Disney to strip Eisner of chairman role

Walt Disney Co directors’ decision to strip chief executive Michael Eisner of his chairman role stops short of what some investors said is needed to boost the company’s shares, which have fallen 25% in five years.

George Mitchell, Disney’s presiding director, will replace Eisner as non-executive chairman of Burbank, California-based Disney, the second-biggest US media company. Mitchell lobbied investors to support Eisner before yesterday’s annual meeting in Philadelphia, where holders withheld 43% of their ballots from Eisner, who has led Disney since 1984.

“There are obviously certain people that are not happy with me,’ Eisner said in an interview last night on Nightline, a programme that runs on Disney’s ABC television network. Eisner said he intends to honour his employment contract, which runs to 2006.

Eisner’s control of Disney’s board prompted Institutional Shareholder Services, the biggest adviser to pension funds, to recommend clients withhold votes from him. The California Public Employees’ Retirement System, the world’s biggest pension fund, said he should have resigned from both jobs.

“I don’t think it’s enough to split the duties of CEO and chairman,’ Barbara Hafer, the state treasurer of Pennsylvania, said today in an interview. “Eisner really should go.”

Pennsylvania holds about three million shares of Disney and was one of the states withholding votes for Eisner’s re-election.

Angela Kohler, a media analyst at Federated Investment Management in Pittsburgh, said the “most vocal shareholders will not be placated’ by Disney’s decision to split the roles.

Federated, which held 5.8 million Disney shares as of December, didn’t disclose how it voted in the board election.

“Disney once again seems to be misunderstanding the situation,’ said Charles Elson, director of the University of Delaware’s Centre for Corporate Governance. “This is a shuffling of the chairs, not a change.” Comcast Corp, which added to the pressure on Eisner by making a hostile $54.1 billion bid for Disney last month, said after yesterday’s vote that Disney directors should reconsider their offer. Disney’s board again rejected the bid of the biggest US cable company last night and said they unanimously support the company’s management and the 61-year-old Eisner.