ANAHEIM --- After nearly five hours in front of an ornery crowd of at least 10,000 at the Pond, Walt Disney Co. officials overwhelming won on the scoreboard --- getting stockholder approval of Disney chairman and CEO Michael Eisner's new 10-year employment contract, among other matters --- but were badly bruised by angry shareholders and employees.
Most of the dissidents' ire at Disney's annual meeting Tuesday was directed at Eisner's lucrative compensation plan. Critics have claimed the exec's package could be worth up to $400 million. Shareholders also expressed grievances against the Burbank-based entertainment company's $90 million-plus compensation package given to erstwhile president Michael Ovitz after 14 months on the job.
Past Disney shareholder gatherings have largely been celebrations of the company's good fortunes. Not so Tuesday. Executives' comments were often slowed by cheers and jeers from an unusually responsive arena-full of people.
That the sometime contentious response came on the home ice of Disney's NHL franchise only underscored the often awkward atmosphere.
Disney made its almost two-hour annual presentation outlining the company's better-than-expected financial results for 1996 and made several announcements.
* Walt Disney Attractions president Judson Green noted that Disney will get into business with Cirque du Soleil and magician David Copperfield --- hot off a high-grossing stint on Broadway late last year --- at Walt Disney World in Florida. They are also developing a resort in Colorado Springs.
* Barton Boyd, president of Disney Consumer Products, revealed plans to open a chain of ESPN retail sporting goods stores. The first will open this September in the Glendale Galleria, where the first Disney store debuted a decade ago.
* Peter Schneider, president of Disney feature animation, unveiled his slate of films, which included an updated "Fantasia" called "Fantasia 2000" which will include six newly orchestrated pieces of music as well as the musical "Mulan."
Expected out in 1998, "Mulan" is an ancient Chinese tale of a girl who disguises herself as a male to get into the Chinese army. Eddie Murphy provides the voice of a dragon in the film.
Others such as Walt Disney Studios chairman Joe Roth and ABC Inc. president Robert Iger made presentations. Included on the feature film slate are "Face/Off" and "Starship Troopers" which will be released by other studios domestically.
On Monday, Disney and Pixar entered into a 10-year, five-picture agreement (Daily Variety, Feb. 25).
Eisner and his top lieutenants boasted about the company's plans for overseas and domestic expansion in what Eisner jokingly referred to as "Mickey's Millennium."
Eisner and company outlined plans to expand both international film and video distribution and the company's ongoing effort to create more than 500 retail outlets by the year 2000 in China, India and "other developing Asian countries."
Disney CFO Richard Nanula noted that the company's operating income from all divisions increased by 7% to $3.7 billion, and produced net income of $1.5 billion, a 16% jump over '95. Addressing the $12 billion in debt accrued in part from the acquisition of CapCities/ABC, Nanula admitted the figure is high but added that it is mitigated by Disney's $37 billion in assets and $4.6 billion in cash flow.
Still, Disney's good news seemed to be overshadowed by its vocal and frustrated shareholders.
In an unusual move, Eisner and Disney executive committee chairman Raymond Watson attempted to preempt some of the pressing stockholder concerns. Watson tried to explain executive compensation packages with a pre-scripted defense, while Eisner addressed criticism about the election of certain board members as well as the large, and publicly embarrassing payout to Ovitz.
While he described the Ovitz deal as "not good, a mistake, won't happen again," Eisner later added, "The cost to the company, as high as it was, would have been much higher if we had stayed the unstayable course."
After Eisner's speech, senior executive VP and chief of corporate operations Sanford Litvack rose to the podium to respond to the confrontational queries. Like his boss, Litvack defended the Disney board of directors, which was accused of being "too cozy."
Shareholders voted Tuesday to re-elect the five board members (out of a total of 16) whose three-year terms had expired.
The most controversial of the board members were Reveta Bowers, the principal at the elementary school Eisner's children once attended, former Disney CFO Gary L. Wilson and ex-Senator George J. Mitchell, who was a paid Disney consultant last year.
"Five of the 11 are industry insiders who draw fees from the company," said one shareholder, who spoke to a round of applause.
Litvack responded by reminding stockholders of the remarkable company growth over the time period and called the five board members "exemplary ... each bring a unique talent."
More than 87% of the proxy ballots approved the election of the five directors. A little more than 12% of the stockholders voted against re-election. A vote of 10% against is considered a significant protest.
Later Eisner, flanked by Disney Studios chairman Roth and ABC prexy Iger in the front row, sat stone-faced as one by one his shareholders attacked his elaborate compensation package.
One stockholder, whose question was applauded by most of the attendees, suggested if the compensation package was performance-based and if Eisner admitted he made a mistake in hiring Ovitz, then why not take the $90 million that Ovitz is reportedly receiving and deduct it from Eisner's $400 million compensation package?
In fact, several shareholders asked why Eisner was being "rewarded" for his error in hiring Ovitz.
One woman garnered loud support when she addressed that issue, telling Litvack: "I feel that you are being arrogant in your answers."
Litvack apologized to a crowd who booed him and spent the afternoon repeatedly defending the bonus package of his boss. He explained that Eisner has a big job and that the 12-year Disney veteran is being compensated for overall performance of the company. That prompted one shareholder to comment: "He gets paid more than the President of the United States, and look what he runs!"
Later in the meeting, Eisner, appearing exhausted from queries about Ovitz, attempted to close books on the issue. "We honor our commitments. It's like other failures," he said. "Not that I want to compare (the situation) to a movie. ... That didn't work, but it's over with. It was written off on our first quarter. Be angry, be mad. ... God only knows I am, but there's nothing I can do about it anymore."
Toward the end of the meeting when the crowd thinned out, Eisner returned to the podium to say: "I don't think people understand executive compensation," and then explained to shareholders the theory behind creating the employment package.
He also noted that executives who perform their jobs well should be fairly compensated. He noted that if the company's new ventures are successful, "I hope all these people (his executives) get their second homes."
Despite the belligerent questions, Eisner's contract was approved by nearly 90% of the 569 million shareholder proxies cast. In addition, a plan for cash bonuses for executive officers was approved by 90%.
A shareholder measure that called for accountability in exec pay as well as a resolution to monitor foreign workplaces were both soundly defeated.
Meanwhile, dozens of picketers paced outside the auditorium protesting in support of the anti-sweatshop measure.
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