Walt Disney's Corporate Governance Crisis|Corporate Governance|Case Study|Case Studies

Walt Disney's Corporate Governance Crisis

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Case Details:

Case Code : CGOX002
Case Length : 8 Pages
Period : 2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Walt Disney
Industry : Entertainment
Countries : Global

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Walt Disney and his brother Roy started Disney Brothers Studio in Hollywood, California, in 1923. Walt directed the first Mickey Mouse cartoon, Plane Crazy, in 1928 (the third, Steamboat Willie, was the first cartoon with a soundtrack). The studio produced its first animated feature film, Snow White and the Seven Dwarfs, in 1937...

Overview of Corporate Governance

In the early 2000s, Disney found itself in various controversies involving the board of directors. Media reports indicated that Eisner had picked most of the directors himself and installed some in roles for which they were not suitable.

For example, one elementary-school principal Reveta Bowers and actor Sidney Poitier were on the compensation committee.

Eisner had also became notorious for excessive CEO pay when he cashed in $750 million of options during the 1990s. Many felt Eisner did not deserve such a handsome reward, in view of Disney's mediocre performance...

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Future Outlook

On March 3, 2004, Eisner was stripped of his role as chairman, but kept his position as chief executive, after 43 percent of shareholders voted against him in an unprecedented protest. Convening in Philadelphia after a stormy annual meeting, Disney's board said it had elected former U.S. Senator George Mitchell as the company's chairman and that 61-year-old Eisner had its unanimous backing as Disney's top executive.

People close to Disney felt the board wanted to keep Mr. Eisner around, because it did not want to destabilize the company in view of the takeover attempt by Comcast.

Disney's board added that while it recognized that some shareholders were calling for Eisner's removal, it was confident that the entertainment conglomerate's financial results would validate its support of management and current strategy.

"While there appear to have been a number of different forces at work in the shareholder vote, a significant message conveyed in the vote was in the area of governance," Disney's board said in a statement...


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