NEW YORK — Fortified by Disney’s strong earnings run this year, the company’s board of directors again held firm Friday in support of Mouse management. Its resolve comes in the face of vociferous complaints from a group of state pension funds demanding more aggressive efforts on succession planning (for the CEO and chair positions) and greater board independence.
Mouse chairman George Mitchell, several independent board members and company execs met in Gotham on Friday with pension fund officials from New York, California, Connecticut, North Carolina and Ohio. Plan was to discuss a range of issues that have dogged Disney since a large number of shareholders voted their discontent in company leadership in March.
At a press conference immediately after the 2½-hour sesh, Mitchell described discussions as “cordial, civil, frank (and) thorough.” He said the meeting “included a thorough exchange of views and ideas” and added that he and the board will continue to work hard to address their concerns.
“We hope these leaders have gained 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,” Mitchell said.
“We welcome their input,” he said of the pension fund leaders’ request to make suggestions about the qualifications and characteristics for new independent board members. They will have further discussions on the topic.
Mitchell said participants reviewed Disney’s new corporate-governance rules and its CEO succession planning process along with plans and process to name a new independent director by the end of this year.
Disney also offered up a financial review of its recent earnings performance and reiterated its expectation for 50% earnings growth this year and double-digit earnings growth through 2007.
Hearing all sides
While not dismissing the pension funds’ complaints, Mitchell said that it was the third such shareholder meeting he had convened last week and that other groups “with bigger shareholdings” in Disney had contrary views as to what direction the company should take. The seven state funds collectively hold just under 40 million shares of Disney stock, repping about 2% of outstanding shares.
“Every shareholder is important,” Mitchell said, adding that the state groups understood that the board was obliged to take all stockholders’ views into consideration in making decisions.
Independent board members Judith Estrin, Monica Lozano, Robert Matschullat and Aylwin Lewis met with the shareholder group, along with Disney president and board member Iger and chief financial officer Tom Staggs.
Eisner, who was in Gotham on Thursday night being feted by a major charity org, was noticeably absent from the meeting. Mitchell, however, insisted it was not unusual for a CEO to skip such meetings.
Mitchell did say that while succession planning had been part of the board’s discussion for many years, he had recently asked the board to intensify its attention to the task.
He said board guidelines call for the CEO to meet with nonmanagement directors at least once a year to discuss potential successors, and that those nonmanagement directors would meet without management present to discuss succession for the CEO as well as for at least 10 other key execs.
Mitchell would not comment on what may be an appropriate time to reconsider Eisner’s tenure at the helm but said the board had set specific criteria for management to meet and will hold them all accountable for meeting those targets. “We think that is the prudent way to handle it, rather than considering hypotheticals.”
North Carolina treasurer Richard Moore credited the Disney board for doing “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.”