Disney Directors Give Nod to Funds

Walt Disney Co. made modest concessions to a group of restive investors Friday, saying it would allow them to suggest nominees for a seat on the company’s board this year.

Disney directors also told the group -- consisting of some of the nation’s biggest pension funds -- that it would consider allowing an advisory panel to serve as a liaison between the board and investors.

But the board did not give in to a key desire of the funds: a time frame for naming a successor to Chief Executive Michael Eisner, who has led the entertainment giant for nearly 20 years.

Disney Chairman George J. Mitchell, one of six directors who met with the pension funds in New York, said he told the funds that the board was working on a succession plan for Eisner and other senior executives.

“When the board determines the time is right for a decision on succession, we will make that decision,” Mitchell said.

In the meantime, Mitchell and his colleagues renewed their support for the company’s top brass, including Eisner, who did not attend the session.

“We hope these leaders now have a better understanding as to why the board remains firm in its view that the Disney management team

His comments followed a two-hour meeting with officials of the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and pension funds from North Carolina, Ohio, Connecticut and New York.

The funds have been sharply critical of Disney’s long-term financial performance. Some have called for Eisner’s ouster.

Even as he welcomed the dialogue with the pension funds, Mitchell appeared to downplay their clout, pointing out that directors had met this week with other, larger shareholders that were more supportive of Disney. When asked why Eisner did not attend the meeting, Mitchell said: “He’s very busy and has other things to do.... The people we met with hold less than 2% of the shares.”

Cynthia Richson, corporate governance officer for the Ohio Public Employees Retirement System, was taken aback by Mitchell’s comments. “He’s trying to minimize us as a group, which is unfortunate because we walked out of this meeting feeling positive,” she said.

In fact, several fund officials pronounced the session with the Disney directors a success.

“It was a very positive first step,” said New York state Comptroller Alan Hevesi.

Others were more cautious. “This is a company and a board that is still operating under a cloud,” said North Carolina Treasurer Richard Moore. “They did an outstanding job today of saying all the right things.... What needs to happen is that some of the talk needs to be backed up by action.”

CalPERS President Sean Harrigan, whose fund has called for Eisner to resign by year’s end, said: “The dialogue is healthy but the proof is in the pudding.”

For their part, directors stressed that Disney was on track to achieve double-digit average annual growth in earnings through 2007 -- and took issue with those who accuse them of being too cozy with Eisner.

“The Disney board plans to continue to hold management accountable for performance,” Mitchell said.

He said the board would consider any suggestions from the pension funds of people who could serve as an independent director. Those names -- along with others -- would be culled by the nominating committee, with the board expected to name the director by late December.

The pension funds had demanded the meeting with Disney directors in the wake of a 45% protest vote cast in March against Eisner’s reelection.

Friday’s discussion focused on several corporate governance issues, including guidelines for director independence, duties of the chairman and executive compensation. Moore asked the board to consider publicizing proposed executive pay increases 30 days before they are adopted.

Eisner had been in New York the day before to receive a humanitarian award from the United Jewish Appeal. As he prepared to open an envelope during the awards ceremony, he joked that it contained the name of his successor.

“It’s Omarosa,” he said, referring to a widely reviled contestant on Donald Trump’s TV show, “The Apprentice.”

Times staff writers James Bates in Los Angeles and Thomas S. Mulligan in New York contributed to this report.