Man Without Qualities

Thursday, August 01, 2002

Corporate Governance in Disneyland

The Walt Disney Company says it is outlining steps aimed at making operations more transparent for investors, including a call for rules on expensing stock options and plans to reduce its board's size!

Not that Disney is going to start expensing its executive options. It just wants someone to say how everyone is to do that. Of course, nobody is going to do that anytime soon. So what Disney is really saying is "If the SEC or a complete sea-change in accounting practice makes us expense options, we will comply with the law or accounting mandates." They are such good people in Burbank! And you have to admire the spin.

And Disney is not saying it is going to make its board better, just smaller. The basic problem is that making Disney's board any better than it is would automatically provoke a crisis in the company, since any increase in Board quality is bound to trigger serious conflict with Michael Eisner.

In fact, the Walt Disney Company has one of the most notoriously passive boards of any major company in the country. With the exception of Roy Disney, who is quite sharp, independent and possessed of considerable personal charm, the board contains not one member who would dare challenge Eisner in any serious way, notwithstanding Eisner's now long track record for bad judgment and virtual disengagement from the company.

The more interesting aspect of the board shrinkage plan is: Will the board shrinkage remove Eisner's passive acolytes or strengthen even further the crushing grip of his long-dead hand?

It is now pretty obvious that the Disney-Second-In-Command, Robert Iger is to be soon disintegrated, whether he knows it or not:

"Disney's president, Robert Iger, and Mr. Eisner have been closely involved in the fall lineup. Executives close to Disney say that Mr. Eisner and Mr. Iger were recently at Mr. Eisner's Aspen home for a two-day retreat and had budgets faxed to them for review." Perhaps a budget for liquidating Mr. Iger's contract?

But will that buy Eisner any time? It shouldn't, but it probably will. Maybe Iger will go when the Board is shrunk.

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