Reference no: EM132638909

The Walt Disney Company

Roy Disney, Walt Disney's nephew, was the last remaining member of the Disney family on the board of the famous Walt Disney Company. He was vice-chairman of the board and an executive director as chairman of the Animated Features Division. He was often paraded as the last survivor of the founder's family serving in the company.

However, in November 2003, he had a shock. The governance and nomination committee of the board lowered the mandatory retirement age for directors to 72. Roy was 73. Moreover, John Bryson, who was chairman and CEO of Edison International, an outside director of the Walt Disney Company and a member of its nomination and compensation committee, told him that, since he was past mandatory retirement, the committee had decided to make no exceptions and had agreed that he should not run for the Disney board at the next AGM.

Roy's response was: 'You'll regret this. . . ' But he was not really surprised: for a few years, relations between him and Michael Eisner, the chairman and CEO of Disney, had been poor. Indeed, by 2003, they were scarcely speaking.

Michael Eisner, who previously had a highly successful career with ABC and Paramount Pictures, had been appointed to Disney in 1984 by Roy Disney himself. In his early years, the company was highly successful in both animated and main films, videos, theme parks, and merchandise. The company's financial performance and its share price had improved significantly. In 1988, Eisner was the highest paid executive in America, with a salary, a bonus on profits, and the exercise of stock options amounting to some US$40 million. In 1992, he earned over US$200 million.

But as the 1990s progressed, problems arose. Financial performance fell off. Critics complained that Disney had lost its creative energy. The Euro World theme park in Paris faced a massive overspend and below-budget revenues: the strategies that had worked in the United States did not work in Europe. Roy Disney was not alone on the board in criticizing Eisner. Stanley Gold, an independent outside director, questioned why, when profits had fallen 25% and the Disney share price was low, Eisner had been given a US$5 million bonus by the compensation committee. Gold had been chairman of that committee, but had been replaced by Judith Estrin just before this bonus was awarded. Another outside director, Andrea van der Kamp, was also told in 2003 that she would not be re­ appointed to the board. She wrote complaining that:

I was asked to serve on this board to be an independent director, and now I'm not being re-nominated because that is just what I am -an independent director. . . The performance of this company has not been wonderful. I, along with some employees and shareholders are concerned. Michael Eisner has cost this company a lot of money. . . We have terrible relations with creative people in Hollywood because of Michael Eisner's arrogance. Many of the best executives have left the company. We've just fired all these people and yet Michael Eisner is getting a $5 million bonus.

Andrea van der Kamp, an independent outside director, complained that she was not re­ nominated to the board because she had been too independent. What can a director, who has criticized corporate culture, do if he or she is then not re-nominated?