Monday, March 14, 2005
Michael Eisner will step down one year early.
LOS ANGELES (AP) -- The Walt Disney Co. said Sunday its president, Robert Iger, will succeed Michael Eisner as chief executive and that Eisner will leave his post one year earlier than previously announced.
The company said Iger was unanimously elected by the board at a meeting Saturday and will take charge Oct. 1, which is the start of Disney's 2006 fiscal year. Eisner will step down the day before, although he will remain on the board for another year. Disney will pay him through Sept. 30, 2006, when his contract expires.
Eisner will end his tenure at the company after serving 21 years. Iger will become just the sixth leader of Disney in its history.
'Lengthy process'
The announcement came under fire from two prominent shareholders who questioned the integrity of the process, noting Iger's insider status and close ties to Eisner.
But Disney board chairman George Mitchell said Iger's choice came after a "lengthy, thorough and professional selection process" that included serious consideration of outside candidates. He declined to be more specific, but an EBay Inc. spokesman confirmed Sunday that eBay CEO Meg Whitman had withdrawn her application for the job Friday after being interviewed.
"We believe Bob Iger represents the right blend of continuity, of very successful performance, particularly over the past two years in which Bob had played a major role . . . and a recognition of needed change" in the areas of new technology and expanding the company's business in Asia, Mitchell said.
"This is not a huge surprise," said Paul Kim, an analyst for New York-based Traditional Asiel Securities. He said Disney has done a good job of cutting costs and increasing profits over the past 18 months, and Iger's challenge will be to continue that momentum.
Disney's objections
During Sunday's conference call, Mitchell strongly denied charges made by former board members Roy E. Disney and Stanley Gold that Eisner inappropriately participated in candidate interviews. The two also alleged that some external candidates declined to be interviewed because of Eisner's role.
"We find it incomprehensible that the board of directors of Disney failed to find a single external candidate interested in the job and thus handed Bob Iger the job by default," the two men said in a statement. "The need for the Walt Disney Company to have a clean break from the prior regime and to change the leadership culture has been glaringly obvious to everyone except this board."
Mitchell said Eisner was never present during any interviews with Iger and attended only part of one meeting with a candidate.
Iger, himself a board member, did not participate in any planning meetings, said Mitchell, adding that drastic changes are not needed.
"If you are a major investor and the company has produced a 60 percent increase in earnings, has just increased its dividend 14 percent, has record cash flow and a substantial increase in return of invested capital, you don't encourage major change," Mitchell said.
Front-runner
Iger, 54, who also serves as chief operating officer, was considered a front-runner for the post from the start. He was president of Capital Cities/ABC when Disney bought the company in 1995, and went on to become president of the ABC Group and head of Walt Disney International, being named president in 2000.
Iger is credited with reversing the fortunes of Disney's ABC television network, which had slid to fourth in the ratings. The network is poised to turn a profit this year and is improving in the ratings thanks to hits such as "Desperate Housewives."
He also played a behind-the-scenes role in smoothing out the contentious relationship between Eisner and Miramax Films co-chairman Harvey Weinstein. On Sunday, Weinstein praised Iger's selection, although Disney and the Weinsteins are still expected to sever ties later this month.
Tough times
The selection of Iger follows several rocky years for the company, and especially for Eisner, who was removed as board chairman last year after shareholders withheld 45 percent of their votes for his re-election to the board.
Since then, the company's fortunes have improved, although a recent trial over a multimillion-dollar severance paid to another former Disney president, Michael Ovitz, and an unflattering book about Eisner's long reign, have left his legacy in doubt.