Disney Report
Content
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
HUMAN RESOUCE MANAGEMENT
DISNEY : SUCCESSION PROBLEMS IN MAGIC KINGDOM
Submitted to: Dr. Shalini Khandelwal
Submitted by: Ashish Jain-11BSP0185 Mohita Sud-11BSP0559 Noopur Falod-11BSP1962 Vivek Saini-11BSP1148
1 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
INTRODUCTION
Born on December 05,1901,in Chicago Walt Disney spent his childhood years on a farm near Marceline, Missouri. The creative journey commenced in 1920 when he formed a company called Iwerks-Disney Commercial Artists . In 1922, Walt Disney founded his first studio called Laugh-O-Grams Inc.. After continues failure, Walt Disney moved to Holly wood and started the Disney brothers cartoon studio. Success knocked in 1923 with the first short live action/animated film Alice s Wonderland . In 1927, an all cartoon series Oswald the Lucky Rabbit , based on a character was successful, with which Walt Disney Corporation further expanded its operations. After losing his series in 1928, work on a new character Mickey Mouse commenced. Third movie of this series was released with sound, which turned out to be a huge success. Renowned Characters like Donald Duck , Goofy and Pluto were launched with Silly Symphonies , where there were no continuing characters and classical music was used effectively in the background. Walt Disney was also credited with introducing color in animation movie making with Flowers and Trees in 1932, which won an academic award. In 1938, Snow White and Seven Dwarfs became the most successful picture of the year by earning US$ 8 million, followed by Pinocchio and fabtasia in 1940. In 1941, problems were encountered due to a strike, also due to World War II , most of WDP s facilities were contracted to make films for the military. Comeback was made in 1950s with the first live action film Treasure Island and animated ventures like Cindrella . A weekly show called Disneyland was also hosted on television, followed by The Mickey Mouse Club and Zorro . Own distribution company was set up in 1954.
2 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
In 1955, dream venture became possible was established with Disneyland Park at Anaheim, which became a huge success. In mid 1960s, feature film Mary Poppins , received 13 Academy Award Nominations. The end of Walt Disney s journey came in 1966, when he died of lung cancer.
3 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
WALT DISNEY PRODUCTIONS AFTER WALT DISNEY
Walt Disney s brother Roy Sr. continued with Walt Disney s vision with Walt Disney Park in 1971. Animated movies like The Jungle Book and The Aristocrats , released in 1967 and 1970, proved to be huge hits. The Love Bug , a live action film about a car with a mind of its own, became the highest grossing film of the year. Roy Sr. passed away in 1971 and Don Tatum took over as chairman and CEO with Card Walker as President.
4 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
SITUATIONAL ANALYSIS
Walker took over as Chairman and CEO in 1980 when Tatum resigned. During Walker's tenure, the company did not do well due to the following reasons: The audience's preference for family films was slowing down and WDP's films were not attractive enough for the adult and teen market. There were no major additions to the theme parks. A number of animation employees also left the company. In 1984, Walker resigned on account of the poor earnings performance of WDP and Miller took his place When Miller took over as Chairman and CEO, Roy resigned from the board of directors on account of his differences with him. Disney s share price fell from a high of US$ 84.13 ON APRIL 1983 to US$45.63 ON JULY 1984 as the company faced an attack from two corporate raiders-ie by SAUL STEINBERG and later by IRWIN JACOB. Steinberg had purchased 6.3 % of the company s stock and later increased his stake to 12.1% and had an intension of buying 25 % of the company s stock. So because of this Steinberg was paid US$32 million by WDP to relinquish his Disney stock. So in order to protect the company from hostile takeovers, Roy and Gold teamed up with Bass Brothers, who in turn bought 25% stake in Disney. Having gained control over WDP ,Roy and Gold got Miller and other top executive ousted from the company. And in place of Miller, EISNER was appointed as chairman and CEO and Frank WELLS as president and COO. Eisner was earlier the president and COO of paramount pictures and Wells was the vice president at Warner brothers before they joined WDP. As Eisner and wells took the charge of WDP, Roy returned to the company as vice president of the board of directors and head of the animation department. And under the new management team, WDP two pictures ie SPLASH and TOUCHSTONE were a huge success in 1984.
5 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
Eisner s Reign At Disney
Appointment of Eisner as Chairman & CEO and Wells as President & COO of WDP Eisner brought 2 executives with him: Jeffrey Katzenberg & Richard Frank WDP became Walt Disney Company (WDC). Launched 1st Disney Store in Glendale, California to merchandise its branded products. Later over 300 stores were setup across the U.S, Europe & Japan. Foray into adult market with acquisition of Miramax Films Acquisition of Capital Cities/ABC for US$ 20 Billion 1984-1994: The Golden Decade Released cartoon movies as home videos. Buena Vista International (BVI), the distribution arm of WDC was set up. Existing theme parks were expanded & new rides were added. Construction of many hotels and resorts at Walt Disney World The Grand Floridian Resort and Spa, Disney s Yacht & Beach Clubs. The Swan & Dolphin resorts.
Euro Disney opened in Paris in 1992. The Capital Cities/ABC acquisition was the largest in the media & the 2nd Largest in the world at that time. Revenues shot up from US$ 1.7 billion in 1984 to US$ 25 billion in 1996.
6 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
The Downfall
± 1994 Wells died in helicopter crash. Eisner suffered heart attack & had an open bypass operation. Katzenberg was frustrated for not succeeding Wells, so he resigned & formed DreamWorks SKG (DW). He sued WDC for US$ 581 million as compensation but after a 5-year legal battle, he got US$ 250 to US$ 275 million as payout.
± 1995 Eisner brought in Michael Ovitz as president. Ovitz quit after 14 months & was paid US$ 140 million as a severance package.
± 1997 Shareholders termed this payout as financially irresponsible & filed a case against Eisner & WDC board.
± 2005 August: court ruled that WDC had not breached the financial duties in Ovitz case. October: shareholders filed an appeal against court ruling
7 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
ISSUE OF SUCCESSION
The issue of succession became an important agenda on 3rdMarch 04, because 43 percent of the shareholders withheld their votes to re-elect Eisner as the CEO and the CHAIRMAN of WDC. Unanimously former U.S. Senator George Mitchell was elected as the new CHAIRMAN & Eisner continued with the CEO of WDC. A NO-CONFIDENCE vote for both Eisner and Mitchell were seen as the majority of people who participated in 401(k) plan(employer sponsored pension plan) had no confidence in them. Eisner still had 2 years left with him to serve as a CEO of WDC, which was not liked by either the shareholders or ROY & GOLD .But still the board had no clear names in hand. In May 04 George informed media that he had outlined plans for naming a successor to Eisner. At this point there was an intense speculation in media that who would be the next CEO of WDC. In June 04, IGER publicly expressed that he would like to take over the MagicKingdom . The issue of succession gained momentum in Sept 04 when Eisner announced that he would retire in 30 Sept 06 as mentioned in the contract. After Eisner s announcement, Roy and Gold wrote a letter to the Board to immediately reject Eisner s order and look for a successor or else they would install an alternate set of Directors and it should happen before the next shareholders meeting (early 2005). George Mitchell acknowledged Roy & Gold s letter and started the decision process of succession planning. Roy & Gold also wrote a letter to non employee members of WDC board to hire an Independent Recruiting firm(Heidrick & Struggles OCT 04) to find an able successor to Eisner so that he does not serve for coming 2 years.
8 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
Choices considered
ROBERT IGER The internal choice Maintained low key and was liked by media Closeness to Eisner would lead a ve response from the shareholders
JOB Pixar s CEO & CHAIRMAN The top most choice as it had a long term business relationship with Disney Would extend Pixar s contract with Disney Questions were raised whether Job would be able to satisfy the leadership for such a big industry
TERRY SEMEL Former CEO of Warner Brothers Not considered due to his age
MEG WHITMAN (CEO of E-BAY) PAUL PRESSLER (CEO of GAP Inc) STEVE BURKES (SECOND In COMMAND at COMCAST )
9 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
The final choice
Search and process for considering potential candidates was thorough and exhaustive and met the most rigorous standards. March 2005, The final choice has made by WDC announced Robert Iger would take over as a CEO after Eisner s retirement Disappointment- Roy and gold were disappointed with the selection of Iger .( as they were of the view that Iger was Eisner s man.)
10 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
SWOT ANALYSIS
Strengths
Diversification of their products and services-produces balance revenue streams Well known characters over 300 stores were setup across the U.S, Europe & Japan Acquitions of miramax films , capital cities/ABC , venture with pixar animations 30 billion$ co with emloyees of 12000
Weakness
Employees morale was down Lack of succession planning Fight in board of the company Confidence of shareholders decrease Owing to bad performance , company share price was down Eisner repressive style of management Key employees leaving the company Transparency in policy for which company was sued by the shareholders
11 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
Opportunities
Acquisitions to strengthen their position in the market Improving presence in emerging Indian and Asian markets Increasing demand for animated movies and serials (in 3d also) Can enter into huge gaming market
Threats
Piracy in the entertainment industry Intense competition in each business line "Lagging Economy New technology compromises ability to protect intellectual property Attempt of takeover from other big corporates
12 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
CONCLUSION
Disney : Leading case on succession.
Succession requires a much more complex decision process than hiring. Succession affects the future of the corporation, and it requires the board to exercise judgment on whether and to what extent the CEO is to be involved. The board s role also consists of monitoring the arrangements after employment to assure that the succession process, which by its very nature is ongoing until succession occurs, is not being derailed. The jurisprudence of entrenchment is applicable here, and like the oversight necessary under Unocal, the succession process must also be open to review by the courts to make sure that the transition is being properly effected. Change in the CEO is also a change in control. The composition of the board will change. Everyone on the board, in addition to the CEO, can be charged with interest in the outcome, which justifies court oversight.
13 HUMAN RESOURCE MANAGEMENT
HUMAN RESOUCE MANAGEMENT
DISNEY : SUCCESSION PROBLEMS IN MAGIC KINGDOM
Submitted to: Dr. Shalini Khandelwal
Submitted by: Ashish Jain-11BSP0185 Mohita Sud-11BSP0559 Noopur Falod-11BSP1962 Vivek Saini-11BSP1148
1 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
INTRODUCTION
Born on December 05,1901,in Chicago Walt Disney spent his childhood years on a farm near Marceline, Missouri. The creative journey commenced in 1920 when he formed a company called Iwerks-Disney Commercial Artists . In 1922, Walt Disney founded his first studio called Laugh-O-Grams Inc.. After continues failure, Walt Disney moved to Holly wood and started the Disney brothers cartoon studio. Success knocked in 1923 with the first short live action/animated film Alice s Wonderland . In 1927, an all cartoon series Oswald the Lucky Rabbit , based on a character was successful, with which Walt Disney Corporation further expanded its operations. After losing his series in 1928, work on a new character Mickey Mouse commenced. Third movie of this series was released with sound, which turned out to be a huge success. Renowned Characters like Donald Duck , Goofy and Pluto were launched with Silly Symphonies , where there were no continuing characters and classical music was used effectively in the background. Walt Disney was also credited with introducing color in animation movie making with Flowers and Trees in 1932, which won an academic award. In 1938, Snow White and Seven Dwarfs became the most successful picture of the year by earning US$ 8 million, followed by Pinocchio and fabtasia in 1940. In 1941, problems were encountered due to a strike, also due to World War II , most of WDP s facilities were contracted to make films for the military. Comeback was made in 1950s with the first live action film Treasure Island and animated ventures like Cindrella . A weekly show called Disneyland was also hosted on television, followed by The Mickey Mouse Club and Zorro . Own distribution company was set up in 1954.
2 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
In 1955, dream venture became possible was established with Disneyland Park at Anaheim, which became a huge success. In mid 1960s, feature film Mary Poppins , received 13 Academy Award Nominations. The end of Walt Disney s journey came in 1966, when he died of lung cancer.
3 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
WALT DISNEY PRODUCTIONS AFTER WALT DISNEY
Walt Disney s brother Roy Sr. continued with Walt Disney s vision with Walt Disney Park in 1971. Animated movies like The Jungle Book and The Aristocrats , released in 1967 and 1970, proved to be huge hits. The Love Bug , a live action film about a car with a mind of its own, became the highest grossing film of the year. Roy Sr. passed away in 1971 and Don Tatum took over as chairman and CEO with Card Walker as President.
4 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
SITUATIONAL ANALYSIS
Walker took over as Chairman and CEO in 1980 when Tatum resigned. During Walker's tenure, the company did not do well due to the following reasons: The audience's preference for family films was slowing down and WDP's films were not attractive enough for the adult and teen market. There were no major additions to the theme parks. A number of animation employees also left the company. In 1984, Walker resigned on account of the poor earnings performance of WDP and Miller took his place When Miller took over as Chairman and CEO, Roy resigned from the board of directors on account of his differences with him. Disney s share price fell from a high of US$ 84.13 ON APRIL 1983 to US$45.63 ON JULY 1984 as the company faced an attack from two corporate raiders-ie by SAUL STEINBERG and later by IRWIN JACOB. Steinberg had purchased 6.3 % of the company s stock and later increased his stake to 12.1% and had an intension of buying 25 % of the company s stock. So because of this Steinberg was paid US$32 million by WDP to relinquish his Disney stock. So in order to protect the company from hostile takeovers, Roy and Gold teamed up with Bass Brothers, who in turn bought 25% stake in Disney. Having gained control over WDP ,Roy and Gold got Miller and other top executive ousted from the company. And in place of Miller, EISNER was appointed as chairman and CEO and Frank WELLS as president and COO. Eisner was earlier the president and COO of paramount pictures and Wells was the vice president at Warner brothers before they joined WDP. As Eisner and wells took the charge of WDP, Roy returned to the company as vice president of the board of directors and head of the animation department. And under the new management team, WDP two pictures ie SPLASH and TOUCHSTONE were a huge success in 1984.
5 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
Eisner s Reign At Disney
Appointment of Eisner as Chairman & CEO and Wells as President & COO of WDP Eisner brought 2 executives with him: Jeffrey Katzenberg & Richard Frank WDP became Walt Disney Company (WDC). Launched 1st Disney Store in Glendale, California to merchandise its branded products. Later over 300 stores were setup across the U.S, Europe & Japan. Foray into adult market with acquisition of Miramax Films Acquisition of Capital Cities/ABC for US$ 20 Billion 1984-1994: The Golden Decade Released cartoon movies as home videos. Buena Vista International (BVI), the distribution arm of WDC was set up. Existing theme parks were expanded & new rides were added. Construction of many hotels and resorts at Walt Disney World The Grand Floridian Resort and Spa, Disney s Yacht & Beach Clubs. The Swan & Dolphin resorts.
Euro Disney opened in Paris in 1992. The Capital Cities/ABC acquisition was the largest in the media & the 2nd Largest in the world at that time. Revenues shot up from US$ 1.7 billion in 1984 to US$ 25 billion in 1996.
6 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
The Downfall
± 1994 Wells died in helicopter crash. Eisner suffered heart attack & had an open bypass operation. Katzenberg was frustrated for not succeeding Wells, so he resigned & formed DreamWorks SKG (DW). He sued WDC for US$ 581 million as compensation but after a 5-year legal battle, he got US$ 250 to US$ 275 million as payout.
± 1995 Eisner brought in Michael Ovitz as president. Ovitz quit after 14 months & was paid US$ 140 million as a severance package.
± 1997 Shareholders termed this payout as financially irresponsible & filed a case against Eisner & WDC board.
± 2005 August: court ruled that WDC had not breached the financial duties in Ovitz case. October: shareholders filed an appeal against court ruling
7 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
ISSUE OF SUCCESSION
The issue of succession became an important agenda on 3rdMarch 04, because 43 percent of the shareholders withheld their votes to re-elect Eisner as the CEO and the CHAIRMAN of WDC. Unanimously former U.S. Senator George Mitchell was elected as the new CHAIRMAN & Eisner continued with the CEO of WDC. A NO-CONFIDENCE vote for both Eisner and Mitchell were seen as the majority of people who participated in 401(k) plan(employer sponsored pension plan) had no confidence in them. Eisner still had 2 years left with him to serve as a CEO of WDC, which was not liked by either the shareholders or ROY & GOLD .But still the board had no clear names in hand. In May 04 George informed media that he had outlined plans for naming a successor to Eisner. At this point there was an intense speculation in media that who would be the next CEO of WDC. In June 04, IGER publicly expressed that he would like to take over the MagicKingdom . The issue of succession gained momentum in Sept 04 when Eisner announced that he would retire in 30 Sept 06 as mentioned in the contract. After Eisner s announcement, Roy and Gold wrote a letter to the Board to immediately reject Eisner s order and look for a successor or else they would install an alternate set of Directors and it should happen before the next shareholders meeting (early 2005). George Mitchell acknowledged Roy & Gold s letter and started the decision process of succession planning. Roy & Gold also wrote a letter to non employee members of WDC board to hire an Independent Recruiting firm(Heidrick & Struggles OCT 04) to find an able successor to Eisner so that he does not serve for coming 2 years.
8 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
Choices considered
ROBERT IGER The internal choice Maintained low key and was liked by media Closeness to Eisner would lead a ve response from the shareholders
JOB Pixar s CEO & CHAIRMAN The top most choice as it had a long term business relationship with Disney Would extend Pixar s contract with Disney Questions were raised whether Job would be able to satisfy the leadership for such a big industry
TERRY SEMEL Former CEO of Warner Brothers Not considered due to his age
MEG WHITMAN (CEO of E-BAY) PAUL PRESSLER (CEO of GAP Inc) STEVE BURKES (SECOND In COMMAND at COMCAST )
9 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
The final choice
Search and process for considering potential candidates was thorough and exhaustive and met the most rigorous standards. March 2005, The final choice has made by WDC announced Robert Iger would take over as a CEO after Eisner s retirement Disappointment- Roy and gold were disappointed with the selection of Iger .( as they were of the view that Iger was Eisner s man.)
10 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
SWOT ANALYSIS
Strengths
Diversification of their products and services-produces balance revenue streams Well known characters over 300 stores were setup across the U.S, Europe & Japan Acquitions of miramax films , capital cities/ABC , venture with pixar animations 30 billion$ co with emloyees of 12000
Weakness
Employees morale was down Lack of succession planning Fight in board of the company Confidence of shareholders decrease Owing to bad performance , company share price was down Eisner repressive style of management Key employees leaving the company Transparency in policy for which company was sued by the shareholders
11 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
Opportunities
Acquisitions to strengthen their position in the market Improving presence in emerging Indian and Asian markets Increasing demand for animated movies and serials (in 3d also) Can enter into huge gaming market
Threats
Piracy in the entertainment industry Intense competition in each business line "Lagging Economy New technology compromises ability to protect intellectual property Attempt of takeover from other big corporates
12 HUMAN RESOURCE MANAGEMENT
DISNEY : SUCCESSION PROBLEM IN THE MAGIC KINGDOM
CONCLUSION
Disney : Leading case on succession.
Succession requires a much more complex decision process than hiring. Succession affects the future of the corporation, and it requires the board to exercise judgment on whether and to what extent the CEO is to be involved. The board s role also consists of monitoring the arrangements after employment to assure that the succession process, which by its very nature is ongoing until succession occurs, is not being derailed. The jurisprudence of entrenchment is applicable here, and like the oversight necessary under Unocal, the succession process must also be open to review by the courts to make sure that the transition is being properly effected. Change in the CEO is also a change in control. The composition of the board will change. Everyone on the board, in addition to the CEO, can be charged with interest in the outcome, which justifies court oversight.
13 HUMAN RESOURCE MANAGEMENT
