Exec power turning sour

Turmoil roils ranks of toppers

NEW YORK — As disgruntled Disney investors met Tuesday to prep strategy ahead of the conglom’s board meeting later this month, it’s become clear this season of Wall Street discontent promises continued turmoil in the executive suites of the top media firms.

Disney has dimissed the confab’s organizer Herbert Denton as a corporate gadfly who owns less than 1% of its shares. Denton even acknowledgd in a 1998 Wall Street Journal article that he’s accepted payments from companies to back off. But neither Disney nor any other other showbiz conglom can easily dismiss the challenge he and other increasingly vocal stakeholders represent.

Denton has heped push through change at Tyco, ICN Pharmaceuticals and elsewhere. Tueday night, he assembled three dozen institutional Mouse shareholders to air grievances and discuss corporate governance, including a succession plan for chairman-CEO Michael Eisner.

Speculation of top management change has bounced from Viacom to Walt Disney to AOL Time Warner. But there seem to be more execs at risk than qualified execs ready and able to fill their shoes.

A number of fund managers holding AOL TW expect to see the back of AOL TW chairman Steve Case by year-end. They’d like to see Richard Parsons move into the top job, leaving the chief executive post open for — who else — Mel Karmazin. One Wall Streeter said Bob Wright’s name has also been bandied about as a potential CEO. The former NBC topper is now a vice chairman of GE.

Others dismissed out of hand the idea that the longtime GE exec would jump ship. A company spokesman declined comment.

But it’s Karmazin whose name has seemed ubiquitous of late, due in large part to the weak market, simultaneous meltdowns at several media companies and the fact that his contract is up next year. Some big-time Disney investors are still hoping the one-time radio whiz will bring his talent and reputation to the Mouse.

Heck, if Vivendi Universal and Bertelsmann still needed CEOs, they’d probably be eyeing Mel too.

Known for boosting stocks

He’s a vet known for creating value and boosting stocks. He has made lots of investors lots of money throughout his career. And the merger of CBS and Viacom was hands down the most successful of recent mega deals. But the focus on Karmazin also indicates the paucity of managers experienced at running — and running well — the current crop of huge and diverse media congloms.

“I don’t think we have evolved sufficiently the kind of managers needed to run the scope of media companies we have today,” said one former top exec of an entertainment company.

Many Wall Streeters don’t see the Viacom chief operating officer reupping despite a flurry of publicity several months ago around a new three-member board committee to communicate with chairman Sumner Redstone and hash out a new contract. Even those who were heartened by recent cooing noises from Redstone acknowledge the mogul may want more control in a revised pact than Karmazin would be likely agree to.

His current contract gives him unfettered day-to-day operating control and a board structure that makes it nearly impossible for Redstone to fire him. Redstone can refashion the board in March. Karmazin’s contract expires at year-end.

“Sumner is covering himself,” one media analyst said. “If everybody tells you, ‘Your stock will fall if Mel leaves,’ then you do your best to say, ‘I tried to keep him. There were just a few technical points, no big deal. He wouldn’t agree. There was nothing I could do.’ ”

“It’s a big step from forming a board committee to Mel staying on,” said one Viacom insider.

All the Mel talk also brings up another issue: Many fund managers hold stakes in all the big media companies. So as much as they might want him to perk up their shares in AOL TW or Disney, they don’t want Viacom to suffer.

“Whether it’s December or whenever he does sit down with Sumner, Mel first and foremost has to tend to his responsibilities to Viacom shareholders. And then, if he becomes available, we’ll see where he chooses to go,” said one fund manager.

Aside from its capital-intensive theme parks, Disney’s asset mix — it has a big radio group — may be a better fit for Karmazin than AOL TW’s. But that presupposes an early exit by embattled chairman-CEO Michael Eisner, an outcome that’s far from certain.

Denton, of Gotham’s Providence Capital, convened a meeting with other disillusioned Mouse shareholders to discuss the stock’s meager returns and a survey of opinion of the Mouse’s much-maligned corporate governance issues. He hopes to present the gist of the discussion to Disney’s board at a meeting this month.

Eisner has taken some steps to address governance issues and said last week that the board plans to discuss them at the next meeting.

Case’s departure isn’t a shoe-in either.

“There is no truth to the rumors. Steve Case is not leaving the company,” an AOL TW representative reiterated Tuesday.

Several board members and investors feel that Case, the last remaining America Online presence in AOL TW’s upper echelon, has been discredited and isn’t adding value as the stock price lingers near historic lows. According to the merged company’s bylaws, it would take a three-quarters board majority to oust Case, although that provision expires at the end of 2003.

“Steve Case doesn’t really have a job now. So there’s no job for Mel to replace him in,” said one investor with significant AOL TW holdings.

AOL TW and Disney both lack one thing that Karmazin is sure not to miss: a single controlling shareholder.

(Carl DiOrio in Los Angeles and Meredith Amdur in New York contributed to this story.)

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