Another open letter from Roy to Shareholders

[Loomis]

Just got this in my inbox from SaveDisney. Thought y'all might be interested...

AN OPEN LETTER TO OUR FELLOW DISNEY SHAREHOLDERS

FROM ROY E. DISNEY AND STANLEY P. GOLD



Roy E. Disney
Stanley P. Gold
4444 Lakeside Drive
Burbank, CA 91505



January 27, 2004

Dear Fellow Walt Disney Company Shareholders:

Now is the time for all Disney shareholders to take the first step to bring needed change to The Walt Disney Company. We ask each of you to join us in our campaign to change senior management’s and the Board’s “business as usual” attitude at Disney.

Join us in voting NO on the re-election of Michael Eisner, George Mitchell, Judith Estrin, and John Bryson as Directors at the Wednesday, March 3 Annual Meeting of Shareholders in Philadelphia.

Eight weeks ago, we resigned from the Board of Directors to vividly demonstrate our dissatisfaction with the direction and management of The Walt Disney Company. Our resignation letters, which can be easily accessed on our website www.savedisney.com , describe in detail our reasons. In particular, our ongoing concern is that the Company's senior management has been unable to generate long-term growth and performance and that the Board of Directors has failed to hold management accountable for its failures.

SEND A MESSAGE TO EISNER AND THE BOARD

By just saying NO you will send a message the Board of Directors cannot ignore. By withholding your vote from these four directors - who we believe are representative of what is wrong at Disney - you will force the Board to recognize the widespread conviction that serious changes in both senior management and the Board are necessary.

NO ON EISNER AND NO ON ESTRIN, MITCHELL AND BRYSON

We are seeking a NO vote on Michael Eisner and also a NO vote on George Mitchell, Judith Estrin and John Bryson because they symbolize, respectively, the poor management, poor governance, poor compensation practices, and lack of board independence that are impeding the development of long-term shareholder value at The Walt Disney Company.

MICHAEL EISNER (poor management): Since the death of Frank Wells in 1994, Michael Eisner has been unable to manage growth or achieve performance levels that were once commonplace at The Walt Disney Company. Since 1995, Return-on-Invested Capital has declined by 63% from 18% to 7%. Return-on-Equity has declined by 80% from 22% to 6% and Return-on-Assets has declined by 79% from 10% to 3%. While the Company’s stock has improved in recent months, it is important to note that since January 1996, an initial investment of $10,000 in Disney stock would have grown to only $11,497 over the 8 years ending December 2003, as compared to an investment in Dow Jones which grew to $20,191 (or 75% greater than Disney).

Mr. Eisner has failed to formulate a viable long-term strategy. Instead of investing wisely the cash flow produced by the company over the past ten years, those resources have been squandered on many failed projects, the most recent of which is the $5.2 billion acquisition of the Fox Family Channel.

He has built theme parks using copies of rides found elsewhere and built other attractions that fail to spark the imagination and excitement our guests and customers have a right to expect from Disney. The dismal financial results at Disney’s California Adventure and Disney's Studio Paris are testimony to this flawed strategy.

The revolving door of executives has also led to an enormous loss of creative talent - once the clear hallmark of Disney.

While these activities may provide a short-term (in many cases, very short) boost to revenues, they have the long-term effect of dissipating what has made The Walt Disney Company great. If this process is allowed to continue, Disney will wind up “just another entertainment company”— and will never be able to recover its hard-earned reputation for providing unparalleled quality family entertainment and exceptional value to its guests and customers.

GEORGE MITCHELL (poor governance): We believe Ex-Senator Mitchell is not capable of providing effective leadership as the Company’s “Presiding Director.” He has opposed our repeated efforts to separate the functions of CEO and Chairman of the Board. Instead, he supported the Company’s new governance rules, which are more form than substance — and which have left him as a Presiding Director with no authority or real responsibility.

Equally troubling, in addition to his full-time career as a practicing lawyer, ex-Senator Mitchell serves on far too many other boards to permit him adequate time for his Disney commitments. (It is worth noting that many of the other companies on whose boards he has sat have experienced significant financial, legal, and governance problems — among them Xerox, U.S. Technologies, Oily Rock Group Ltd. and Staples Inc.).

Moreover, within the last several years ex-Senator Mitchell has served as a paid consultant to the Company and his law firm has received more than $1 million in fees from The Walt Disney Company.

JUDITH ESTRIN (poor compensation practices): As Chair of the Board’s Compensation Committee for the past two years, Ms. Estrin engineered what we believe were excessive total compensation packages for the Company’s top five executives. For example, in fiscal 2002, when the Disney stock price was down approximately 16%, total compensation for those executives alone was approximately $40 million.

Good governance requires — and shareholders deserve — a real connection between performance and pay. Under Ms. Estrin's leadership of the Compensation Committee, we believe that connection has been severed.

JOHN BRYSON (lack of independence): For almost two years, we have pointed out to the Board that John Bryson should not be considered an “independent” director because his wife was being paid millions of dollars as an executive of Disney's 50%-owned Lifetime Channel.

Moreover, as CEO of Edison International, Mr. Bryson oversaw transactions with The Walt Disney Company for the naming rights to Anaheim Stadium that involved tens of millions of dollars. Nonetheless, the Disney Board continued to publicly declare that John Bryson was independent.

In his capacity as an “independent” director and Chair of the Nominating and Governance Committee, he collaborated with Michael Eisner to manage the removal of Andrea Van de Kamp from the Board one year ago because of her opposition to some of management’s proposals. He performed a similar role this year in removing Roy E. Disney from the Board.

Only after eliminating dissenting voices from the Board and being confronted with the recently adopted New York Stock Exchange certification requirements for independent directors, did the Board belatedly concede that Mr. Bryson is not independent.

A company seriously committed to “best practices” in corporate governance would not have allowed Mr. Bryson to serve as Chair of its Nominating and Governance Committee.


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

JOIN US IN VOTING NO ON YOUR PROXY

WITHHOLD YOUR VOTE FROM EISNER, MITCHELL, ESTRIN AND BRYSON

We believe it is important for you to understand that our actions today are not motivated by any personal ambitions. Neither of us has any desire to be Chairman or CEO of The Walt Disney Company. Rather, we are launching our “Vote No” campaign in an effort to improve the long-term financial health of the Company, to restore shareholder value, and to return the quality of its products and services to a level that will yield sustainable growth.

PLEASE TAKE A FEW MOMENTS TO VOTE YOUR SHARES. EVERY VOTE COUNTS. WE NEED YOU TO SIGN AND RETURN YOUR PROXY CARD – BUT PLEASE TAKE THE TIME AND INDICATE ON YOUR PROXY THAT YOU ARE WITHHOLDING YOUR VOTE FOR MICHAEL EISNER, GEORGE MITCHELL, JUDITH ESTRIN AND JOHN BRYSON.

DON’T LET YOUR BROKER VOTE FOR YOU. UNLESS YOU SEND BACK YOUR PROXY WITH AN “X” MARKED IN THE BOX “FOR ALL EXCEPT” AND LIST THE NAMES OF MICHAEL EISNER, GEORGE MITCHELL, JUDITH ESTRIN AND JOHN BRYSON (OR THE NUMBERS ASSOCIATED IN THE PROXY WITH THESE NOMINEES) IN THE SPACE PROVIDED, YOUR SHARES WILL BE VOTED “FOR” EISNER AND ALL THE OTHER MANAGEMENT DIRECTORS.

If you have any questions on how to VOTE NO, please contact our proxy specialists -- Mackenzie Partners, Inc. Toll-Free at (800) 322-2885 or at (212) 929-5500 or by email at savedisney@mackenziepartners.com. They will be pleased to help you through the process. You may also see www.savedisney.com for specific instructions or email us at voteno@savedisney.com.

Make sure your voice is heard. The damage The Walt Disney Company has suffered at the hands of Michael Eisner and the current Board must be repaired before it is too late. VOTE NO TODAY AND BRING BACK THE MAGIC! Thanks for your support.

Sincerely,

Roy E. Disney Stanley P. Gold

[Joshua Clinard]

Hope it does some good. I wish I was a shareholder, so I could vote.

[karlsen]

Maybee someone should post some advice on how to become a shareholder.

Altough I do not have much money I would love to invest in Disney. I know it is to late for this voting, but it could be nice to be ready for the next one if Roy does not win this.

[Loomis]

Maybee someone should post some advice on how to become a shareholder.

Altough I do not have much money I would love to invest in Disney. I know it is to late for this voting, but it could be nice to be ready for the next one if Roy does not win this.

Well, pretty much the only advice one could give is to either speak to a stockbroker and/or buy some shares in Disney.

To vote in the general meetings, you don't need to have more than one share and everyone is entitled to one vote.

However, I think when you are talking about unseating the upper echelons of power, there is more involved than simply the general shareholders votes.

By just saying NO you will send a message the Board of Directors cannot ignore. By withholding your vote from these four directors - who we believe are representative of what is wrong at Disney - you will force the Board to recognize the widespread conviction that serious changes in both senior management and the Board are necessary.

He doesn't actually say how it will happen though, does he? Are we actually doing anything by doing this, or just sending them a "message". "Ok, message received. What can we close down now?"

Look, I dig Roy - seems like a nice guy. But I think he is being a little one-sided here. Obviously, HE is anti-Eisner, but that is no reason the shareholder should be. The fact is - Eisner seems to be making money for these shareholders. Certainly more than when Roy was running the shop. And if you are investing your money in a company, most people are not concerned about whether the product is nice - they are concerned about whether the company is making returns on their shares.

While these activities may provide a short-term (in many cases, very short) boost to revenues, they have the long-term effect of dissipating what has made The Walt Disney Company great. If this process is allowed to continue, Disney will wind up “just another entertainment company”— and will never be able to recover its hard-earned reputation for providing unparalleled quality family entertainment and exceptional value to its guests and customers.

In an ideal world, we could just say "things should be like this" and they would be. But the shareholders don't want to lose their money any more than any of us do, or the executives do. You have to ask yourself - what is better: a 'dissipated' Disney name, or no Disney at all. In the end, Disney is just that - a name. We may be fond of it, but it is just a brand that is highly recognisable and thought of fondly. But they aren't, and never were, in the business to JUST entertain and be thought of fondly. Everyone from Walt on wanted to make a profit, the current head seems to be doing a good job of that.

I can understand where Roy is coming from - after all, it is his name that is attached to the company. I just think Roy is going about this the wrong way, directing all this hatred at Eisner, who may have made some bad artistic decisions, but some good financial ones lately. It all just seems counterproductive.

[Ludwig Von Drake]

I own shares and was wondering when the proxies are usually sent out, does anyone know?

[Rebel]

I own shares and was wondering when the proxies are usually sent out, does anyone know?

I usually get the forms 4-6 weeks before the shareholder meeting, but have not yet receive my Disney papers this year. I expect to recieve them soon. It may vary a little depending on your broker or holding company. Call them and ask.

For those who are not currently stock holders, it is now too late to buy stock and vote. Of course, the stock is not necessarily a good buy at the moment anyway.

[Rebel]

Look, I dig Roy - seems like a nice guy. But I think he is being a little one-sided here. Obviously, HE is anti-Eisner, but that is no reason the shareholder should be. The fact is - Eisner seems to be making money for these shareholders. Certainly more than when Roy was running the shop. And if you are investing your money in a company, most people are not concerned about whether the product is nice - they are concerned about whether the company is making returns on their shares.

. . . . . . . . . . . . . . .

I can understand where Roy is coming from - after all, it is his name that is attached to the company. I just think Roy is going about this the wrong way, directing all this hatred at Eisner, who may have made some bad artistic decisions, but some good financial ones lately. It all just seems counterproductive.

.

Long term stockholders definitely have major reasons to hate Eisner.

Yes the stock price has gone up some during the past year, but that is only because for the previous few years it had been on a downward trend. In 2002, Disney's stock price was at it lowest point in 10 years.


Here is a chart of Disney stock price for the past 5 years :

[img]http://pvcharts.quicken.com/images/char ... ount=10000][/img]

Woohoo!! The stock is almost to the point that I can break even on the Disney stock that I bought in late 2000 (which I had bought when the stock had dropped to a 52 week low).

SaveDisney.com also has some information comparing Disney's stock performance over the past 8 years to various market indicators. Disney has done very poorly.

[Loomis]

Here is a chart of Disney stock price for the past 5 years :

Ok, I stand corrected. I'm a little unsure on how to read it, though

It looks like stock prices have dropped this month, but I'm not sure how to reach the 5 year one. Help a non-economically minded soul will you

As I said, Eisner has made decisions largely financial. I can't say if they are good or bad, but partly what I was getting at was that stockholders should only be thinking about that when they vote.

Roy is thinking with his heart too, and the two arguments don't seem to want to get along. In this new wacky age we live in, art seems to be driven by money.

That aside, I think I was just trying to say that I think Roy's campaign is a little directionless at the moment - kind of jabbing at anything Eisner shaped in the dark. I don't know about finance, and perhaps I should stop commenting on it, but I think I know a little about anti-economic protest movements. And one thing they need is a focus. Something everyone can rally around (for example, anti-economic liberalisation networks focus their protests on free trade agreements and conferences).

At any rate, you have given me some figures to think about, Rebel. Good find. Thanks

Now I just have to figure out how to read them

[2099net]

I don't think the historical stock review is a fair point to make. Almost all share prices were down over the past few years. Most of the reasons for the low stock are due to circumstances out of Disney or Eisner's control. The terrorist attack on September the 11th combined with the then recent Enron scandal had a major impact on all shares (which can clearly be seen in the chart) and overall shares were dropping before then too - remember the hi-tech bubble bursting?

That said, Eisner is responsible for some of the lower share prices... Buying ABC wasn't his best decision (in my opinion).

But all that matters is how the company is performing NOW to the shareholders, and the company is performing well. You'll even see the stock is raising after the whole Roy Disney debarcle. I conclude the vast majority of shareholders don't mind.

It must also be pointed out, for a global company like Disney, the freefall in the US dollar exchange rate worldwide isn't making it any easier for Disney to make bigger profits... any overseas' income is now automatically bringing in less US Dollars when converted from the original currency! Considering the US ecomomy is generally regarded as "broken" at the moment (notice how low your interest rate is, and the motivation behind the recent US 'taxcuts') Disney must be performing better than most US companies...

Finally, can I just state, this post doesn't mean I support Eisner. But I do support realism. Some realism needs be to entered into the equation, because Roy doesn't seem to have any

[Rebel]

I don't think the historical stock review is a fair point to make. Almost all share prices were down over the past few years. Most of the reasons for the low stock are due to circumstances out of Disney or Eisner's control. The terrorist attack on September the 11th combined with the then recent Enron scandal had a major impact on all shares (which can clearly be seen in the chart) and overall shares were dropping before then too - remember the hi-tech bubble bursting?

That is true. A lot of the market has been down. The thing is that Disney has been down more than most.

I posted the 5 year graph because that was what I had available to post. Through my online broker, I can see graphs up to 10 years, but due to how they provide those graphs, I can not link to them.

However, as I mentioned before, Roy Disney has some other graphs showing how Disney's stock has underperformed during the past 8 years.

Graph 1
Graph 2
Graph 3

Or if you do not trust Roy, go to somewhere like ShareBuilder where you can enter "what if" scenarios for any stock you choose.

For example, what if starting in January 1996 you had invested $100 each month in Disney stock :



Compare that to if starting in January 1996 you had invested $100 each month in Time Warner stock :



GE (owner of NBC) :



Viacom :



FOX Entertainment :



Microsoft :



Some people say Apple has been going out of business for the past 20 years, but investing in Apple would have been better than Disney :



From the ShareBuilder site, you can choose pretty much any stock, any dollar amount, and any time frame since January 1 1996. You can choose whether to calculate "what if" you had made a one time investment or periodic investments.

If you are skeptical, then do not rely on the charts that I have presented here or that Roy and Stan have presented on SaveDisney.com. Do some research of your own. I am sure that you will see for yourself that Disney stock has consistantly performed below average. Of course there are some stocks that have done worse (ie Enron) but that is no reason that Disney could not have done better. Disney was doing relatively poorly BEFORE the tech bubble burst, BEFORE 9/11, and BEFORE the Enron scandal.

( BTW, I am not making any endorsement of ShareBuilder.com; they just have a nice "what if" tool. )

[2099net]

Rebel, I cannot argue with those graphs. And I'm pleased to see that some people are willing to do more than simply repeat other views with out doing their own research It's posts like this that add to the debate, while some others contribute nothing.

This is what is needed if Roy's vision is to survive and carry any weight. I'm particularly impressed with the other entertainment company's stocks, such as Fox and Time Warner. But... and I know you won't like me for saying this... but I don't think these comparisons are like-for-like. Disney theme park attendence did drop significantly after 9/11 and there wasn't really much anyone at Disney could have done to prevent it.

Even companies like Fox and Warner who are in the entertainment business have different interests than Disney. Especially Warners seem to have much more diverse business interests over Disney. The more diverse a company, the more likely it is to ride out any bumps in the economy.

But this doesn't invalidate your research, but it's something to perhaps think about... under Roy's vision for Disney, the company would have even less diversity. While it may be better artistically (I won't argue that) it may not be better commercially. After all, this is how Disney was in the late 70's, and as we all know Disney was in trouble then. And, reading most of Roy's statements, I've not actually seen any firm reason for his version of Disney performing better than Eisners, other than "building a trust" and "long term benefits", which may or may not arrive.

But thanks for posting, and it's given something for me (and I presume everyone else, no matter which side they are on) something to think about. (That sounds a little naff, and it's not intended to. I just cannot think of a better way of putting it).

Update:

I see Eisner awarded himself a pay-rise above the average earnings increase.
http://www.animated-news.com/archives/00000763.html

Now, this, is how Roy can get rid of Eisner. We've just had a couple of similar cases in the UK, and believe me, if the shareholders don't think the CEOs/Directors are doing enough for their money, they can be kicked out. WH Smith today is going through something similar (but I think this is just an attempt to withold bonus payments, not remove the employee).

[Mermaid Kelly]

Wow, maybe it's beacuse I'm younger than a lot of you (I'm 17), but this is all really confusing!

[Loomis]

But thanks for posting, and it's given something for me (and I presume everyone else, no matter which side they are on) something to think about. (That sounds a little naff, and it's not intended to. I just cannot think of a better way of putting it).

It's not naff - I said exactly the same thing two posts ago.

At any rate, you have given me some figures to think about, Rebel. Good find. Thanks

Now I just have to figure out how to read them

As you say, it is nice to see some solid work done here rather than Eisner bashing without something to back it up.

Eisner bashing with solid proof - I'm all for it

Rebel rocks - by doing so much for the forum (and it's members I might add Thanks again Rebel, I'll email or PM you when I get back from my holiday).

[Rebel]

I'm particularly impressed with the other entertainment company's stocks, such as Fox and Time Warner. But... and I know you won't like me for saying this... but I don't think these comparisons are like-for-like.

It is rather difficult to do a like-for-like comparison with Disney since there is no other company in the world quite like Disney.

However I disagree with your argument about the other companies being more diverse than Disney. The current Disney is rather diverse; take a look at what all they own. Disney has enough unrelated revenue that poor attendance at the theme parks by itself would not have much impact.

I am not sure whether Time Warner is more diverse or not; it kind of depends upon how you measure diversity. They cover pretty much the same categories as Disney, but with a few variances; Time Warner just owns a lot more of each. Well, you can see for yourself.

Likewise you can check out the holdings for GE and Viacom.

[Joshua Clinard]

Under Roy's Leadership, I think they would be concentrating less on minor things like Direct-To-Video Sequeals, and more on major things like making really great movies, both animated and live action. It's been years since they have made a really great animated feature. The last one was The Emporers New Groove, and before that, it was Tarzan. Great movies is what has made Disney great in the first place. Not a just bunch of okay shows and movies. A lot of other studios in the past have put out a lot of okay stuff, but they made money because there was so much of it. Disney is becoming like that. They should concentrate on doing the few things they do really well, and do them well. They should also scale back some of the other things. They are just dressing. The meat is Tradditional 2D Animated Features. My point is that they really need to go back to the basics, and I think that is what Roy is asking for. That is one of the major reasons the stock hasn't performed well. Of course part of it is the Theme Park attandance, but if they had been releasing great movies, it would make up for the low attendance. There are also a lot of other operations they could scale back.

Another point, is under Eisner, they have lost their creative direction, and that has an impact on box office sales. Pixar has that down pat, Disney has lost it. Also, the fact that Disney is not offering Pixar enough to stay with them is another reason to get rid of Eisner.