Stanley & Roy: still trying to tame Disney; The latest act in their long-running governance show bears watching.

• Author: Kaback, Hoffer
• Position: QUIDDITIES

WHAT IS SOLELY WITHIN the purview of the board and therefore not an appropriate matter for stockholders? What is solely within the purview of operating management and therefore not an appropriate matter for directors?

Not too long ago (say, the mid-1970s), we used to know, or profess to know, the answers to these rather basic questions of corporate law. If an unhappy stockholder sought access to the proxy statement so he could present a resolution about the CEO's compensation, he never got far. He was swatted away by young corporate lawyers, who would obtain from SEC staff an acknowledgment that the proposal was properly "excludable" from the company's proxy statement under one (or even two) of the provisions of Rule 14a-8. The stockholder was left in the dust. A corporate officer's remuneration was simply not a proper issue for stockholders; it was for the board.

Today's corporate governance world is a tad more complicated. How about CEO succession? In 1975, was there any question that that was quintessentially a matter for the board? For a stockholder to try to insinuate himself into that process was preposterous. In public corporations, the CEO is designated by the board, not by the stockholders; and it is, of course, (only) the board that chooses the process through which that selection is made.

Veteran readers of this column may recall my analyses of the then-states of play concerning (a) Roy E. Disney and Stanley P. Gold ("Stanley & Roy"), former directors of the Walt Disney Co. and vocal opponents of its CEO, Michael Eisner, and (b) the Disney board. (See "High Noon at the Magic Kingdom," Winter 2004, and "Power of Suggestion," Spring 2004.) Basically, Stanley & Roy resigned from the Disney board, criticized Eisner for having numerous shortcomings to the detriment of the Disney stock price, and successfully engineered a campaign pursuant to which, at the spring 2004 annual meeting, 45% of the votes for Eisner's re-election as a director were withheld.

Shortly thereafter, Eisner promised he would retire as CEO, the board trumpeted its commencement of a CEO search, but--lo and behold--at the end of that search Robert Iger, currently the Disney No. 2 and purportedly Eisner's fair-haired boy, was selected as CEO-designate.

To the Delaware Chancery Court come now Stanley & Roy, complaining. In a suit filed in early May, Stanley & Roy assert that the company's (that is, the board's) CEO search was a sham because, although the board created...