Tuesday, March 2, 2004

PHILADELPHIA — The Walt Disney Co. for decades has been providing high drama and memorable entertainment. Today, that tradition will continue, but not on a movie screen.

At the media and entertainment giant’s annual meeting here, the story line that is keeping millions of investors, employees and fans intrigued is the fate of Michael Eisner, the chairman and chief executive officer who has reigned over the Magic Kingdom for two decades.

Rather than a sedate corporate gathering, “this will be more like a Roman circus … complete with human sacrifice,” said Patrick McGurn, senior vice president of Institutional Shareholder Services Inc. The Rockville proxy advisory firm is urging investors to withhold their votes from Mr. Eisner, who is unopposed for re-election to his two posts, as a sign of no confidence. Many state pension funds also are withholding their votes from Mr. Eisner.

At most annual meetings, corporate executives provide a dry review of recent financial performance and talk up coming attractions. But Disney is in the midst of a shareholder rebellion and fighting a hostile takeover attempt.

Orders for protest posters have been pouring into local printing shops as dissidents gear up for the war of words that could erupt at the meeting.

In an ironic twist, the showdown between Mr. Eisner and the rebels is being held in Philadelphia, home of Comcast Corp. The nation’s largest cable TV provider announced last month it was starting a $48 billion stock bid to acquire Disney.

The venue was selected long ago by the Burbank, Calif., company, which moves its annual meeting around the country.

Now, the gathering in the City of Brotherly Love will be crammed with so many plots, subplots and surprises that a viewer’s guide is needed. These are some of the issues:

• Roy Disney, a nephew of the company’s founder who left the board late last year, is trying to get shareholders to withhold their support of Mr. Eisner.

Yesterday, Disney and another former board member, Stanley Gold, accused Mr. Eisner at a news conference of being unresponsive to criticism, failing to nurture talent or groom a successor, failing to maintain creative relationships with outside partners such as Pixar Animation Studios, allowing the company’s ABC network to fall behind its rivals, and generally mismanaging the company.

Under Mr. Eisner, the company has been “going down, down, down,” Mr. Disney said. He said theme park fans even send him e-mail saying, “When did you stop keeping the restrooms clean?”

Calling their campaign “Save Disney,” Mr. Gold and Mr. Disney hope protests at the annual meeting will persuade the board to oust Mr. Eisner as well as three key allies, board members George Mitchell, Judith Estrin and John Bryson.

Some shareholders support Mr. Eisner’s ouster simply to help fend off the Comcast bid. Many Wall Street analysts believe that if the board were to fire Mr. Eisner, Disney’s stock would rise. That would make Comcast’s already-low stock offer even less likely to succeed. Disney stock closed yesterday at $26.76, down 0.4 percent, on the New York Stock Exchange.

• Other shareholders are seeking lesser corporate governance reforms. For example, they want the positions of chairman and chief executive to be divided, reducing Mr. Eisner’s iron grip on power.

• Still other stockholders want to keep Mr. Eisner, noting that the company has been doing better lately, with its stock price rising in recent months. An improving economy is helping Disney theme parks, and it appears the company’s biggest troubles may be smoothing out.

Meanwhile, public interest groups that have no direct stake in Disney have showed up at the annual meeting to call attention to their causes.

A coalition of groups opposed to greater media concentration, including the Communications Workers of America and the Pennsylvania Pubic Interest Research Group, held a news conference to denounce the proposed takeover of Disney by Comcast.

“We need media diversity, not media monopolies,” said Beth McConnell, director of PennPIRG. “This merger of two corporate giants such as Comcast and Disney is bad for consumers, democracy, workers, art and culture.”

Another group, the Christian Action Network, passed out literature condemning the “lewd, obscene and illegal behavior” that they say occurs at Disney World each June during “Gay Days,” a time when many homosexuals and lesbians visit the theme park in Orlando, Fla.

But perhaps the biggest group of people here for the meeting are Disney fans, who simply love the company that gave the world Mickey, Minnie, Donald and Goofy.

Roughly 700 people, some wearing mouse ears, packed a hotel ballroom to see Roy Disney. Hundreds more were turned away because of crowding, though everyone was given a colored gift bag stuffed with mementos such as bumper stickers and shirts saying: “Goodbye Michael … Restore the Magic.”

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