Embattled Walt Disney Co. Chief Executive Michael Eisner on Wednesday was stripped of his role as chairman, but kept his position as chief executive even after 43 percent of shareholders voted against him in an unprecedented protest.
Convening in Philadelphia after a stormy annual meeting, Disney's board said it had elected former U.S. Senator George Mitchell as the company's chairman and that 61-year-old Eisner had its unanimous backing as Disney's top executive.
The board once again rebuffed a $49 billion hostile takeover offer by cable operator Comcast Corp., saying it was insufficient, but that it would review "any reasonable proposal."
Comcast called on Disney's independent directors to open talks, while Microsoft Corp. Chairman Bill Gates rejected speculation the software giant would bid for Disney. The vote -- widely seen as a rebuke to Eisner's leadership -- sent shock waves through corporate America and marked the strongest such protest against an incumbent chief executive ever. It signaled Disney's concession was unlikely to satisfy shareholders campaigning for Eisner's removal.
Calpers, the nation's largest public pension fund, said the "stunning" result of the vote showed the depth of investor frustration with Eisner.
"This discontent is too wide and way too deep in the marketplace, and it has led us to believe that Eisner should go," said Sean Harrigan, president of the board of administration of Calpers, or the California Public Employees Retirement System.
Disney's board said that while it recognized that some shareholders were calling for Eisner's ouster, it was confident that the entertainment conglomerate's financial results would validate its support of management and current strategy.
"While there appear to have been a number of different forces at work in the shareholder vote, a significant message conveyed in the vote was in the area of governance," Disney's board said in a statement. "In particular, there was substantial focus on whether the chair and CEO functions at the company should be split."
Eisner, appearing on Disney's own ABC network in an interview with anchor Ted Koppel, said he planned to stay as chief executive at least until his contract expires in 2006.
"My intention is definitely to serve (the CEO contract) out to its completion," Eisner said, adding the board had separated the roles of chief executive and chairman in response to shareholder demands.
Analysts had expected Disney would strip the chairmanship from Eisner, but many doubted that step would be enough to placate investors now.
"No, no, no. That to me would be just a cosmetic or technical response. This in my mind goes much deeper," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "It's got to be a management change one way or the other."
Alan Hevesi, the New York State Comptroller who had called for Eisner to leave, said in a statement that the vote marked a "wake-up call" for Disney management.
Pat McGurn, spokesman for Institutional Shareholder Services, the influential adviser which stoked opposition to Eisner, said splitting the CEO and chairman roles at Disney would only mark a first step toward reform.
"If they think that is going to be the end, they are kidding themselves," he said.
BOARDROOM SHOCKWAVES
Eisner has been criticized over Disney's longer-term stock performance, low ratings at the company's struggling ABC network and what detractors see as his mishandling of a now-scuttled movie distribution deal with Pixar Animation Studios Inc.
Two former Disney directors, Stanley Gold and Roy Disney, who first touched off the shareholder insurgency last year, said they would continue their fight until the board ousted Eisner, whose contract ends in 2006.
Gold had earlier said that Mitchell, who had been Disney's lead outside director, was not fit to serve as chairman after 24 percent of shareholders voted against him.
More than 20 percent of shareholders who voted also opposed Judith Estrin and John Bryson, two other directors targeted by Gold and Disney.
All Disney candidates were guaranteed election since there were no other rivals running.
The vote against Eisner passed the 35 percent threshold of a Securities and Exchange Commission proposal that, if approved, would open the way for dissidents to run their own candidates on the Disney ballot at next year's meeting.
Disney shares closed off 11 cents at $26.65 on the New York Stock Exchange.
Convening in Philadelphia after a stormy annual meeting, Disney's board said it had elected former U.S. Senator George Mitchell as the company's chairman and that 61-year-old Eisner had its unanimous backing as Disney's top executive.
The board once again rebuffed a $49 billion hostile takeover offer by cable operator Comcast Corp., saying it was insufficient, but that it would review "any reasonable proposal."
Comcast called on Disney's independent directors to open talks, while Microsoft Corp. Chairman Bill Gates rejected speculation the software giant would bid for Disney. The vote -- widely seen as a rebuke to Eisner's leadership -- sent shock waves through corporate America and marked the strongest such protest against an incumbent chief executive ever. It signaled Disney's concession was unlikely to satisfy shareholders campaigning for Eisner's removal.
Calpers, the nation's largest public pension fund, said the "stunning" result of the vote showed the depth of investor frustration with Eisner.
"This discontent is too wide and way too deep in the marketplace, and it has led us to believe that Eisner should go," said Sean Harrigan, president of the board of administration of Calpers, or the California Public Employees Retirement System.
Disney's board said that while it recognized that some shareholders were calling for Eisner's ouster, it was confident that the entertainment conglomerate's financial results would validate its support of management and current strategy.
"While there appear to have been a number of different forces at work in the shareholder vote, a significant message conveyed in the vote was in the area of governance," Disney's board said in a statement. "In particular, there was substantial focus on whether the chair and CEO functions at the company should be split."
Eisner, appearing on Disney's own ABC network in an interview with anchor Ted Koppel, said he planned to stay as chief executive at least until his contract expires in 2006.
"My intention is definitely to serve (the CEO contract) out to its completion," Eisner said, adding the board had separated the roles of chief executive and chairman in response to shareholder demands.
Analysts had expected Disney would strip the chairmanship from Eisner, but many doubted that step would be enough to placate investors now.
"No, no, no. That to me would be just a cosmetic or technical response. This in my mind goes much deeper," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "It's got to be a management change one way or the other."
Alan Hevesi, the New York State Comptroller who had called for Eisner to leave, said in a statement that the vote marked a "wake-up call" for Disney management.
Pat McGurn, spokesman for Institutional Shareholder Services, the influential adviser which stoked opposition to Eisner, said splitting the CEO and chairman roles at Disney would only mark a first step toward reform.
"If they think that is going to be the end, they are kidding themselves," he said.
BOARDROOM SHOCKWAVES
Eisner has been criticized over Disney's longer-term stock performance, low ratings at the company's struggling ABC network and what detractors see as his mishandling of a now-scuttled movie distribution deal with Pixar Animation Studios Inc.
Two former Disney directors, Stanley Gold and Roy Disney, who first touched off the shareholder insurgency last year, said they would continue their fight until the board ousted Eisner, whose contract ends in 2006.
Gold had earlier said that Mitchell, who had been Disney's lead outside director, was not fit to serve as chairman after 24 percent of shareholders voted against him.
More than 20 percent of shareholders who voted also opposed Judith Estrin and John Bryson, two other directors targeted by Gold and Disney.
All Disney candidates were guaranteed election since there were no other rivals running.
The vote against Eisner passed the 35 percent threshold of a Securities and Exchange Commission proposal that, if approved, would open the way for dissidents to run their own candidates on the Disney ballot at next year's meeting.
Disney shares closed off 11 cents at $26.65 on the New York Stock Exchange.
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