updated 2/25/2004 6:17:45 PM ET 2004-02-25T23:17:45

The nation’s largest public pension fund said Wednesday it will withhold its votes for the re-election of Michael Eisner to the board of the Walt Disney Co., dealing another blow to the embattled chairman and chief executive.

The California Public Employees’ Retirement System cited what it called Disney’s “dismal performance” over the past five years.

The announcement came hours after Glass Lewis & Co., a San Francisco-based research firm that advises institutional shareholders, recommended that holders of Disney stock withhold their votes for Eisner.

“The Disney board has been notoriously insular, famously gullible and blindly loyal to Mr. Eisner,” Glass Lewis said. “In our view, Disney’s board has come a long way, but not far enough.
Disney did not immediately return a call seeking comment.

The news adds momentum to an aggressive campaign by former board members Stanley Gold and Roy E. Disney aimed at producing a protest vote against the re-election of Eisner and three other board members at the company’s March 3 shareholder meeting in Philadelphia.

Gold and Roy E. Disney, the nephew of founder Walt Disney, say Eisner has mismanaged the company since 1994 and acted to squelch board criticism and that board members have lacked independence.

Cable television giant Comcast Corp. made an unsolicited takeover bid for Disney on Feb. 11. The Disney board unanimously rejected the offer as too low and expressed support for Disney’s current management.

The pension fund is the 29th single largest shareholder of Disney, with 9.9 million shares.

“We have lost complete confidence in Mr. Eisner’s strategic vision and leadership in creating shareholder value in the company,” said Sean Harrigan, president of the CalPERS board of administration.

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