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Votes against Disney's Eisner mounting

The shareholder protest aimed at Walt Disney Co. Chief Executive Michael Eisner is expected to see more than 30 percent of shares cast at next week's annual meeting effectively opposing his re-election as chairman of the company's board, a Disney source said.
/ Source: Reuters

The shareholder protest aimed at Walt Disney Co. Chief Executive Michael Eisner is expected to see more than 30 percent of shares cast at next week's annual meeting effectively opposing his re-election as chairman of the company's board, a Disney source said.

That show of discontent with Eisner's stewardship of the entertainment conglomerate would be much more widespread than first anticipated by analysts.

Disney would be inclined to see the result as a referendum on whether to separate the roles of chief executive and chairman, the source said.

Roy Disney -- the nephew of company founder Walt Disney -- and Stanley Gold launched what was first seen as a long-shot campaign against Eisner and three other Disney directors after leaving the Disney board late last year.

Most analysts had initially assumed that Disney's improved results and rebounding share price would limit the impact of that campaign for major fund managers.

Disney shares have gained almost 90 percent since bottoming out in August 2002. The stock jumped earlier this month after Comcast Corp., the largest U.S. cable television operator, announced an unsolicited, all-stock bid for Disney that Eisner and the board rejected.

In the past two weeks, two proxy advisers, Institutional Shareholder Services and Glass Lewis, have recommended that investors withhold their votes for Eisner, effectively opposing his reappointment. A range of public pension funds including those representing California and New York have signaled that they would do so.

On Friday, North Carolina Treasurer Richard Moore said he directed the state’s fund managers to vote against  Eisner.

Moore, in a televised interview on CNBC, said he also asked that the state’s funds to vote against Disney board members who sit on the company’s audit committee and to vote against retaining PricewaterhouseCoopers as auditor.

“We don’t think the corporate governance at Disney is right,” Moore said. “To continue to have these side agreements with an auditing firm after all we’ve been through these last couple years boggles the mind.

“I don’t think we’re going to teach any of these old dogs any new tricks. It’s time for some change."

Disney believes that the ISS recommendation, in particular, will carry weight with investors controlling 30 percent or more of its shares when the vote is tallied at its annual meeting, scheduled for March 3 in Philadelphia, a person familiar with the matter said.

The Wall Street Journal reported in its Friday edition that mutual fund company T. Rowe Price had also decided to vote in protest against Eisner by withholding its vote.

Some analysts have suggested that if the protest vote against Eisner, who like other Disney directors, is running unopposed, were to top 20 percent, that could force the hand of the company's board, already under intense pressure to demonstrate its independence.

One option urged by many analysts and ISS would be to split the roles of chairman and chief executive at Disney.

Another option would be for the company to detail a succession plan and perhaps even a timetable for the departure of Eisner, 61, who has led Disney since 1984 and whose contract expires in 2006.