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Roy Disney, Stanley Gold Sue The Walt Disney Company, Certain Directors For Fraud, Breach of Duty of Disclosure Regarding Board's Public Statements About Search for Eisner's Replacement As CEO

Suit Asks Court to:
Void 2005 Election of Directors
Compel Company to Hold Another Election for Directors After Full Disclosure About CEO Selection Process
Enjoin Company and Board from Changing Eisner's or Iger's Compensation or Contracts

Burbank, CA - May 9, 2005 -- Roy E. Disney and Stanley P. Gold today filed suit in Delaware Chancery Court against The Walt Disney Company and certain members of the Board of Directors of the Company alleging that the Board made false statements to the Company's shareholders about its CEO search in order to induce shareholders to vote for the incumbent Board at the 2005 meeting and to induce Messrs. Disney and Gold not to run an alternate slate of directors at that meeting.

In addition to The Walt Disney Company, the two former Disney Directors sued Robert A. Iger, Michael D. Eisner, Judith L. Estrin, John S. Chen, Aylwin B. Lewis, Monica C. Lozano, George J. Mitchell and Leo J. O'Donovan, S.J, for fraud and breach of the duty of disclosure in connection with the Board's public statements about the search for a replacement for outgoing CEO Michael Eisner.

In their lawsuit, Messrs. Disney and Gold are asking the Court to void the 2005 election of Disney Company directors and to compel the Company to hold another election for directors after full and fair disclosure of all material facts about the CEO selection process. Messrs. Disney and Gold are also asking the Court to enjoin the Company and the Board from changing either Eisner's or Iger's compensation or employment contracts. :

The complaint states, "In light of Disney's and Gold's successful 'Just Say No' campaign at the 2004 Annual Meeting and threat to run an alternate slate of directors at the 2005 Annual Meeting, Defendants delayed their selection of [Robert] Iger until shortly after the 2005 Annual Meeting, used Company resources to promote Iger's candidacy and did not in good faith seriously consider any other candidate." As a result of Messrs. Disney's and Gold's efforts, a total of 45.37% of the Company's stockholders withheld their votes for Mr. Eisner, 25.69% withheld their votes for Senator Mitchell, and 24.37% withheld their votes for Ms. Estrin in an unprecedented "No Confidence Vote" at the Company's 2004 Annual Meeting.

According to the complaint, despite the Board's public promises to Company shareholders that it would conduct the CEO search with 'open minds' and with no predeterminations or preconditions, in reality, the Board's CEO selection process precluded serious and effective consideration of external candidates. The complaint cites, among other things:

reports that the Board interviewed only one external candidate, delayed notifying her of any decision and did little to dissuade her from withdrawing her candidacy;
Michael Eisner's presence or expected presence at interviews of external candidates; and
the Board's failure to investigate Iger's role in the Fox Family Channel acquisition, the presentation of overly optimistic projects about Fox Family to the Board and the related withholding from the Board of the CFO's plan to save the Company $400 million by writing down the value of those Fox Family assets.
Messrs. Disney and Gold's complaint states that shareholders were misled by the Board's public promises of open mindedness, saying 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, [they] would have run an alternate slate of directors at the 2005 annual stockholders meeting."

Also revealed in the complaint is the Company's recent rejection of Messrs. Disney's and Gold's request under Delaware law for books and records documenting the Board's search for Eisner's successor. Messrs. Disney and Gold's complaint cites the Company's refusal to permit any scrutiny of the Board's decision to appoint Iger as CEO as further evidence that shareholders were misled by the Board's statements about a bona fide process.



See what else is new at SaveDisney.

I heard rumor Mel Gibson was being considered for next Disney CEO

Just came to post this after I got the savedisney.com press release.

Wow, this is big. Someone, either Eisner or Disney is gonna come out of this smelling really bad. I hope it isnt Royl.

PMcOuntry wrote:I heard rumor Mel Gibson was being considered for next Disney CEO

I'd have much more confidence in him than on the other guys. I think it would be really nice to see what he'd do; it'd be really nice for him to be CEO.

What is this world coming to, Disney suing Disney

I wonder whats going to happen then
Could this mean Iger wont be the new CEO?

Ciaobelli wrote:What is this world coming to, Disney suing Disney

Didn't we already go through this when the Beatles broke up?

Roy Disney vs. Walt Disney (Co.).... it is interesting, I'll admit. Not to mention very big news! The biggest since Disney War came out, in fact, which wasn't from SaveDisney... I was wondering when Roy and Stan were really gonna turn on the heat again. Can't wait to see this unfold.

-Aaron

Just as long as Cinderella 3 comes out.

ohmahaaha wrote:

Ciaobelli wrote:What is this world coming to, Disney suing Disney

Didn't we already go through this when the Beatles broke up?

YOKO! It's Yoko's fault!

Last week, I finished reading Walt's biography written by Bob Thomas. Think about it: his nephew Roy had been with the company for a good long time.

Above all, I don't want wrongdoing going on -- don't start; and if it's been going on, then STOP! It just seems, that for this company, there should be some Disney blood as part of the organization.

Why didn't the just pick me for CEO???lol Mel would do a great job!

Ciaobelli wrote:What is this world coming to, Disney suing Disney

Agreed.

Now I had read a story over on Jim Hills site that Roy was asked to re-read the dedication at Disneyland's 50th. Guess that might not happen now.

Is it just me or does this strike anyone else as petty? I go to SaveDisney frequently and am a stockholder, but I think Roy's made his point known. Suing? No one ever took charge of someone else through other means and had a good experience (think of all the historical wars; the conquered always harbor ill will towards the winner). Even if Roy somehow did get in charge again, things would be so strained between him and the rest of the board that very little would get done.

I don't think Roy is being petty. The Disney company "done him wrong" and we all know he belongs there. And if he has to resort to the lowest common denominator and sue, then so be it.

Roy isn't trying to "take charge." He isn't seeking the chairmanship for himself (and not even a position on the board, at least not openly). He's trying to oust those who are there in favor of external candidates. In addition to being the presiding member of the Disney family, he's also a very large stock holder, and so his finances depend on the decisions of the Disney board. The Disney Company is his career and his heritage. Whether or not it's the most effective strategy for "saving Disney" remains to be seen, but it hardly strikes me as petty. Beside, it's already met with success:

Judge Allows Disney Suit To Go Forward

Delaware Court Allows Lawsuit Filed by Roy Disney and Stanley Gold to Void 2005 Election of Walt Disney Company Directors to Go Forward
Monday June 6, 7:41 pm ET

BURBANK, Calif., June 6 /PRNewswire/ -- Roy E. Disney and Stanley P. Gold today said that they are pleased with the Delaware Chancery Court's ruling allowing their lawsuit to go forward against the Walt Disney Company and certain members of the Board of Directors of the Company with an expedited trial date of August 2005.

The lawsuit, which was filed on May 9, 2005, alleges that the Walt Disney Company Board made false statements to the Company's shareholders about its CEO search in order to induce shareholders to vote for the incumbent Board at the 2005 annual meeting and to induce Messrs. Disney and Gold not to run an alternate slate of directors at the meeting.

In addition to the Walt Disney Company, the two former Disney Directors sued Robert A. Iger, Michael D. Eisner, Judith L. Estrin, John S. Chen, Alwyn B. Lewis, Monica C. Lozano, George J. Mitchell and Leo J. Donovan, S.J., for fraud and breach of duty of disclosure in connection with the Board's public statements about the search for a replacement for outgoing CEO Michael Eisner.

In his ruling, Chancellor Chandler stated, " ... plaintiffs have alleged facts suggesting that the Company's board did not go about the process of searching for a new CEO with 'open minds,' without prior determinations and giving "full consideration" to external candidates. The complaint alleges that only one external candidate was interviewed, that Mitchell told that candidate 'she was not a serious candidate,' and that Eisner's presence at interviews of external candidates, "was intended to chill and did chill full consideration of qualified external candidates for the position of CEO.'"

"Should these allegations be proven, plaintiffs could be entitled to the relief they seek because the board's statements materially misled plaintiffs with respect to the board's intent to conduct a bona fide executive search process."

In their lawsuit, Messrs. Disney and Gold asked the Court to void the 2005 election of Disney Company directors and to compel the Company to hold another election for directors after full and fair disclosure of all material facts about the CEO selection process. Messrs. Disney and Gold also asked the Court to enjoin the Company and the Board from changing either Messrs. Eisner's or Iger's compensation or employment contracts.


Source: Roy Disney and Stanley Gold

Source: http://biz.yahoo.com/prnews/050606/lam121.html?.v=13

...And critics said it wouldn't get through!

-Aaron

This isn't petty! Just because Roy did this the action is called petty, when actually he's the only shareholder that cares! As much as I'm satsified with what Iger has promised, he was not chosen with careful consideration. I think we fans should hope for the best CEO out there. That's why I'm surprised so many of us complain about this law suit. It may be unpleasent, but I'm sure if the end result is achieved everyone will profit from this!

DisneyFan 2000 wrote:This isn't petty! Just because Roy did this the action is called petty, when actually he's the only shareholder that cares!

I would not say he was the only one when you look upon last years shareholders meeting voting. There were many that had another oppinion on Eisner then Roy.

karlsen wrote:

DisneyFan 2000 wrote:This isn't petty! Just because Roy did this the action is called petty, when actually he's the only shareholder that cares!

I would not say he was the only one when you look upon last years shareholders meeting voting. There were many that had another oppinion on Eisner then Roy.

He was the one that arranged for the whole voting no at the shareholders meeting. Just look at this year when he didn't put pressure. Only 10% of shareholders actually bothered to place their vote.