Walt Disney Co. Chairman George Mitchell said Friday he had outlined broad CEO succession planning at a meeting with six state pension funds and would consider their suggestions when choosing a new board member this year.
Disney directors met with representatives of six funds from California, New York, Connecticut, Ohio and North Carolina that had led a protest vote at the March 3 annual meeting.
Chief Executive Michael Eisner, who was stripped of the chairman role after that March 3 meeting, did not attend Friday's meeting in New York between Mitchell and the pension funds.
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Disney, states talked CEO succession, new director
Reuters, 05.21.04, 1:19 PM ET
NEW YORK (Reuters) -
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The Walt Disney Company Statement Following Meeting with Public Pension Funds
Friday May 21, 2:21 pm ET
NEW YORK--(BUSINESS WIRE)--May 21, 2004--Six Directors of The Walt Disney Company Board met today with representatives of seven public pension funds that collectively hold 39.9 million shares of Disney stock, about two percent of shares outstanding, to review specific steps the company's management is taking to build long-term shareholder value as well as steps the Board is taking in the area of governance. The Board members, led by Disney Chairman George Mitchell, also solicited detailed input regarding specific performance and governance initiatives.
The Disney presentation included a discussion of the company's financial performance; executive succession planning; the separation of roles between the Chair and CEO and the selection process for a new independent director. Tom Staggs, Disney senior executive vice president and CFO, also attended to present financial information.
"The Disney Board takes seriously the responsibility to listen to all shareholders. This meeting was part of that process," Mitchell said following the meeting. "Today's meeting included a thorough exchange of views and ideas. The Board members continue to respect and understand the specific issues raised by this group. We hope these leaders now have a better understanding as to why the Board remains firm in its view that the Disney management team, led by Michael Eisner and Bob Iger, is executing against its strategic plan in order to continue to drive long-term shareholder value, as evidenced by the most recent earnings report, and to strengthen the company's position as the global leader in quality family entertainment."
Independent Directors Judith Estrin, chair of the Compensation Committee; Monica Lozano, chair of the Governance and Nominating Committee; Robert Matschullat, chair of the Audit Committee; and Aylwin Lewis, as well as Director Bob Iger, Disney's president and chief operating officer, also attended the meeting.
Among the items also discussed during the meeting were Disney's short- and long-term financial performance and trends, a review of the company's corporate governance guidelines including duties for the Chair, director independence, the Board's ongoing search for a new independent director, and succession planning for the CEO and other senior executives.
"The Disney Board plans to continue to hold management accountable for performance, by measuring management's success based on its ability to execute on its strategic priorities, and to prepare for the company's future," Mitchell said. "We expect this success to manifest itself in, among other things, continued growth in earnings, increased free cash flow, and increased returns on invested capital."
In terms of performance, Disney stock in the past year has risen 29 percent. For calendar year 2003, Disney stock rose 43 percent, compared to 26 percent for the S&P 500 and 25 percent for the Dow Jones Industrial Average. Over the long term, Disney has provided an impressive return for shareholders. An investment of $10,000 made when Eisner became Disney's CEO in Sept. 1984 would be worth more than $200,000 today, representing nearly 85 percent more than the S&P 500 would have returned on that investment. And the Company's future prospects look bright. As the Company stated in its most recent earnings release, "Barring negative changes in the environment and given the strength of our recent results and the positive trends we are seeing in our businesses, we now believe we will deliver growth in earnings for the full year of 50 percent or more, excluding the potential impact from items like the sale of the Disney Stores. We are also keeping an eye on the exposure we have from airline lease investments made in the early 90's which could impact our outlook ... We are also expecting to deliver double-digit average annual earnings growth from 2004 through at least 2007."
Disney Board members also discussed the Board's corporate governance guidelines, specifically those on succession and Board member independence. The Disney Board's guidelines call for the chief executive officer to meet with non-management Directors at least once yearly to discuss potential successors. The non-management directors also are to meet in executive session, without management present, to discuss succession. In addition, the CEO also is to review periodically with the non-management directors the performance of other key members of the senior management team, as well as succession arrangements for those key senior management members.
The Disney Board has adopted a policy that a "substantial majority" of its Directors will be independent of the company and its management, under independence standards that are set out in the guidelines that meet or exceed those that are required by the NYSE. In addition, all members of the Audit, Compensation and Governance and Nominating committees must be deemed independent under Board guidelines and NYSE rules.
On March 19, 2004, Disney sent a letter to more than 100 institutional investors asking for continued feedback, and especially for input on key attributes, skills and characteristics the Board's Governance and Nominating Committee should consider in recruiting a new independent director. The Board has stated the intention to identify and elect a ninth independent director before year's end.
Certain statements in this release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management's views and assumptions regarding future events and business performance as of the time the statements are made and management does not undertake any obligation to update these statements. Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including restructuring or strategic initiatives and information technology improvements, as well as from developments beyond the Company's control, including international, political, health concern and military developments that may affect travel and leisure businesses generally and changes in domestic and global economic conditions that may, among other things, affect the performance of the Company's theatrical and home entertainment releases, the advertising market for broadcast and cable television programming, expenses of providing medical and pension benefits and demand for consumer products. Changes in domestic competitive conditions and technological developments may also affect performance of all significant company businesses. Additional factors are set forth in the Company's Annual Report on Form 10-K for the year ended September 30, 2003 under the heading "Factors that may affect forward-looking statements."
Source: The Walt Disney Company
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State Funds Who Met Disney Liked Talk, Want Action
LOS ANGELES (Reuters) - State pension fund leaders who met Walt Disney Co. directors on Friday said they had a good dialogue and were waiting for the board to demonstrate its independence and decide whether Chief Executive Michael Eisner was the best person to lead the company.
"They did an outstanding job today of saying all the right things. What needs to happen in the future though is that some of the talk needs to be backed up by appropriate action," North Carolina Treasurer Richard Moore told reporters after the meeting. Other leaders of the six state funds who attended the meeting in New York expressed similar views.
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Disney Urged to Become More Independent
1 hour, 11 minutes ago By GARY GENTILE
LOS ANGELES - (Reuters) - Leaders of six large state pension funds urged the Walt Disney Co. board Friday to become more independent and be more aggressive in finding a successor for chief executive Michael Eisner.
The pension funds met for 2 1/2 hours in New York Friday with six Disney board members in what both sides described as a frank and thorough exchange on a variety of issues, including problems at the ABC Television network and the company's troubled relations with Pixar Animation Studios and Miramax Pictures.
While the pension funds together represent less than 2 percent of Disney's outstanding shares, they wield tremendous influence over corporate boards and led an effort that resulted in Disney shareholders withholding 45 percent of votes cast for the re-election of Eisner to the board at a March 3 annual shareholders meeting.
Soon after that vote, the pension funds requested Friday's meeting to pressure Disney's board to adopt more extensive corporate governance measures, including establishing a committee devoted to regular communications with the funds.
Disney has already separated the duties of chairman and chief executive officer, a key demand of the pension funds.
After the meeting, the pension fund representatives from California, Connecticut, North Carolina, New York and Ohio called their meeting "fruitful," but said they would wait for actions that showed Disney's board was listening to their concerns.
"They did an outstanding job today of saying all the right things and quite honestly I'm not surprised at that," North Carolina State Treasurer Richard Moore said at a press conference. "What needs to happen in the future is that some of the talk is backed up by appropriate action."
In addition to demanding improved fiscal performance in the coming years, the pension fund leaders asked Disney that all future executive compensation agreements be sent to investors for comment 30 days before being adopted — a step that exceeds any current corporate governance standards.
Disney board Chairman George Mitchell said he and the other five directors who attended Friday's meeting would consider all the suggestions, except for one asking for a special committee on the issue of succession.
"Every board member should participate fully and actively" on the topic of succession planning, Mitchell said during a press conference.
Mitchell said that the pension funds would be invited to nominate candidates for a new independent director, to be named by year's end.
He also gave yet another strong endorsement of Eisner, Disney President Robert Iger and the current management team which, he said, is delivering improved performance and has pledged double-digit earnings increases through 2007.
Eisner did not attend the meeting. Iger, who is also a board member, did attend, along with Chief Financial Officer Thomas Staggs, who made a presentation on the company's finances.
Mitchell said the board is taking succession planning seriously and is considering candidates for chief executive and the next 10 top positions in the company.
He said the planning includes all contingencies, including the sudden death or disability of an executive or a vacancy "created by an executive leaving voluntarily or by the board creating a vacancy."
Mitchell called the discussion, which was requested by the state pension funds, "cordial, civil, frank, and thorough." But he emphasized that the board has been meeting with other shareholders who, in some cases, have expressed opposite views from those expressed Friday.
"We are trying extremely hard to listen to everybody's views," Mitchell said. "We simply want them to understand that they don't speak for all shareholders. Our task is to sort through all those views and make the judgments we think are in the best interests of the shareholders."
The pension funds stopped short of asking for the immediate resignation of Eisner. But they made it clear they expected Disney's board to seriously consider whether Eisner is the best person to lead the company going forward.
"We didn't sit at that meeting and ask 'Are you firing Eisner today, next week or some time certain?'" New York State Treasurer Alan Hevesi said.
"There are some serious problems with regard to his leadership," said Sean Harrigan, president of the California Public Employees Retirement System, the nation's largest public employees pension fund.
Specifically, Harrigan questioned the company's loss of its relationship with Pixar Animation Studios, which has produced Disney's most successful animated films in recent years. He also questioned reports of Disney's deteriorating relationships with Bob and Harvey Weinstein, the founder of Miramax, which is owned by Disney.
"What happened on March 3 was that the focus changed from Michael Eisner to the board," Harrigan said. "It's the board's responsibility to decide whether they will go through a search and selection process to replace Michael Eisner."
Connecticut State Treasurer Denise Nappier said Friday's meeting was a welcome contrast to a shareholders meeting she spoke at several years earlier.
"The room was dark and I could not see the board members," Nappier said of the 2002 shareholders meeting held in Hartford, Conn. "Today there was light." Disney shares fell 37 cents to $22.68 on Friday on the New York Stock Exchange
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Investors are offered a say in filling a board seat, but not a timetable for naming a new CEO.
By Richard Verrier
LATimes Staff Writer
May 22, 2004
Walt Disney Co. made modest concessions to a group of restive investors Friday, saying it would allow them to suggest nominees for a seat on the company's board this year.
Disney directors also told the group — consisting of some of the nation's biggest pension funds — that it would consider allowing an advisory panel to serve as a liaison between the board and investors.
But the board did not give in to a key desire of the funds: a time frame for naming a successor to Chief Executive Michael Eisner, who has led the entertainment giant for nearly 20 years.
Disney Chairman George J. Mitchell, one of six directors who met with the pension funds in New York, said he told the funds that the board was working on a succession plan for Eisner and other senior executives.
"When the board determines the time is right for a decision on succession, we will make that decision," Mitchell said.
In the meantime, Mitchell and his colleagues renewed their support for the company's top brass, including Eisner, who did not attend the session.
"We hope these leaders now have a better understanding as to why the board remains firm in its view that the Disney management team … is executing against its strategic plan," Mitchell said.
His comments followed a two-hour meeting with officials of the California Public Employees' Retirement System, the California State Teachers' Retirement System and pension funds from North Carolina, Ohio, Connecticut and New York.
The funds have been sharply critical of Disney's long-term financial performance. Some have called for Eisner's ouster.
Even as he welcomed the dialogue with the pension funds, Mitchell appeared to downplay their clout, pointing out that directors had met this week with other, larger shareholders that were more supportive of Disney. When asked why Eisner did not attend the meeting, Mitchell said: "He's very busy and has other things to do…. The people we met with hold less than 2% of the shares."
Cynthia Richson, corporate governance officer for the Ohio Public Employees Retirement System, was taken aback by Mitchell's comments. "He's trying to minimize us as a group, which is unfortunate because we walked out of this meeting feeling positive," she said.
In fact, several fund officials pronounced the session with the Disney directors a success.
"It was a very positive first step," said New York state Comptroller Alan Hevesi.
Others were more cautious. "This is a company and a board that is still operating under a cloud," said North Carolina Treasurer Richard Moore. "They did an outstanding job today of saying all the right things…. What needs to happen is that some of the talk needs to be backed up by action."
CalPERS President Sean Harrigan, whose fund has called for Eisner to resign by year's end, said: "The dialogue is healthy but the proof is in the pudding."
For their part, directors stressed that Disney was on track to achieve double-digit average annual growth in earnings through 2007 — and took issue with those who accuse them of being too cozy with Eisner.
"The Disney board plans to continue to hold management accountable for performance," Mitchell said.
He said the board would consider any suggestions from the pension funds of people who could serve as an independent director. Those names — along with others — would be culled by the nominating committee, with the board expected to name the director by late December.
The pension funds had demanded the meeting with Disney directors in the wake of a 45% protest vote cast in March against Eisner's reelection.
Friday's discussion focused on several corporate governance issues, including guidelines for director independence, duties of the chairman and executive compensation. Moore asked the board to consider publicizing proposed executive pay increases 30 days before they are adopted.
Eisner had been in New York the day before to receive a humanitarian award from the United Jewish Appeal. As he prepared to open an envelope during the awards ceremony, he joked that it contained the name of his successor.
"It's Omarosa," he said, referring to a widely reviled contestant on Donald Trump's TV show, "The Apprentice."
Times staff writers James Bates in Los Angeles and Thomas S. Mulligan in New York contributed to this report.
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14 Jun 2004
Iger enters battle to head Disney
The president and chief operating officer of the Walt Disney Company has, for the first time, expressed an interest in taking over control of the group from chief executive Michael Eisner.
In an interview with The Times, Iger said the company’s board was “aggressively dealing with the subject of succession” and that Iger saw himself as a ‘prime contender’ to assume the top job.
Iger added: “I would like to succeed Michael [Eisner]. Looking at internal and external candidates, I consider myself to be in the running so I think it’s fair to say that the subject of succession is a fairly important one for me.”
In March 2004, Eisner was forced to stand down as chair of the Disney Group following a shareholder revolt, but kept his position as chief executive, despite 43 per cent of the company's shareholders voting against the continuation of his leadership.
Iger confirmed that non-executive Disney board members discuss the issue of Eisner’s successor “at every board meeting”.
Eisner has now been chief executive of Disney for 20 years, but industry insiders are doubtful as to whether he’ll reach 21.
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