The Ride of a Lifetime

by Robert Iger;

  As we struggled to collect ourselves together, another wave hit that we didn’t see coming. A company called Institutional Shareholder Services (ISS) is the biggest company in the world providing proxy and governance advice to investors—largely mid-sized funds—on how they should assess corporate governance and cast their proxy votes. ISS typically influences more than a third of the voting shares in a proxy election, and that morning they issued a public recommendation in support of Roy and Stanley’s campaign to vote against Michael. The proxy votes wouldn’t be announced until March, but we already knew to expect a large vote of no confidence.

  As we left Michael’s suite to go to the investors’ meeting, we were now facing two massive crises. I remember thinking that it was like we’d entered a conventional war with Roy and Stanley and Steve, and now another party had launched nuclear weapons. We did our best under the circumstances to defend ourselves to the investors, but serious concerns about the future of the company had been raised in very public ways. We held our heads high, touting our recent returns and walking them through our future plans, making the best case we could under the circumstances. It was a tough meeting, though, and there was no way around it: Things were only going to get tougher.

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  OVER THE NEXT several weeks, Comcast’s takeover bid collapsed. Brian Roberts had assumed that Disney’s board would jump at his initial offer, and when they didn’t, it allowed for a number of other factors to emerge. First, the announcement of our increased earnings resulted in a spike in our stock price, so we immediately became more expensive. Second, Comcast’s shareholders reacted negatively to the announcement. They weren’t in support of Brian’s move, and Comcast’s stock price sank fast, diminishing the offer even further and throwing the whole calculus off. Last, influencing all of this was a general public opposition to the deal being expressed to the media: that “Disney” still had emotional resonance as an American brand, and the idea of its being swallowed by a giant cable provider was anathema to consumers. Comcast eventually withdrew its bid.

  Michael’s troubles weren’t going away, however. The following month, three thousand Disney shareholders gathered in Philadelphia for our annual meeting. The night before the meeting, Roy and Stanley and the Save Disney contingent held a big public rally at a downtown hotel. There was a lot of media coverage of the event, in which Roy and Stanley vehemently criticized Michael and called for a change in leadership. At some point Zenia came to me and said, “You have to go out and talk to the press. We need to get our side of the story out.” There was no way Michael was going to do it—it would have been too charged and confrontational—so I had to be the one.

  Zenia quickly notified some members of the press that I would be coming out to speak with them, and the two of us walked into the lobby of the convention center, where our meeting was to take place the next day. Seventy-five giant, differently designed Mickey Mouse statues had been transported from Orlando for the meeting, and I stood between two of them and took questions for about an hour. I didn’t have any notes prepared, and I don’t recall the specific questions, though I’m sure they were all about the shareholder meeting, and how we were planning to respond to the criticisms coming from Roy and Stanley. I do recall that it was withering. I defended the company and supported Michael, and I expressed my genuine skepticism about Roy and Stanley’s motivations and actions. It was the first time in my career I’ve ever had to withstand the glare of so much press scrutiny, and while there was no way to reverse the tide that was coming in, I look back on that moment and feel proud for having been able to stand there and hold my ground.

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  THE NEXT DAY, shareholders started lining up outside the convention center at 5:00 A.M. When the doors opened hours later, thousands of people streamed in, many of whom were sent into a large overflow room to watch on closed-circuit TV. Michael and I made opening remarks; then each of our business-unit leaders gave presentations about the state of their businesses and future plans.

  We had agreed to allow Roy and Stanley to each make fifteen-minute statements, but not from the stage. When they went beyond the time limit, we let them finish out of courtesy. Their statements were blistering, and greeted with cheers by many people in the room. After they were done we took questions for an hour. Michael knew it would be an all-out assault from the beginning, but he carried himself through it admirably. He acknowledged many of the difficulties and made his case that our performance and our stock price were improving. He talked about his passion for the company, but it was a foregone conclusion that the day was not going to end well for him.

  When the proxy votes were finally tallied, 43 percent of shareholders withheld their support of Michael. It was such a devastating expression of no confidence that we announced the count in raw numbers rather than as a percentage, hoping it might sound less bad. Still, there was an audible gasp in the room when the announcement was made.

  The board met in an executive session immediately after the shareholders meeting. They knew they had to do something in response and decided to strip Michael of his role as chairman but let him remain as CEO. George Mitchell, the former Senate majority leader from Maine, was a member of the board, and they unanimously voted for him to replace Michael as chairman. Michael made some effort to convince them otherwise, but he was mostly resigned to the inevitability of it.

  There was one final indignity to the day. The news was so big that our own news program, Nightline, wanted to devote that night’s show to the Save Disney movement and the voting results. We collectively decided that it was in Michael’s and the company’s best interest to face the music and go on the show to take questions from Ted Koppel, Nightline’s anchor, about what it meant for Michael and for the future of Disney. It was incredibly painful for him to be subjected to scrutiny from his own news people, but he did it with a brave face.

  The March shareholders meeting and the loss of his chairman’s title marked the beginning of the end for Michael, and the reality was beginning to sink in. In early September 2004, he sent a letter to the board announcing that he would step down when his contract expired in 2006. Two weeks later, the board met and accepted Michael’s offer. George Mitchell came to me afterward to say they were going to issue a press release announcing that Michael would not renew his contract when it expired, and a search process would commence immediately, with the intention of finding a successor by June 2005. Once they found someone, George told me, they would hasten the transition—in other words, they intended to replace Michael in the fall of 2005, a year before his contract expired.

  I asked him what they were planning to say about the search.

  “That we’re going to look for outside candidates and inside candidates,” George said.

  “What inside candidates are there other than me?”

  “None,” he said. “You’re the only one.”

  “Then you need to write that,” I said. “I’m the COO, and as of today, you’re making Michael a lame duck. I’m going to have to step in and exert a lot more authority.” I understood there was no guarantee that I would be Michael’s successor, but people in the company needed to know it was at least a possibility.

  I felt so much depended on that moment. If the rest of the company didn’t believe I was a serious candidate, then I’d have no real authority, and I would be a lame duck right along with Michael. Often people who worry too much about public perception of their power do so because they are insecure. In this case, I needed the board to bestow some degree of power in me if I was going to be able to help run the company through this turbulent time, and if I was going to have any chance of being the next CEO.

  “What are you asking?” George said.

  “I’m asking you to write in the press release that I’m the only internal candidate.”

  George understood exactly what I needed and why,
and I’ll always be grateful for that. It meant I was able to run the company from a position of…not exactly strength, but not exactly weakness, either. Even though they’d formally stated that I was a candidate, I don’t think anyone on the board, maybe not even George, thought I would get the job, and many of them thought I shouldn’t.

  There would be a lot of talk during the upcoming months about how Disney’s problems could only be solved by a “change agent” from the outside. It’s a meaningless phrase and a corporate cliche, but the sentiment was clear. Exacerbating matters was the feeling on the board that their reputation had been sullied, and while it was far less painful to them than what Michael had suffered, they were exhausted from the drama and they needed to send a signal now that things were going to be different. Handing the keys to the guy who’d been Michael’s number two through five of the most difficult years in the company’s history didn’t exactly signal a new day.

  CHAPTER 7

  IT’S ABOUT THE FUTURE

  THE CHALLENGE FOR me was: How do I convince the Disney board that I was the change they were looking for without criticizing Michael in the process? There had been some decisions I disagreed with, and I thought the company was in need of change given all the noise, but I respected Michael and was grateful for the opportunities he’d given me. I’d also been COO of the company for five years, and it would have been hypocritical, transparently so, to lay all of the blame on someone else. Mostly, though, it just wouldn’t have been right to make myself look better at Michael’s expense. I vowed to myself not to do that.

  I spent a few days after the announcement trying to figure out a way to thread that particular needle—how to talk about the past without implicating myself too much in decisions that weren’t mine, or swinging too far the other way and joining in a pile-on of Michael. The solution to that predicament came from an unexpected place. A week or so after the board’s announcement, I received a phone call from a highly regarded political consultant and brand manager named Scott Miller. Years ago, Scott had done some very useful consulting for ABC, so when he called to say he was in L.A. and asked if he could come see me, I was eager to meet with him.

  He arrived in my office a few days later and dropped a ten-page deck in front of me. “This is for you,” he said. “It’s free.” I asked what it was. “This is our campaign playbook,” he said.

  “Campaign?”

  “What you’re about to embark on is a political campaign,” he said. “You understand that, right?”

  In some abstract way, yes, I understood that, but I hadn’t been thinking of it in the literal terms Scott meant. I needed a strategy for getting votes, he said, which meant figuring out who on the board might be persuadable and focusing my message on them. He asked me a series of questions: “Which board members are definitely in your corner?”

  “I’m not sure any of them are.”

  “Okay, who’s never going to give you a chance?” Three or four names and faces immediately flashed through my mind. “Now, who are the swing voters?” There were a handful whom I thought I might be able to convince to take a flyer on me. “Those are the ones you have to focus on first,” Scott said.

  He also understood the bind I was in regarding how I talked about Michael and the past, and he’d already anticipated it. “You cannot win this as an incumbent,” he said. “You cannot win on the defensive. It’s only about the future. It’s not about the past.”

  That may seem obvious, but it came as a revelation to me. I didn’t have to rehash the past. I didn’t have to defend Michael’s decisions. I didn’t have to criticize him for my own benefit. It’s only about the future. Every time a question came up about what had gone wrong at Disney over the past years, what mistakes Michael made, and why they should think I’m any different, my response could simply and honestly be: “I can’t do anything about the past. We can talk about lessons learned, and we can make sure we apply those lessons going forward. But we don’t get any do-overs. You want to know where I’m going to take this company, not where it’s been. Here’s my plan.”

  “You must think, plan, and act like an insurgent,” Scott told me, and your plan should be formed with one clear thought in mind: “This is a battle for the soul of the brand. Talk about the brand, how to grow its value, how to protect it.” Then he added, “You’re going to need some strategic priorities.” I’d given this considerable thought, and I immediately started ticking off a list. I was five or six in when he shook his head and said, “Stop talking. Once you have that many of them, they’re no longer priorities.” Priorities are the few things that you’re going to spend a lot of time and a lot of capital on. Not only do you undermine their significance by having too many, but nobody is going to remember them all. “You’re going to seem unfocused,” he said. “You only get three. I can’t tell you what those three should be. We don’t have to figure that out today. You never have to tell me what they are if you don’t want to. But you only get three.”

  He was right. In my eagerness to demonstrate that I had a strategy for solving all of Disney’s problems and addressing all of the issues we were confronting, I hadn’t prioritized any of them. There was no signaling as to what was most important, no easily digested, comprehensive vision. My overall vision lacked clarity and inspiration.

  A company’s culture is shaped by a lot of things, but this is one of the most important—you have to convey your priorities clearly and repeatedly. In my experience, it’s what separates great managers from the rest. If leaders don’t articulate their priorities clearly, then the people around them don’t know what their own priorities should be. Time and energy and capital get wasted. People in your organization suffer unnecessary anxiety because they don’t know what they should be focused on. Inefficiency sets in, frustration builds up, morale sinks.

  You can do a lot for the morale of the people around you (and therefore the people around them) just by taking the guesswork out of their day-to-day life. A CEO must provide the company and its senior team with a road map. A lot of work is complex and requires intense amounts of focus and energy, but this kind of messaging is fairly simple: This is where we want to be. This is how we’re going to get there. Once those things are laid out simply, so many decisions become easier to make, and the overall anxiety of an entire organization is lowered.

  After the meeting with Scott, I quickly landed on three clear strategic priorities. They have guided the company since the moment I was named CEO:

  1) We needed to devote most of our time and capital to the creation of high-quality branded content. In an age when more and more “content” was being created and distributed, we needed to bet on the fact that quality will matter more and more. It wasn’t enough to create lots of content; and it wasn’t even enough to create lots of good content. With an explosion of choice, consumers needed an ability to make decisions about how to spend their time and money. Great brands would become even more powerful tools for guiding consumer behavior.

  2) We needed to embrace technology to the fullest extent, first by using it to enable the creation of higher quality products, and then to reach more consumers in more modern, more relevant ways. From the earliest Disney years under Walt, technology was always viewed as a powerful storytelling tool; now it was time to double down on our commitment to doing the same thing. It was also becoming clear that while we were still, and would remain, primarily a content creator, the day would come when modern distribution would be an essential means of maintaining brand relevance. Unless consumers had the ability to consume our content in more user-friendly, more mobile, and more digital ways, our relevance would be challenged. In short, we needed to view technology as more of an opportunity than a threat, and we had to do so with commitment, enthusiasm, and a sense of urgency.

  3) We needed to become a truly global company. We were broad with our reach, doing business in numerous markets around the world, but we needed to b
etter penetrate certain markets, particularly the world’s most populous countries, like China and India. If our primary focus was on creating excellent branded content, the next step was to bring that content to a global audience, firmly planting our roots in those markets and creating a strong foundation to grow significantly in scale. To continue to create the same things for the same loyal customers was stagnation.

  That was the vision. It was about the future, not the past—and the future was about organizing the entire company’s mission, all of our businesses, and every one of our 130,000 employees at the time, around these three priorities. Now I just needed to convince ten board members, most of whom had little or no faith in me, that this was the right course for the company and I was the right person for the job.

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  MY FIRST ALL-ON-ONE interview with the board took place on a Sunday evening in our boardroom in Burbank. They questioned me for two hours, and while they weren’t openly combative, they weren’t especially warm and friendly, either. They had been under pressure for a long time, and now they were under even more. Their determination to project how seriously they were taking this process was evident in their no-nonsense demeanor. It was clear that my having been on the board myself for five years wasn’t going to make the road any smoother.

  It so happened that months before I’d committed to participating in a triathlon in Malibu that day, and I didn’t want to leave my team in the lurch. So I woke at 4:00 A.M. and drove to Malibu in the dark, rode the eighteen-mile bike leg of the race, then sped home and showered and changed and went to Burbank for my meeting with the board. At the last minute, to keep my energy from slumping during the interview, I devoured a protein bar right before I walked through the door. For the next two hours, my stomach loudly gurgled, and I worried the board was thinking that my GI system was sending a signal to them that I couldn’t handle the pressure.