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  1. #1

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    Interesting POV on the lawsuit

    From a legal POV...Roy Disney's lawsuit (a little painful on the bottom - but I think it has interesting points) - I prepare to be yelled at now...

    http://www.professorbainbridge.com/2...sneys_law.html

    Roy Disney's lawsuit
    Dissident Disney investors (and former Disney directors) Roy Disney and Stanley Gold have filed suit against, among others, Walt Disney Co., the Disney board of directors, outgoing CEO Michael Eisner, and incoming CEO Bob Iger. Disney and Gold claim that Disney's board of directors misled investors about the succession process that led to Iger's selection. Specifically, the complaint (available from SaveDisney.com) alleges that had "Disney and Gold known that the Company and a majority of the Board did not intend to stand by their public statements about engaging in a bona fide CEO selection process, [Disney and Gold] would have run an alternate slate of directors at the 2005 annual stockholders meeting." As relief they seek invalidation of the 2005 board election and new board election.

    I would be very surprised if Disney and Gold received the relief they're seeking. Their fraud claim seems pretty weak - anybody who had been following events at Disney knew Iger was the frontrunner to succeed Eisner. Indeed, as I reported in September 2004, Disney and Gold were already complaining all the way back then about the prospect that Iger would succeed Eisner. The notion that the board somehow juked them out of their socks when it came time to put up or shut up is just ludicrous. (Gordon Smith seems to agree, while Larry Ribstein seems inclined to give Disney and Gold the benefit of the doubt.)

    Update: With respect to the foregoing, Larry replies:

    I don’t see the logic of that argument against the suit. Doesn’t it show why Disney and Gold thought it important that the board promised an open search?

    Count I of the Disney-Gold complaint sounds in fiduciary duty, but is actually a nondisclosure claim. Count II of their complaint is explicitly grounded in fraud. I don't think they'll be able to prove they reasonably relied on the purported Disney board statements. How can they reasonably claim to have been defrauded when they were complaining all along about the prospect of Iger being selected?

    Setting aside the merits of their claim, it's worth noting that the relief they're seeking is highly extraordinary. In public corporations, Delaware courts rarely grant equitable retrospective relief of this sort. Damages for fraud and/or breach of fiduciary duty would be far more typical.

    A minor point: Larry notes that:

    ... it’s not clear Disney and Gold would have no claim even if they clearly wouldn’t have run an alternative slate – the shareholders might well have just voted down the incumbent slate, as they almost did before.

    The problem with this argument is that Disney followed (and I believe still does so) the statutory default under which directors are elected by a mere plurality. As I've explained before, the shareholders' option to withhold authority to vote for certain candidates does not empower them to vote against those candidates. In the absence of a competing slate, a single vote for Eisner (say) would suffice for him to be elected to the board even if all the other shareholder withheld their votes from him. So I disagree that Disney and Gold have a claim absent a showing that they would have run a competing slate.

  2. #2

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    I think the suit should be dropped. Makes Roy and Stanley look very childish.
    They got what they wanted: Eisner out. How much will ME still control once he's "gone"? No one knows for sure, but I don't think the majority of investors (institutions, mutual funds) have his back anymore.
    "Here You Leave the World of California Today and Enter the World of, um, er, California Today."

  3. #3

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    Like I have said many times before, the real fight is going to be at next years proxy...

    I don't know if this suit has a chance in heck, but you bet Bob, Eisner, Meg Whitman, George Micheal, and the rest of the board will recieve Supoenas... And everyone will be dragged yet again through the mud publicly... and we will all see executives performing badly...

    Clearly this is to create more pr damage...

    -------------

    Make no mistake, they don't just want Eisner out... They want his policies that are geared toward only producing Singles and Doubles out and corporate culture changes gone as well... They want the Studio to be the focus of the company again... This will drive the sales arm and increase profits expotentially... The concept of a strong studio would multiply the profit... The arguement is that Disney is actually UNDER performing... And they are...
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  4. #4

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    I disagree that next year's fight will be the proxy - the best chance Roy had was last year's shareholder's mtg.

    Roy Disney own less than 2% of the total outstanding stock - so his shares are relatively minor (he only owns a total of ~17 mil shares). Almost 70% of the TWDC stock is held by institutional investors - large corporate pensions (Calpers) and investment funds (Barons). Those groups have largely supported Bob's appointment and the introduction of the new independent board members. Most research firms have the stock at Buy or Hold (there are no sell recommendations). The Corporate staff has done an concerted effort this last year to ensure that the institutional investors support the vision of the company under Bob. The Board of Directors can be re-elected by a majority of of proxy votes- which can be done just with the institutional investors. So the focus is on the institutional groups which is about the bottom line..

    The remainder of the shares are held by individuals who many times do not return their proxy. Therefore their votes are automatically voted in coordination with the board. But given the size of the institional investor -the individual votes usually do not matter.

  5. #5

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    Whether anyone inside the executive offices of the Walt Disney Company understands it or not, Roy (and his kids) will never give up. Bob Iger has no idea what he is in for. To Bob and George and the Board, Disney is just a job. No matter how important they think the Disney Company is to them, they will never understand how important it is to Roy's family and the artistic Disney community. Visionaries, idealists and artits don't give up when they believe in something. Disney is their home and Eisner/Iger/Mitchell kicked them out. If history teaches us anything, it has taught us that men fight harder when defending their homes than those that are paid to fight. I feel bad for Bob. I know he really just wanted to be CEO of Cap Cities/ABC. He never bargened for this, but he chose his friends too poorly and failed to (even once) stand up for what was right while he was President/COO, and now he will spend the rest of his tenure in a fight with the son of one of the founders. Whether or not you agree with the lawsuit, it was accepted by the court and drafted by an exceptional lawyer. Roy and Stan have successfully removed two CEOs from the Walt Disney Company, I don't think it is wise to underestimate them.

  6. #6

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    Quote Originally Posted by laman6
    I disagree that next year's fight will be the proxy - the best chance Roy had was last year's shareholder's mtg.

    Roy Disney own less than 2% of the total outstanding stock - so his shares are relatively minor (he only owns a total of ~17 mil shares). Almost 70% of the TWDC stock is held by institutional investors - large corporate pensions (Calpers) and investment funds (Barons). Those groups have largely supported Bob's appointment and the introduction of the new independent board members. Most research firms have the stock at Buy or Hold (there are no sell recommendations). The Corporate staff has done an concerted effort this last year to ensure that the institutional investors support the vision of the company under Bob. The Board of Directors can be re-elected by a majority of of proxy votes- which can be done just with the institutional investors. So the focus is on the institutional groups which is about the bottom line..

    The remainder of the shares are held by individuals who many times do not return their proxy. Therefore their votes are automatically voted in coordination with the board. But given the size of the institional investor -the individual votes usually do not matter.
    Many of those are actually owned by KIDS... Who don't know what is involved...

    I was really upset when Roy just simply rolled over and let them have their way... the writing was on the wall... Still the fight really isn't over... It will take time but, I think Iger is on a short leash with many funds including CalPERS...

    But if Eisner is on the Proxy, particularly for Chairman... You will have a fight on your hands...
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  7. #7

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    Quote Originally Posted by laman6
    The Corporate staff has done an concerted effort this last year to ensure that the institutional investors support the vision of the company under Bob.
    Really, for this last year the corporate staff used Company time and resources to "ensure that the institutional investers support the vision of the company under Bob"? That was happening at the same time that the Board of Directors was doing an "exaustive" search the world over for a new CEO? Is there no conflict of interest there? If the Board was truly searching corporate America of the new CEO, wouldn't the corporate staffs "concerted effort" undermine that serch? I think you just proved Roy's point.
    Last edited by Mr. Eggz; 06-25-2005 at 06:54 AM.

  8. #8

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    Sorry if I was not precise enough (trying to be short and sometimes too general - my apologies).

    After last year's shareholders mtg, there was an effort to get the investing community on board with the company again - push the agenda for the future under Michael/Bob. Part of that effort was coordinated by Bob, since he was the President he was the face. Once Bob was appointed to replace Michael - he already had built relationships with the institutions and they became comfortable with him. I do not think that there is a conflict of interest. No matter what the board decided, the executive staff still had to make the investing community comfortable with the future of the company. Since Bob was in the leadership role, by default they would have looked to him..

    On the Delaware Court taking the case, it is not surprising. Delaware laws are very beneficial to corporations, and to balance this the courts are more willing to take on cases that may appear to have challenged merits...

    I agree that Roy is very passionate about the cause and that passion is admirable. But if the courts do not agree with him, he will need to turn to the shareholders. But since 70% of the shareholders are institutional investors - Roy needs to make sure he is not perceived as sour grapes. This will be a challenge, if Roy is seen as focusing too much on Michael and making this a personal issue. Institutional investors do not necessarily want to be pulled into a personal agenda. Roy needs to make sure that he balances the line between the passion of his heart and the reality of the game...
    Last edited by laman6; 06-25-2005 at 03:44 PM.

  9. #9

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    Quote Originally Posted by laman6
    After last year's shareholders mtg, there was an effort to get the investing community on board with the company again - push the agenda for the future under Michael/Bob. Part of that effort was coordinated by Bob, since he was the President he was the face. Once Bob was appointed to replace Michael - he already had built relationships with the institutions and they became comfortable with him. I do not think that there is a conflict of interest. No matter what the board decided, the executive staff still had to make the investing community comfortable with the future of the company. Since Bob was in the leadership role, by default they would have looked to him..
    That's not what you said. You said "support the vision of the company under Bob." That's not the same thing. The meaning of your first statement is evident.

  10. #10

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    Not what I intended... but accepted how you perceived it...

  11. #11

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    Quote Originally Posted by laman6
    From a legal POV...Roy Disney's lawsuit (a little painful on the bottom - but I think it has interesting points) - I prepare to be yelled at now...

    http://www.professorbainbridge.com/2...sneys_law.html

    Roy Disney's lawsuit
    Dissident Disney investors (and former Disney directors) Roy Disney and Stanley Gold have filed suit against, among others, Walt Disney Co., the Disney board of directors, outgoing CEO Michael Eisner, and incoming CEO Bob Iger. Disney and Gold claim that Disney's board of directors misled investors about the succession process that led to Iger's selection. Specifically, the complaint (available from SaveDisney.com) alleges that had "Disney and Gold known that the Company and a majority of the Board did not intend to stand by their public statements about engaging in a bona fide CEO selection process, [Disney and Gold] would have run an alternate slate of directors at the 2005 annual stockholders meeting." As relief they seek invalidation of the 2005 board election and new board election.

    I would be very surprised if Disney and Gold received the relief they're seeking. Their fraud claim seems pretty weak - anybody who had been following events at Disney knew Iger was the frontrunner to succeed Eisner. Indeed, as I reported in September 2004, Disney and Gold were already complaining all the way back then about the prospect that Iger would succeed Eisner. The notion that the board somehow juked them out of their socks when it came time to put up or shut up is just ludicrous. (Gordon Smith seems to agree, while Larry Ribstein seems inclined to give Disney and Gold the benefit of the doubt.)

    Update: With respect to the foregoing, Larry replies:

    I don’t see the logic of that argument against the suit. Doesn’t it show why Disney and Gold thought it important that the board promised an open search?

    Count I of the Disney-Gold complaint sounds in fiduciary duty, but is actually a nondisclosure claim. Count II of their complaint is explicitly grounded in fraud. I don't think they'll be able to prove they reasonably relied on the purported Disney board statements. How can they reasonably claim to have been defrauded when they were complaining all along about the prospect of Iger being selected?

    Setting aside the merits of their claim, it's worth noting that the relief they're seeking is highly extraordinary. In public corporations, Delaware courts rarely grant equitable retrospective relief of this sort. Damages for fraud and/or breach of fiduciary duty would be far more typical.

    A minor point: Larry notes that:

    ... it’s not clear Disney and Gold would have no claim even if they clearly wouldn’t have run an alternative slate – the shareholders might well have just voted down the incumbent slate, as they almost did before.

    The problem with this argument is that Disney followed (and I believe still does so) the statutory default under which directors are elected by a mere plurality. As I've explained before, the shareholders' option to withhold authority to vote for certain candidates does not empower them to vote against those candidates. In the absence of a competing slate, a single vote for Eisner (say) would suffice for him to be elected to the board even if all the other shareholder withheld their votes from him. So I disagree that Disney and Gold have a claim absent a showing that they would have run a competing slate.


    Can this PR guy do anything more to try and discredit Roy and Stan????

  12. #12

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    Quote Originally Posted by laman6
    I disagree that next year's fight will be the proxy - the best chance Roy had was last year's shareholder's mtg.

    Roy Disney own less than 2% of the total outstanding stock - so his shares are relatively minor (he only owns a total of ~17 mil shares). Almost 70% of the TWDC stock is held by institutional investors - large corporate pensions (Calpers) and investment funds (Barons). Those groups have largely supported Bob's appointment and the introduction of the new independent board members. Most research firms have the stock at Buy or Hold (there are no sell recommendations). The Corporate staff has done an concerted effort this last year to ensure that the institutional investors support the vision of the company under Bob. The Board of Directors can be re-elected by a majority of of proxy votes- which can be done just with the institutional investors. So the focus is on the institutional groups which is about the bottom line..

    The remainder of the shares are held by individuals who many times do not return their proxy. Therefore their votes are automatically voted in coordination with the board. But given the size of the institional investor -the individual votes usually do not matter.

    ....and I disagree with you SIR!!!

    You and all of the other PR people (Eisner and Iger's stooges) are all in for a shock!

    You just don't get it do you????

    Don't you understand that Roy and all Disney fanatics WILL NOT GIVE UP UNTIL WE HAVE MEANINGFUL CHANGE??!!

  13. #13

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    We have this Hoyle card game on the PC, wherein when you play Old Maid, whoever gets stuck with the "old maid" (actually a troll) at the end of the game has their avatar change slowly into a troll.

    Sorry, this isn't the "Post the first thing that pops into your mind" thread?
    "Here You Leave the World of California Today and Enter the World of, um, er, California Today."

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