Cita:Disney Crowns a Familiar Head
President Robert Iger will succeed CEO Michael Eisner, but given the feuding, there's no guarantee of a happy ending

Rarely has a new CEO been appointed amid such a storm. On Mar. 13, over heated objections from some shareholders and after eBay (EBAY ) CEO Meg Whitman took herself out of consideration, Walt Disney's (DIS ) board named its president, Robert Iger, to succeed embattled Michael Eisner as CEO, effective Sept. 30, 2005.

Iger's ascension comes complete with the potential for a nasty proxy battle, a slew of shareholder lawsuits -- and a mountain of unanswered questions. "We just don't know what went into their decision process," says Charles Elson, chairman of the John L. Weinberg Center for Corporate Governance at the University of Delaware. "How many people did they interview? Why were there no more internal candidates? This clearly is not the ideal way to select a CEO."

HOT WIRES. Indeed, in a conference call after the board voted by telephone, Disney Chairman George Mitchell refused to discuss any of the candidates the board had interviewed before selecting Iger, who Mitchell said "is clearly the best individual to lead this company." Almost immediately, former board members Roy Disney and Stanley Gold, who mounted a drive to force Eisner from office last year that resulted in a 45% no-confidence vote for the Disney chief, called Iger's selection "a ruse." Says Gold: "The company needs a clean break from the prior regime."

Gold and Disney previously have contemplated a proxy battle to unseat the majority of the board, and those who know how the duo operate expect that they will field their own candidates in time for Disney's 2006 annual meeting.

At that time, the board also will have to select a new chairman to succeed Mitchell, who has declared he won't seek reelection in 2006. The board is said to have two members in the running for the chairmanship -- Northwest (NWB ) Chairman Gary Wilson and Robert Matschullat, a former Seagram CFO who is chairman of Clorox (CLX ). Gold and Disney will likely run their own candidate for chairman as well.

Iger's selection capped a weeklong flurry of telephonic board meetings, punctuated by eBay head Whitman's Mar. 11 decision to take herself out of the running, a move that virtually handed the job to Iger. Those with knowledge of the board's inner workings say that both Whitman and Iger interviewed with Disney's board for nearly three hours each on Mar. 5, with Eisner present for the Whitman interview.

PIXAR'S PUNCH. A Whitman spokesman said she decided against proceeding when the Disney board was unclear about how long it would take before completing the search. Eisner's role in the Whitman interview prompted yet another strenuous objection from Gold and Disney, who charged in a letter that "the fix was in" and that the board was already set on picking Iger, whom Eisner publicly had backed as his successor. Michell responded in his press conference that "we definitely had choices and made the right choice."

Whitman, a one-time Disney consumer products executive, was pushed by some Disney board members such as Matschullat, who wanted a viable alternative to Iger. According to those with knowledge of the selection process, the board decided against interviewing News Corp. (NWS ) President Peter Chernin, a top candidate on the list provided by search firm Heidrick & Struggles, when Chernin publicly said he didn't want the job.

The Disney board also talked of interviewing Jeff Bewkes, head of Time Warner's (TWX ) entertainment unit, which operates HBO and Warner Brothers, but never contacted him after determining it couldn't afford to buy out his existing contract, according to sources with knowledge of the selection process.

In naming the 53-year-old Iger to the chief executive post, the board cast aside its differences and announced it was a unanimous vote, on the strength of a strong financial showing for Disney this year with Iger as president. In the year ended Sept. 30, earnings increased by 85%, to $2.3 billion, largely because of stronger performances at Disney's cable unit and the success of The Incredibles, a movie made by its partner, Pixar Studios (PIXR ).

HELLO, GOODBYE? Revenues for the year increased by 14%, to $30.7 billion. Disney's stock also rose -- at one point soaring to 43% over last year -- outpacing both the Standard & Poor's 500-stock index and other media companies. All media stocks have struggled of late, however, and Disney's, which closed at $27.59 on Mar. 11, is now up only by 6% over a year earlier. "With this kind of performance, you don't encourage major change," said Mitchell.

Iger, a one-time president of CapCities/ABC before Disney acquired it in 1996, won accolades for turning around the struggling ABC network this year with hits like Desperate Housewives and Lost. But as if to punctuate the problems that he inherits from Eisner, who drove off key executives during his final 10 years, Disney is expected to announce in the next few days that it is parting ways with Harvey and Bob Weinstein, who headed Disney's Miramax unit but have chafed under Eisner-ordered budget cuts. The Weinsteins are expected to be paid $100 million to settle an ongoing audit they have instituted into bonuses they say they are owed.

Iger also gets strong marks for his role as a conciliatory executive. His skills there will get an immediate test, as he tries to renew the company's soon-to-expire contract with Steve Jobs's Pixar, which in addition to The Incredibles has made Finding Nemo and a string other animated hits for Disney.

HEAVY LIFTING. According to intimates, Jobs dislikes Eisner but knows little of Iger. He has indicated he wants to meet the new Disney CEO before deciding on other bids from studios that are said to include Fox and Warner Brothers.

"The good news with naming Bob Iger is that a lot of Disney's executives aren't going to worry about some new person coming and won't be dusting off their resumes," says Victor Hawley, a portfolio manager with Reed, Conner & Birdwell, which owns 2.3 million Disney shares. As far as keeping Pixar in the fold, Hawley sees Iger having "a better chance than Michael Eisner did because Pixar will still have folks at the studio that they enjoy working with."

Iger certainly has worked hard to get to the top stop at the Disney since his days as TV weatherman. He joined ABC in 1974 as a studio supervisor, then moved up through ABC Sports before heading the network's programming operations. He became president of ABC in 1994 and was named Disney's president in 2000. Known as a tireless worker, he rises at 4:30 a.m. each morning to exercise and is at his desk before 7 a.m. Now he'll get another workout, trying to deal with the problems left by Eisner's stormy departure.