Not So Young Frankeneisner

In YoungFrankenstein, Mel Brookstheorized in between scenes of slapstick that, as in the 1931 original, Dr. Frankenstein could never have indulged his insane belief in his godlike power without the unheralded grunt work of his hunchbacked henchman, Igor. Remember such priceless dialogue from the beak-nosed and bug-eyed Marty Feldman as: “My boss don’t appreciate me either. To him I’m just a gofer. ‘Igor! Go for brains! . . . Igor! Go for dead bodies! . . . Igor! Go for sandwiches!’ ” Now, life is imitating art, only this time the crazy guy in charge of the castle is Eisner, and he’s installed his faithful flunky, Iger, to replace him at Disney.

So I’ve got to ask (and pardon me for continuing the analogy): Where are the angry villagers waving torches and pitchforks to storm the Burbank headquarters?

Hello? Is anybody out there trying to protest besides Roy Disney and Stanley Gold, who instigated last year’s shareholders revolt, which led to Eisner’s denouncement, demotion and decommissioning prematurely this fall? Sheesh, you’d hardly know from the overwhelmingly obsequious media coverage that, in reality, the Disney board’s promotion of president Robert Iger was a monstrous move. We’re talking here about shamefully rewarding a corporate executive who may be movie-star handsome but whose 10-year track record following in Eisner’s footsteps is downright ugly. And, truth be told, for it to occur at this precise moment looks like mice behaving badly.

For, just as important as any analysis of Iger’s demerits as Disney’s Il Duce, is the unfortunate timing of his appointment. I believe it couldn’t be worse, not just for Mouse House shareholders but for U.S. corporate stockholders worldwide. Here’s why:

Right now, CalPERS, the acronym for the California Public Employees’ Retirement System, whose board runs the state’s largest public pension fund with $180 billion in assets, is under tremendous pressure to scale back its two-decades-old proactive campaign to force public companies to be more answerable to their investors. What began in the early 1980s as a fight to stop corporate raiders like T. Boone Pickens from scamming shareholders with practices like “greenmailing” evolved into a well-publicized push for better corporate governance.

What has that got to do with Iger? The fund holds a whopping 9.44 million Disney shares — half a percent of the Magic Kingdom’s total stock. In other words, when a big institutional investor talks, even arrogant corporations listen. A shareholder who dabbles in the market can be ignored. But not CalPERS.

For the previous five years, CalPERS talked and talked (actually more like kvetched and kvetched) about Disney’s dismal performance. But Eisner didn’t heed the warnings. So last year CalPERS and more than half a dozen other pension funds announced they were siding with Stanley and Roy and withholding votes for Eisner’s usually pro-forma re-election to the Disney board, thus helping set in motion one of the most thrilling, and certainly the shrillest, shareholder revolts in American corporate history. Disney’s board finally got the message. Directors stripped Eisner of his chairman title, bestowed it on former Democratic Senator George Mitchell, and pushed, pushed, pushed until Eisner announced last September that he would step down as chief executive when his contract expired in 2006. But that’s when things at CalPERS started getting hinky.

Suddenly, CalPERS president Sean Harrigan was under predictably intense scrutiny from Republicans and lobbyists in Washington, D.C., and Sacramento, including party pals of Gov. Arnold Schwarzenegger and the pro-GOP U.S. Chamber of Commerce. During his two-year tenure, Harrigan had taken on the high-profile role of spearheading the fund’s corporate campaigns against Disney et al. The attacks on Harrigan escalated when the supermarket union leader also targeted Safeway (Vons, Pavilions, etc.). Still, it was a shock when the activist lost both the CalPERS presidency and his board seat on December 1 after the State Personnel Board voted to replace him as its rep. Harrigan is claiming a conspiracy among business leaders, the California Republican Party and the Schwarzenegger administration.

Since then, Harrigan is hoping his ouster won’t stop CalPERS from using its portfolio power to pressure incorrigible corporations and/or their CEOs. But the problem now centers on the pro-corporate Republican cabal trying to remove other CalPERS board members who favor the fund’s shareholder activism.

Okay,sonowbacktoIger.Without a Harrigan-led CalPERS continuing to watchdog management, Disney shareholders won’t be able to tell the corporate shit from Shinola and Disney’s board has been all too eager to make suspect moves when nobody’s standing guard. Egads, it’s already started with Iger’s appointment. First, Corporate America doesn’t decide these things on a Saturday night and then announce it on a Sunday. Second, just because eBay co-founder (and Disney alum) Meg Whitman pulled out of the running for Eisner’s job was no reason for Disney directors to cut short their candidate search by four months. Third, the board allowed Eisner to sit in on interviews with his prospective successors. Lastly, and most importantly, Iger wasn’t the best and brightest for the job.