OT: Eisner and Disney

[Anrhydeddu]

I, like most people of my generation, grew up on Disney. I have been long time customer of Disney, including many trips to Disneyland but over the past 10 years, I have become a vocal critic of Eisner and his cronies (specifically of the recently departed Paul Pressler). While there are many areas of Disney that I am critical of, it is the degraded state of Disneyland and monumental waste that is DCA that makes me really mad. I have been a long time fan of Disney critic, Al Lutz and even wrote an unrelated article at Mouseplanet while he ran it. Since then, he and Kevin Yee moved to another site and this is Kevin’s recent article. It focuses on what we, as Disney fans and critics, can do to get Eisner (and his ungodly bonus) out or at least, to get them to change.

http://www.miceage.com/kevinyee/ky031103a.htm

Many of you have followed my arguments in past weeks as I have connected overcrowding, the increasingly higher prices for admission to Disneyland (incrementalism), and the ancillary effects of the annual passholder program (regionalism). I tried to connect all the dots with a look at the Disney stock price, in an attempt to show that an awful lot of Eisner’s moves are geared toward one thing only: a rise in the stock price. This is, after all, how he gets paid those bonuses of stock options sometimes worth hundreds of millions of dollars. And the company’s jockeying for good bottom line numbers has led to the short-term thinking that created those problems (overcrowding, incrementalism, regionalism). Then, more recently, I made an argument for Eisner’s reactionism rather than innovation. All this argument is building toward something: we need to do something about Eisner.

But what can be done? There are a number of possibilities, none of them ideal. Unfortunately, it boils down to this: we, the public, simply aren’t significant enough to cause them to change their ways. But let’s look at the specific courses of action in detail, beginning with the simplest and moving up to the more radical.

1. Letter-writing campaign to Michael Eisner.
Perhaps the most polite of the options is to write to the Chief Executive Officer himself and explain your dissatisfaction. I hold no illusions that everyone is as dismayed about FastPass as I am, so maybe you’re only dissatisfied with DCA and disappointed that we didn’t get WESTCOT instead. Perhaps you buy into the reactionism I’ve outlined before, and want to urge Eisner to innovate radically (as the company seemed inclined to do with the proposed park Disney’s America). Or, maybe you’re actually happy with Eisner and only want to see the price of Disney stock rise again for a change. In any or all these cases, the thing to do is write to Eisner, right? Surely if thousands of letters were to arrive all at once, they’d have the intended effect, wouldn’t they?
Except that I doubt they would. Writing letters to Congressmen is one thing – they are hired specifically to represent their jurisdiction. Eisner, on the other hand, is hired to lead the company (these days, with a multinational media conglomerate like Disney, his job is to get the company stock to rise). His primary role is not correspondence with you. Thus, I have every suspicion that writing the CEO is going to be like writing Disneyland’s City Hall: mostly pointless. With City Hall, at least the chance exists that if you have a truly great idea (it happens every few months) then your idea really will be passed along. But I doubt very much that will happen in the corporate offices in Burbank. Your letter will be read by someone far lower on the food chain than Eisner himself, and if you get a reply, it will be composed by that person too.
Mr. Michael Eisner
Chairman / Cheif Executive Officer
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Ultimate worth of this strategy: 2 (on a scale of 10).

2. Letter-writing campaign to Roy Disney.
Currently Vice-Chairman of the board, and a known critic of Michael Eisner’s recent performance (despite spearheading the push to get Eisner hired in the first place), Disney also holds the distinction of being Walt’s nephew, and thus a sentimental favorite. Surely Disney will listen even if Eisner doesn’t! This method has the additional advantage that Disney is already pre-disposed to be critical of Eisner, so whatever criticisms we bring his way can only add fuel to the fire, right?
Possibly. I consider it just as likely that additional letters supporting Disney’s already-established view won’t do very much. After all, he already believes Eisner needs to reform (or possibly be pushed out). Does he need us to tell him what he already thinks? Still, it is also possible that an outpouring of support for his position will embolden him, and push that much harder – perhaps at a key moment – for new leadership.
Mr. Roy Disney
Vice Chairman - The Walt Disney Co.
c/o The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Ultimate worth of this strategy: 4 (on a scale of 10).

3. Letter-writing campaign to members of the Disney Board.
In the past several articles I’ve talked about the short-term thinking that has dominated Disney’s moves since the death of company President Frank Wells. Most, if not all, of the blame for that can be laid at Eisner’s feet. In pushing for short-term bottom-line advances (in a bid to up the stock price), he is rotting the company’s infrastructure from the inside out. One could argue that the Board of Directors is supposed to watchdog the CEO. But it is no accident that this CEO is also the Chairman of the Board of Directors, and it’s not secret that Eisner has the Board in his back pocket (one of the former members, for instance, was the head of the school attended by his children). Simply put, they do what he asks.
One need look no further than the recent case of Director Andrea Van De Kamp (from Sotheby’s) who will lose her Board seat in March 2003; she claims it is due to her increasing criticism of Eisner, who had reportedly announced that anyone not on his side was going to be off the board. Eisner, for his part, maintains that she and three others will be cut in an effort to trim the size of the Board, presently at a whopping sixteen members. Here’s the current Board of Directors, organized into their respective committees:
Audit
Robert Matschullat (Chair) – former CFO, Seagram Company Ltd.
Monica Lozano – CEO, La Opinion
Leo O'Donovan, S.J. – Emeritus, Georgetown University
Andrea Van de Kamp – Sotheby’s West Coast
Raymond Watson – Vice Chairman, Irvine Company
Compensation
Judith Estrin (Chair) – CEO, Packet Design LLC
John Bryson – CEO, Edison International
Sidney Poitier – CEO, Verdon-Cedric Productions LLC
Leo O'Donovan, S.J. – Emeritus, Georgetown University
Governance and Nominating
John Bryson (Chair) – CEO, Edison International
Judith Estrin – CEO, Packet Design LLC
Monica Lozano – CEO, La Opinion
Gary Wilson – Chairman, Northwest Airlines
Executive
Raymond Watson (Chair) – Vice Chairman, Irvine Company
Roy Disney
Michael Eisner
Thomas Murphy – Former Chairman, Cap Cities/ABC
Is it worthwhile to write the Board? A good question. Much depends on WHICH Board member is written. Some would remain unswayed, while others might be more willing to listen.
Ultimately, Board members are there to protect and grow shareholder value; that’s what they were hired for. Any effective letters would have to argue that shareholder value is being eroded, and to my mind the way to get this point across is to draw a distinction between short-term value and long-term value. Don’t buy the argument that Disney’s stock is doing so poorly because of the bear market in equities; Viacomm, a similar media conglomerate, has almost doubled its share price in the past five years, while Disney’s price has shrunk.
Point this out in your letter, and urge the Director to re-think its faith in Eisner. Directors are motivated by stock price performance. Additionally, the corporate governance world post-Enron has been radically shaken-up, and Directors in Boards all over are now much less likely to be complacent about CEOs and their leadership of the company. It used to be that a Director collected an easy paycheck and asked few hard questions – but now some Directors at other Boards may be looking at significant fines or even jail, and everyone across the national boardrooms is looking a little more alert.
To write to a Disney Board member, simply add their name to this address:
c/o The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Ultimate worth of this strategy: 7 (on a scale of 10).

4. Voting by proxy statements, with grassroots activism.
This one only applies to shareholders of Disney stock. Every so often, certain kinds of decisions (such as who to place on the Board of Directors) need to be done by the shareholders of the company, legally speaking the actual owners. All too often, people spend no time at all reading their voting cards (called proxy statements, since they vote "by proxy" most of the time).
Since companies realize that few shareholders bother to read the issues, they (un)helpfully offer a recommendation. A proxy statement might therefore pose the question "Should we buy this small company?" with the rather blatant statement right next to the question on the actual voting card "The Board of Directors recommends a YES vote." Can you just IMAGINE if presidential elections were run this way? Well, actually, I can... and they took place in Iraq a few months ago. I wish the SEC would do something about that, but that’s leading us in a whole different direction.
If enough shareholders voted against the Board, soon enough the message would get through that the stockholders have lost faith in the Board and its objectivity. To be truly effective, votes against particularly bad proxy issues need to organized by grassroots efforts, mobilizing not only everyone to vote, but to vote in a particular way. The record for such grassroots efforts is mixed; it’s hard to find the requisite addresses, plus it takes a lot of time, money, and effort to truly make a difference.
Besides, at the end of the day, this method may not make crystal clear to the Board what the problem is. They may think that the public simply doesn’t approve of this specific acquisition, or of one particular nominee for the Board. It’s more direct, and more effective, to write the Board members letters directly.
Ultimate worth of this strategy: 6 (on a scale of 10).

5. Attend the annual shareholder meeting and speak up.
Any shareholder of Disney stock is required, by law, to be allowed at the annual shareholder meeting. These used to be fun events, held in Anaheim and Orlando. About five years ago, though, Eisner was verbally pelted at the Anaheim Pond for the deteriorating conditions at Disneyland and Cast Member morale, so he privately vowed not to allow such an attack to occur again. As a consequence, the annual meeting took to the road, ostensibly to allow shareholders outside Anaheim/Orlando to attend. Whatever. That’s not PR-doublespeak, that’s an outright lie. The meeting moved to Chicago, Seattle, Fort Worth, Hartford, and will occur this year on March 19th in Denver.
I have to admire Eisner’s audacity: by making it cost-prohibitive for the vast majority of discontented shareholders to attend the meeting, he can paint a rosier picture without the risk of criticism. But for those who CAN attend the meeting, it is imperative that they do. There is customarily a one hour question-and-answer session where shareholders can address Eisner directly via microphone. If you can go, I heartily encourage you to ask the tough questions. Feel free to say to Eisner whatever is in your heart, and don’t hold back for his feelings (he is worth almost a billion dollars, after all, while your Disney stock has gone, um, slightly downhill over five years).
I wish these meetings were required to be near the Company headquarters. Perhaps we SHOULD target the SEC for a letter-writing campaign after all.
Ultimate worth of this strategy: 8 (on a scale of 10).

6. Boycott.
And so we arrive at the most radical solution to the Eisner problem: boycott. It makes sense on paper – since money is all the company cares about, hit them where it hurts most: the pocketbook. By not buying Disney merchandise, seeing Disney movies, or going to Disney parks we, the public, can demonstrate that we disapprove.
But there's a big problem: boycotts have a radically mixed success rate. There is ALREADY a boycott of Disney out there by the Southern Baptists, who objected in 1997 to Disney’s support to gay employees and the gay community via "Gay Days" at the parks. There has, to date, been very little impact on the bottom line. The Disney product remains too popular.
I certainly don’t have the charisma to lead a boycott of my own, and anyway I personally debate the efficacy of boycotts. People, I think, are motivated by self-interest rather than organized boycotts for solidarity. If they perceive a value with Disney, they will use/consume the products.
Ultimate worth of this strategy: 3 (on a scale of 10).

7. Do nothing.
On that note, we move from the most radical to the least radical proposition: waiting. Is this just the vain (and admittedly lazy) hope that things will just work out in the end? Not quite. As stated above, I believe that people act in self-interest. For consumers, that means they will stop buying Disney products when they are no longer interested in them. For park visitors, they will stop going, or will spend less money, when they perceive the prices as too high or the value not present.
Both of these are already happening. Disney Consumer Products (the Disney Store) is a shell of what it once was. Attendance at the parks has been dropping, though part of that is a result of 9/11 and a decline in tourism. (But not all.) The bottom line is already being impacted. Think of it as a passive boycott.
With the bottom line financials suffering, more people will hesitate to buy the stock. Worse, some will choose to sell it – once again, out of self-interest – and such selling drives the price of the stock down further.
And now, suddenly, by just doing what we would do otherwise (i.e., nothing), we finally have succeeded in hitting them where it hurts most. The pressure on the Board of Directors and Eisner will increase – in fact, it HAS BEEN INCREASING already – until a breaking point is reached. Eisner will be out, no doubt with a golden parachute that will annoy all of us greatly, and someone else will come in. I’m still hoping for someone of creative vision and long-term strategy like Steve Jobs.
See? Capitalism works. And the best part is, we don’t have to do anything to make it happen! But precisely that is also the weakness of this strategy. It’s much better, and much faster, to get the word out. Let your complaints be known to the Board or even better at the annual meeting. Otherwise we may be in for a long, excruciating wait.
Ultimate worth of this strategy: 5 (on a scale of 10).

Putting is all together, it’s hard to see which strategy for a course of action is the best. Clearly, the most impact can occur at annual meetings, and I think it’s worthwhile to consider letter-writing to Board members. But part of me is hopeful that these forces work themselves out.

I used to think there was a chance that Eisner would recognize the deteriorating nature of his businesses and step in to do something about it, but I’m not convinced that he could effectively convince me of anything anymore. His PR-speak has betrayed so often in the past that I only see duplicity and greed now.

Am I jaded? Perhaps I am somewhat. But I very much doubt that I’m alone in this belief that Eisner must, and someday soon will, leave the Walt Disney Company.