Disney board splits chairman and CEO positions

The Walt Disney board voted to strip Michael Eisner of his chairman’s post while retaining him as CEO, only hours after shareholders delivered a stinging rebuke by withholding 43% of their votes for his re-election to the board.

Disney directors voted unanimously to split the chairman and chief executive duties and make board member George Mitchell the company’s new chairman, even as they voiced their continuing approval of Mr Eisner’s management and the company’s strategy.

The change is effective immediately.

The board also rejected a renewed overture from cable television giant Comcast, saying it would serve no purpose to reconsider an offer already dismissed as too low.

“Our belief in the company’s strategy, financial results over the last several quarters, and the level of earnings and improved returns we expect going forward make us confident that results will validate our judgment on the quality of our management team,” the board said in a statement.

Although the action curbs Mr Eisner’s control of the company and satisfies the concerns of corporate governance groups who had called for the change, it will not satisfy the company’s most vocal critics – ex-board members Stanley Gold and Roy Disney – who have vowed to continue their fight to oust Mr Eisner

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Mr Mitchell, a former senator from Maine, may also prove to be a controversial choice.

Shareholders withheld 24% of their votes from his re-election yesterday - the second highest total after Mr Eisner.

Mitchell has been criticised by Mr Gold and Mr Disney as being too close to Mr Eisner and not independent enough because his law firm had worked for Disney in the past.

In its statement, the board said it understood that investors were concerned about more than just the issue of separating the chairman and CEO positions.

“We are aware that some voted for an immediate change in management and in the board,” the statement said. “However, taking all these factors into account, we believe the action we have taken today is in the best long-term interest of the shareholders of the company.”

The board’s action follows a nearly five-hour shareholders meeting marked by cheers and standing ovations for former board members Mr Gold and Mr Disney, who have waged a bitter three-month campaign to oust Eisner.

The two hailed the vote and said it was a clear indication that Mr Eisner should go.

Analysts had said that in the face of the votes, Disney’s board either had to split the chairman and CEO jobs, do nothing, or fire Mr Eisner, who has served as Disney’s chairman and CEO since 1984.

The 61-year-old Eisner, who chaired the meeting, showed little emotion, even as Mr Gold and Mr Disney took the stage and called for his firing.

“Michael Eisner must leave now,” Mr Gold said. “We see today’s meeting as a first step toward saving the company. … We are seeking real and meaningful change.”

His voice a bit hoarse, Mr Eisner briefly defended himself and his fellow managers, saying he enjoyed an “excellent relationship” with the dissident board members until they disagreed with his handling of the company after the September 11 terrorist attacks.

“I love this company,” Mr Eisner said. “The board loves this company. And we are all passionate about the output of this company.”