Eisner called Gold, hoping to defuse things a little. “Stanley, I think we need to discuss Roy,” Eisner said. “I’m not sure Bryson gave him all the information about this. Maybe it’s not a done deal.”
“Have Bryson call me,” Gold said coolly. He told Roy the decision wasn’t final, and he thought something might be worked out to salvage Roy’s board membership.
After Bryson spoke to his fellow members of the nomination and governance committee—Lozano, Estrin, and Wilson—he reported that the committee remained firm in its determination to force Roy off the board. If the rule were applied inconsistently—forcing off Murphy and Watson, but giving Roy a reprieve, or not applied at all—Disney might be open to criticism.
In this matter Eisner has portrayed himself as simply bowing to the will of the committee. Other board members confirm that at this juncture, they were so annoyed with Gold and Roy and what they considered their disruptive tactics that, having come this far, they were determined to press forward. But given Eisner’s influence over the committee and the board as a whole, there can be little doubt that had Eisner wanted to keep Roy on the board, he could have. There were obvious alternatives: as chairman of animation, Roy was a management director, and thus not subject to mandatory retirement; or the board could simply have raised the mandatory retirement age to seventy-five for all directors, which would have given Roy three more years.
When Gold actually spoke with Bryson, the conversation went nowhere. Bryson said the committee had again discussed the issue and concluded that Roy would not be renominated. The committee’s decision was final.
Even so, the committee’s decision would have to be approved by the full board. Though the board had never overruled the committee, it was theoretically possible that Roy could prevail. But Bryson and Eisner quietly contacted the other board members to brief them and make sure they were on board. Eisner was confident he wouldn’t have to worry about a board revolt.
When Roy returned from the drink with John Bryson, Patty Disney could tell her husband was in shock. All four of their children gathered on the yellow floral sofas in the formal living room at the Toluca Lake home, and along with their parents, discussed for hours what had happened and how Roy should react. In the ensuing days, Roy met regularly with his advisers at Shamrock—Gold, of course; Clifford Miller, the PR adviser who had helped advise them in 1984; an outside lawyer, David Robbins; and a younger executive, Mike McConnell, a former investment banker and teacher who had helped prepare the September 24 boardroom presentation. “No one can force me off or make me quit,” Roy declared at the outset. “I’d rather leave first.”
The board’s action galvanized the extended Disney family in ways Roy hadn’t anticipated. On impulse, he picked up the phone the day after Thanksgiving and called Diane, who was with Ron Miller at their Silverado vineyard in Napa Valley. The cousins rarely spoke, and had not been close since the events of 1984 that culminated in Miller’s ouster. But Roy was working on “Destino,” an unfinished animated short begun by Walt and Salvador Dalí in 1945. Diane had sent him an image of Walt and the surrealist painter, and had mentioned that she’d met Salvador Dalí at their house. Roy had written back that she should be interviewed for the DVD version of the film.
When Diane answered the phone, Roy said he wanted to thank her for the Dalí image, adding that the short had turned out so well that some people were talking about it as a possible Oscar nominee. But then he said he had some bad news. “I’ve been asked to step down from the board,” he said, describing the painful meeting with Bryson.
Despite the strains in the family, Diane felt an immediate wave of sympathy for her cousin. He was so much more invested in the Disney company than she and Ron were, and she could tell how dispirited he was. “That’s terrible,” she said. “You shouldn’t be treated like this.”
“Well, they’ll probably call me the ‘idiot nephew’ again,” Roy said, sounding even more dejected.
“Roy,” Diane said firmly, “I want you to know that in our family, that was never said.”
“I think it came from Card Walker,” Roy volunteered.
“I do, too,” Diane agreed. They chatted for a few moments, and Diane asked Roy to keep her informed.
By then, Roy, Patty, and their four children had all agreed that Roy had no choice but to resign rather than be forced off. Roy and his advisers labored over Roy’s letter of resignation. In contrast to Gold’s presentation to the board, Roy didn’t want to dwell on Disney’s financial performance, its slumping earnings, or stagnant stock price. These things, per se, weren’t as important to him. He had always felt, as Walt had, that if you provided quality products that the public enjoyed and wanted, then profits would follow. Roy didn’t like to think in financial terms; indeed, he felt Eisner’s drive for short-term profits, a near-obsession over 20 percent annual growth, was at the root of many of Disney’s problems. In Roy’s sometimes romantic view, Disney at heart was a creative company, and creativity had to be the engine of profit growth.
On November 30, 2003, the Sunday after Thanksgiving, Roy had the letter hand-delivered to Eisner, who was at his apartment in the Pierre hotel in New York. Copies of the letter were faxed to The Wall Street Journal, The New York Times, the Los Angeles Times, and other media outlets, as well as to all board members. Open warfare had begun.
In New York, Eisner was watching a football game on television. He was feeling far more relaxed than usual. He’d taken a day off, and he and Jane had visited the branch of the Smithsonian Museum on Fifth Avenue, and then he’d walked five miles through the city. He was beginning to think about his annual letter to shareholders, and there was a board meeting the next week when he could expect another awkward confrontation with Gold and Roy. But for now he could relax.
Then a chime went off on his computer signaling an urgent email. When he went to the monitor, he saw a message from Zenia Mucha: “Urgent. Call me. What are we going to do about Roy’s resignation?”
Resignation? What was she talking about? Then Eisner thought he heard something at the entrance to the apartment. When he got to the entry, he saw an envelope had been thrust under the door.
Dear Michael,
It is with deep sadness and regret that I send you this letter of resignation from the Walt Disney Company, both as Chairman of the Feature Animation Division and as Vice Chairman of the Board of Directors.
You well know that you and I have had serious differences of opinion about the direction and style of management in the Company in recent years. For whatever reason, you have driven a wedge between me and those I work with even to the extent of requiring some of my associates to report my conversations and activities back to you. I find this intolerable.
Finally, you discussed with the Nominating Committee of the Board of Directors its decision to leave my name off the slate of directors to be elected in the coming year, effectively muzzling my voice on the board—much as you did with Andrea Van de Kamp last year.
Michael, I believe your conduct has resulted from my clear and unambiguous statements to you and to the board of directors that after 19 years at the helm you are no longer the best person to run the Walt Disney Company. You had a very successful first 10-plus years at the company in partnership with Frank Wells, for which I salute you. But, since Frank’s untimely death in 1994, the Company has lost its focus, its creative energy, and its heritage.
Roy identified various ways in which Eisner had “failed”: ABC prime time; the Family channel; his “micromanagement” and resulting “loss of morale”; his “timidity” in building new theme parks “on the cheap”; a “creative brain drain”; poor relations with creative partners such as Pixar and Miramax; and the lack of a succession plan.
Michael, it is my sincere belief that it is you who should be leaving and not me. Accordingly, I once again call for your resignation or retirement. The Walt Disney Company deserves fresh, energetic leadership at this challenging time in its history just as it did in 19
84 when I headed a restructuring which resulted in your recruitment to the Company.
I have and will always have an enormous allegiance and respect for this Company, founded by my uncle, Walt, and father, Roy, and to our faithful employees and loyal stockholders. I don’t know if you and the other directors can comprehend how painful it is for me and the extended Disney family to arrive at this decision….
With sincere regret,
Roy E. Disney
On one hand, Eisner wasn’t surprised. Events had been pointing to something like this for over a year. In a sense it was a relief. The gauntlet had been thrown, and Roy had been forced into the open. It was also exciting. Eisner felt his adrenaline pumping. He felt he was at his best in a crisis, calm and focused.
Bob Iger was planning to enjoy a rare quiet Sunday afternoon with his wife at the Neue Galerie, the museum of Austrian art and culture on Fifth Avenue, but he had barely walked in when he felt his cell phone vibrate. He went outside to take the call. It was Eisner. Roy had resigned. He had just read Roy’s letter and had spoken to Zenia Mucha. Bruce Orwall was calling from The Wall Street Journal seeking comment.
It was a lot for Iger to absorb. He saw his Sunday evaporating. Eisner asked him to join him at the Pierre as soon as possible. They’d have to draft a press release and plan strategy. He was also summoning Mucha; Alan Braverman, the general counsel; and his own assistant, Chris Curtin. They were all in New York for the upcoming board meeting. They quickly decided that Roy was trying to make Eisner the issue, and therefore Eisner himself should stay above the fray. Instead they would portray this as an attack on the company and its entire board, an issue of corporate governance, with Roy trying to block needed reforms, not of management’s performance. They would not respond to Roy’s specific allegations, since that would inevitably put the spotlight on Eisner and management. George Mitchell, the presiding director, was chosen to issue the statement the group drafted.
Whether he yet realized it, Mitchell was being drawn into a precarious position. As a director, he owed a fiduciary duty to shareholders—not to Eisner or other Disney executives. He was now being asked to lend his reputation, bolstered by his Nobel Peace Prize for negotiating a truce in Northern Ireland, to defend Eisner and Disney management against Roy’s charges.
Mitchell issued a statement:
The Governance and Nominating Committee recently informed Mr. Disney of its judgment that the mandatory age limits of the company’s Corporate Governance Guidelines, which had previously been unanimously approved by the Board, should be applied to him and two other Board members, Thomas S. Murphy and Raymond Watson. It is unfortunate that the Committee’s judgment to apply these unanimously adopted governance rules has become an occasion to raise again criticisms of the direction of the Company, and calls for change of management, that have been previously rejected by the Board.
The group spent considerable time trying to anticipate what would come next. Where was Gold in this picture? How would they deal with him at the board meeting? The situation promised to be exceedingly awkward now that Roy had resigned. How could the board discuss a counteroffensive, with Gold telling everything to Roy, not to mention leaking to the press? Somehow, Gold would have to be neutralized.
And, in typical fashion, Eisner ruminated on his long relationship with Roy, amazed that after all he had done to protect Roy, and to show him respect, Roy—the “idiot nephew”—would now turn against him. Eisner remained convinced that it was all Gold’s doing, and that Gold was acting out of selfish motives—still bitter that he hadn’t been offered Wells’s job; angry that Eisner wouldn’t buy back the Basses’ Disney shares; disgruntled that Eisner wouldn’t “listen” to him.
For the next week, Eisner’s apartment in the Pierre became the “command center.” The inner circle, joined by outside PR consultants and lawyers, met every day to plot strategy. But no one was really worried, least of all Eisner. What could Roy and Gold do? This wasn’t 1984. Roy and Gold weren’t up against a weakened chief executive like Ron Miller; they didn’t have the threat of a hostile takeover behind them, or the support of anyone else on the board. There wasn’t going to be any boardroom coup, not with this board. It was too late to mount a proxy contest to elect new directors; Disney’s 2004 annual meeting was in March, and under Disney’s bylaws, the deadline for submitting the names of alternate candidates was less than three weeks away. Anyway, Disney shares were so widely held that a proxy contest would be prohibitively expensive, and probably doomed.
All Roy had, really, was the Disney name.
At the Shamrock offices in Burbank, discussion turned to how Stanley Gold should react. By remaining on the board, he would continue to have access to confidential financial information, as well as insights into the board’s thinking. But he would also be muzzled by confidentiality agreements and fiduciary obligations. Roy argued that Gold would be isolated, excluded from important committee meetings and “executive sessions.” Before Roy resigned from the board in 1984, he’d been the only dissenting voice, and it had been frustrating and lonely. Far better for Gold and Roy to be free to wage an all-out campaign. In Roy’s view, the decision to purge him from the board was a declaration of war. They needed to wage it with every means at their disposal. Still, the group decided that they’d gauge the reaction to Roy’s resignation before making a final decision.
The official Disney response, coming as it did from Mitchell, speaking on behalf of the board, convinced Gold that there was no point in his remaining. The following day, he resigned, issuing a letter that, in contrast to Roy’s, was focused on criticism of his fellow board members.
“It is with regret that I resign effective immediately,” Gold began,
and second Roy Disney’s call for the removal of Michael Eisner as Chairman and CEO. I am proud of my more than 15 years of service and my role in reshaping the Company in 1984 by bringing Frank Wells and Michael Eisner to the Company. I do, however, lament that my effort over the past three years to implement needed changes has only succeeded in creating an insular board of directors serving as a bulwark to shield management from criticism and accountability….
As for the decision to oust Roy from the board,
The real reason for the committee’s action is that Roy has become more pointed and vocal in his criticism of Michael Eisner and this board. This is yet another attempt by this board to squelch dissent by hiding behind the veil of “good governance.” What a curious result.
Roy has devoted a lifetime to Disney as both an employee and director. He has served with renewed vigor during these times of malaise, disappointment and instability at the Company, trying to maintain the morale of employees, focusing on the magic that makes Disney special and attacking bonuses to the CEO and increased compensation for board members while the company falters and shareholder value erodes….
The board seems determined to devote its time and energies to adopting policies that…only serve to muzzle and isolate those directors who recognize that their role is to be active participants in shaping the Company and planning for executive succession. Further, this board isolates those directors who believe that Michael Eisner (when measured by the dismal results over the last 7 years) is not up to the challenge.
Perhaps acting independently, from outside the boardroom, not ham-strung by a recently enacted board policy barring board members from communicating with shareholders and the media, I can have greater success in shaping the policies, practices and operations of Disney than I had as a member of the board.
Eisner may have succeeded in barring Roy from any meaningful role at the animation division, but the company’s animators were among the first to rally to his cause. Dave Pruiksma, the supervising animator for Beauty and the Beast (he also drew Mrs. Potts and Chip) and Lion King (he drew Pumbaa), and Academy Award nominees Tim Hauser, a writer, and Steve Moore, a director, issued a letter the day after Roy’s letter became public. It was not just an endorsement of Roy, but a window into the th
inking of a critical contingent of Disney’s creative artists, as well as confirmation of the crisis in morale that Roy had been trying to bring to the board’s attention:
We, the undersigned members of the animation community, wish to lend our full support to Roy E. Disney and Stanley Gold as they seek to uphold the traditions of excellence that once defined the Disney name. [Roy] protected the Feature Animation division from the new studio brass, who did not sense its continued potential. Without Roy, the Little Mermaid, Beauty and the Beast, Aladdin and The Lion King would never have come to be, let alone the company’s artistic renaissance and financial turnaround.
But after a string of critical and box office successes, animation artists were increasingly locked out of leadership roles. In the new corporate template we became little more than factory workers or unskilled laborers at the studio we had helped rebuild. Micro-managers from outside the medium fostered a highly toxic work environment, spawning a creative malaise that continues unchecked.
The unique traditions of visual storytelling, humor and personality animation on which the Walt Disney Studio had thrived, gave way to politically correct sloganeering, stale one-liners and film seminar formulae to which audiences have refused to respond. Mr. Eisner’s rejection of Walt Disney’s heritage has been a colossal failure. Yet this is a man who has been paid over $700 million in compensation since 1996, while the feature animation department has been decimated by pink slips.
Now, skilled craftsmen go unemployed while the executive ranks swell. A unique American art form, the Disney cartoon feature, hangs precariously in the balance—reduced to the production of cheap direct-to-video franchise extensions made by committee.
Without Roy, who will protect the 70-year Disney legacy from becoming no more than a hollow brand?
Within two weeks of the letter’s appearance, 4,500 present and former Disney animators—nearly everyone who had worked there—had added their names as signatories.
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