DISNEY : SUCCESSION PROBLEMS

GROUP MEMBERS
KARTIK
RACHIT
SHIVANI
SONAM
VARUN
VIPIN
ISSUES
BRIEF
THE WALT DISNEY ERA
Walt Disney was born on December 5, 1901
Served in American Red Cross in France during
World War I
Founded 1st studio ,Laugh- O- Grams Inc in
1922
Started Disney Brothers Cartoon Studio in 1923
In 1926 Co. name was changed to Walt Disney
Studio
In 1927 They completed the “Alice Comedies”
series
In 1928 negotiated with Universal Pictures

Walt Disney Productions
In 1928 WDS was renamed as Walt Disney
Productions
Character of Mickey Mouse was introduced
Introduced ‘Silly Symphonies’
Launched characters like ‘Donald Duck’,
‘Goofy’, ‘Pluto’

Contd ..
In 1932, Flowers and Trees was 1st
commercially released full-color cartoon film
In 1934, created a full length animation feature
of the famous fairy tale ‘Snow White’
In 1938, Snow White and the Seven Dwarfs was
released
In 1940 ‘ Pinocchio’ and ‘Fantasia’ were
released
In 1941 ‘ Bambi’ and ‘Dumbo’ were released
Contd ..
New subsidiary called WED Enterprises was
created for Amusement theme park
In 1950 1st live-action film ‘ Treasure Island’
was released
WDP produced 1st television special ‘ One hour
In Wonderland’
Hosted a weekly show on ABC called
‘Disneyland’
Followed by television shows like ‘Mickey
Mouse Club’ and ‘Zorrow’
In 1954, WDP set its own distribution company
called the ‘Buena Vista Pictures Distribution
Inc.

Walt Disney
Disneyland amusement park
was opened at Anaheim,
California on July 17, 1955
In 1960 animated movies
‘Sleeping Beauty’ ‘101
Dalmatians’ were released
In 1966 Walt Disney died
Before death bought 43
square miles land in Florida
Roy Sr. continued with Walt
Disney’s vision

Contd ..
In 1967 - The Jungle Book
In 1969 - The love Bug
In 1970 - The Aristocrats
In 1971 - Roy Sr. died, Don Tatum took over as
Chairman and CEO with Card Walker as
President
In 1977 – Tatum gave up the CEO post to
Walker
Miller was named the president of WDP
WDC after the Disney
Brothers
Walker took over CEO after Tatum retired & during his
tenure,
Company did not do well.

No major Additions to the theme Parks.

EPCOT project did not do well resulting into decrease in

animation Employee & due to poor earnings performance
Walker resigned & Miller took over & ROY resigned.

In 1983, Disney share price fall from US$ 84.13 to US$

45.63.

In 1984, Steinberg & Jacobs( corporate raiders) announced

that he had purchased 6.3% stock of the company which
later increased to 12.1% with a intention of having 25%
Eventually WDP had to pay Steinberg US$32 million to
relinquish his Disney stock.

In order to protect the company, Roy & Gold teamed up

with bass brothers( bought 25% stake)

They framed a new leadership team with EISNER as CEO &

Chairman & Frank Wells as President & COO

EISNER was working at PARAMOUNT & churned out huge

hits like Saturday night fever, star trek etc

After EISNER & WELLS had taken charge, ROY returned to

the company as Vice Chairman of the Board of Directors
& head the animation department, resulted into a huge
success of movie called SPLASH featuring TOM HANKS..
 EISNER Rein at Disney
EISNER brought his two executives from paramount named
Jeffery & Richard who handled motion picture division &
television business Operations respectively.

Disney gave a huge no of hits like- “The little mermaid,

Aladdin, The Lion King,” Beauty & the Beast.

Company launched Disney stores to merchandise its

branded products.

Existing themes parks were extended & new rides were

added, Resorts were constructed like Beach clubs so as
studios like MGM, Typhoon Lagoon.

Euro Disney was opened in Paris in 1992 which later

changed to
Disneyland Paris
Acquisition of Miramax Films & Capital Cities broadened
its films
Portfolio.

In 1994 Wells died at Helicopter crash & Eisner suffered a

heart attack
and Katzenberg resigned & formed Dream works (competitor to
WDC)

Katzenberg sued WDC for US$581 million as compensation.

In 1995, Michael Ovitz become president but quit after 14

months & was being paid US$140million.

In 2000, WDFA faced stiff competition from rivals like DW.

Pixar-Disney combine became critical and ABC networks faced

a decline in the viewership.

Terrorist attack of 9/11 coupled with recession added to

the company woes
January 2001 – WDC closed its portal Go.com,
laid off 400 employees and accounted for a
non-cash write-off of US$790 million.
March 2001 – WDC reported that it would lay off
around 4000 full time workers. This was
expected to result in saving of US$ 400
million.
2002 – WDC was reorganized into four major
business segments viz. Disney Studio
Entertainment; Disney Parks and Resorts;
Disney Consumer Products; and Disney Media
Networks
 D isn e y S tu d io E n te rta in m e n t
n d a tio n o f W D C
trib u te s m o tio n p ictu re s u n d e r W a lt D isn e y Pictu re s a n d D isn e y To o n S tu d io s
n a V ista In te rn a tio n a lse rve d a s stu d io ’ s In te rn a tio n a ld istrib u tio n a rm

D isn e y Pa rks a n d R e so rts

p a rks a cro ss th e w o rld , a lo n g w ith 3 5 re so rt h o te ls, 2 lu xu ry cru ise sh ip s a m
e W a lt D isn e y W o rld R e so rt in Flo rid a a n d T h e To kyo D isn e y R e so rt, Ja p a n
  Disney Consumer Products
 Extends the Disney brand to merchandize
 One of the largest licensors in the world
 It is divided Disney Hardlines, Disney Softlines and Disney Toys

D isn e y M e d ia N e tw o rks
e s a va st a rra y o f p ro p e rtie s o n th e Te le visio n , C a b le , ra d io a n d In te rn e t l
Problems faced by the company
 Roy resigned criticizing Eisner for his
‘micromanaging’ leadership style and loss of
morale in the company.
 He also mentioned that Eisner was responsible for
the company being perceived as ‘rapacious, soul-
less and always looking for a quick-buck rather
than long term value leading to loss of public
trust.
 Gold also resigned on similar lines, charging the
board inefficient and lack of strategic focus. He
believed that company faced management
failures and there was no accountability of those
failures.
 Roy and Gold started a campaign against Eisner
and gathered other dissident shareholders.
January 2004 – Pixar warned that their
partnership with Disney would end in 2005.
Pixar was responsible for the content while
Disney took care of the marketing and
distribution.
The main concern was that WDC, always and
innovator in animation technology, had
missed out on Digital animation revolution.
Disney was turning out the lights on Pixar
without having turned them on at Disney in
computer-generated animation
Disney had not developed its digital prowess

THE ISSUE OF SUCCESSION
On March 3,2004, an overwhelming 43% of
shareholders withheld their votes for Eisner’s
re-election to the board.
As a result, the Board separated the roles of
CEO and Chairman, in effect, reducing
Eisner’s power.
Therefore former U.S. Senator George Mitchell
became the new Chairman, while Eisner
continued to remain CEO
In April 2004, it was revealed that Eisner had
received a ‘No Confidence’ vote from 72.5%
and Mitchell from 63.7% of the votes cast at
the company’s annual 2004 meeting.
Meanwhile Eisner had made it clear that his
intention was definitely to serve the CEO
contract out to its completion till 30th Sept
2006.
However as the ouster of Eisner started gaining
momentum, the most important agenda was
to find a successor.
 The problem lied in the fact that WDC had no
succession plan. The Board had no clear names
on hand.


 Many names were put forward as likely successors

to Eisner.


Bob Iger, WDC President & COO

(Internal Choice)
Steve Jobs, Chairman & CEO of Pixar
Mel Karmazin, COO of Viacom
Peter Chernin, President of News Corp.
Terry Semel, former Warner Brothers
Chief
Meg Whitman, CEO of e-bay
Paul Presserler, CEO of GAP Inc.
Steve Burkes, second-in-command at
 Roy and Gold, two former directors insisted that
an immediate search for a new CEO should be
launched and at the conclusion of this search
Eisner should be removed.


 They urged the non employee members of the

WDC Board to hire an independent recruiting
firm. They also charged that Eisner wished to
install Iger as the next CEO in order to retain his
position in the company as Iger was essentially
Eisner’s man.


 In October 2004, the Board hired the executive

search firm Heidrick & Struggles to help it name
a CEO successor by June 2005.


 However WDC could not still come up with a

concrete succession plan.
Impact of the Stalemate
 The fight between Roy and Eisner created an
unfavorable environment similar to the one in
1984.
 Confidence in the Disney brand – and the
prospects for whoever succeeded Eisner – has
eroded even among those who believed that
Disney could essentially do any wrong when it
came to creating magic among customers.
 This also had a negative impact on employee
morale.
 The image if the company took a beating as the
WDC Board came under a barrage of criticism.
 43% of the company’s shareholders withheld their
votes gainst Eisner’s re-election was evidence of
their reduced faith in Eisner’s leadership
 Also, the company’s stock had underperformed,
Roy and Gold, two former directors insisted
that an immediate search for a new CEO
should be launched and at the conclusion of
this search Eisner should be removed.
They urged the non employee members of the
WDC Board to hire an independent recruiting
firm. They also charged that Eisner wished to
install Iger as the next CEO in order to retain
his position in the company as Iger was
essentially Eisner’s man.
In October 2004, the Board hired the executive
search firm Heidrick & Struggles to help it
name a CEO successor by June 2005.
However WDC could not still come up with a
concrete succession plan.
The Final Choice
 In March 2005, WDC announced the Iger would
succeed as the CEO after Eisner retired in
september 2005.
 Heidrick & Struggles claimed that there was a
thorough and exhaustive search for the process
of considering potential candidates and it met the
most rigorous standards.
 Roy and Gold were still dissatisfied as they believed
that Iger was Eisner’s man and said that the
investors had been ‘conned’.
 They were also dissapointed that Board had not
been able to find a suitable external candidate to
replace Eisner.
 They believed that the need to have a clean break
from the prior regime and to change the
leadership culture at Disney was eveident to
everyone else except the Board.
Q1) Analyze the performance of
Disney under Eisner. Identify the
key issues that led to his ouster?
Performance of Disney under
Eisner
Eisner, Wells and new team turned around the
performance of WDC & called a golden
decade.
The Little Mermaid, Beauty and the Beast,
Aladdin, The Lion king became popular.
Disney stores were launched to merchandise
products with first in Glendale, California.
Broadened its film portfolio by acquiring
Miramax Films and Capital Cities/ABC
WDC’s performance slowed down as it had
increased the salary of animators to retain
them on facing tough competition from
Dreamworks.
Closed its portal Go.com and laid off 400
employees to save US $ 350 million.
In 2003 there was increase in share prices of
WDC by 34 % with increase in attendance in
theme parks.
Key issues leading to Eisner’s
ouster
Poor Governance norms at WDC that lead the
Ovitz payout.
Abrasive management style, insecurity, micro-
management lead to exit of highly talented
executives.
Leadership style was criticized and held
responsible for loss of morale in company.

Also perceived as rapacious, soul-less, and
looking for quick buck rather than long term
value
Also blamed for cannibalization of certain
company icons for short term gains.
Eisner was again held responsible for ending of
the long running partnership with Pixar in
2005 .
Q2) “Succession planning is
something most companies turn to
only when it is too late”. Comment
on this statement and its relevance
to the succession problems at
WDC.
Relevance of Succession
Planning
In march 2004, 43% of shareholders wanted
Eisner’s re-election.
In April 2004 Eisner & the new appointed
chairman, Mitchell received No confidence
vote.
Because of absence of name of successor
company was ready for any kind of
emergency, voluntary or non-voluntary
succession.
Governance being criticized by six state
pension funds.
Iger, WDC president & COO was also one of
the option but his lack of success in ABC
networks was going against him.
Questions were being raised if Jobs, chairman
& CEO could satisfy leadership needs at
Disney.
Warner Brother’s chief was not considered
because of his age.
Retirement of Eisner was opposed by Roy &
Gold and said to install alternative set of
directors.
Fight between Roy and Eisner created an
unfavorable environment.