Q$3$: Case study: The Walt Disney Company

Roy Disney, Walt Disney's nephew, was the last remaining member of the Disney family on

the board of the famous Walt Disney Company. He was vice$-$chairman of the board and an

executive director as chairman of the Animated Features Division. He was often paraded as

the last survivor of the founder's family serving in the company.

However, in November $2003,$ he had a shock. The governance and nomination committee

of the board lowered the mandatory retirement age for directors to $72.$ Roy was $73.$

Moreover, John Bryson, who was chairman and CEO of Edison International, an outside

director of the Walt Disney Company and a member of its nomination and compensation

committee, told him that, since he was past mandatory retirement, the committee had

decided to make no exceptions and had agreed that he should not run for the Disney board

at the next AGM.

Roy's response was: 'You'll regret this. $..\text{'}$ But he was not really surprised: for a few years,

relations between him and Michael Eisner, the chairman and CEO of Disney, had been

poor. Indeed, by $2003,$ they were scarcely speaking.

Michael Eisner, who previously had a highly successful career with ABC and Paramount

Pictures, had been appointed to Disney in $1984$ by Roy Disney himself. In his early years,

the company was highly successful in both animated and main films, videos, theme parks,

and merchandise. The company's financial performance and its share price had improved

significantly. In $1988,$ Eisner was the highest paid executive in America, with a salary, a

bonus on profits, and the exercise of stock options amounting to some US$$40$ million. In

$1992,$ he earned over US$$200$ million.

But as the $1990$s progressed, problems arose. Financial performance fell off. Critics

complained that Disney had lost its creative energy. The Euro World theme park in Paris

faced a massive overspend and below$-$budget revenues: the strategies that had worked in

the United States did not work in Europe. Roy Disney was not alone on the board in

criticizing Eisner. Stanley Gold, an independent outside director, questioned why, when

profits had fallen $25\%$ and the Disney share price was low, Eisner had been given a US$$5$

million bonus by the compensation committee. Gold had been chairman of that committee,

but had been replaced by Judith Estrin just before this bonus was awarded. Another outside

director, Andrea van der Kamp, was also told in $2003$ that she would not be re appointed to

the board. She wrote complaining that:

I was asked to serve on this board to be an independent director, and now I$\text{'}$m not being re$-$

nominated because that is just what I am $-$an independent director. $..$ The performance of

this company has not been wonderful. I, along with some employees and shareholders are

concerned. Michael Eisner has cost this company a lot of money. $..$ We have terrible

relations with creative people in Hollywood because of Michael Eisner's arrogance. Many of

the best executives have left the company. We've just fired all these people and yet Michael

Eisner is getting a $$5$ million bonus.

Question:

Andrea van der Kamp, an independent outside director, complained that she was not re

nominated to the board because she had been too independent. What can a director, who

has criticized corporate culture, do if he or she is then not re$-$nominated?