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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BECG038) click on the button below, and select the case from the list of available cases:
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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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"I spend my life being Odysseus. I tie myself to the mast, and I don't listen to the Sirens."
- Michael Eisner, chairman and CEO of Disney in 2002.1
"Michael has used the shield of corporate governance to get rid of people who were not in his pocket."
- Andrea Van de Kamp, an ex-director of Disney in 2003.2
"It's almost a religious view, fervently held, that directors (at Disney) don't talk. They don't talk to the press. They don't talk to investors. They don't talk about what goes on in the boardroom. I think that's got to change. They were elected by the shareholders, and they ought to be accountable. As it stands now, the owners have no clue as to who's effective or what's going on."
- Richard Koppes, a corporate governance lawyer with Jones Day in 2003.3
Disney Directors Resign
At the end of November 2003, Roy Disney (Roy), the vice chairman of the Walt Disney Company (Disney) and the chairman of its animation department, resigned from the company.
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Roy was the nephew of Walt Disney (Walt), the founder of Disney, and last surviving member of the Disney family to work at the company. Holding over 17 million shares, he was the company's largest individual stockholder and served on the board of directors.
Roy's resignation was said to be prompted by the information that he would not be nominated to the board in the following year. This was because according to the new corporate governance norms adopted by Disney in 2002, he was past the maximum age limit to be a director of the company. Roy, who had served the company throughout his life in various capacities, preferred to avoid such an ignominious exit and chose to resign voluntarily.
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Close on the heels of Roy's resignation came the resignation of Stanley Gold (Gold), an investment banker, who was also a director at Disney. Both men wrote lengthy resignation letters outlining their reasons for leaving the company.
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They laid the major portion of the blame on Disney's CEO and chairman,4 Michael Eisner (Eisner) who, they alleged, did not run the company in accordance with the principles of good governance. They also expressed concern that bad governance would put the future of the company at risk, unless drastic changes were made. They believed that Eisner was the root of all troubles at Disney and that the company would benefit from his departure. In his resignation letter to Eisner, Roy wrote, "It is my sincere belief that it is you that should be leaving and not me."5 The company's board was also criticized for being a rubber-stamp to the decisions of Eisner and for not giving sufficient consideration to the benefit of the shareholders. |
Trouble in the 'Magic Kingdom': Governance Problems at Disney
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