For Them, the War at Disney Isn’t Over

In the week since the Walt Disney Co. board announced it would move quickly to find a successor to Michael Eisner, the chief executive’s two fiercest critics have publicly been as quiet as, well, a mouse.

But behind the scenes, former Disney directors Stanley P. Gold and Roy E. Disney have been canvassing their allies, seeking consensus on whether their work is complete. Their answer came Tuesday: Yes, with reservations.

“I’m heartened, but we’re not done,” Roy Disney, nephew of the company’s co-founder, said in an interview at his Burbank office. He and Gold made clear that they were reluctant to declare victory too soon. They said they still could make good on their threat to propose an alternative slate of directors if it appeared the board was retreating from its promise to conduct a far-reaching search for Eisner’s replacement.

Describing himself as cautious, Roy Disney quoted a line from Greek mythology: “There’s many a slip ‘twixt the cup and the lip.”

Still, Gold and Disney offered kind words to a board they’ve vilified for the better part of a year.

In a statement, they praised directors for deciding to conduct an independent search and to name Eisner’s replacement by June, a display of “precisely the kind of leadership and independence” needed. Gold and Disney had pushed the board hard on both those issues, as well as in obtaining assurances that Eisner would not be named chairman after his contract expired in September 2006.

The board did not, however, set a definitive timetable for Eisner’s exit, as Gold and Disney had wanted. Instead, the directors said he would step down when his replacement was installed. The pair acknowledged in their statement that the board “left some questions unanswered.”

Among Gold and Disney’s biggest remaining concerns is the possibility that the board might end up backing Eisner’s preferred choice, Disney President Robert Iger, when the search is completed. The directors recently praised him as an “outstanding executive” and the “one internal candidate.”

The dissident former directors have often stated that the selection of Iger would be unacceptable to shareholders, given his close ties to an Eisner management team that they accuse of tarnishing the company’s finances and image.

“What we’ve said about Bob Iger stands,” Gold said Tuesday. “We think there are stronger candidates out there.”

Among the names most often mentioned: News Corp. President Peter Chernin; Yahoo Inc. CEO Terry Semel; Viacom Inc. Co-President Leslie Moonves; and Time Warner Inc.’s Jeff Bewkes, who is chairman of the company’s entertainment and networks group.

Neither Gold nor Roy Disney would say exactly what action they might take if Iger were selected as the best available replacement for Eisner. But the two have repeatedly threatened to wage a proxy fight “with unrelenting vigor” to pressure the board. They have until Dec. 3 to nominate a full or partial alternative slate of directors. Gold said he and Roy Disney had enlisted “enough high-quality people to run a slate,” but he would not provide their names.

In their statement Tuesday, Gold and Disney endorsed two board candidates proposed by a coalition of pension funds during a recent meeting with Chairman George J. Mitchell. They are TV mogul Haim Saban and former Securities and Exchange Commission Chairman Richard Breeden.

“These individuals have unassailable credentials in the entertainment industry and in corporate governance, and it would not take long for either of them to get up to speed,” the statement said.

Saban declined to comment other than to say: “I am waiting for the board and the shareholders to resolve their issues before I make my decision.” Breeden did not return a call or an e-mail.

The pension funds, which helped engineer a shareholder revolt in March that led to a 45% no-confidence vote against Eisner, could again find themselves allied with Gold and Disney.

Some funds have grown increasingly frustrated with what they consider to be the board’s slow response to their request for two independent directors who could participate in the selection of a new CEO. Officials of those funds have privately suggested that if the delay continues, they may join Gold and Disney in a proxy fight.

Although Gold, Disney and the funds have proved their ability to mobilize shareholders, they would face a tough challenge in dislodging the current board, investors say, including those sympathetic to the cause. Some investor representatives surveyed by Gold and Disney in recent days had bluntly told the two men that the odds were long, said sources familiar with the conversations.

The sense of urgency that preceded the March shareholder vote, according to many observers, has passed now that the board has made clear its succession plans.

“It certainly takes a ton of pressure off this board and will make a proxy fight a very difficult battle to win,” said Greg Taxin, CEO of Glass Lewis, one of the proxy advisory firms that had advised its clients to withhold votes for Eisner’s reelection to the board

What’s more, Disney’s financial performance has improved. Earnings are expected to rise more than 50% this fiscal year, thanks largely to a recovery in Disney’s theme parks and consumer products operations.

“Given the events of last week and [Disney’s] improved performance, a lot of the swing votes that went to Roy and Stanley last time are leaning toward the board,” said Patrick McGurn, senior vice president of Institutional Shareholder Services. “But that could change if the performance falters and the board meanders in its search for a new CEO.”

Times staff writer Sallie Hofmeister contributed to this report.