Open Letter to The Walt Disney Company Board of Directors
from Roy E. Disney and Stanley P. Gold:

DO THE RIGHT THING!

"If the shareholders and cast members of The Walt Disney Company are ever again to have confidence in the Company's leadership, they need to know that their new CEO was chosen in circumstances that were open and candid, and that the Board fully investigated and considered the allegations made against Bob Iger in DisneyWar."

Read the entire letter at savedisney.com:

http://savedisney.com/letters/red_spg_to_board031005.asp

Roy E. Disney and Stanley P. Gold Press Release

BURBANK, Calif., March 10 -- Roy E. Disney and Stanley P. Gold today sent the following letter to each member of the Board of Directors of The Walt Disney Company:






Roy E. Disney

Stanley P. Gold

4444 Lakeside Drive

Burbank, CA 91505



March 10, 2005



Open Letter to The Walt Disney Company Board of Directors:



In September 2004, following Michael Eisner's public announcement that he intended to step down as CEO of The Walt Disney Company, we urged you to hire an outside independent recruiting firm to conduct a search for the best possible replacement based on a process in which candidates were selected and reviewed openly and fairly. When you voted to conduct such a search, we commended the decision and expressed our cautious optimism that the Disney Board finally seemed ready and willing to make real progress with regard to succession planning.






Your actions since then have seriously eroded whatever faith we may have had in the way you are conducting the search. Accordingly, we are asking you to reconsider two of your recent decisions affecting the search for the new CEO.






1. We are advised by credible sources that all of the CEO candidates will be interviewed in the presence of Michael Eisner. If this is true, the practice would make a mockery of the idea that candidates should have meaningful interchanges with the non-management members of the Board. Quite honestly, it would subvert the entire search process.



As we have chronicled in numerous letters to you -- as early as August and September of 2002 and again in March and April of 2003 --no meaningful discussion about the Company and its strategy as well as its prospects, opportunities and mistakes can be discussed forthrightly in the presence of Michael Eisner. In our view, Michael Eisner is incapable of honest self-evaluation without seeking to blame or vilify others. Indeed, based on our experience on the Board, what kept most of our fellow Board members from challenging him was the combination of his overbearing nature, the Board's reticence for confrontation, and the fear that any director who did speak his or her mind would be shown the door (e.g., Andrea Van de Kamp and Roy).



The list of missed opportunities is catalogued in James Stewart's "DisneyWar" and it is not an admirable record for current senior management. It is inconceivable how you can expect a real candidate for the CEO position to come in and discuss in a thoughtful and meaningful way strategic issues, the decisions made by senior management over the last ten years, and how the candidate would approach the important issues now facing Disney, with Michael Eisner sitting in the room. As Board members, many of you were unable to do it (although privately with us you expressed your concerns) and it is unrealistic to expect a potential CEO candidate to do so.



Moreover, Michael Eisner has already publicly announced that his selected candidate to succeed him is Robert Iger and, at the Company's expense, has conducted a campaign for Mr. Iger's selection in both the media and on Wall Street. His choice of Bob Iger is nothing more than a ploy to hang onto power in some capacity and preserve his legacy. He has acknowledged as much in the Stewart book. His presence in the interview room is an obstacle to an open discussion and we urge you to exclude him (as well as all other non-independent directors) from this process if you want to conduct a careful, reasoned and meaningful search process.



This Board has an obligation to properly fulfill its corporate governance responsibilities, including its paramount task, the search for a CEO. This is not a decision that should be abdicated to Michael Eisner. Although management's recommendations should be considered, it is not appropriate for a CEO with a reputation for quelling opposing views and who has already decided who his successor should be to participate in the candidate reviews. Your fiduciary duties require the Board to make an informed, independent decision -- one that is not blindly predicated on the dictates of a CEO who received a 45% withhold vote just a year ago.



2. You should reconsider your decision not to investigate the facts surrounding senior management's withholding of information from the Board regarding the Fox Family acquisition and its unsuccessful operations. We were dismayed to see Chairman George Mitchell quoted in the February 11, 2005 edition of the New York Post to the effect that he had personally spoken with each and every Director and that not one of you was interested in investigating the allegations in "DisneyWar" regarding the Fox Family cable channel.



Mr. Stewart's book indicates that senior executives at Disney in 2002 and 2003 withheld materials from Board members in an attempt to cover up their mistakes in acquiring Fox Family and prevented the Board from considering a plan (initially proposed by the Company's CFO) that reportedly could have resulted in approximately $400 million in tax savings. Did the senior executives who withheld this information do so because they wanted to preserve their millions of dollars of annual bonuses? Did they want to avoid embarrassment and escape criticism by the Board? In effect, senior management apparently manipulated the information flow in order to prevent a fair inquiry into what was happening. Whether this manipulation cost the Company money is difficult to fully assess from the materials in the Stewart book, but it clearly raises an integrity issue with respect to these senior managers, including Bob Iger, a candidate for the CEO position that Chairman Mitchell embraces as an "outstanding candidate."



The undisputed facts in the Stewart book are:



A. Disney's senior management (Eisner and Iger) proposed the acquisition of Fox Family for $5.3 billion, provided that Disney did not have to assume Fox Family's Major League Baseball contract, which would have cost Disney at least an additional $700 million in losses.



B. Eisner agreed to buy Fox Family for $5.3 billion, plus he agreed to assume the baseball contract, for a total cost of at least $6 billion.



C. Eisner and Iger told the Board that, notwithstanding this increased purchase price, Fox Family was a good deal because they could put better programming on the Channel at little or no additional cost. They said they would "repurpose" programming from the ABC Network (i.e., do a "second run" of ABC Network programs on the Fox Family Cable Channel with very minimal additional costs). From the Stewart book, it would now appear that they made these representations to the Board without first checking with the producers of the programs, Disney executives with operational responsibilities in this area or the Company's lawyers. In fact, their repurposing scheme was dead- on- arrival; the Company didn't have rights to do repurposing; and it couldn't acquire those rights at a cost that would have justified the purchase price for Fox Family.







So far, a lot of very bad and very expensive business judgments, but nothing evidencing a lack of integrity. But then comes the cover-up.






D. As soon as Fox Family is acquired, its operating results grossly under-perform the projections presented to the Board at the time it was considering the acquisition. As some Board members began to question the acquisition and the inability to achieve projected results, the Company's CFO apparently devised a plan to write-down the acquisition by some $2 billion, the difference between the purchase price and fair market value of the Fox Family assets. That plan, while embarrassing to senior management, purportedly had the advantage of saving the Company and its shareholders $400 million in taxes, not a trivial matter.



E. According to "DisneyWar," when the $400 million tax saving plan is presented by the CFO to Peter Murphy and other executives, the CFO is instructed to terminate the outside consultants he hired to work on the project and to make sure their report is not finalized. Moreover, Mr. Stewart indicates that certain members of senior management are admonished not to inform the Board members of the plan in an effort to conceal management's mistakes.



F. Finally, in order to avoid disclosing the sorry state of affairs at Fox Family at the Board's next strategy session, Bob Iger reportedly instructed Company personnel to increase the projected performance of the renamed ABC Family Channel; even though those managers charged with the operation of the Channel believed these newly revised projections were unrealistic.



G. It is unclear from the Stewart book how much of this cover-up was directed by Eisner or Iger, but there is clearly an implication that they were involved.





For the last three years, the Disney Board has put its collective head in the sand and refused to address, or even discuss, the serious issues of Michael Eisner's management. Those of you who were around in 2002-2003 will undoubtedly recall the series of letters we wrote to you trying to stimulate such a discussion. We are afraid that your failure to investigate and understand Michael Eisner and Bob Iger's involvement in the Fox Family matter is another example of your avoiding the real issues. Failure to investigate these matters in the current post-Enron era is impossible to fathom.






The two issues discussed above pose a litmus test for the Disney Board. If the shareholders and cast members of The Walt Disney Company are ever again to have confidence in the Company's leadership, they need to know that their new CEO was chosen in circumstances that were open and candid, and that the Board fully investigated and considered the allegations made against Bob Iger in "DisneyWar". You have only to consider what Boeing's board of directors did earlier this week to see how a responsible board responds to even the appearance of unethical or inappropriate behavior on the part of the CEO. Similarly, Hewlett-Packard's board sets a worthy benchmark for how a board should deal with a CEO whose multi-billion-dollar acquisition strategy fails to come close to delivering projected results. In selecting a new CEO, the Disney Board should be no less demanding.


Unfortunately, when it comes to selecting a new CEO, high standards don't seem to be on the Board's agenda. Indeed, between last September (when it announced it would select a new CEO by June of this year) and the annual shareholders meeting in early February, the Disney Board did not interview a single outside candidate for the job. Nonetheless, during much of this time (i) Eisner and Iger have utilized the Company's extensive public relations operations to promote Iger for the job, (ii) the Board itself has publicly proclaimed Iger a leading candidate to succeed Eisner, and (iii) at least three Board members are reported to have already committed their votes to Iger's candidacy.


Given all this, is it any wonder that some potential candidates have said both publicly and privately that they believe "the fix is in"?


If the facts are even close to those presented in the Stewart book and there was a cover-up, this Board ought to at least demand a return of the very large bonuses from 2002, 2003 and 2004 from the senior executives involved (the bonuses for Eisner, Iger and Peter Murphy were more than $38 million in the aggregate for those years). Other remedies should be considered once the facts are uncovered. And you ought to do that before some plaintiff's lawyer or regulatory official makes that demand. It is time to clear the air at The Walt Disney Company and begin a new era. That cannot be done by avoiding problems because you think they will embarrass Messrs. Eisner and Iger.


We urge you to accept these recommendations and make a clean break from the sordid practices that have typified Disney's leadership these last few years. Good governance involves more than filling in questionnaires and adopting nice-sounding policies. It is about doing the right thing.


Sincerely,


Roy E. Disney
Stanley P. Gold

Of course the fix is in. Who is surprised by that?

Unfortunately, I don't know that anyone who matters (read: people making investment decisions for the largest institutional shareholders) are listening to these two anymore.

Unfortunately, I don't know that anyone who matters (read: people making investment decisions for the largest institutional shareholders) are listening to these two anymore.

I doubt that there are even many people that don't matter who are listening to these two anymore. They really have become incredibly irrelevant and their occasional press releases seem more like cries for attention all the time.

-Jeff

I doubt that there are even many people that don't matter who are listening to these two anymore. They really have become incredibly irrelevant and their occasional press releases seem more like cries for attention all the time.

-Jeff

Sadly, all of this is true. They've done so much to undermine their own credibility and commitment that now they're just coming across as a couple of yappy little dogs with no bite.

I believe the final straw was when they totally wimped out and refused to even nominate an alternate slate of board members choosing instead to take the seated Board at their word that change was forthcoming. This outrage was compounded by their explanation why, wherein they stated they didn't believe the Board was going to keep their word yet they still did nothing.

That was the end for me. I've written off the whole Save Disney movement since that time. Despite hundreds of millions in personal assets each, Stan and Roy just don't have the nads to really get tough in this fight.

Heck, Roy doesn't even take the time to write a new personal letter for the website homepage anymore.

Pack it in guys and call it a day.

I doubt that there are even many people that don't matter who are listening to these two anymore. They really have become incredibly irrelevant and their occasional press releases seem more like cries for attention all the time.

-Jeff

I am beginning to agree. Once I found out that Roy helped oust Diane Disney-Miller's husband from the helm...that made me dislike the guy some. To be that way towards family without first trying to work on the problems at hand, makes me question the guy and his motives. He seems to me to be a cry baby who thinks his uncle made no good decisions but rather it was all controlled by his dad.

I would like to see some more of the Disney family members involved with the company again although I am not sure if Roy is the one anyone would want back in there.

As for Iger, I will wait and see what happens. There is so much speculation out there right now that I think the guy needs to be given a chance. Let's see the progress or lack thereof in the next couple of years and then judge.

Kadiehl, did you ever read that book "Storming The Magic Kingdom" about the ouster of Ron Miller? David Koenig suggested that I read it, and it was very interesting. Afterwards I was shocked at the way that Roy and Stan got rid of Miller. I admit, I know nothing about big business, but the way that he was ousted was really mean. It appeared to me that it hit him like a ton of bricks. Kind of sneaky and underhanded. It left a bad taste in my mouth afterwards, and I had a hard time supporting the Save Disney effort after that.

David Koenig explained that at the surface it appears that way, but that it was driven by Wall Street and it didn't happen fast enough for them. Again, I admit I understand NONE of it, it just seems so cold to me.

If I were Diane Disney Miller I would have a hard time forgiving my cousin for this. She is a bigger person than I could be about it!

Kadiehl, did you ever read that book "Storming The Magic Kingdom" about the ouster of Ron Miller? David Koenig suggested that I read it, and it was very interesting. Afterwards I was shocked at the way that Roy and Stan got rid of Miller. I admit, I know nothing about big business, but the way that he was ousted was really mean. It appeared to me that it hit him like a ton of bricks. Kind of sneaky and underhanded. It left a bad taste in my mouth afterwards, and I had a hard time supporting the Save Disney effort after that.

David Koenig explained that at the surface it appears that way, but that it was driven by Wall Street and it didn't happen fast enough for them. Again, I admit I understand NONE of it, it just seems so cold to me.

If I were Diane Disney Miller I would have a hard time forgiving my cousin for this. She is a bigger person than I could be about it!

First off...I LOVE THE SIG LINE!! Too true..but I will not get started. I have been reading bits and pieces of books and came up with this thought but thanks for the idea of reading this book...I did not know about it and will be ordering it shortly!

I agree about the forgiveness factor. I know you are supposed to forgive but there is a point where I question that.....I would not be able to forgive my cousin after that!

First off...I LOVE THE SIG LINE!! Too true..but I will not get started. I have been reading bits and pieces of books and came up with this thought but thanks for the idea of reading this book...I did not know about it and will be ordering it shortly!


Thanks! I bet you can guess what I was feeling lately with that last thread! ;) :rolleyes:

I got my copy used from Amazon. It was pretty cheap. Too bad I didn't keep it, I could have given you mine! ;)

Tell me your opinions when you are done. I wonder if anyone else got the same impressions I did.

A year ago when the battle at the 2004 Disney Shareholders' meeting was heating up prior to the meeting Diane Disney Miller did in fact offer some public support of her cousin Roy's efforts to oust Michael Eisner from Disney. However, I too have read "Storming the Magic Kingdom". It's essential reading for Disney fans. Some public libraries may have it, it's out of print and quite old. But if anyone can find a copy and has the time, it's quite an excellent book about the business of Disney and in hindsight how the people in today's story of the company came into power.

But notice that Mrs. Miller is content nowadays to laud her father Walt Disney's memory and stay removed from her cousin's current advocacy efforts. A museum honoring the memory of Mrs. Miller's father is opening I believe in the San Francisco area, and a segment of the official Disney website does honor Walt's family history. In 2001 Mrs. Miller wrote a pictorial book about Walt Disney in honor of the 100th anniversary of his birth, also a fabulous documentary video was shown on ABC-TV the Sunday after 9/11 (by coincidence only) and is for sale as a VHS/DVD home video well worth owning. Perhaps that is a comfort to Diane Disney Miller, to perpetuate who her father truly was rather than get entangled in complicated and potentially bitter family and corporate politics. Classy, but I'm sure quite difficult, to stay above the fray as much as she has.

As to Roy Disney and Stanley Gold, I just hope they can keep the interest in this subject of change at Disney alive and going. Perhaps after those decades ago and what happened with Ron Miller as CEO, maybe Roy grew since then and is trying to make things right. Who knows?