Roy E. Disney and Stanley P. Gold today (May 9, 2005) filed suit in Delaware Chancery Court against The Walt Disney Co. and certain members of the board of directors alleging that they made false statements to the company's shareholders about its ceo search in order to get the shareholders to re-elect incumbent board members and block Disney and Gold from running an alternate slate of directors.
The two former Disney directors, Disney and Gold, sued Robert A. Iger, Michael D. Eisner, Judith L. Estrin, John S. Chen, Aylwin B. Lewis, Monica C. Lozano, George J. Mitchell and Leo J. O'Donovan, S.J., for fraud and breach of the duty of disclosure concerning the ceo search to replace Eisner.
The claimants are seeking to void the 2005 election of Disney Co. directors and to hold another election for directors after full and fair disclosure of all material facts about the ceo selection process. They also hope to stop the company and the board from changing either Eisner's or Iger's compensation or employment contracts.
According to the complaint, the board's ceo selection process precluded serious and effective consideration of external candidates. The complaint cites, among other things:
* Reports that the board interviewed only one external candidate, delayed notifying her of any decision and did little to dissuade her from withdrawing her candidacy;* Eisner's presence or expected presence at interviews of external candidates; and* the board's failure to investigate Iger's role in the Fox Family Channel acquisition, the presentation of overly optimistic projects about Fox Family to the board and the related withholding from the board of the CFO's plan to save the Company $400 million by writing down the value of those Fox Family assets.
The complaint also reveals the company's recent rejection of Disney's and Gold's request under Delaware law for books and records documenting the Board's search for Eisner's successor.