Fool.com: Disney Disses Shareholders [Special] March 11, 2004

An unprecedented 43% of Disney(NYSE: DIS) shareholders gave the embattled Michael Eisner a vote of no confidence at the company's annual meeting last week. Eisner was stripped of his role as chairman of the company, though he remains as CEO.

On The Motley Fool Radio Show on NPR, David and Tom Gardner recently talked about the wonderful -- and not so wonderful -- world of Disney with Kim Masters, author of The Keys to the Kingdom: How Michael Eisner Lost His Grip. She attended the annual shareholder meeting last week and shared her thoughts with us. This is the last of three parts. All previous parts are in the related links box. Right up there. -----^

TMF: Let's look ahead a little bit. Someone on our Motley Fool news staff informed me that Steve Case got turned away as chairman of Time Warner(NYSE: TWX), pretty much when 22% of voters said, "No confidence" in him. Well, now you have Eisner up over 40%, but interestingly George Mitchell, the man who has been named the chairman of the board, got 24% no confidence at the shareholder meeting. Where is Disney headed?

Masters: I don't know, but I can tell you that, especially having been there at the shareholder meeting, this is almost like waving a flag in front of a bull. These people came in, they said, "We want to make it extremely clear. We are not talking about splitting these jobs and giving one of them to Michael Eisner; we are talking about replacing Michael Eisner." So what do they do? They split the job. They left Michael Eisner as the chief executive; they put in someone who had a completely clear "no confidence" vote. This just feeds the flame. This is like saying we are ignoring you. I don't think that can hold.

TMF: With so much lack of confidence reportedly in Eisner, it is interesting to note that the stock is up some 60% over the last year, partly buoyed, but certainly not fully, by the Comcast(Nasdaq: CMCSK) bid. Is that ironic? Is it ironic that a supposed lack of confidence, where you think everybody is selling the stock, and yet it is up 60%?

Masters: What Roy Disney said is that these were not renewable resources. For example, a lot of the money was Finding Nemo. We know what has happened to the Pixar(Nasdaq: PIXR) relationship. A lot of the money was Pirates of the Caribbean, which is a great hit, but no one can rely on an entertainment company to pop that kind of hit out quarter to quarter and keep that kind of thing going. So I think Roy and Stanley would have had an easier time attacking maybe 18-20 months ago, but I think they have been able to convince shareholders not to rely on these recent results as a sign that ABC is turned around, or as a sign that animation is now on the mend. I think these people are kind of scared about, no matter what happens, they are scared about status quo or change.

TMF: On a lighter note, Kim Masters, I am guessing you have seen the movie Shrek. I remember reading at the time that the Prince Farquaad character, the diminutive dictator, was based on Michael Eisner. Is that your opinion?

Masters: That is certainly what many people thought, but you know, Shrek was Jeffrey Katzenburg's revenge. Shrek proved that someone besides Disney could have a giant animated hit. I have seen this movie about 8,000 times because of my child. The way that you entered the kingdom of Lord Farquaad is obviously a send-up of Disney and the little, teeny Lord Farquaad had the sort of oblong head, not unlike a certain CEO, so I would say it is not unreasonable speculation.

TMF: Kim Masters is the author of The Keys to the Kingdom, How Michael Eisner Lost His Grip. Thanks for the update on all things Disney.

Masters: My pleasure.

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