Disney succession: PR master Eisner manages exit, but questions remain

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Michael Eisner looked every bit the Everyman on a recent trip to Walt Disney World, dressed casually in sport shirt, sneakers and a Mickey Mouse baseball cap. The Walt Disney Co. CEO was surveying the damage from Hurricane Charley and thanking park employees for helping out during the crisis. It was a consummate Eisner moment, projecting a calm image in the eye of the corporate storm.

In announcing his retirement days later from the entertainment giant at the end of his contract in 2006, Mr. Eisner again showed a characteristic penchant for public-relations finesse. There was no guarantee, under the cloud of pressure from shareholder groups and former board members, that Disney's current board would have renewed Mr. Eisner's contract. This way, observers said, he can perhaps leave without being dismissed.

"The handwriting was on the wall," said Russ Reynolds, chairman of executive-search firm Directorship Search Group. "He handled it gracefully, in a way that doesn't look like he was forced."

The positioning and timing may mean that Mr. Eisner's detractors, including former board members Stanley Gold and Roy Disney, will have less to fight about, though they're still asking for his early ouster. "It's a move that strongly deflates the engine of hostility," Mr. Reynolds said. "Anything the dissenters do now just looks vindictive."

stepping out

Mr. Eisner, who had remained largely silent during recent shareholder revolts, has given some of his first media interviews in months about his departure after nearly 20 years at Disney's helm. He has hired a high-powered New York-based public relations firm that could not be identified to help him hone his public image. That likely will include more media coverage of his folksy "I'm going to Disneyland" side.

"He handled the retirement announcement much better than he's handled his PR up to date," said Michael Montgomery, president of Montgomery & Co., an investment-banking and consulting firm.

Though Hollywood loves a dignified exit, business circles aren't so sure about the move. It comes at a time when Disney is on track to deliver on a promise of 50% earnings growth in the 2004 fiscal year ending Sept. 30, fueled by its cable channels, its rebounding theme parks and consumer-products division and home video. But its film division has struggled this year with several costly flops, and ABC is trying to recover from several weak years.

unresolved issues

Moreover, there are especially pressing matters on the table. After nearly 10 months of wrangling over a new deal, earlier this year Apple Computer founder and Pixar Animation Chairman Steve Jobs walked away from talks with Disney. The two entertainment powerhouses have worked together for more than a decade, with Disney distributing Pixar's films-cash cows that pulled in more than $1 billion and accounted for about half of Disney Studios' operating profit in recent years.

Then there's the future of Miramax. After Disney refused to let it distribute Michael Moore's "Fahrenheit 9/11," Bob and Harvey Weinstein bought back the movie and shepherded it to release through an outside distributor, where it's become the highest-grossing documentary of all time. The Weinstein brothers are due to renew their contracts, but those talks have dragged on; Harvey Weinstein has clashed repeatedly with Mr. Eisner.

`unsatisfactory'

"It seems very statesmanlike to announce you're stepping down," said Robert Monks, a longtime advocate for corporate-governance reform who founded Institutional Shareholder Services. Mr. Monks has been an adviser to the attorneys for shareholders suing Disney for quickly hiring and firing Michael Ovitz, shelling out some $140 million of the company's money as a severance in the late '90s (the suit is headed for trial this year). But "this is a very unsatisfactory resolution from a practical position of shareholder value," said Mr. Monks. "Someone has to make decisions. This is not a business for lame ducks."

Just how much control Mr. Eisner will cede in the meantime is anyone's guess. Mr. Eisner, a well-known micromanager, drove talented executives away from the company, a report from Merrill Lynch's Jessica Reif Cohen noted. At least a few of those former Disney employees-Comcast Corp. Chief Operating Officer Steve Burke, National Football League's senior executive Steve Bornstein and The Gap's Paul Pressler-have been suggested as Disney CEO candidates.

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