Of Mouse & men

Iger news stirs stock but dissidents lie in wait

It was a typical morning after.

The principals seemed a little the worse for wear; shareholders had a buzz; analysts were shaken but not stirred; and Roy Disney and Stanley Gold, true to form, seemed to have a nasty hangover.

Having finally made their announcement about corporate succession, Disney board directors hovered on the sidelines Monday. Robert Iger would be the new CEO, and Michael Eisner would ultimately retire. Maybe.

Meanwhile, as folks privately mused about how quickly Iger would get into gear — and Eisner wind down — Mouse shares edged modestly upwards.

Stock closed up 1.6% at $28.02 — up a healthy 34% from a 52-week low last summer on ABC’s turnaround and rising profits.

But dissident shareholder Gold, who has resumed full-attack mode, noted the stock is back only to its levels of the late ’90s.

“It’s up from the bottom, for which I’m grateful. It’s regained its former level, but this is not some kind of panacea,” he told CNBC from Paris.

The stock had “a nice 12-month run, but it’s still down over a five-year period. Eisner in his letter wants to go out as a hero, but the performance over five years doesn’t win accolades,” agreed Gregory Taxin, CEO of shareholder advisory firm Glass Lewis.

‘Aimless strategic direction’

At issue, he told Daily Variety, is Disney’s “aimless strategic direction” — whether buying Fox Family Channel or burning bridges with Miramax and Pixar. Will Iger be “Eisner, the sequel, or is it a whole new show?,” he mused.

The board needed to ask, ” ‘Who can we find to storm this place, to right the ship?,’ ” he said. “Iger will be watched closely. What Disney needs is not just day-to-day management improvement.”

Wall Street clearly believes the door’s been opened to Pixar, whose stock jumped 2.2% to $90.96. Iger indicated as much Monday, saying he wanted “to open a dialogue with Pixar about a continued relationship.”

The loser was eBay, which dropped 4.6% to $36.48 on the first day of trading after news that its CEO Meg Whitman interviewed for the Mouse chief exec post — despite the fact that she withdrew herself from consideration and her insistence that she has no plans to ankle.

Whitman may have been the only outside candidate interviewed by the board — one week before it named Iger.

The possibility of such a market reaction worried other top media execs. Imagine the impact on News Corp. stock if it leaked that Peter Chernin was talking to Disney’s board. He is said to have stopped the process after an initial discussion with Disney chairman George Mitchell.

Eisner’s shadow

Eisner’s long shadow, and the fact that the board seemed predisposed to Iger, didn’t help the search process. During the search, Eisner initially wasn’t planning to step down as CEO until September 2006. And Disney still hadn’t selected a chairman.

Keeping the posts separate is a nod to good corporate governance, which experts say makes for better checks and balances. Disney is the only major media conglom that splits the jobs.

“I think some outside candidates would have had to nail down who the chairman would be — either you want it, or you want to know who it will be,” said one Wall Streeter.

“Iger was probably less concerned, given he had a power base in the company, knew all the directors and didn’t fear one of them becoming chairman,” he added.

But Taxin and others said that no one knows enough about what really happened in the board room to criticize the search — or to sue — although rumors are floating that there may be legal proceedings.

“CEO searches are often frighteningly badly done,” noted Paul Hodgson of governance research group the Corporate Library. Interviewing only one candidate isn’t unheard of.

“It’s really back of the envelope in a lot of cases. The nominating committee gets together and says, ‘Who do you think can do this job?,’ and someone says, ‘This guy from Widget Co. and this guy from Gizmo Co. could probably do it. We’ll ring them up.”

In this case, Disney had the benefit of search firm Heidrick & Struggles. Some industryites are curious to see that bill.

Inside contenders

Board members Robert Matschullat and Gary Wilson are said to be inside contenders for the chairman post, with Matschullat — previously chief financial officer at Seagram under Edgar Bronfman Jr. and head of worldwide investment banking for Morgan Stanley — favored by some investors.

Former Warner Bros. co-chair Bob Daly has sought to engage the Disney board about the post, but the interest doesn’t seem to be mutual.

Meanwhile, Gold and Roy Disney — who more than anyone are responsible for Eisner’s fall — did nothing less than call for another shareholder revolt in the wake of Iger’s appointment. They have almost an entire year to mobilize before the company’s 2006 annual meeting.

“Shareholders should seriously consider replacing this board and starting anew,” Gold and Disney said in a joint statement.

“The selection of Iger is yet another example of this board’s breach of faith. The pledge made by chairman Mitchell to conduct a bona fide search was a ruse to avoid a contest at the 2005 annual meeting,” they said.

That meet was held in Minneapolis late last month.

With Eisner soon to be out of the picture, the pair are turning their ire on the incoming CEO.

“I’m rooting for him to be a success. But let’s be serious. ABC’s had two programs on the air that have been successful — he resisted them, fired the people who created them and took credit,” Gold said.

Others wonder how active Eisner will be in what they still consider an overly long transition period given Iger’s long tenure at the company.

“If the transition at Disney is like at other companies, Iger has to be the one calling the shots starting now. It would be problematic for Eisner to be picking the TV shows or the movies that will come out during Iger’s rule,” said one industry exec.

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