Peace Work Pays Off at Disney

A surprise peace deal soothes the Magic Kingdom, ending a pair of potentially embarrassing suits and heralding Roy Disney's return

By Ron Grover

Chalk another one up for Bob Iger. The incoming Walt Disney (DIS ) CEO, who has been in overdrive cleaning up problems inherited from departing CEO Michael Eisner, pulled a giant thorn from his outfit's hide July 8 by striking a surprise agreement with dissident shareholders Roy Disney and Stanley Gold to "put aside their differences." As a result, the duo will withdraw a pair of pending lawsuits and agree not to run a rival slate of directors for the next five years.

Why the sudden change in heart? Neither Disney nor Shamrock Holdings, Roy Disney's holding company, are commenting beyond a one-paragraph statement. Clearly, the Mouse House wanted to avoid airing internal discussions in open court -- a development that would have been all but certain if the pair had continued with their legal efforts, one of which was set for trial Aug. 8 in Delaware.

In that lawsuit, the two former Disney board members were seeking a new board election in an effort to overturn the selection of Iger, who takes over as CEO on Oct. 1. That would have meant putting board members, including Chairman George Mitchell and Eisner on the stand.

BUILDING BRIDGES.

  Earlier this year, in a still-pending shareholders' suit over the 1995 hiring of former President Michael Ovitz, Disney executives, including Eisner, were forced to testify about several less-than-flattering examples of how they ran the company. At the same time, a continuing fight may have kept some investors away -- a possible reason why Disney's stock has traded downward in recent weeks, despite a pickup in ratings at its ABC network.

Since being selected in March for the CEO job, Iger has hustled to diffuse a variety of issues. He replaced Peter Murphy, the outfit's long-time strategic planning chief, who rubbed many Disney insiders the wrong way by squelching initiatives.

Iger also settled long-simmering tensions with Miramax founders Harvey and Bob Weinstein, who left before their contract expired. And he has reopened talks with Pixar (PIXR ), whose CEO, Apple's (AAPL ) Steve Jobs, refused to extend the animation powerhouse's existing joint venture with Disney while Eisner remained CEO.

TRUCE AND CONSEQUENCES.

  To make peace, the company had to invite Roy Disney back to the board, which dispatched him in 2003, when he reached the mandatory retirement age of 75. Disney returns as director emeritus and a consultant. No mention was made of Gold's role. A close adviser to Roy Disney, he has argued loudly that the company made several missteps in recent years, such as allowing theme parks to deteriorate and the outfit's animation franchise to be challenged by others in Hollywood.

Under the agreement, Iger & Co. "noted [Roy Disney's] long-time devotion to the company", while Roy Disney and Stanley Gold "expressed confidence in Iger's leadership" and "acknowledged [Eisner's] contribution...over the years." For Iger, who inherited a kingdom in turmoil, peace seems to be breaking out.

Grover is BusinessWeek's Los Angeles bureau chief

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