Like tributaries flowing into the Delaware River, various streams of anti-Michael Eisner sentiment will be converging in Philadelphia this weekend. In a major turnabout from just a few months ago, it's possible that these forces will gather enough strength to tear Eisner from his chairman and CEO perches atop Disney ( DIS). But like any Hollywood executive who has climbed to the top and stayed there, Eisner will be no pushover. On one hand, anti-Eisner sentiment has grown steadily. A herd of institutional investors has announced plans to withhold votes for Chairman Eisner and other directors at Wednesday morning's shareholder meeting. Public criticism of Eisner has mounted as well, underscoring such matters as management's reaction to an acquisition offer by cable colossus Comcast ( CMCSA) and Eisner's role in Hollywood agent Mike Ovitz's unproductive and costly tenure as president in the mid-1990s. On the other hand, Eisner enjoys an incumbent's advantage, including the apparent support of the board. Disney has already started managing expectations on the shareholder vote, perhaps seeking to diffuse the impact of a large block of votes against Eisner in the official count next week. In fact, Eisner can use the multifaceted nature of the criticism he faces to his advantage: Rather than interpreting anti-Eisner votes as a specific order to vacate the premises -- as disgruntled former directors Roy Disney and Stanley Gold might see it -- Eisner could characterize the ballots as a mandate to improve corporate governance, a task that he and the board say they've already begun. For Eisner to stay, says an institutional Disney shareholder who spoke on condition of anonymity, he will soon have to show "how he has a plan and how he's going to implement the plan to improve the performance of the Disney Company." Oddly enough, Philly's best-known Eisner antagonist won't be around next week. The convention center where Disney's shareholder meeting is set to start Wednesday is only three blocks away from the headquarters of Comcast, which announced an unsolicited bid valued at $48 billion, excluding debt, for Disney last month. Disney -- which for several years has been holding its annual meeting in different cities -- picked Philadelphia for this year's meeting well before that Comcast bid surfaced.
But though Comcast might be expected to use this geographical proximity for some sort of home-court advantage, Comcast didn't have any such activity on its agenda as of last week. In fact, from Sunday through Wednesday, Comcast's executives are slated to be at a companywide management meeting at the other end of the country, in Phoenix, Ariz. That meeting, which has been in the works nearly a year, will bring together hundreds of Comcast managers from across the nation. Philadelphia promises to be busy nonetheless. On Tuesday afternoon, dissidents Gold and Disney will be holding a briefing and reception for investors, a meeting at which they will once again make their case for withholding board-of-directors votes for Eisner and fellow directors George Mitchell, Judith Estrin and John Bryson. Gold and Disney, who left Disney's board last year, are also planning to meet with the press earlier in the day. Also showing up in town will be various public interest groups protesting the potential Disney-Comcast deal because of opposition to media consolidation. They plan to march from Wednesday's shareholder meeting to Comcast's headquarters. Just as these groups and Eisner might both be against a Comcast takeover, but for much different reasons, it's difficult to place a single issue behind the anti-Eisner campaign. Whereas Disney ex-directors want Eisner out altogether, other shareholders merely want to see the CEO and chairman posts, both of which are now held by Eisner, to be split between two people. Nor is there much unanimity on which other directors, if any, deserve to have votes withheld for their election to the board. For example, the proxy advisory firm Institutional Shareholder Services is recommending votes for all directors other than Eisner. And though ISS alludes to Disney's mixed financial results under Eisner, it pointedly rejects the ex-directors' anecdote-fueled tactics of crusading against Eisner's allegedly Machiavellian tendencies.
Rather, says ISS, the recommended "withhold" vote for Eisner is more of an encouragement for the board to continue the cleanup of its corporate governance act, a cleanup that would include a division of the chairman and CEO positions. On Friday, North Carolina's state treasurer said he instructed the state retirement system's money managers to vote against Eisner, but again, his motivation was just a bit different. "This is an important test in the new world of corporate governance," Treasurer Richard Moore said in a statement. "As one of the most visible companies in the country, Disney's management needs to be more responsive to its owners. The failure of the company to generate long-term value for shareholders, combined with their past inattention to good corporate governance practices, has forced us to take this step." Moore also ordered the managers not to vote against the other directors targeted by Gold and Eisner, but against directors on the audit committee, for allowing the company's auditor, PricewaterhouseCoopers, to perform nonaudit services. Meanwhile, Disney and Eisner have been busy in recent weeks exuding the message that anything broken at Disney is on its way to being fixed, and any meddling by outsiders would only make it worse. "Our future is in good hands," read a newspaper ad that the company filed with the Securities and Exchange Commission on Friday. "Our momentum is real and growing." In addition, reports that Disney expects a 30% "withhold" vote for Eisner could be the company's attempt to manage expectations. After all, ahead of the quarterly earnings releases, companies have been known to preannounce negative results to get the bad news out of the way, then release better numbers to eke out a measure of a victory. The direct consequences of the withheld-vote totals are, however, negligible. Eisner and the other directors, facing no competing slate, will be re-elected to their posts. A significant symbolic loss would occur if 35% of the Eisner votes were for "withhold," since the SEC is considering a rule -- not yet in effect -- to enable dissident shareholders to nominate a nonmanagement slate if a management candidate encountered that amount of opposition.
If Comcast succeeded in its bid for Disney, Eisner will almost certainly be out. But until Comcast raises its offer, such an outcome is unlikely: Given the rise in Disney's stock price and the fall in Comcast shares, down 18% from their 52-week high in January, shortly before the overture was announced, Comcast's offer represented a 12% discount to Disney's share price as of Friday evening. Or, since Disney's board has proven so supportive of Eisner, he might be able to ride out the latest confluence of criticism. He's done that before, after all: In 1997, Eisner endured a 12.7% "withhold" vote sparked by oversized pay packages for him and departed president Michael Ovitz. (Resurrected in unsealed court documents last week, Ovitz's tenure was reared as another reason for shareholders to gripe about Eisner.) The anonymous institutional shareholder speculates that if Eisner leaves, it would be months from now after a face-saving delay. He says Eisner has to convince shareholders he has a plan for improvement, though not necessarily at Wednesday's meeting. "It would also be helpful if Eisner had admitted that he has done things wrong," adds the shareholder, "which he doesn't seem interested in saying right now."