Luv2Roam
DIS Veteran
- Joined
- Jun 3, 2000
LA Times/August 8, 2002
Eisner Under More Fire as Stock Sinks are putting heat on the CEO to act more aggressively. Shares are at their lowest since November 1994.
By JAMES BATES and CLAUDIA ELLER, TIMES STAFF WRITERS
Questions about Michael Eisner's performance as Walt Disney Co.'s chief executive grew sharper Wednesday as the media giant's stock fell to an eight-year low in the wake of last week's dismal earnings forecast and amid shakiness in the company's credit ratings.
What makes the latest round of Disney discontent different from numerous stretches over the last five years when Eisner has felt heat at the company is that key directors are increasingly impatient with its lagging financial performance and stock price.
According to sources close to the board, relations have become especially strained between Eisner and two of Disney's most powerful board members, Roy E. Disney and Stanley P. Gold, whose Shamrock Holdings investment arm has been hurt as the stock price has tumbled.
Although neither Roy Disney nor Gold would comment Wednesday, sources say the two are pressuring Eisner to lift the company's plunging stock price, deal more aggressively with such issues as turning around key divisions such as the ABC television network and even to clarify his succession plans. Tensions have risen in recent weeks, including some pointed exchanges between Eisner and Gold, sources said.
"The board is getting to the point where it is less likely they are going to be as passive as they have been historically," said Jeffrey Logsdon, an analyst with investment banking firm Gerard Klauer Mattison who has covered Disney for years.
But Disney director Ray Watson said the board as a whole supports Eisner, who has headed the company for the last 18 years.
"We have no interest in going out and bringing an unknown into this company and this difficult industry when we believe we already have the best CEO in the business. All companies are under a lot of pressure right now. His pressure is of his own volition, and the board is supporting him," Watson said.
Another Disney director, who requested anonymity, said although Eisner is clearly under pressure, as many CEOs are these days with stock prices tumbling, "there's no coup going on. The board is taking a collegial approach to helping create future shareholder value."
Eisner was unavailable Wednesday for comment. Other Disney executives declined to comment.
Disney's stock fell 48 cents, or 3.3%, to $13.90 on the New York Stock Exchange on Wednesday, its lowest close since November 1994. Last week, Disney announced another quarter of soft earnings, further warning that the firm's theme park business had eroded. Two credit-rating firms, Standard & Poor's and Moody's Investors Service, subsequently said they might downgrade Disney's debt.
Tensions at Disney also come in the wake of recent shake-ups at three rival media companies: AOL Time Warner Inc. Chief Executive Gerald Levin and Chief Operating Officer Robert W. Pittman resigned under pressure; Vivendi Universal fired CEO Jean-Marie Messier; and Bertelsmann ousted Thomas Middelhoff. It also comes as directors throughout corporate America are being forced to do a better job of scrutinizing company operations.
"I think the board, given what's going on with corporate governance, cannot ignore the need to make immediate improvements," Logsdon said.
In an interview after Disney's earnings were released last week, Eisner and Chief Financial Officer Thomas Staggs defended the company's performance, saying its balance sheet remains strong. They expressed confidence that the company's theme parks and ABC network would recover when the economy stabilizes.
Eisner also disclosed moves aimed at defusing long-standing criticisms that Disney's board is too passive, saying he plans to reduce its size and strengthen the role of independent directors.
"Do I feel specific pressure?" Eisner said in that interview. "No, we feel an obligation to do it."
As poorly as Disney has been performing, the company can point to the stocks of such competitors as AOL Time Warner and Vivendi, both of which have performed even worse. Some analysts believe this has helped deflect heat from Eisner. And, they add, some of Disney's problems are not Eisner's doing but result from the soft economy that has hurt the advertising marketing and tourism.
"It's under-performing, and some of it's the fault of the company," said analyst Tom Wolzien, with Sanford C. Bernstein. "The biggest problem is the combination of the decline of advertising and ratings at ABC. Theme parks are having a tough time--that's not of the company's making. But you put that together with problems at ABC, and people who are supporters of the stock have shifted downward."
Although no single Disney shareholder has enough stock to single-handedly force a change at the company, the growing rift with Roy Disney and Gold is important. Roy Disney is the single largest individual stockholder with 17.5 million shares, according to the company's proxy statement, and is the nephew of Walt Disney. Gold runs Roy Disney's Shamrock Holdings investment empire.
Historically, they have been among his staunchest supporters.
Gold played a pivotal role in the last coup at Disney in 1984 that resulted in Eisner's being hired to turn the company around. In addition, another of Eisner's longtime supporters, the Bass family of Texas, last year divested its shares.
But other major investors have been showing signs of impatience as well. Said Logsdon: "Many institutional investors are very concerned about the performance of some of Disney's assets."
Eisner's status also has been one of the hottest topics in the last week among financial pundits, some of whom have been calling for Eisner to leave. In the online publication Slate, columnist Daniel Gross published a scathing commentary titled: "The Louse in the Mouse House--Why Disney's Michael Eisner should be fired."
Disney's 16-member board is scheduled to meet next in late September. Sources cautioned that the board is not united on taking any specific action. "The board hasn't coalesced. They aren't in camps," the source said.
And Disney internal sources insist that the board is not badly divided and that directors continue to support Eisner.
But Logsdon said the future relationship between Eisner and the Disney board is uncertain.
Eisner Under More Fire as Stock Sinks are putting heat on the CEO to act more aggressively. Shares are at their lowest since November 1994.
By JAMES BATES and CLAUDIA ELLER, TIMES STAFF WRITERS
Questions about Michael Eisner's performance as Walt Disney Co.'s chief executive grew sharper Wednesday as the media giant's stock fell to an eight-year low in the wake of last week's dismal earnings forecast and amid shakiness in the company's credit ratings.
What makes the latest round of Disney discontent different from numerous stretches over the last five years when Eisner has felt heat at the company is that key directors are increasingly impatient with its lagging financial performance and stock price.
According to sources close to the board, relations have become especially strained between Eisner and two of Disney's most powerful board members, Roy E. Disney and Stanley P. Gold, whose Shamrock Holdings investment arm has been hurt as the stock price has tumbled.
Although neither Roy Disney nor Gold would comment Wednesday, sources say the two are pressuring Eisner to lift the company's plunging stock price, deal more aggressively with such issues as turning around key divisions such as the ABC television network and even to clarify his succession plans. Tensions have risen in recent weeks, including some pointed exchanges between Eisner and Gold, sources said.
"The board is getting to the point where it is less likely they are going to be as passive as they have been historically," said Jeffrey Logsdon, an analyst with investment banking firm Gerard Klauer Mattison who has covered Disney for years.
But Disney director Ray Watson said the board as a whole supports Eisner, who has headed the company for the last 18 years.
"We have no interest in going out and bringing an unknown into this company and this difficult industry when we believe we already have the best CEO in the business. All companies are under a lot of pressure right now. His pressure is of his own volition, and the board is supporting him," Watson said.
Another Disney director, who requested anonymity, said although Eisner is clearly under pressure, as many CEOs are these days with stock prices tumbling, "there's no coup going on. The board is taking a collegial approach to helping create future shareholder value."
Eisner was unavailable Wednesday for comment. Other Disney executives declined to comment.
Disney's stock fell 48 cents, or 3.3%, to $13.90 on the New York Stock Exchange on Wednesday, its lowest close since November 1994. Last week, Disney announced another quarter of soft earnings, further warning that the firm's theme park business had eroded. Two credit-rating firms, Standard & Poor's and Moody's Investors Service, subsequently said they might downgrade Disney's debt.
Tensions at Disney also come in the wake of recent shake-ups at three rival media companies: AOL Time Warner Inc. Chief Executive Gerald Levin and Chief Operating Officer Robert W. Pittman resigned under pressure; Vivendi Universal fired CEO Jean-Marie Messier; and Bertelsmann ousted Thomas Middelhoff. It also comes as directors throughout corporate America are being forced to do a better job of scrutinizing company operations.
"I think the board, given what's going on with corporate governance, cannot ignore the need to make immediate improvements," Logsdon said.
In an interview after Disney's earnings were released last week, Eisner and Chief Financial Officer Thomas Staggs defended the company's performance, saying its balance sheet remains strong. They expressed confidence that the company's theme parks and ABC network would recover when the economy stabilizes.
Eisner also disclosed moves aimed at defusing long-standing criticisms that Disney's board is too passive, saying he plans to reduce its size and strengthen the role of independent directors.
"Do I feel specific pressure?" Eisner said in that interview. "No, we feel an obligation to do it."
As poorly as Disney has been performing, the company can point to the stocks of such competitors as AOL Time Warner and Vivendi, both of which have performed even worse. Some analysts believe this has helped deflect heat from Eisner. And, they add, some of Disney's problems are not Eisner's doing but result from the soft economy that has hurt the advertising marketing and tourism.
"It's under-performing, and some of it's the fault of the company," said analyst Tom Wolzien, with Sanford C. Bernstein. "The biggest problem is the combination of the decline of advertising and ratings at ABC. Theme parks are having a tough time--that's not of the company's making. But you put that together with problems at ABC, and people who are supporters of the stock have shifted downward."
Although no single Disney shareholder has enough stock to single-handedly force a change at the company, the growing rift with Roy Disney and Gold is important. Roy Disney is the single largest individual stockholder with 17.5 million shares, according to the company's proxy statement, and is the nephew of Walt Disney. Gold runs Roy Disney's Shamrock Holdings investment empire.
Historically, they have been among his staunchest supporters.
Gold played a pivotal role in the last coup at Disney in 1984 that resulted in Eisner's being hired to turn the company around. In addition, another of Eisner's longtime supporters, the Bass family of Texas, last year divested its shares.
But other major investors have been showing signs of impatience as well. Said Logsdon: "Many institutional investors are very concerned about the performance of some of Disney's assets."
Eisner's status also has been one of the hottest topics in the last week among financial pundits, some of whom have been calling for Eisner to leave. In the online publication Slate, columnist Daniel Gross published a scathing commentary titled: "The Louse in the Mouse House--Why Disney's Michael Eisner should be fired."
Disney's 16-member board is scheduled to meet next in late September. Sources cautioned that the board is not united on taking any specific action. "The board hasn't coalesced. They aren't in camps," the source said.
And Disney internal sources insist that the board is not badly divided and that directors continue to support Eisner.
But Logsdon said the future relationship between Eisner and the Disney board is uncertain.
And it seems the CEO's who surround themselves with the most Yes Men lose. But they never seem to realize that since their egos are larger than their determination.
