Breakdown from governance and managerial optimization
Michael Eisner saved Walt Disney Company when he became the CEO in 1984. He implemented many creative and insightful strategic actions that turns around Disney’s fortunes. However Eisner’s leadership has been criticized in recent years because of the multitude of problems cumulating in the firm’s weak financial performance. Eisner has been criticized for exceptionally high levels of compensation, especially at times of weak firm performance, and for not developing a person to succeed him as a CEO. His last five or more years as CEO have been controversial.
Disney (and Eisner) has been criticized for having a weak board with many members having ties for Eisner. In fact, the board has awarded Eisner compensation at levels highly criticized in the media and has also taken no action against Eisner for his ineffective dictions, strategies and actions.
However, the situation at Disney changed in 2004. Powerful shareholders Roy Disney and the California Public employees’ retirement system (CalPERS), a large institutional investor, stated they would vote against reappointing Eisner as CEO. CalPERS representatives said that “We have lost complete confidence in Mr. Eisner’s strategic vision and leadership in creating shareholder value in the company.”
The vote of no confidence for Eisner as CEO was supported by 43% of the shareholders. Such a vote is almost unprecedented. While the board did not oust Eisner as CEO, they withdrew his position as the chairmen of the board gave it to George Mitchell, a former U.S. senator. While some feel that Eisner has “nine lives”, he may have used all of them. The board reported that it is developing detailed succession plane and is working to increase its independence from the CEO. Of course, a critical issue is the need for improvement in Disney’s performance. All of these actions may have influenced Eisner to state in late 2004 that he would step down as CEO in September 2006. However, critics were not quieted until the board announced that it would hire a search firm no later than June 2005 to move forward with the succession plane.
Source : H.Yeager, 2004, Disney Board talking the right steps, Financial times, http:// www. ft.com, May 21; L.M Wilson, 2004, Eisner vote force Disney to catch up, New York Times, http:// www. Nytimes.com, March 10; B. Orwall & J.S Lublin, 2004, Disney Shareholders’ revolt widens, wall street Journal Online, http:// www. wsj.com, February 27; P.T Larsen, 2004, CalPERS turns against Disney’s Eisner, Financial Times, http:// www. ft.com, February 26; B. Orwall & J.S Lublin, 2004, Eisner’s critics now like the script: Roy Disney, Stanley Gold suspend bid to oust CEO after board pledges action, wall street Journal, September 29;B3.
Morale
Strategic leadership involves developing a vision for the firm, designing strategic actions to activate this vision, and empowering otters to carry out those strategic actions. Establishing the firm’s vision (and mission), developing a management team and planning for the succession, managing the resource portfolio, building and supporting an entrepreneurial culture, promoting integrity and ethical behavior, and using effective organizational controls are the actions of strategic leadership.
A top management team is the group of managers responsible for developing and implementing firm’s strategies. Strategic leaders shape an organization’s culture. In the current competitive environment, all the firms need to be innovative to remain competitive. Therefore, building an entrepreneurial culture is of particular importance to strategic leaders. An entrepreneurial culture encourages employees to identify and exploit new opportunities. It encouragers the creativity and risk taking and tolerates failures as results.
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