The Negotiator

by George Mitchell

  It was a widespread practice at the time (and still is, although less so) for the CEO of a large corporation to also serve as chairman of the board. But in the period during which Disney’s growth slowed, several of the organizations that monitor and advocate on corporate governance urged that the positions be separated. For many of them, Disney became the poster child for this issue, and they were loud and insistent in urging that someone other than Eisner be appointed to serve as Disney’s board chairman.

  The process of separation had already begun in December 2002, when I was elected to the newly created position of presiding director. But as the bad news continued (Disney’s revenues were essentially flat in 2001 and 2002) the demand intensified. The year 2003 was difficult, and it ended on a down note when Roy and Stanley resigned from the board to devote themselves to a full-time public campaign.

  That campaign reached its peak of intensity on March 3, 2004, at the company’s annual shareholders meeting, held that year in Philadelphia, the city of brotherly love. But it was neither brotherly nor loving when over three thousand shareholders gathered in the grand hall at the Philadelphia Convention Center. Gold unleashed a stinging attack on Eisner and received applause for it. He also criticized me, but only briefly; I was just collateral damage. To Gold I was too close to Eisner and thus part of the company’s problem. I had never had a disagreement, personal or professional, with Roy or Stanley. But to them the fact that the rest of the board had refused to join their public campaign to remove Eisner was evidence of our lack of fitness. They wanted allies, not neutrals, and certainly not friends of Eisner.

  Although they had drawn applause during the discussion, Roy and Stanley fell short in the voting. Since all shareholders are eligible to vote on the election of directors, those present at the meeting represented a small portion of the total. Eisner received 55 percent of the votes cast for his reelection to the board, and I received 75 percent, both enough to be reelected but both well short of an overwhelming vote of confidence.

  The board met immediately following the shareholders meeting. Earlier Eisner had become convinced that he could not retain both positions, of chief executive officer and chairman of the board; a few days before the meeting he had asked me to agree to serve as chairman. I had declined, reasoning that to do so just prior to the shareholders meeting would appear to be a panicked attempt to foreclose criticism at the meeting; besides, I told him, I was already so overwhelmed at my law firm and with other activities that I doubted I had the time to serve effectively as chairman.

  Now, in the aftermath of the shareholders meeting, he renewed the request, this time accompanied and supported by the full board. I hesitated, torn between wanting to be of help to a company I had come to love and the concern that I was already too busy and that this would be a long and painful effort not likely to end well. After an inconclusive discussion with the full board, Eisner requested a brief recess and asked to speak with me alone.

  We went into an adjoining room where we talked for a half hour. I liked and admired him; he had been remarkably successful in re-creating the company and making it profitable. I felt that Stanley and Roy had been excessively personal and unfair in their criticism. But their concerns were not unfounded. The company had not been doing well, and now the management and the board were being held accountable. As is often the case with strong leaders, as the criticism mounted Eisner became more defensive and less willing to accept it.

  In the end I couldn’t say no. I realized that I would have to shed some of my other activities, and, although I enjoyed serving on other boards, I resigned from some of them. Over the next three years, serving as chairman of the Disney board was, by itself, a full-time job; since I also was practicing law full time, it was a very hectic period in my life. The complexity was eased somewhat by the fact that the company’s New York office was just one block from the apartment in which Heather and I lived. I took an office there and enjoyed the shortest commute to work I’ve ever had, before or since. But the short commute had no effect on my main concern: how to help the company return to growth and profitability and, in that context, determine whether Eisner should continue as CEO.

  In fact the turnaround had already begun. In 2004 the company’s revenues rose by 14 percent, its net income by 83 percent; in 2005 the figures were 4 and 11 percent, respectively. But was that enough?

  As with almost all major public figures, Eisner has received both praise and criticism, but, to the best of my knowledge, no one has ever described him as unintelligent. He is in fact brilliant, creative, and provocative, especially in his chosen field of entertainment and the arts. He also has a keen business sense. Despite his deeply held feeling that he could and should continue as CEO, ultimately he realized that the issues raised by the internal struggle through which he and the company had gone would not subside; rather they would continue to hamper him and the company to which he had devoted much of his life. In the end, although he still felt strongly that Disney would be best served if he remained as CEO, he accepted the reality of change.

  That led to the question of succession. A prime candidate was Bob Iger. His entire work life had been in television, beginning as a weatherman at a small local station and gradually working his way to the top. He was running ABC when it was acquired by Disney in 1995. Over the next decade he worked diligently alongside Eisner and was the clear heir apparent. Eisner himself strongly favored Iger. But the board was unanimous in insisting on a full search for a new CEO, including examining external candidates. It meant no disrespect to Iger, who was highly regarded by most board members. But it was essential, especially in view of the turbulence through which the company was going, to seek out and hire the best possible candidate; that required a wide-open national search.

  Rather than appoint a search committee of a few board members, I decided to have the full board participate in the search process. It was at times acrimonious, and it took a long time, but in the end it proved to be the right approach. Throughout the process every member of the board was fully informed and had an equal opportunity to participate in and influence the decision.

  There were several candidates, some of them clearly qualified by ability and experience to serve as CEO, and early on there was some support for several of them. But the more deeply into the process the board went, the more support for Iger grew. In early March 2005 the board concluded the process in a series of long and intense meetings, during which I advocated strongly for Iger. At the very end of the very last meeting the decision became unanimous. On March 12, a Sunday afternoon, at a telephonic press conference, I announced to hundreds of reporters that Bob Iger would succeed Michael Eisner as CEO, effective October 1, 2005.

  I thought we had finally navigated our way through the turbulence to a safe landing. But not quite. The hostility that Stanley and Roy harbored for Eisner and Iger was so intense that it clouded their judgment. Just a few weeks later they filed a lawsuit challenging Iger’s election. In it they alleged that the board had falsely represented that it would engage in a bona fide CEO selection process, including serious consideration of external candidates, and that this false representation caused Roy and Stanley to refrain from running a competing slate of directors at the 2005 annual shareholders meeting. They sought from the court an order voiding the 2005 election of directors, compelling a new election, and prohibiting any change in Eisner’s and Iger’s employment contracts. The suit was wholly lacking in merit and proved to be the final act in a long and painful episode.

  Iger quickly demonstrated his good judgment and common sense. He called Roy and invited him to lunch. Roy soon returned to the company as a consultant and was named a director emeritus, and the lawsuit was dismissed. All involved, including and perhaps especially Roy, were relieved that the dispute was finally over. I will always believe that Roy himself was uncomfortable with some of the words spoken and actions taken in the dispute.

  In the decade since Iger’s arrival the company has performed ex
tremely well. For fiscal year 2013 revenues were $45 billion, net income was $6.6 billion, and by the end of fiscal year 2014 the stock price rose to around $90. For the past thirty years the Walt Disney Company has been led by two outstanding executives. For two decades Michael Eisner was a creator and builder; for the past decade Bob Iger has been an innovative manager. Each was the right man at the right time.

  Helping to manage a great company through a difficult transition was an experience I will forever treasure. And there was personal pleasure as well. When I became chairman of the board, Andrew was six years old and Claire three. On many joyous occasions we traveled to Orlando and to Anaheim, where together we laughed our way through the rides and held our breath on the roller coasters; learned the words to “It’s a Small World”; had our pictures taken with Mickey, Donald, and Goofy; checked out the lions and giraffes; and demonstrated that you’re never too young, or too old, to have fun.

  * * *

  I. See note here.

  II. In 2014 The Lion King became the largest grossing show in Broadway history.

  THE OLYMPIC GAMES

  The Olympic Games are among the premier sporting events in the world. Thousands of skilled athletes from every corner of the globe gather for two weeks of competition watched by billions on television. Legends are created, reputations are made, and billions of dollars change hands. But, as with other inspiring and glittering human institutions, there is also a seamy underside.

  On January 9, 1991, Norman Seagram, Arthur Eggleton, and Paul Henderson appeared before the leaders of the International Olympic Committee (IOC) in Lausanne, Switzerland. Eggleton was then the mayor of Toronto; Seagram and Henderson had been leaders of Toronto’s bid to host the 1996 Summer Olympic Games. They failed, despite what they regarded as a superior presentation, the product of a five-year, multimillion-dollar campaign.

  On reflection, and after inquiry, they concluded that they had been victims of a corrupt process in which the votes of IOC members had effectively been bought. In polite but blunt language, the Canadians pried open the lid on a mess teeming with improper gifts, including cash payments, in exchange for votes. In strikingly prophetic language they warned of the consequences of such behavior continuing unchecked. The IOC peered into the mess, then replaced the lid and looked away. And what the Canadians feared soon came to pass.

  I was in my law office in Washington on a Friday afternoon when Bill Hybl called. A short, friendly, enthusiastic man, with an open face and manner, Bill was the chairman of the U.S. Olympic Committee. He wanted to see me, and I agreed. When we met he asked me to serve as chairman of the USOC’s Ethics Oversight Committee. I had always loved sports, and I knew I would enjoy the opportunity to be involved in what I thought would be an interesting and constructive role. Bill assured me that it was a part-time responsibility and that I’d be assisted by an able staff. Although I was still involved in Northern Ireland, which meant that I was out of the country much of the time and was concerned that it would be difficult to find the time to do the job right, I accepted. Not long afterward a scandal erupted in Salt Lake City.

  From 1989 to 1991 Salt Lake City had competed to host the 1998 Winter Olympic Games. The city’s Olympic Bid Committee made what its members felt was a persuasive effort and presentation. Included was the expenditure of over $250,000 on travel, hotel, entertainment, gifts, and payments of money to members of the IOC, their relatives, or friends. But when the IOC met in Birmingham, England, in June 1991, it chose Nagano, Japan. Stunned and disappointed, the Salt Lake City Bid Committee resolved to try again for the 2002 Winter Games. In an effort to improve their chances, they reviewed the process they had just gone through and concluded that Nagano’s effort had been more sophisticated and extravagant. To win next time they would have to step up their game. And they did.

  In a process of “gift creep,” they moved from goodwill gifts to strangers to payments specifically intended to get votes; from small, inexpensive items they graduated to lavish gifts, and ultimately to payments of substantial sums of money to individual IOC members. The Salt Lake City committee didn’t invent the culture of corruption; they stepped into it and came to believe that in order to win they had to match or exceed their competitors in the petty and grubby process of buying votes. As so often happens, in their zeal for victory good men and women left their judgment and conscience at the door in the comforting belief that “everybody does it.” And they prevailed.

  When the scandal broke publicly, Hybl moved quickly and urged me to do so as well. He asked me to chair an independent commission to make recommendations that, if adopted, would help to prevent such abuses in the future. The target date for the commission’s report was the end of February 1999, barely two months later. That precluded an exhaustive factual inquiry, which in any event would have been impossible because criminal investigations were under way in the United States and most of the participants refused to talk to an independent commission. Lacking subpoena power, we could not compel them to testify or to produce relevant documents. What we needed, and what we were able to get, was a sufficient factual basis to enable us to craft meaningful recommendations for reform.

  I was joined on the commission by four outstanding members. Ken Duberstein had served as President Reagan’s chief of staff and is a business consultant in Washington. I had known Ken for several years and liked and respected him. I had not previously known the other three members: Donald Fehr was the executive director and general counsel of the Major League Baseball Players Association; Roberta Cooper Ramo was a partner in an Albuquerque law firm and had previously been president of the American Bar Association; Jeff Benz was a lawyer in a San Francisco law firm and had been a national champion figure skater. In an intense setting and a tight time frame we worked well together. There were no substantive disagreements, and our report was unanimous. That result was facilitated by the outstanding lawyer we retained to assist us, Richard Hibey, an experienced trial lawyer and former prosecutor, who was a partner in a Washington law firm.

  Although we did not identify the particulars of every improper transaction, we had more than enough information on which to base our recommendations. The Canadians had laid it out clearly eight years earlier. Our recommendations were made to both the USOC and the IOC. They were intended to eliminate the practices that contributed to the buying of votes; to strengthen oversight by both organizations over the site-selection process; and to make fundamental structural changes to increase transparency and accountability to the public.

  To his credit, Bill Hybl provided the commission with full support and complete independence. He also urged the USOC to adopt our recommendations, which it did promptly and in their entirety. The IOC made meaningful changes in its site-selection process, in some respects going further than our recommendations. But while the IOC’s response was generally positive, it was less forthcoming on structural changes and it remains a relatively closed and tight-knit organization.

  For me it was another lesson in the complexity of human behavior. At the Olympic Games the best and the worst coexist: superb athletes, thrilling performances, and spectacular ceremonies alongside greed, theft, hypocrisy, and falsehood. This doesn’t detract from the greatness of the performances, but it does remind each of us how high we can soar and how low we can sink.

  BASEBALL

  In the past few years a remarkable transformation has taken place in Major League Baseball. In the midst of the 2013 season, in which he won the Cy Young Award, Detroit Tigers’ pitcher Max Scherzer told reporters that players were “tired of guys who blatantly try to break the system” and expressed support for the development of “a fairer system that correctly punishes players . . . so that players don’t feel the need to cheat.”1 Mike Trout of the Los Angeles Angels, the 2013 American League Rookie of the Year, said, “To me, personally, I think you should be out of the game if you get caught. It takes away from the guys that are working hard every day and doing it all natural.”2 David Hernandez, a pit
cher for the Arizona Diamondbacks, was emphatic: “I think you should be out of baseball. It sounds harsh but at the end of the day you’re making it harder on somebody else who is trying to make it in the game. You’re essentially ending somebody else’s career if you’re cheating and putting up numbers. You should be done. It’s not fair to all of us who have played the game the right way. I think there should be stiffer penalties from the get-go. Apparently 50 games isn’t enough to stop players from cheating. A lot of us feel that way around here. Basically you’re cheating us, the players. Not only the fans, but us, the union.”3 Boston Red Sox infielder Dustin Pedroia and Los Angeles Angels pitcher C. J. Wilson made similar comments.4 Later that year other players were outspoken in their criticism after Jhonny Peralta signed a lucrative contract with the St. Louis Cardinals following a fifty-game suspension for his involvement with the Biogenesis clinic that had been implicated in providing performance-enhancing substances to players.5 The Major League Baseball Players Association acknowledged that players were “disgusted” that some were continuing to use such substances despite years of efforts to eradicate them from the game.6

  On March 28, 2014, Major League Baseball and the Players Association announced that they had reached agreement on what they described as the “most significant improvements to the disciplining and testing provisions of the Joint Drug Program since 2006.” Those provisions include the following: