• by Paul Gough , March 3, 2004

During a contentious and sometimes raucous annual stockholders' meeting in the City of Brotherly Love, Walt Disney Co. chief Michael Eisner came face to face with his critics, who charged that he couldn't bring the Magic Kingdom back to its former glory. He was also stripped of his chairman's job, though he remains CEO of the company. Former Senator George Mitchell, a Disney board member, was named chairman.

The critics delivered a message to Disney's management and board of directors, withholding the support of 43 percent of Disney's outstanding shares for Eisner's re-election and making similar protests against other directors.

Wednesday's annual meeting was more than five hours of corporate theater, the likes of which haven't been aired publicly in recent memory. At some points, in the unscripted question period with Disney stockholders, it seemed more like an old-style New England town meeting than the annual gathering of the media conglomerate. The meeting was broadcast over the Internet at Disney's Web site in an unedited stream that wouldn't have made the cut in official corporate histories. Some stockholders' questions bordered on the bizarre. Many were seemingly more interested in the price of rides at Disney World and whether all the Disney Stores would be sold than with the high-profile dissension of two directors and the hostile takeover bid by Comcast Corp.

Eisner, Mitchell and the rest of the Disney team tried to portray Walt Disney as a company that had seen hard times since 9/11, but one that was definitely on the road to recovery.

"Your company has the management skill and the creative talent to continue its growth path, moving aggressively into the future," Eisner told the stockholders in his opening statement.

But the two former directors who left the Disney board in a struggle with Eisner, Roy Disney and Stanley Gold, weren't moved. In speeches to stockholders--the board agreed to give them 15 minutes each to air their grievances, and they were true to their word--Gold and Disney called for the return to Disney's roots.

"Roy Disney and I have been on a mission--a mission not to promote ourselves but to save Disney," Gold said. He said that they tried to get the board to face up to what Gold called "management and governance problems," from the underperformance of ABC to the lack of a succession plan.

"Michael Eisner must leave now," Gold said. "We see today's meeting as a first step toward saving the company."

Roy Disney appealed to shareholders' visions of the company that his uncle founded.

"The Walt Disney Co. is more than just a business. It's an authentic American icon, which is to say that over the years it's come to stand for something meaningful and real and worthwhile," Disney said. "Our single biggest need is to get back to that core."

Both speeches were interrupted by applause. When Eisner returned to the stage and was applauded, he cut them off: "This should not be a political campaign." Eisner also disagreed with Gold's contention that the Disney board refused to listen, saying instead that the two sides couldn't agree.

"I think I have to say the conclusions that you just heard are fundamentally wrong. Disney's record of creating value is really undisputable," Eisner said.

Eisner has been under attack in recent months, first from Gold and Roy Disney and then within the month following a surprise and unwelcome bid for the company by Philadelphia-based cable company Comcast Corp. Never in Eisner's 20 years at Disney has there been as much contention. The plot thickened in recent weeks as several pension funds, who own millions of shares of Disney, said they weren't happy with the direction of the company, and that they wouldn't vote for Eisner.

Disney's message to them and the rest of the shareholders was simple, beginning with the stock price up 40 percent in a year, success at ESPN and Disney Channel, and improvements at the theme parks that were hit hard following the terrorist attacks in the United States. But he acknowledged that ABC's perennial fourth-place finish among broadcast networks was disappointing.

"We think we can greatly improve, and we are working toward that goal," Eisner said.

At several points during the annual meeting, Disney shareholders had their chance to talk to Eisner and other members of the upper management. They ranged from a 40-year shareholder who had to be interrupted due to time considerations to a former ABC News employee who said that Eisner personally responded to employees' email and questions about the Disney Stores and why Walt Disney World isn't more affordable for families. Two questions were raised regarding ABC News' Mideast coverage. Several talked about "the magic" that Disney possessed.

Eisner, hoarse from talking, answered them with occasional signs of strain. When one stockholder who had eight members of his family working for Disney asked the company to "do the right thing," Eisner responded that he was a shareholder too.

"I think doing the right thing in presenting the kind of management that we present today, creative, excellent ... With all due respect, we do not believe that the allegations and the conclusions that were presented are either correct or in the best interests of the company," Eisner said. "To continue to work as hard as we can to keep the magic alive is what is in the best interest."