevailed, it would still surely face rounds of negative publicity. No one connected with the company relished the idea of Michael Eisner being crossed-examined by Disney and Gold's attorneys just weeks before he was to formally step down and hand the keys to the kingdom over to Iger.

Disney's non-executive directors are said to have encouraged Iger to return Roy Disney to the fold, although in a far more ceremonious rather than substantive role. With the blessing of the board, Iger offered Roy Disney the honorary position of director emeritus. Again, according to sources close to Roy Disney, he is said to have balked at the idea of returning to the company only as a figurehead.

Meanwhile, word was beginning to leak out of SaveDisney that the prospect of winning their suit against the Disney Company could be more costly than loosing. It had previously been estimated that SaveDisney had spent over $20 million in its efforts to remove Michael Eisner and several other Disney Company directors from the board. Now if they prevailed in court, it could conceivably cost Messrs. Disney and Gold tens of millions more to conduct a campaign for an alternate slate of candidates.

Friends also said that Roy was beginning to speak more openly and frequently about tiring of the whole affair.

A close associate of Roy Disney's has said that, "Roy told Iger he didn't want to come back in just a ceremonial role. That he wanted to be able to make a contribution."

It was at this point that a deal was struck giving Roy Disney an office on the lot and a position as consultant to the company. The Disney War was finally over.

Planning the Peace

Since releasing their joint statement, there has been no further official comment by the Disney Company, Roy Disney, Stanley Gold, or their SaveDisney.com and Shamrock Holdings offices. The same, however, cannot be said of "unofficial" sources close to all parties concerned.

Sources close to the Disney board have been busy making sure that the financial media is well aware that Bob Iger gets full credit for bringing peace in our time to the Mouse House.

For their part, sources close to SaveDisney have confirmed that due to his participation in this year's Transpac Yacht race, Roy Disney "in all likelihood" will not participate in this coming Sunday's ceremonies commemorating Disneyland's actual 50^th Anniversary. Walt's daughter Diane Disney Miller is expected to represent the Disney family at these events.

These same sources, however, are quick to suggest that Roy Disney will join Michael Eisner and Robert Iger on stage at a special version of this year's "Disney Legends" ceremony to be held to coincide with Eisner's departure and Iger's ascension.

Both sides are playing down reports that Iger wasn't keen on the idea of returning Roy Disney to the company. Instead, they are focusing on his efforts to begin his career as the Mouse House's new Big Cheese with a clean slate wiped free of the company's previous problems.

On the Internet, SaveDisney's many friends in the animation community are expressing their hopes and desires that in his new position as consultant to the company, Roy Disney will be able to bring traditional "2D" animation back to Walt Disney Feature Animation.

Some industry analysts, too, have expressed the idea that Roy's return to the Burbank lot could mean a return to hand-drawn animation as well. Still others see it as a possible way for the company to use Roy as a scapegoat should things go wrong in animation while he's advising the company.

"You of course realize that the very first thing Roy is going to say is to return to hand drawn animation," a former animation production accountant told o-meon.com. "Iger could now do that and blame it on Roy if it shouldn't pan out."

Of all the problems within the Disney Company that Iger has inherited and is doing something about, WDFA remains one of his biggest challenges. There are hundreds of former Disney animators all around the country still looking for work in their chosen field. Even the studio's better direct-to-video sequels, dubbed "cheapquels," are regularly trounced in the media for cheapening the studio's reputation for high quality, imaginative, event-based animated films.

Then there's the matter of the Disney Pixar relationship. Iger has received praise from the investment community for reaching out to Pixar CEO Steve Jobs to reopen talks aimed at continuing their very successful business relationship. At the same time, Disney is running the risk of offending Jobs and Pixar by continuing to move forward, without their Emeryville-based partner, with plans to make sequels to Toy Story and Monsters, Inc., something Pixar has said it would rather not see happen.

When Iger formally becomes CEO at the beginning of Disney's fiscal year on October 1, he will vacate the position of President and COO. Board chairman George Mitchell, who reaches mandatory retirement age for Disney directors this year, has announced he will step down and retire from the board at next year's annual shareholders' meeting.

It's generally believed that Robert W. Matschullat, board member and former head of worldwide investment banking at Morgan Stanley & Co., will succeed Mitchell as chairman of the Disney board. Matschullat was also Vice Chairman of the Board of The Seagram Company Ltd. from October 1995 until June of 2000.

Matschullat, who at 56 is just two years older than Iger, is believed to be the driving force behind efforts to aid Iger in laying to rest most, if not all, of the problems that have plagued the company in recent years.

At this time there is no consensus as to who might replace Iger as President and COO. The name of one man sure to be considered for the position, however, has recently been appearing in the media with increasing frequency.

On July 1, Disney reported in a Securities and Exchange filing that CFO Tom Staggs, as part of his compensation package for the year, was granted options to acquire 125,367 shares of Disney common stock at a price of $25.80.

Later that same week, Disney named Kevin Mayer executive vice president of the new Corporate Strategy, Business Development and Technology Group. The new group replaces Disney's old Strategic Planning Division, which in recent years had come under increasing criticism from within the company for inhibiting rather than enhancing new business initiatives.

In announcing Mayer's appointment, Disney said that Mayer and his new group, unlike the old Strategic Planning Division that reported directly to CEO Michael Eisner, would report to CFO Tom Staggs.

The 42-year-old Staggs joined Disney in 1990 as a manager of strategic planning, and advanced through a series of positions of increased responsibility, becoming senior vice president of the former Strategic Planning Division in 1995. He was appointed executive vice president and CFO in 1998. Staggs is credited with spearheading efforts to drive greater cost and capital efficiency throughout the organization.

Prior to joining Disney, Staggs worked in investment banking with Morgan Stanley & Co.

this business of show

Member of the Walt Disney Company board of directors, Robert W. Matschullat.

Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company.