In 1984, two board members of the Walt Disney Company (WDC) — Stanley Gold and Roy Disney — mounted a targeted campaign to convince major shareholders that Michael Eisner and Frank Wells were the right team to lead the faltering entertainment giant. Gold and Disney’s campaign succeeded and was amply rewarded; over the course of ten years, annual profits of WDC went from $291 million to $1.11 billion under the management of Eisner (CEO and chairman) and Wells (president and COO).

By the mid-1990s, however, storm clouds had gathered over the Magic Kingdom. Wells’s death in a 1994 helicopter crash coincided with a decline in WDC profits, and its board was consistently ranked as one of the worst in corporate America. In December 2003, nearly twenty years after lobbying to hire Eisner, Gold and Disney resigned from the board in protest and mounted a grassroots effort to remove Eisner and several board members.

“Saving Disney,” by HBS assistant professor Nancy Beaulieu, tells the story behind their efforts, following the timeline of events from Eisner’s arrival at Disney to a historic shareholder vote in March 2004, when an unprecedented 43 percent of shareholders withheld their votes for Eisner’s reelection to the board.

“I was looking for a case about executive compensation and corporate governance,” says Beaulieu, who teaches the elective Coordination, Control, and Management of Organizations (CCMO). “I wanted to discuss incentives in the boardroom and link those to the popular governance ratings published by magazines and various shareholder groups in order to illustrate the strengths and weaknesses of different governance measures.” The goal? To push students to consider what measurable principles of good governance they would establish in their own organization — and to consider the relationship between the CEO and the board.

“The board is supposed to simultaneously advise and evaluate the CEO,” observes Beaulieu. “The Disney case brings out the challenges board members face in fulfilling this dual role and provides an opportunity to examine whether and how the incentives support them in this regard.”

Beaulieu says that class discussion moves back and forth between general questions around governance and Disney-specific examples. Due to extensive media coverage of Eisner and WDC, students aren’t at a loss for words. And the story is far from over. After Michael Eisner announced that he would retire in 2006, Gold and Disney filed suit to challenge the designation of Robert Iger as his successor, charging that the board rubber-stamped Eisner’s pick without conducting a valid search for a new CEO (the suit was dropped in July).

“The fact that the situation doesn’t stand still makes it challenging to teach,” Beaulieu remarks. “The B case could be even more interesting.”

In their efforts to replace Eisner, Disney and Gold effectively tailored the medium and message to a wide range of shareholders, from families who owned one or two shares, to state pension funds, to former and current Disney employees. Taking a page out of Howard Dean’s book, they used the Internet to reach supporters via a Web site, SaveDisney.com. Thousands of e-mails poured in.

Beaulieu plans to teach the case again this fall but expects the questions she poses will be somewhat different, given the ongoing nature of the Disney story. Like any good Hollywood movie — packed with plot twists and memorable characters — it promises to keep its audience guessing for the foreseeable future.

— Julia Hanna

“Saving Disney” was the subject of a discussion hosted in May by Bill Kuehn (MBA ’69) for members of the HBS Association of Southern California. It was also selected to be featured on Strategic Decisions, a program hosted by Wei Zhang (MBA ’99) and produced by HBS Publishing, Shanghai TV, and CNBC Asia Pacific that aired in August on China’s Dragon TV.

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