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Thursday, February 12, 2004

Tuesday Morning Quarterback's revenge

Per the New York Daily News,

The curtain's coming down for Michael Eisner.

That was the word from Wall Street yesterday after Comcast launched its $54 billion hostile bid for Walt Disney.

Corporate governance law expert Professor Stephen Bainbridge of UCLA, long a critic of the imperial reign of Eisner, has a perceptive writeup of the story, its causes, and its implications:

Bad management is just another form of information that efficient markets are able to process. When a declining market price signals shirking by directors or management, among those who receive the signal are directors and managers of other firms, who possess the resources to investigate the reason for the potential target's deteriorating performance. Sometimes it will be something that is beyond anybody's ability to control, such as where highly specialized assets are languishing because of a permanent shift in consumer demand. Sometimes, however, it will be due to poor management, which presents real opportunities for gain if the personnel or policies causing the firm to languish can be corrected. A successful takeover gives the acquirer the ability to elect at least a majority of the board of directors and thereby control personnel and policy decisions. The resulting appreciation in value of the acquired shares provides the profit incentive to do so. It is partly for this reason that we refer to the takeover market as "the market for corporate control."

Michael Eisner's Disney looks like a ripe candidate for a disciplinary takeover....

The long-term problem at Disney has been that virtually every mechanism we have for holding boards accountable has failed. Director independence failed because the board has been comprised of nominally independent folks who in fact were cronies of Eisner or know-nothing ceremonial directors. Shareholder activism failed because it never made a serious dent in the board's complacency. Litigation failed because the board was willing to pay zillions to Ovitz, Katzenberg, etc.... SOX and the other post-Enron reforms failed because Eisner is so good at boardroom politics that he was able to use even those reforms to further entrench himself.

There is one tool left: Have somebody buy the company and fire Eisner.

Driving home last night, I heard some "expert" on NPR question whether potential acquirer Comcast, a large cable TV company that "brings sex, nudity, and violence into people's homes," was an appropriate candidate for acquiring Disney. I thought that pretty ironic. It was, of course, TMQ Gregg Easterbrook's attack on the gratuitous violence of a Quentin Tarantino film from Disney's Miramax subsidiary that not only got Easterbrook fired from his spot as a columnist for Disney subsidiary ESPN, but also got everything that Easterbrook had ever written for ESPN "disappeared" from its website in a twenty-first century retaliatory act of "nacht und nebel." Eisner's spinmeisters spun some unfortunate loose language of Easterbrook's as being "anti-Semitic" as their purported grounds to fire him, but I doubt they'll be able to make such a claim to fend off Comcast's takeover bid.

Disciplinary takeover. Heh. Easterbrook, who also writes a blog for The New Republic and whose TMQ column has a new and better home at NFL.com, has to be enjoying this. I know I am. Easterbrook is probably cackling like Rafiki did when Simba returned to cast out Scar in "The Lion King." And if by chance his employment at ESPN left Easterbrook with any Disney stock, I'll bet he'll enjoy tendering it into Comcast's bid.

Posted by Beldar at 04:27 AM in Current Affairs, Humor, Sports | Permalink


Other weblog posts, if any, whose authors have linked to Tuesday Morning Quarterback's revenge and sent a trackback ping are listed here:


(1) Daniel made the following comment | Feb 12, 2004 9:22:38 AM | Permalink


Did you actually read Easterbrook's comments that were the basis for the charges of anti-Semitism? Google it, if you haven't. I don't necessarily believe he is really anti-Semitic, but at best, his comments were irresponsible and stereotyped, and it doesn't take very much stretching at all to perceive anti-Semitism, IMO.

(2) Beldar made the following comment | Feb 12, 2004 12:54:50 PM | Permalink

Daniel, thanks for commenting.

Yes, I quoted and blogged about Easterbrook's comments, and his subsequent apology, in the first of two of my earlier posts I linked above in this one, and I also followed the firestorm in the blogosphere at the time (see the links in my two earlier posts). I don't disagree with you, and I was slightly off the mark in this latest post when I accused the Disney spinmeisters of "spinning" Easterbrook's remarks to be anti-Semitic. As I wrote then:

So, TMQ, you screwed up; you threw a pick into double coverage, they ran it back for a score to win the Super Bowl. Yes, blogging is like speaking into an open mike on national television, and you of course knew that — but then again, that excitement, that danger was part of the attraction that caused you to chose a career that has you walking on tightropes, dealing with hot topics like politics and race and religion and NFL cheerleaders with or without breast implants.

I also wrote then, however, and still believe, that

one would have to be naïve indeed to think that to the powers-that-be at Disney, the religious issue was anything more than a pretext for what was actually a reaction to Easterbrook-as-film-critic. It doesn't have to be about Eisner personally. No, Easterbrook had it right the first time, if he'd just omitted the religious references — it's all about profits. The Mouse is ruthless.

Easterbrook had dis'd King Michael personally, and even worse, he had taken a public position that arguably threatened a Disney asset (the revenue stream for "Kill Bill" and other such movies). He'd fired a salvo in a longstanding and ongoing debate about corporate greed versus corporate moral responsibility, and that salvo struck Disney amidships. He'd messed with the Mouse.

But since he'd done it in his blog for TNR, though, rather than in his ESPN column, it would have been a stretch for Disney to fire him from ESPN for just doing that. So Eisner used Easterbrook's poorly chosen words and mistaken injection of religion into a screed about greed — decisions which clearly were a screwup, and for which Easterbrook rightfully apologized — to axe him on the politically correct grounds that Easterbrook had been politically incorrect. Hence my sense is that this takeover offer is cosmic retribution for Disney's overreaction and cynicism, of which Easterbrook has been far from the only victim.

(3) Ernie made the following comment | Feb 12, 2004 3:14:14 PM | Permalink

Bill - I heard the same NPR program and I thought exactly the same thing when the Annenberg Journo Prof said that Disney was all about 'pure family entertainment.' Heh. Yeah, what about Kill Bill? I thought.

(4) Daniel made the following comment | Feb 12, 2004 6:01:04 PM | Permalink


I understand completely. My apologies for not reading your posts on the matter in full. It just sounded like you were attributing full causation for the termination to Disney's greed.

But no doubt, you are right that Easterbrook's ill-chosen comments were merely a reason for Eisner to axe Easterbrook for his other, perhaps more mortal sins (more mortal to Disney, that is).

All that said, I LOVE TMQ.

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