U.S. Securities and Exchange Commission
Washington, D.C. 20549
NOTICE OF EXEMPT SOLICITATION
Submitted pursuant to Rule 14a-6(g)
1. Name of the Registrant:
The Walt Disney Company
2. Name of person relying on exemption:
Roy E. Disney, Patricia A. Disney, Roy P. Disney, Susan Disney Lord,
Abigail E. Disney, Timothy J. Disney, Shamrock Holdings, Inc., Shamrock
Holdings of California, Inc. and Stanley P. Gold
3. Address of person relying on exemption:
4444 Lakeside Drive, 2nd Floor, Burbank, California 91505
4. Written materials. Attach written materials required to be submitted
pursuant to Rule 14a-6(g)(1):
The attached materials were posted on the savedisney.com website.
WHAT WENT WRONG?
By Michael McConnell, Shamrock Holdings Managing Director
Creative dynamism has always been at the heart of Disney's business.
From the days of Walt and Roy, corporate infrastructure helped to make
creative ideas a reality, and the company prospered. Today, the
scenario is inverted, with strategic planning, marketing, and finance
schemes dictating the terms to creatives. It's no coincidence that the
bottom line is suffering.
In 1992, The Walt Disney Company experienced its first significant
stumble under modern leadership: EuroDisney. Its failure, in many ways,
was prophetic of things to come. EuroDisney highlighted for the first
time a shift in methodology that would become problematic for the
Company.
The shift? An emphasis on the scheme rather than the consumer now
results in recycling rather than innovation.
EURODISNEY SIGNALS SHIFT
In the case of EuroDisney, the emphasis on the scheme involved
extracting generous concessions from the French Government to support
the development of the Theme Park and Hotel development.
On paper, the numbers looked great, and the returns looked even better.
But when the park opened, the rooms went empty. Consumers were happy to
stay less than an hour away in Paris, only to visit the Parks for the
day. Meantime, the French labor laws were onerous and, of course, there
was the weather. Let's use some common sense... Had the schemers
thought of the consumer first they would have chosen Barcelona as the
site - acknowledging that the Orlando "if-you-build-it-where-it-is-warm-model"
is what people want.
While the initial scheme may have looked great on paper, EuroDisney has
been both a public relations and financial failure and marked the rise
to power of the "planners" at the expense of the "creators."
With the financial dust still unsettled in 2004 - over a decade later -
the monetary loss to Disney will be in the hundreds of millions of
dollars. Incidentally, at the end of March 2004, the bank waivers
expire and another restructuring is likely. Not to mention the
distraction of management's time and attention for over 10 years in
trying to fix a scheme destined for failure from its first day.
The resulting criticisms of excessive spending also seemed to make
Michael Eisner lose interest in delivering a quality product. From now
on tighter financial "boxes" would be constructed for everything and
costly innovation would have to go.
1994-95: A YEAR OF CHANGE
Then came 1994. Frank Wells passed away, Jeffrey Katzenberg left, and
the management dynamic that had guided the company for 10 years was
forever altered. In hindsight, the next year changed everything -
CapCities/ABC was acquired, Michael Ovitz was hired and Snow White and
the Seven Dwarfs was released on video. Each of these decisions had
significant implications:
o CapCities/ABC changed the essential nature of the Company. The
insatiable demands of an ad-driven culture took Disney even
further away from its roots as a producer of boutique content.
For a controlling CEO like Eisner, the resulting multi-armed
conglomerate was beyond his capabilities to manage - both
administratively and creatively.
o The hiring of Michael Ovitz foreshadowed the current "poor
governance" culture and Michael's disconnect with the people for
whom he works; the shareholders. The company image has suffered
long-term damage and the Board has yet to design a succession
process or plan that gives investors comfort.
o As for Snow White - it was the last of the "A-list" animated
features from the Disney library to be released on video. Rather
than holding back this title for an inevitable bad year, the
crown jewel was put to market during the same year as The Lion
King -all because the company is "locked into" chasing 20% per
annum growth. The carefully nurtured reissues that remarketed the
Disney perennials to each successive generation became a thing of
the past.
These three milestones marked a turning point in Disney culture. They
signal a turn from the past (innovation) and a redirection toward
global brand marketing (schemes). Along the way, the baby was left
behind with the bathwater.
Not insignificantly, Disney stock is currently trading at levels last
seen in 1996 - a year that the Dow industrial average traded around
6,000 (today it is over 10,000).
FAILED VENTURES
Since 1996, the Company has continued to invest shareholder capital -
$25 billion - in schemes that recycle rather than innovate. Rebranding
the Disney image became more important than enhancing the classic
Disney assets. At the New Disney, core businesses like Feature
Animation and Imagineering became "high risk" niche properties.
To be sure, not all initiatives have failed. But in the aggregate, more
have failed than succeeded, and it shows in the company's declining
performance ratios since 1995.
GO.COM
Go.com was born of desperation. The Internet was hot, the Company felt
it had missed its opportunities, and the "planners" convinced
themselves that Disney had assets that gave it an advantage in the
emerging Internet marketplace. The Company acquired Infoseek, yet
another search engine, that was designed to drive traffic to
established Disney-owned Internet sites. Rebranded as Go.com, it looked
great on paper.
However, any Internet user (the consumer) could have told you they
didn't need another search engine driving them to a very small and
finite group of Disney Internet sites. Go.com merely recycled the
innovation of other search engines. It presented consumers nothing new.
The schemers were late to the party.
Not surprisingly, Go.com resulted in a write-off of hundreds of
millions of dollars.
DISNEY'S CALIFORNIA ADVENTURE AND DISNEY STUDIOS PARIS
With a strategy put together by the schemers to transform single-park
sites into multi-day destination resorts (and a price tag of well over
$1 Billion) Disney's California Adventure was destined to failure
before ground was broken.
Frightened by the economics of EuroDisney and misinterpreting the
reasons for its failure, the "numbers guys" assigned an investment cap
to DCA's construction. Rather than innovating and designing the Park
from the bottom-up based upon what the consumer would expect for the
price of admission, DCA was designed from the top-down based on what
the spreadsheets said was required to hit a return figure that has
never materialized.
The continued suppression of innovation - fixing the off the shelf
rides - is likely as the schemers desperately try to avoid any
financial write-offs at this time. DCA has failed and will never come
close to generating the financial return the planners forecast.
Why? Consumers are not willing to pay the same admission price for a
smaller and subjectively less-special park. The excessive discounting
in the last twelve months clearly supports that the consumer knows what
DCA is worth. If only the schemers had listened in the first place.
By contrast, Oriental Land Company financed and opened the innovative
and luxurious Tokyo DisneySea during the same period. Its' marvels
quickly became a major draw even in a flat Japanese economy. Anaheim
should have been so lucky.
The insistence on avoiding reality in Anaheim led to Disney Studios
Paris - another "second gate" failure akin to DCA. Conceived on an even
smaller creative scale and, it too, heavily relied on recycled product.
In both instances, planners mistakenly assumed that Disney name alone
would move the product regardless of the quality of its content.
We fear Hong Kong Disneyland will be similarly doomed to mediocrity.
Although the schemers negotiated a very favorable deal from the local
government, there will not be many rides at the new Park on opening
day, and those that do open will be recycled attractions from Anaheim
and Orlando. The "half-park" scheme remains in effect despite two
enormous failures.
ABC FAMILY CHANNEL
ABC Family Channel (formerly Fox Family) represents another example of
recycling rather than innovation. The stated intent for purchasing this
"beach front property" was to repurpose ABC programming, a bottom line
scheme. But the original network content never proved popular enough to
resell. Now the asset is worth billions less than what was paid, the
planners can't figure out how to fix it and are now in the third scheme
to recycle or repurpose the Channel and its content.
We predict that ten years from now the Channel could be gone unless
Disney creates special content consumers want to view. For that to
happen, leadership must shift focus back to the creative core. Without
such a shift, the Company is marching toward a precipice with a steep
and dramatic fall inevitable.
MARKETING MANIA
Management's grand emphasis today is marketing. Marketing is an
important element of a comprehensive business strategy, but at today's
Disney it is the center of all existence. The product is no longer what
matters most, just how you sell it.
Problems creating or programming a hit Prime-Time program? ...Just own
a network to "market" the shows. Don't worry about losing money on the
Super Bowl or Monday Night Football ... it will help "market" new
programs. DCA attendance numbers low? .... Let's simply "market" a way
out of the problem and sell "2-for-1" tickets. The Company will
remarket and repromote over and over... but at the end of the day, it
will amount to a whole lot of motion and not much movement.
Sustainable success at Disney is predicated on creativity and
innovation. Without these, marketing and schemes will ultimately fail
to create lasting and long-term value and growth.
GETTING BACK ON TRACK: BREAKING FROM DENIAL
The unfortunate byproducts of the scheming/recycling model are years of
missed opportunities, and failed initiatives. A culture of denial and
lack of self-criticism has taken root. Everyone and everything is to
blame except the schemes; ...be it the economy, the weather, terrorism,
timing, or talent.
The daring, dynamic, creative and businesslike management of the
post-1984 years has given way to a staid and inbred group under the
singular imperial rule of an Emperor (Michael Eisner) and his enabling
Court (The Board of Directors). The once lean organization has become
top heavy with intelligent and well intentioned schemers who, rather
than supporting the creative soul, dictate to the artists what must be
done (and won't tolerate differing views). The results are painfully
obvious.
Management decay hit a dramatic peak in 2001 when CFO Tom Staggs and
Head of Strategic Planning Peter Murphy each received $1 million
bonuses in a year when Go.com sustained a major write-off and the $5.2
billion Fox Family acquisition significantly missed its aggressive
forecasts.
Ask yourself why this first quarter performance in 2004 is so good -
it's not because of marketing or schemes - it's because some
wonderfully creative storytellers in Northern California and the Jerry
Bruckheimer team "created" two terrific stories that are loved by
people around the world. Pixar is now leaving the fold. Who will be
next?
The Walt Disney Company's current problems date back almost a decade.
The decline results from a mindset that diverges from the creative
core. This schism is led by the CEO and enabled by the Board of
Directors. We need an acknowledgement of Disney's cultural decay and
attendant negative consequences.
Without a commitment to innovative leadership and the primacy of
creativity, Disney's decline will continue for years to come. We must
steer the company back on course, so future generations may inherit the
full Disney legacy.
WHY WE NEED YOU TO VOTE "NO"
By Michael McConnell, Shamrock Holdings Managing Director
The goal of our campaign to "Just Say 'NO'" is simple. We want to send
a powerful message to The Board of Directors at The Walt Disney
Company: Change must happen.
We want you--the Disney shareholder--to vote "NO" on Michael Eisner,
Senator George Mitchell, Judith Estrin, and John Bryson as they seek
confirmation to continue serving on Disney's Board of Directors. The
vote will take place at Disney's Annual Meeting in Philadelphia,
Pennsylvania on March 3, 2004.
We want to unify shareholders behind a single action that communicates
directly to our representatives.
Our intent is to protect you, the shareholder. We must ensure that the
Board is doing its best to achieve long-term growth and stability for
your investment and the Company.
The reasons are clear:
1) Accountability: Michael Eisner
Management must be held accountable by the Board for the Company's
performance.
o Management has repeatedly fallen short of goals and predictions,
with new business initiatives repeatedly failing.
o Michael Eisner is the sitting chairman of the Board. His choice
of Presiding Director is poor and can't stand the test of good
judgment.
We are asking shareholders to Vote "NO" on Michael Eisner, sending the
Board a clear message that you are giving the Chairman a failing grade.
2) Weak "Presiding Director": Senator George Mitchell
A Board of Directors are the "eyes and ears" of the shareholders. Their
role is to monitor management, ensuring that the business is run in the
best interests of shareholders. The Presiding Director is, in theory,
expected to challenge the status quo and be free from conflicts of
interest. With proper checks and balances, the CEO can't take
autocratic control of the Company.
o Your Presiding Director, Senator George Mitchell, has neither the
power nor the will to provide you, the shareholder, with
appropriate protection. Without exercising opposing force of
opinion, the position of Presiding Director is simply a "yes" man
to Michael Eisner.
We are asking shareholders to Vote "NO" on Senator George Mitchell.
This will send the Board a clear message that we are not fooled by his
title of "Presiding Director."
3) Overcompensation: Judith Estrin
At Disney, the Board's Compensation Committee determines the reward for
senior executives. This should be based solely on performance. The
Chair of the Compensation Committee for 2002 and 2003 was Ms. Judith
Estrin.
o Over the past three years, the Top Five executives were paid over
$68 million in total compensation, while the Company's share
price declined by approximately 50%.
o Worse, in Fiscal Year 2002, when the stock declined by almost
20%, this group was paid $40 million.
We are asking shareholders to Vote "NO" on Judith Estrin, sending the
Board a message that executive compensation shows no correlation to
Company performance.
4) Better Governance: John Bryson
Through aggressive Public Relations, the Board has tried to convince
Disney shareholders that it has improved its "Governance" practices and
no longer warrants the title of "One of the Worst Boards in America."
The Governance and Nominating Committee holds the responsibility of
developing, implementing and leading a Board culture of good
governance, including openness, independence, insight, prudence,
accountability, challenge, and critical oversight.
This Board has built a facade of procedure that only results in
rubber-stamping management's plans.
o John Bryson replaced Stanley Gold as Chair of this critical
Committee in 2002. At the time, we objected to his appointment
because he was not independent in thought or action, as his wife
earned in excess of $1.5mm per year from Disney's cable channels.
We are asking shareholders to Vote "NO" on John Bryson, affirming that
we are not impressed with any veiled attempts at substantive governance
improvement.
On many levels, The Walt Disney Company Board of Directors is not doing
its job for you. These are your elected representatives. You must hold
them accountable. Here is a rare opportunity for you to join with
others to send a message.
Remember: The real boss is the shareholder.
While the procedures of the Board may sound remote to you, when you may
just want to enjoy a memorable day at Disneyland or an artful animated
feature, we can assure you that the tone and culture of the Company is
set at the top. By saying "NO" to these Directors, you are saying that
you are not satisfied with recent products, services, management
decisions and practices that have resulted in poor stock performance,
limited growth and little confidence in the long-term future of the
Company.
Show the Board that you are paying attention, do not like what you see,
and demand change.
Vote "NO" on Michael Eisner, Senator George Mitchell, Judith Estrin,
and John Bryson. For the future of Disney. For future generations.
MICHAEL EISNER HISTORICAL COMPENSATION: FISCAL 1994-2002 ($ IN ACTUAL AMOUNTS)
Annual Compensation Long-Term Compensation
Total Hyp. Value Restricted Total LT
Cash Annual of Stock Stock All Other Total LT & Annual
Fiscal Year Salary Bonus Comp. Option Grants Awards Comp. Cash Comp. Comp.
1996 $750,000 $7,900,000 $8,650,000 195,583,281 - $3,520 $195,586,801 $204,236,801
1997 $750,000 $9,900,000 $10,650,000 - - $3,820 $3,820 $10,653,820
1998 $764,423 $5,000,000 $5,764,423 - - $3,820 $3,820 $5,768,243
1999 $750,000 $0 $750,000 - - $3,820 $3,820 $753,820
2000 $813,462 $8,500,000 $9,313,462 1,625,652 - $3,004,020 $4,629,672 $13,943,134
2001 $1,000,000 $0 $1,000,000 - - $4,020 $4,020 $1,004,020
2002 $1,000,000 $5,000,000 $6,000,000 - - $4,718 $4,718 $6,004,718
2003 $1,000,000 $6,250,000 $7,250,000 - - $4,775 $4,775 $7,254,775
TOTAL $249,619,331
Michael Eisner's total compensation for the eight years from 1996-2003 was
$250 MILLION!
During that same time period, shareholders have made approximately 2% per
year on their investment in The Walt Disney Company.
o What is wrong with this picture?
o Where is pay-for-performance?
o How can the board ignore the last eight years of lackluster growth?