updated 2/9/2004 7:41:00 PM ET 2004-02-10T00:41:00

The Walt Disney Co. took the offensive Monday against two former board members, touting the Disney brand in full-page newspaper ads and writing shareholders to outline the company’s recent accomplishments.

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The moves come two days before Disney is expected to release strong first quarter earnings and follows an aggressive campaign to oust Disney chief executive Michael Eisner waged by former board members Roy E. Disney and Stanley Gold.

In a “Dear Shareholders,” letter dated Friday, Disney’s 13 board members outlined the “company’s real turnaround” over the past year and urged shareholders not to be “misled” by claims made over the past few months by Gold and Roy Disney.

“You should be disturbed by this attack, which comes at a time when your company is achieving very positive results,” the letter stated.

The letter repeats the company’s expectation of earnings growth of at least 30 percent in 2004 and adds that the board expects to add another independent director this year.

The letter also offers the company’s first formal defense of Eisner’s record.

“And they totally ignore the impressive performance record of Michael Eisner, who, as one of the company’s largest individual shareholders, is fundamentally focused on your interests,” the letter states.

The letter points out that Disney’s stock rose 43 percent in 2003, compared to a 26 percent gain in the Standard & Poor’s 500 index.

Why they're complaining
Roy Disney and Gold have complained that Disney’s stock price underperformed major indexes from 1996 through 2003.

“They’re trying to defend Mr. Eisner’s positions in many different facets of the company leading up to the shareholder meeting,” David Miller, an analyst with Sanders Morris Harris, said Monday of the company’s letter. “They’re saying, ’Let our financial performance speak for itself and whatever critics are out there, let’s silence them with our numbers.”’

The company is expected to report significantly higher earnings this week, boosted by profits from its film studio and improvements at its theme parks and television networks.

The Disney dissident group sent its own letter last week to company board member George Mitchell, challenging the company to release letters and presentations Gold and Roy Disney made to the board over the past two years.

“The company has questioned the accuracy of our statements without supporting its claims,” according to the letter, signed by Shamrock Investments officer Michael McConnell. “We are prepared to openly discuss all of our statements.”

Shamrock Investments is run by Gold primarily to manage Roy Disney’s financial holdings.

The dissidents also challenged the company to respond to a list of questions they plan to pose next week about Disney’s recent financial performance.

Both sides in the corporate dispute have been wooing large shareholders and corporate governance proponents over the past few months. Eisner and Mitchell have met with key financial analysts and others.

Gold and Roy Disney are planning to make their case on a conference call with institutional shareholders Wednesday — the same day Disney releases its first quarter earnings.

The unprecedented communications are expected to intensify ahead of Disney’s March 3 shareholder’s meeting in Philadelphia.

Gold and Roy Disney are urging shareholders to cast a “no” vote against four director candidates, including Eisner and Mitchell, as a protest. The two have not nominated an opposing slate of directors.

“I think that Disney has made progress and they are interested in making more progress and I am delighted the pressure from Roy and Stanley is keeping the fire under their feet,” said Nell Minow, editor of the Corporate Library, a private research group that studies business governance.

Eisner has met twice with Minow in recent weeks, once with Mitchell.

“If it wasn’t for Roy and Stanley, I don’t think anyone would be asking to meet with me,” she said.

Yet Minow questions the credibility of the dissidents and says she is “cautiously optimistic” about Eisner’s willingness to be responsive to shareholders.

“The fact they served at a time of excessive executive compensation and poor corporate governance makes it hard for them at this time to get the credibility they need,” she said of Gold and Roy Disney.

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