Trouble in the 'Magic Kingdom': Governance Problems at Disney
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Case Details:
Case Code : BECG038
Case Length : 12 Pages
Period : 1995 - 2004
Pub. Date : 2004
Teaching Note : Available
Organization : Walt Disney Co.
Industry : Media & Entertainment
Countries : USA
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts Contd...
The Future of the Magic Kingdom
Soon after their well publicized resignations, Roy and Gold announced that they would launch a campaign to oust Eisner. Both men were planning to meet major shareholders in the company as well as institutional investors and governance bodies to seek their help in ousting Eisner from Disney.
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In addition to removing Eisner, they also hoped to get the shareholders to nominate a new body of independent directors at an upcoming board meeting in March 2004.
Their efforts began to yield results when, in December 2003, the corporate governance wing of a major investment firm asked Disney's independent directors to respond to some of the issues raised by Roy and Gold.
At the end of December 2003, Herbert Denton (Denton), who ran a firm called
Providence Capital and specialized in leading shareholder campaigns, organized a
meeting of about 50 investment firms and sent a letter to the Disney board
outlining some of their demands.
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The letter demanded that the post of chairman be separated from that of CEO, director nominees be solicited from major investors, financial benchmarks and timetables be set, the board develop a succession plan, and make it easier for shareholders to vote changes to company bylaws.
"It's our way of seeing whether Michael Eisner's embrace of good governance is for real or for show," said Denton. Several other analysts also favored splitting the positions of chairman and CEO.
"It basically provides checks and balances" said Kathy Styponias, an analyst at Prudential Securities.
There was also some speculation that Disney could become a target of takeover bids, considering the vulnerable condition it was in following the threats to remove the CEO.
Comcast (a cable firm), Yahoo (a major internet company) and InterActiveCorp (a multibrand interactive commerce company) were thought to be some of the likely suitors of Disney...
Exhibits
Exhibit I: Income Statement
Exhibit II: Disney's Performance
Exhibit III: Attributes of a Good Board
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