George Mannes

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Disney Reaches Out to Big Holders

George Mannes

In what some outsiders are calling an unusual move, the company's board of directors is inviting major investors to a cocktail party scheduled for Wednesday evening in New York City.

The reception, hosted by what the company says are "representatives from Disney's board of directors," comes as a Delaware shareholder trial explores the degree to which Disney's board was in the loop during the company's expensive and unproductive mid-1990s employment of former agent Michael Ovitz.

The get-together also comes a few months after two disgruntled former Disney directors, Roy Disney and Stanley Gold, spearheaded a campaign to oust then-chairman and CEO Michael Eisner, along with other directors. That particular campaign -- which resulted in Eisner's replacement as chairman by George Mitchell, one of the other targeted directors -- appeared to crystallize a longstanding sense among Disney shareholders that the company's board had been too complaisant in its oversight of company management and an inadequate champion of shareholders' interests.

A Disney shareholder who received an invitation to the reception said an invitation to meet with a company's board is a rare occurrence occasionally tied to annual meetings of shareholders. To have the reception now -- nine months after the company's annual meeting -- is virtually unprecedented, said the shareholder.

Such a board-centered event was uncommon, agreed other seasoned investors.

"It is unusual, but it does happen," says Frank Husic, managing partner of Husic Capital Management, which isn't a Disney shareholder. For example, Casual Male (CMRG Quote), a company of which Husic is a director, regularly holds a breakfast with major shareholders before its annual meeting, says Husic.

But Husic says he doesn't recall attending any shareholder-board member get-togethers -- organized by either Casual Male or another company -- not tied to an annual meeting. "If you want to talk to the board, you're probably a dissident shareholder," he says.

In May, Disney's board met with representatives of seven public pension funds that were Disney shareholders. "The Disney board takes seriously the responsibility to listen to all shareholders," Mitchell said in a statement issued after that meeting.

A Disney spokesman declined to comment on the planned cocktail party last week.

Wednesday's cocktail reception -- believed to be following a two-day board meeting -- comes as Disney is generating increasing amounts of goodwill among investors. Shares in the company, which were trading as low as $20.88 in August, were trading at $27.34 last Wednesday -- up more than 30%.

Disney's financial performance appears to be on the upswing. Earlier this month the company reported fiscal fourth-quarter results that generally pleased Wall Street. Credit Suisse First Boston's William Drewry, for one, called the results "copacetic" and noted that the theme-park business, excluding the impact of recent hurricanes, was "surprisingly strong." (Drewry has an outperform rating on Disney and a $40 price target; his firm has done recent banking for Disney.)

Disney's underperforming ABC prime-time schedule has also gotten a recent lift from a slate of popular new shows, chiefly Desperate Housewives.

But Disney has also suffered some embarrassment from the Delaware trial, which has dredged up the nearly decade-old soap opera surrounding Ovitz's short-lived career as Disney president. Last week, for example, Mitchell testified that he had been offered the presidency before Ovitz, according to press reports, contradicting earlier testimony from Eisner that he hadn't offered Mitchell the job.