Eisner World 1

Running head:  EISNER WORLD

Eisner World

Heather D. Burchfield

Middle Tennessee State University
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The idea of a public company is that its stock is owned and

traded by

individual and institutional investors. The Walt Disney Company

should understand this definition better than anyone with its

legendary and international success. Although in 1994, the

studio giant had its share of problems after the company’s

president Frank Wells died in a tragic skiing accident. This left

Disney’s CEO Michael Eisner to be the interim president while

looking for a replacement. While Eisner may have performed well

as a team with Wells, he did not make the best individual

decisions for the organization, and I do not feel he ever

understood the concept of a public company from looking at

those who served on his board of directors, others he hired within

the company, and expense decisions he made.

Due to animosity and power struggles between Eisner and

Jeffrey

Katzenberg, then head of Disney Studios, Eisner would not

promote Katzenberg to the position of president. Therefore,

Katzenberg resigned and formed DreamWorks SKG with Steven

Spielberg and David Geffen, but he did not leave Disney empty-

handed. The former employee sued the cartoon giant for money
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that he thought he was entitled and received $250 million in an

out-of-court settlement. To fill Wells’ position, Eisner hired his

long-time friend Michael Ovitz, but that did not work out. Eisner

paid a $140 million severance package to Ovitz. Ovitz worked for

14 months with Disney, and Eisner paid him enough to leave to

the point that he would not ever have to worry about working

again. In the span of about a year, almost $400 million was

irresponsibly spent, and why was Eisner allowed free reign as to

who to hire Ovitz in the first place?

Maybe it has something to do with what Jim Collins

described as, “the problem of charismatic leadership and strong

personalities.” Also do not forget what was written in Business

Week in 2000:

Eisner has steadfastly refused to rid Disney’s board of his

many friends and acquaintances. The board still includes

Eisner’s attorney, his architect, the principal of an

elementary school once attended by his children, and the

president of a university that received a $1 million Eisner

donation. (Albarran, 2006, p. 223)

The magazine also named Disney’s board of directors the

worst board in America in 1999 and 2000. Now the question

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becomes, did the leadership of Disney fail? I feel at the

beginning of the Eisner sovereignty, he and Wells worked well as

a team. They seemed to complement one another with their

marketing and executive leadership abilities, but after Wells’

death, Eisner seemed to become a self-serving leader. He made

business decisions in his own benefit rather than in the interest of

the company and stockholders. Obviously, Eisner did have a

strong personality and charisma because he was able to control

not only the selection of Disney’s board of directors but also their

opinions or ability to speak out against him. He also wanted to

be involved with every aspect of the company and felt he needed

to micromanage others. Personally, I feel micromanagement is

not a productive form of leadership because for employees to be

innovative, they need guidance without conformity. Gershon

(2006) did note in his text how the board of directors did not have

any direct connection with the company’s daily tasks or its

employees, which left them detached and again, feeling helpless

to speak out against Eisner.

When problems did occur, most of the board members felt

powerless or were so beholden to CEO Eisner, that no one

felt confident to come forward and raise the kinds of

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questions that needed asking concerning the company’s

business practices and finances. (p. 223)

In 2003, attention was brought to Eisner’s acts when The

Walt Disney Company was sued in 2004 and 2005 by investors in

regards to negligent spending of its assets, and the situation was

exacerbated when Comcast, Inc. offered $54 billion dollars to

acquire the company and when the relationship between Pixar

Animation Studio was alienated. Roy Disney, the son of Disney

co-founder, was forced to retire, which caused turmoil. He and

Stanly Gold, another critic who resigned, formed a protest Web

site entitled SaveDisney.com.

With all these dilemmas that arose while Eisner was CEO, it

was not until the stockholders got involved at the meeting in

Philadelphia that action was taken. Some of these investors were

so infuriated with the company’s handling that they dressed in

Disney costumes and handed out anti-Eisner brochures. Gershon

wrote, “43 percent of the nearly two billion votes cast by

investors withheld support for Eisner in his post as Disney

chairman.” Because of the uproar, Eisner was voted to remain

CEO, but his title as chairman of the board was relinquished.

Ultimately, Eisner agreed to step down as CEO in 2006 at the

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board’s advice.

There are going to be decisions made in business that are

not the smartest and are simply not successful. It is called trial

and error, but Eisner took a more self-fulfilling role as a leader.

He became greedy and surrounded himself with his friends that

would not stand up against him. I do think Eisner was a good

leader when he had a joint leadership role with Wells, but when

he stepped out of that team player mentality, Eisner was no

longer the kind of leader Disney needed. Because of Eisner’s

track record and demeanor, it was hard for others to see his

faults and realize he was no longer the best one to guide Disney

into the future. The economy, businesses, people, and life

changes, so there has to be revisions made to accommodate.

The recognition of these changes was delayed, which caused

more chaos for Disney than was needed or intended.

In a business, checks and balances are vital, and for any

business to prosper, it has to focus on strategy. This analyzes

competition, but it also looks at the customers and clients of the

entity. They are the ones the organization is trying to reach, and

the customers should have more input, especially when it is

publicly traded. This is where I feel Disney went wrong. They

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tried to solve all its problems internally with board of directors

who did not have any direct connection to the company, and

many times investors did not find out about problems until the

damage had been done. They should have been included or

consulted, particularly prime investors, in its major decisions.

Board of directors should be a sporadic group of people with no

direct ties and no bipartisanship with anyone else on the board.

These directors are being paid to counsel and lead The Walt

Disney Company. Their duty and loyalty is to the organization

and making it the best they know how.

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References

Harvey, C. R.  (2004).  Public Company.  http://financial­

dictionary.thefreedictionary.com/ (accessed February 17, 2009)

Gershon, R. A.  (2006).  Issues in Transnational Media Management.  Handbook of  

Media Management and Economics, 221­224.  New York, NY: Lawrence Erlbaum 

Associates.

Stewart, J. B.  (2005).  Disney War.  New York, NY: Simon and Schuster.