DISNEY SHAREHOLDERS REVOLT: EISNER OUT AS CHAIRMAN

Remains CEO; 43% of Share Votes Withheld in No Confidence Action

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LOS ANGELES (AdAge.com) -- In a stunning shift in the fortunes of a media mogul widely perceived as invincible, Michael Eisner was forced out of his position
Photo: AP
Michael Eisner addressing the annual meeting shortly before the vote that forced him out as chairman.
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audio bug Walt Disney Co. statement issued last night.

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as chairman by angry Walt Disney Co. shareholders at the annual meeting in Philadelphia yesterday.

Capping a rapid series of moves late in the day, the entertainment conglomerate's board announced that former U.S. Senator and presiding board director George J. Mitchell had been named the new chairman.

Hand-picked board
The board members who officially stripped him of his chairman's authority had all been handpicked by Mr. Eisner

A company statement released to announce the new chairman said, "The Board remains unanimous in its support of the Company's management team and of Michael Eisner."

Earlier in the day 771 million of the 1.8 billion company shares eligible to vote were withheld from Mr. Eisner, who was running unopposed for his corporate positions.

The shareholder vote came on the heels of a number of large state pensions funds and two influential proxy firms recommending a "no" vote on Mr. Eisner. The largest public pension fund in the country, California Public Employees' Retirement System, withheld support and asked Mr. Eisner to step down by year's end.

Mr. Eisner's employment contract does not expire until 2006.

Discontent 'too deep'
"This discontent is too wide and way too deep in the marketplace, and it has led us to believe that Eisner should go and the board should get quickly to work on planning for an orderly transition," Sean Harrigan,

president of the Board of Administration, said in a statement. The pension fund owns more than 9.9 million shares of Disney stock valued at approximately $235 million.

As the dissident rumble grew from other shareholders, Roy Disney, nephew of company founder Walt Disney, and Stanley Gold stepped up their attempts to oust Mr. Eisner. Messers. Disney and Gold had resigned from the board last year over what they said was Mr. Eisner's mismanagement of the company. Mr. Disney had said he was forced out by Mr. Eisner, whom he helped bring to Disney in the 1980s to turn around its sagging fortunes.

Dissidents seek total ouster
Dissidents had a voice at the four-and-a-half-hour shareholder meeting, with Mr. Gold pointedly saying, "Michael Eisner must leave now."

Mr. Eisner defended his leadership, saying the company is on the right track and growing in value. He said the company is on a "dramatic, and we believe, sustainable upswing."

Comcast and Pixar
It has been a tumultuous few months for Mr. Eisner. Along with an unsolicited bid still on the table from Comcast Corp. to buy the Walt Disney Co., Mr. Eisner has seen a lucrative deal with animation powerhouse Pixar disintegrate.

Further damaging his stature have been recent revelations, coincidentally timed, about his hiring and quick firing of his former friend, Michael Ovitz. Shareholders have long been critical of Mr. Ovitz's hiring, done without board approval, and his firing, which cost the company upwards of $100 million in severance perks. Documents recently made public detail Mr. Ovitz's lavish spending during his 15-month tenure at Disney, including a $2 million office renovation and hundreds of thousands of dollars worth of limousine services, gifts to actors and dinners with Hollywood's elite.

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