Disney - Succession Problems in the Magic Kingdom?
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Case Details:
Case Code : HROB079
Case Length : 19 Pages
Period : 1984-2005
Pub. Date : 2006
Teaching Note :Not Available
Organization : The Walt Disney Company
Industry : Media, Entertainment, and Gaming
Countries : USA
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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 Issue of Succession
On March 3, 2004, at a meeting of WDC, an overwhelming 43% of
shareholders withheld their votes for Eisner's re-election to the board. As a
result, the Board separated the roles of CEO and Chairman, in effect, reducing
Eisner's power.
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It also unanimously elected former U.S. Senator George Mitchell as the new
Chairman, while Eisner continued to remain CEO. In April 2004, Roy and Gold said
that Eisner had also received a 'No Confidence' vote from 72.5% of the votes
cast by the WDC 401(k) trustee at the company's annual 2004 meeting. It was
revealed that Mitchell too had received a 'No Confidence' vote from 63.7% of the
votes cast. "The simple fact is that the vast majority of people who participate
in the company's 401(k) plans and voted their shares at the annual meeting have
No Confidence in either their CEO or their newly-elected chairman," said Roy and
Gold. They added, "It is hard to imagine how Mr. Eisner can do what needs to be
done at this company without the support of the Company's employees"...
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Impact of the Stalemate
In WDC, history seemed to have repeated itself as the fight
between Roy, the sole surviving member of the Disney family on the WDC
Board, and Eisner created an unfavorable environment similar to the one in
1984.
According
to media sources, "Confidence in the Disney brand -- and the prospects
for whoever succeeds Eisner if he's forced out of the company by the end
of the year -- has eroded even among those who once felt that Disney
essentially could do no wrong when it came to creating magic among
consumers as well as those on Wall Street." This also had a negative
impact on employee morale. The image of the company took a beating as
the WDC Board came under a barrage of criticism. According to a news
item, Eisner's detractors had commented, "The sad reality for WDC
shareholders is that they have a 'lame duck CEO' and a 'Do Nothing
Board' - both oblivious to the serious decline in long-term performance.
Once again, we ask what will it take to get this Board to do the right
thing?"...
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The Final Choice
In March 2005, WDC announced that Iger would take over as CEO after Eisner
retired in September 2005 (one year before his contract was due to expire).
Eisner too clarified that he would not seek another term on the WDC Board after
he retired. "The search and the process for considering potential candidates was
thorough and exhaustive and met the most rigorous standards," said Gerard Roche,
senior chairman, Heidrick & Struggles. However, Roy and Gold were disappointed
with the announcement as they were of the view that Iger was essentially
Eisner's man. They felt that the investors had been 'conned'...
Exhibits
Exhibit I A: Business Segments of WDC
Exhibit I B: Revenue from Business Segments for FY 2004
Exhibit II: Letter to Non Employees of WDC Board
Exhibit III: Income Statement of WDC
Exhibit IV: Disney Stock Performance
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