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Pension funds expected to seek Eisner's ouster


The California Public Employees' Retirement System and five other pension funds this week will demand a meeting with Walt Disney Co.'s board to press directors to name a successor to Chief Executive Officer Michael D. Eisner, people familiar with the matter said.

The New York State Common Retirement Fund, California State Teachers' Retirement System and pension funds in Ohio, Connecticut and North Carolina will join CalPERS, the largest U.S. pension fund, in sending a letter to Disney Chairman George J. Mitchell and the rest of the Disney board, said the people, who asked not to be named.

It's the first time the six funds are speaking together publicly about their concerns over the board's governance and Disney's share performance, CalPERS spokesman Brad Pacheco said. Eisner, 62, and Disney's board are being criticized for a 20 percent decline in Disney shares over the past five years. The Standard & Poor's 500 index has declined 13 percent in the same period.

More specifically, the pension funds, with a combined $460 billion in assets, are challenging Disney's decision to leave Eisner in place as chief executive after shareholders withheld 43 percent of votes at the March 3 annual meeting for his re-election to the board. CalPERS had called for his resignation, saying the Burbank, Calif.-based company's performance has been "dismal." Eisner gave up his chairman title that day to Mitchell, 70.

"The pension funds are long-term shareholders," said C. Warren Neel, director of the University of Tennessee Corporate Governance Center. Neel is also a director at department-store owner Saks Inc. "They are here this year, they'll be there next year. So they really keep the pressure on."

The Ohio Public Employees Retirement System pension fund has been seeking a meeting with the board of Disney since the annual meeting to demand Mitchell's resignation, said Cynthia Richson, 44, a corporate governance officer for Ohio. She declined to comment about the letter.

"We still have significant questions about George Mitchell's independence and his business expertise," Richson, whose fund owns 4.6 million Disney shares, said in an interview. Disney needs to start "a new search for a new chair," she said.

Mitchell, a former federal judge and U.S. senator from Maine who serves as a director on three other boards, has no experience leading a company. He failed to get the support of 24 percent of the votes cast at the annual meeting.

Disney spokeswoman Michelle Bergman declined to comment. Mitchell didn't return a call to his office.

Shares of Disney, which rose more than 10-fold in Eisner's first decade as chairman and chief executive, returned an average 6.4 percent a year after the death in 1994 of Disney President Frank Wells, who ran the company with Eisner.

The shares fell 39 cents to close at $24.90 yesterday on the New York Stock Exchange. They have dropped 43 percent from their high of $43.63 in 2000.

CalPERS, which has $155 billion in assets, has been talking with other state funds and will issue a statement about Disney today, said CalPERS President Sean Harrigan, 57, declining to comment further. CalPERS holds 8.77 million Disney shares.

"There are issues of performance that are still not resolved," New York Comptroller Alan Hevesi, 64, said in an interview.

Disney executives are lobbying pension funds, at least 11 of which withheld support from Eisner this month.

Chief Financial Officer Thomas Staggs, 43, met with officials at Calstrs, the third-biggest U.S. pension fund, in Sacramento, Calif., in the days after the shareholder meeting, said Calstrs spokeswoman Sherry Reser. The teachers retirement fund, which holds 7.96 million Disney shares, had withheld its support from Eisner.

"We are encouraged that one of their high priorities is to engage shareholders," Reser said. Calstrs may participate in writing to and meeting with Disney executives, she said.

Meredith Miller, assistant Connecticut state treasurer for policy, said the state has had discussions with the other pension funds about Disney.

CalPERS has led pension funds in pushing out other chief executives. Richard A. Grasso was forced to resign as New York Stock Exchange chairman and CEO Sept. 17, a day after CalPERS, the New York pension fund and others called for his resignation over his pay package of more than $150 million.

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