Posted on: Thursday, February 26, 2004
California pension fund says it won't back Eisner
By Gary Gentile
Associated Press
LOS ANGELES — Embattled Walt Disney Co. CEO Michael Eisner lost the support yesterday of the nation's largest public pension fund, a big Disney investor that called his performance "dismal" and said it was withholding its votes for his re-election to the company's board.
The California Public Employees' Retirement System said it no longer has confidence in Eisner's long-term strategic vision.
"We have lost complete confidence in Mr. Eisner's strategic vision and leadership in creating shareholder value in the company," said Sean Harrigan, president of the CalPERS board of administration.
CalPERS is the 29th single largest shareholder of Disney, with 9.9 million shares. Its announcement came hours after Glass Lewis & Co., a San Francisco-based research firm that advises institutional shareholders, recommended that holders of Disney stock withhold their votes for Eisner.
The recommendation and CalPERS' announcement both gave strength to efforts by former board members Stanley Gold and Roy E. Disney to oust Eisner.
"The Disney board has been notoriously insular, famously gullible and blindly loyal to Mr. Eisner," Glass Lewis said in a report released yesterday. "In our view, Disney's board has come a long way, but not far enough.
"More importantly, shareholder interests are best served by a board that is on notice that shareholders are watching and have not forgotten past indiscretions."
Disney did not immediately return a call seeking comment.
The proxy firm Institutional Shareholder Services recommended two weeks ago that shareholders withhold their votes from Eisner.
"At the end of the day, all roads lead back to Eisner," the ISS report said.
Gold and Disney have mounted an aggressive campaign to persuade shareholders to withhold votes from Eisner and three other board members at Disney's annual meeting March 3 in Philadelphia.
The two say Eisner has mismanaged the company since 1994 and acted to squelch board criticism. They also say that board members have lacked independence.
Eisner has been chief executive since 1984.
Cable television giant Comcast Corp. made a takeover bid for Disney on Feb. 11. The Disney board unanimously rejected the offer as too low and expressed support for Disney's current management.
The Glass Lewis report made reference to a lawsuit brought on behalf of shareholders against the Disney board stemming from the departure of Michael Ovitz as Disney president in 1996 after serving less than two years.
The lawsuit challenges the severance package Disney paid to Ovitz and alleges Eisner put his friendship with Ovitz over his fiduciary responsibility to the company.
Ovitz received a cash payout of $38 million and shares valued at around $100 million.
The report also mentions a Securities and Exchange Commission investigation into Disney's failure to disclose information on a timely basis about possible conflicts of interest of several directors. The information eventually was disclosed, and Disney recently said it is negotiating a settlement with the SEC.
"Whatever the outcome of the investigation, it is clear it took several tries during 2002 for the company to disclose fully all relevant information about the independence of its investors," the report said.
"We believe this disclosure obligation is paramount to shareholder interests, and the responsibility for ensuring it is carried out falls to the chairman of the board and the CEO."
Glass Lewis also recommended shareholders withhold votes from board members George Mitchell and Gary Wilson.
Glass Lewis recently hosted two conference calls, one with Gold and Roy Disney, and the other, just this week, with Eisner and several board members.
