Disney board splits positions after shareholders rebuke Eisner

PHILADELPHIA -- The Walt Disney Co.'s board voted late Wednesday to split the roles of chairman and chief executive, hours after shareholders delivered a stinging rebuke by withholding 43 percent of their votes for CEO Michael Eisner's re-election to the board.

Disney directors voted unanimously to make board member and former senator George Mitchell the company's new chairman and voiced their continued approval of Eisner's management and the company's strategy. The change is effective immediately.

The board also rejected a renewed overture from cable television giant Comcast, saying it would serve no purpose to reconsider a merger offer already dismissed as too low.

Although the restructuring curbs Eisner's control of the company and satisfies the concerns of corporate governance groups who had called for the change, it won't satisfy the company's most vocal critics -- ex-board members Stanley Gold and Roy E. Disney -- who have vowed to continue their fight to oust Eisner.

Mitchell, a former senator from Maine, may also prove to be a controversial choice. Shareholders withheld 24 percent of their votes from his re-election Wednesday -- the second-highest total after Eisner.

Mitchell has been criticized by Gold and Roy Disney as being too close to Eisner and not independent enough because his law firm has worked for Disney.

In its statement, the board said it understood that investors were concerned about more than just the issue of separating the chairman and CEO positions.

"We are aware that some voted for an immediate change in management and in the board," the statement said. "However ... we believe the action we have taken today is in the best long-term interest of the shareholders of the company."

"It's not a surprise," said David Miller, an analyst at Sanders Morris Harris, who earlier in the day said the board would make such a move within 24 hours.

"It should satisfy at least a portion of the 42 percent of those who voted against Eisner."

Institutional Shareholder Services, a proxy advisory firm that had recommended its large investor clients withhold their votes from Eisner, said the Disney board's change was welcome, but not enough.

"If the Disney board believes this is the silver bullet to fix all the problems, they are sort of mistaken," said Cheryl Gustitus, an ISS spokeswoman.

Earlier Wednesday, the nation's largest public pension fund, which withheld its 9.9 million votes from Eisner, called for his resignation.

"This discontent is too wide and way too deep in the marketplace, and it has led us to believe that Eisner should go and the board should get quickly to work on planning for an orderly transition," said Sean Harrigan, president of the board of administration of the California Public Employees Retirement System.

The board's actions followed a nearly five-hour shareholders meeting marked by cheers and standing ovations for former board members Gold and Roy Disney, who have waged a bitter three-month campaign to oust Eisner.

The two hailed the vote and said it was a clear indication that Eisner should go.

The 61-year-old Eisner, who chaired the meeting, showed little emotion, even as Gold and Roy Disney took the stage.

His voice a bit hoarse, Eisner briefly defended himself, saying he enjoyed an "excellent relationship" with the dissident board members until things soured.

"Stanley felt we weren't listening," he said. "We felt we were listening and not agreeing."

"I love this company," Eisner said. "The board loves this company. And we are all passionate about the output of this company."

Eisner acknowledged that the performance of Disney's ABC network was "disappointing," but he also told shareholders that Disney has "the management skills and creative talent to continue its growth path."

Gold and Disney went slightly over the 15 minutes they were allotted at the meeting to present their case against Eisner, saying it was not sufficient for the company simply to split the roles of chairman and CEO.

"Michael Eisner must leave now," Gold said. "We see today's meeting as a first step toward saving the company. ... We are seeking real and meaningful change."

Shares of Disney fell 11 cents to $26.65 Wednesday on the New York Stock Exchange.

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AP Business Writers Seth Sutel and Rachel Beck in New York contributed to this report.

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On the Net:

Roy Disney and Stanley Gold protest site: http://www.savedisney.com

Walt Disney Co.: http://www.disney.com