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 mr.grumpyguy@gmail.com

You can find us on Facebook at:  Discovering Disney History on FB

Enter Stage Right, Michael Eisner and Frank Wells

I started this piece about a month ago…  Then my live aside of my Disney passions intervened. Do not fear, I have not lost that passion, I am still reading, researching, and recreating the Disney life.  But, until I can find a way to earn a living with my passion, I must find other ways to support my family, and my Disney obsession.  Since I’ve been pursuing those efforts, it has significantly reduced the time available for my writing.

I’m going to go ahead and post this piece, but, you should know, there’s more to come on the Disney hostile takeover attempt ’84.  I was recently been pointed to some additional documentation I did not have when I originally wrote the takeover pieces… Thank You Joseph, I am really looking forward to reading this new material.   

So in 1984, after a fending off a hostile takeover attempt which caused uproar with other stockholders, Ray Watson and Ron Miller were shown the door in favor of the management team of Michael Eisner and Frank Wells.  Michael Eisner was appointed Chief Executive Officer (CEO) and Chairman of the Board (COB), with Frank Wells coming on board as the President and  Chief Operating Officer (COO).  And finally, Roy E. Disney was appointed to the position of Vice Chairman of the Board.  While it is not a publicly confirmed or acknowledged fact, I believe the appointment of Roy to Vice COB was an effort designed to provide some stability and cohesion in the organization as a tie back to the founding family of the company, after having just transited a very tumultuous period in the company’s history.

For a few brief profiles of the principles in this new era of Disney management:

Michael Eisner worked briefly at NBC and CBS before being hired at ABC by then VP of Prime Time Programming, Barry Diller.  When Diller left ABC to become the Chairman of Paramount Pictures, he recruited Eisner away from ABC to become the movie studio’s president and CEO.  Under Eisner’s leadership, the studio produced such movie hits as Saturday Night Fever, Grease, the Star Trek film franchise, Raiders of the Lost Ark, and Beverly Hills Cop, and hit TV shows such as Happy Days, Laverne & Shirley, Cheers and Family Ties.  After Diller left Paramount in 1984, Eisner was expecting to be promoted to the studio chief’s position.  When that did not happen, Michael left Paramount as well to pursue other opportunities.  That new opportunity turned out to be head of Walt Disney Productions.

Frank Wells, a 1953 Rhodes Scholar obtaining his BA at Oxford University, had worked for Warner Brothers as Vice President, President, and Vice Chairman until his departure in 1982.  Frank, ever the adventurer and avid mountain climber, missed his goal of climbing the Seven Summits by one.  Bad weather had forced in climbing party to give up one day before reaching the summit of Mount Everest.  One thing that I learned in researching Frank Wells, Frank’s love of mountain climbing has been honored at the Matterhorn Bobsleds attraction at Disneyland in Anaheim.  Scattered around a scene at the beginning of the ride is exploration equipment marked with the words “Wells Expedition.” Frank’s life was cut short Easter of 1994 in a helicopter crash while returning from a Nevada ski trip.

And finally, as he will become even more instrumental the Disney story, now is a good time to give a brief profile of Roy E. Disney.  Roy E. is the only child of company co- founder Roy O. Disney and his wife Edna.  Roy E. joined Walt Disney Productions in 1954 as an assistant editor working on the “True Life Adventures” Film series.  Roy also worked and a writer, director, and producer on many other Disney productions.  But, he is probably most well known for the two significant changes in management at the company his father and uncle founded.  He was instrumental in Eisner’s ascension to the top of what has become The Walt Disney Company, and as essential in Michael Eisner being shown the exit.

I’ll be doing a more in depth profile of each of these gentlemen in later as I explore this period of the Disney history, along with a few other notable individuals from the Eisner era.  What I have seen to date, reads like a corporate soapbox, and is quite interesting, at least in my opinion.  I’ve also recently acquire two new tomes on Walt Disney himself, one about rarely heard stories, which I am looking forward to reading.  And, one that gives me hope as a writer that I too may someday be able to publish a book on my passion.  So you can expect some revisiting Walt’s story.

In the meantime, I’m going to try to catch up on some of the recent events at the Walt Disney Family Museum as time is available, and you can expect a couple of reports on Disney events coming this summer.  But, the time requirements of my other endeavors will still affect the time available of my writing, so I ask for your patience. If you like to keep up to date on the post to this blog, you can join the Facebook group I created for you, Discovering Disney History on FB

Thanks, and have a Disney-rific Day!  J

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 mr.grumpyguy@gmail.com

Mickey Mouse under attack. A corporate raid is afoot

When last we left, Walt Disney Productions and Mickey Mouse were under attack from investor and corporate raider Saul Steinberg.  Disney was an attractive target for a hostile takeover because it was really worth more in pieces then as a whole operation, and it appeared to be Mr. Steinberg’s intention to reap his profit by breaking up this operation and sell off the pieces.  Actually, it is more complex than stated above:

In March of 1984 Disney blipped on Steinberg’s radar as a company with significant cash potential and a reduced stock value, and he began buying Disney shares at $50.  In April he filed with the FTC and DOJ his intentions to buy as much as 25% of Disney’s shares.  Within a week of that filing he owned 12.2% of Disney.  Disney COB, Ray Watson, and CEO Ron Miller began to implement a first line of defense in this attack, by begin the acquisition of other companies in an effort to lessen Steinberg’s shares.  In May, Disney agreed to buy a Florida based land-development firm, Arvida for 3.3 million shares, almost 10% of its stock.  Steinberg sued to block the deal and lost in U.S district court.  Disney then moved to acquire Gibson Greetings, as Cincinnati based producer of cards and wrapping paper, for about 6.2 million shares of Disney stock.

With these moves threatening to reduce Steinberg’s Disney holdings to under 10%, and the appearance that he was losing his bid to take Disney over, he launched into phase II of his attack, and this is where the idea that he was going to sell of pieces of the company for a profit.  He formed MM Acquisitions (you’ve probably guessed it, but the MM stood for Disney’s own Mickey Mouse), and partnered with Kirk Kerkorian, the majority stockholder in MGM/UA, additionally enlisting investments from Fisher Financial and Development.  These investment deals included options, for Kerkorian’s investment of $75 million, to buy the Disney Studios and film library for $448 million, and Fisher’s similar investment gave it exclusive rights to buy undeveloped land in Florida near Walt Disneyworld and Epcot, and the Disneyland Park in California.  MM Acquisitions then offered to buy 37.9% of Disney’s stock for deal valued at about $970 million at the time.   The offering price, per share, was a third higher than the stock price paid few months earlier.  It was looking like this new offer had a good chance of succeeding, so in a series of meetings held in New York City, a deal was struck for Disney to buy back Steinberg’s approximately 4.2 million shares at a price of $70.83 a share or about $297.5 million,  a 32 million dollar profit.  Additionally, Disney agreed to pay another $28 million to cover Steinberg’s costs associated with the attempted hostile takeover.  For this, Steinberg agreed not to acquire any Disney stock for at least 10 years.

With the immediate crisis averted, Disney’s other stockholders and institutional investors were up in arms at Disney’s management acquiescence to this successful greenmail effort and the cost to their investments.  While Saul Steinberg reaped a healthy profit of nearly 10% for his “investment”, within days of the deal being struck, Disney stock drop $16 to $49.50, and almost 5% loss for all other investors.  An almost 32% loss if you gauge it from the price that Steinberg was offer for his shares.  Disney’s management had escaped to hostile takeover attempt with their jobs, for the time being, but, a new hazard loomed on the horizon for management.   While Disney management was fending off this hostile takeover, another was in the works from within the walls of Disney.  Roy E. Disney, son of founder Roy O. Disney, had left the day-to-day management of the company years earlier over concerns for the company’s direction, resigned the position he still held on the Disney Board, after bringing arranging for the Bass family to come as White Knight investors during the Steinberg bid to take over the company.  As still a significant minority interest stockholder, Roy launched his first Save Disney campaign after resigning.  Recognizing that Disney management had been seriously weaken by the Steinberg assault, the resulting deal, and stockholder anger, Roy E. enlisted the help of the Bass family, now the largest holder of Disney stock, and board member Stanley Gold to usher in new management for the company.  At Roy’s urging, COB Raymond Watson and President and CEO Ron Miller were replaced with the team of Michael Eisner as COB and CEO, and Frank Wells as President and COO.  While I can’t find support for a claim that it was a quid-pro-quo arrangement, but, for his efforts, Roy E. Disney was reinstated as a board member and made Vice Chairman of the Board.

Next we’ll start exploring the Eisner/Wells era at Disney, but first I’m going to catch up on some of the happenings at the Museum.

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 mr.grumpyguy@gmail.com

Review: In Service to the Mouse

Back in July of last year, I, along with some friends and family of the Walt Disney Family Museum, got the opportunity to spend and couple of hours on two afternoons with Disney luminaries on the occasion of Disneyland 55 anniversary.  One of those Disney luminaries was Disney Legend Jack Lindquist.  Jack was hired as Disneyland first advertising manager and spent the next 38 years developing and implementing some of the most creative and memorable marketing campaigns in the Disney Theme Parks’ history.  Activities such as Grad Night at Disneyland, and The 30^th anniversary: Gift Giver Extraordinaire were Jack’s creations.  Jack retired from the company as President of the Disneyland amusement park in 1993, received a window on Main Street, actually on the City Hall Building.  “J.B. Lindquist – Honorary Mayor of Disneyland.  Jack of all trades, Master of Fun,” and was inducted as a Disney Legend in 1994.  So on that joyful day, July 17, 2010, the 55^th anniversary of Disneyland, we got to enjoy Marty Sklar, Tony Baxter, and former Disneyland Presidents Matt Ouimet, and Jack Lindquist trade stories back and forth, and answer questions about Walt Disney and Disneyland.

So when I discovered Jack Lindquist was writing his memoires of his 38 years “In Service to the Mouse,”  it had to go on my reading list.  I've got to tell you how pleased I am that I did…  First, like most Disney or Disney related or inspired activities, the people distributing Jack’s book are top notch.  Since I wanted a signed copy, I ordered my copy from the Neverland Media LLC website (click side bar link for more information).  About a day after ordering, I got confirmation that my order shipped, and then received another very nice email the next day, informing me that there had been an error, and an unsigned copy was mistakenly shipped.  I was free to keep the unsigned copy, and that the signed edition would be on its way to me shortly.  The issue was resolved before I even knew one existed. KUDOS!!!  So now I have a signed copy to keep in pristine collector’s condition, and second working copy which I can read and re-read as often as I like…

Having just completed this tome, I have to say that “In Service to the Mouse” is a must read for any Disney Aficionado, especially those interested in the history of Disneyland and the Disney company.  Jack was there at Disneyland’s beginning.  It is a rare first hand account of what goes go behind the scenes at one of the most iconic companies operating today.  The stories are told in short little vignettes where Jack entertainingly recalls events and activities provides insights not know to very many during his tenure with the Disney Company.  I won’t reveal the stories here, if you want to know, please go pick up the book.  But, I will say that I found the unique and enterprising gin delivery system deployed during one Grad Night quite entertaining.  And, as a miniature Partners statue greets me every morning (the most prized item in my Disney collection), it warms my heart to know that Jack Lindquist played a role in bringing that amazing sculpture into reality.  The adventures and agonies of creating the Pavilions of World Showcase at Epcot are both enlightening and entertaining, and Jack provides a very honest, insightful and humanizing view of the management of a company that has becoming so iconic in today’s culture.

This may sound trite, but I laughed at parts, and cried at others.  However, foremost, I learned things I didn’t know about an organization which has become the gold standard in entertainment today.

Thank You Jack!

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 mr.grumpyguy@gmail.com