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Monday, August 1, 2011

Laying Siege to the Castle, Part II

Laying Siege to the Castle, Part II – July 18, 2011

When last we met, I am sure to some, even many Disney fan, I committed blasphemy!  To most, I laid responsibility for the attempted hostile takeover at the feet of Disney Legend Card Walker.  Even more blasphemous, I intimated that even Walt and Roy’s management style were somehow to blame, or that Ron Miller is somehow faultless in these activities.  Nothing could be further from the truth…  While all of this contributed to the ultimate come of 1984, none it is directly responsible.  It was the culmination of many factors that led to the hostile takeover attempt of Walt Disney Productions, as well as many other corporation of that time.  The following is a synoptic generalization, these are topics that can, have and will continue to fill volumes, and here it is just a primer to build a foundation it is in no way conclusive.

I am continually amazed at the number of people who believe that any corporate board is a collection of logical, unemotional, and egoless individuals with absolutely nothing more than the best interested of the company at heart.  So, so, so wrong a perception.  I have worked with executive management teams and a few corporate boards throughout my career.  I have seen as many illogical, emotional, ego-driven decisions enacted in these executive offices and board rooms, as in life in general.   Anyone with any experience will tell you that the corporate board room is nothing more than a microcosm of life in general.  Also in as a general rule, most shareholders in corporation have no real emotional attachment to the company or management.  It’s about making money.  Where in nature the motto is “Survival of the fittest,” a concept many believe applies to business, the axiom there would be “Survival of the Smartest,” or maybe “Survival of the Quickest.”

While trading in corporate securities had been going on for many decades, centuries even… it was generally an activity reserved for the wealthiest in society.  After America successfully emerge from the Great Depression and World War II, a revitalization of the American middle class began to take hold, and a relatively untapped resource for the capitalization of American business presented itself.  As this new resource began to be exploited, vehicles such as mutual funds, first popularized in the 20’s, resurfaced as an investment opportunity for the smaller, and normally less informed, investors – generally the middle class investor looking build a nest egg for the future.  These smaller investors put their faith in the mutual fund institutions to monitor and protect their nest eggs; they had no tangible attachment to the companies being held in the fund.  The Wall Street analyst, and financial performance, became the unemotional arbiter of corporate success.  Starting in the 60s, as the public’s changing desires for entertainment choices, business was undergoing a change as well.  The focus was changing from long term growth, to short term profits to judge executive management effectiveness.

So what does all this have to do with our beloved Disney?  Well, the board and management of Walt Disney Productions failed to recognize and address the changing environment in which they were operating.  Disney’s management, like so many of us – individually, being resistant to change, chose rather to hold fast to what they believed represented the value that had allowed their co-founders such success.  Instead of embracing creativity and the change it requires, they tried desperately to imitate Walt’s creativity.  A laudable idea, but, a truly impossible effort to accomplish, there is and has only been, or will ever be one Walt Disney at the The Walt Disney Company.  Success is only going to continue by understand the man and his creative process and philosophies, and find ways to embraces those philosophies and continue that creative process in the changing world we live in.  That is in fact what Roy and Walt did to build The Disney Brothers Studio, and then Walt Disney Productions.

Now let’s explore some of the more current events of the period that contributed to the Siege.

The two individuals who remain somewhat enigmatic adversaries in all this are Ron Miller and Roy E. Disney.  Since Roy is no longer with us, unless his family allows someone access to his personal archives, we will never know what he was thinking as all this was transpiring.  Likewise, unless someone can get Ron to sit down and talk about this period in Disney’s history, we are not likely to hear his thoughts on the matter.  As I have observed, in my rather limited interact with Ron, it’s going to take much encouragement to get him to open up.  While I would love to be involved in either endeavor, there are certainly more qualified individuals out there, and I hope they are successful.  I will look to seeing the results of their efforts.  But, to accomplish my efforts to understand this wonderful and sometime strange history that is The Walt Disney Company, I must delve into an examination of these gentlemen with the information I was available to me now.

I don’t know exactly how tall Ron Miller is, but from my perspective at 5’9”, he is at least 6’4”, and at first look has what can be expressed as an intimating appearance.  Not surprising he played football professionally.  But, he never completed college, so the impression by some at the studio was that he was there, because he married into the family.  Include the professional football, and a somewhat menacing presence, could easily foster the notion that he was nothing more than a “jock.”  A characterization that he acknowledged bothered him.  Having met him, I have no problem imagining a younger Ron Miller, developing into a shy and reserved person to compensate for the intimidation some would feel from his size.  I have seen more than a few of my taller friends develop similar traits.  By all reports I’ve seen, Ron is always described precisely as a I conclude, a gentle, shy, and quiet man.  I have even heard the Walt Disney himself would get frustrate when his protégé and son-in-law would fail to speak up for himself in meetings. 

In an earlier time Ron Miller might have made an excellent corporate leader, he was, after all, mentored by a creative genius.  But, in the shark infested waters of 1980’s corporate leadership and investors, his lack of business experience place him at a serious disadvantage.  This situation was further exacerbated when he was promoted to CEO.  While I am sure he felt he could do the job, it could not have helped his confidence when Card Walker, himself concerned about Ron’s experience, approached Raymond Watson about becoming an “interim” Chairman of the Board act pro forma CEO, while Ron obtained some additional experience.  The top leadership position of a major U.S. corporation is not an appropriate environment for on-the-job training.  I am sure that Card had the best of intentions, and was trying to be loyal to the family of his mentor, but his appointment of Ron to the top management positions in the manner he did it, further weaken Disney in the eyes of the stockholders and Wall Street.  Given time Ray and Ron could have very easily become as effective a management team as Walt and Roy O, but, there was already blood in the waters, and the sharks were circling.  There was no time to be had.  Even though Ron’s tenure at the helm was short, he still demonstrated an understanding of the changing movie business and the need for the studio to reassert itself.  As I said in my last article, the creation of Touchstone Pictures and the first Silver Screen Partners under Ron’s leadership demonstrated the need for the Disney Studio to change, and laid significant groundwork for his successors’ early achievement.  But it was not to be, for Ron – with only a few allies on the Board, and even fewer among the larger minority interest shareholders… including his cousin-in-law Roy E. Disney, the clock had run out almost as soon as it had started.

Sitting across the board room table from Ron and Ray was Roy E. Disney – the son of co-founder Roy O. Disney.  Roy E.  Remember the Card Walker claim of Walt’s view of his nephew?  Well, I betting Roy as well and many of the board members were aware of Card’s claim, as well.  Apparently, from the details I’ve culled, Roy, much like his cousin-in-law – Ron, had a somewhat timid personality.  While he was active on the board, and often made strategic management recommendation, his input was apparently never considered.  Where Card’s focus as Chief Executive appeared to be on the park operations and expansion, Ron seemed more focused on the studio’s live action products, and Roy’s focus on animation.  All three, laudable points, but with all vying for attention and resources, and with the Disney movie offering not doing well at the box office, the studio operations began to take a back seat to other operations.  Roy showed concerned about losing one of the company’s founding cornerstones, didn’t seem to have the pulled or personality to push his point as hard as the others.   He wound up choosing to leave the board, and pursue changes in other way.
If Ron and Roy had been able to get in a room and discuss the situation without the perception baggage they both seemed to be carrying, I think they would have found that they had more with which ally themselves then their apparently adversarial relationship would seem to allow.  Regardless of how they were family, the two as allies would have made a formidable pair, as the founders’ family.  But, that was not to be, as much as people would like to think that running a company the size of Disney would be mechanical and unemotional, it is never that easy.

In Part III of “Laying Siege to the Castle,” we’ll explore the actions and activities that led to the arrival of Michael Eisner and Frank Wells.

Your comments or questions are always welcome.  If you have a correction or something you think I should look at in my research, please feel free to contact me at
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