NEW YORK (CNN/Money) -
Just three days ahead of Walt Disney Co.'s annual meeting in Minneapolis, two powerful shareholders and longtime critics of management announced Tuesday they will withhold their votes for a new board of directors.
Roy Disney, the nephew of company founder Walt Disney, and Stanley Gold, a former director, said they're concerned that company directors are not conducting a thorough search for a successor to outgoing CEO Michael Eisner.
Eisner -- forced to relinquish the chairman's title at last year's annual meeting after a shareholder revolt ignited by Disney and Gold -- announced in September plans to step down as CEO when his contract expires late next year.
Disney (Research) directors have said they plan to announce a new CEO by June. Robert Iger, Disney's president and an Eisner ally, is increasingly looking like a shoo-in for the job.
Disney and Gold, in their statement, indicated they're unhappy both with board's CEO hunt and Eisner's 2006 departure date.
"At this point in time, the board's credibility is in question due to reports that they have yet to interview a single outside (CEO) candidate," said Disney and Gold. "Potential candidates, meanwhile, are indicating a lack of interest in the position because of the delays in the search process and the uncertainty regarding when Mr. Eisner will leave the Company."
For those reasons, Disney and Gold said, they're abstaining from Friday's shareholder vote on a new slate of directors, when all 12 current members are up for re-election to one-year terms. Eisner, Iger and chairman George Mitchell are all directors.
A key endorsement
Meanwhile, Institutional Shareholder Services, which advises investors in proxy votes, has endorsed the full board after recommending last year that Disney shareholders withhold their votes on Eisner. ISS said Disney has taken a number of positive steps in the last year, including formally separating the CEO and chairman jobs and adding another independent director and promising to add one more soon.
ISS, in a recent report, noted there are still unresolved issues -- including when Eisner plans to quit and whether he will also resign from the board. Assuming the CEO and chairman posts remain split, there's also the question of who will succeed Mitchell, who will give up his title upon reaching the company's mandatory retirement age in 2006.
Calling the company's public statements on its succession plans "ambiguous" to date, ISS said Disney has said it will provide details about Eisner's exit and the 15-month transition period between CEOs once a successor is announced.
Adopting a more austere stance, Disney and Gold omitted their usual feistiness in their statement. They gave muted praise to the company's board for "saying the right words" and adopting a number of policies over the past year that the duo, without expressly saying so, indicated they support.
The twosome also said they're not formally calling on other shareholders to withhold their votes too. At last year's March meeting, 45 percent of Disney's investors withheld votes against Eisner, prompting the board to strip him of his CEO role.
At the time Disney was reeling from a hostile takeover bid launched a month earlier by Comcast Corp. and the lingering effects of the Sept. 11 terrorist attacks and a lumbering economy, both of which hit its theme park business hard.
But growth at Disney, the world's second-largest entertainment company, had been sluggish for years. Investors vented their frustration at Eisner, the company's mercurial leader since 1984.
In the last year, however, Disney appears to have turned itself around. After years of losses, the company's ABC television network is on track to turn a profit this year, helped in large part by a string of primetime hits, including "Desperate Housewives" and "Lost."
Led by the ESPN sports channel, Disney's cable operations have posted strong gains. The company's film business appears on solid ground thanks to strong DVD sales and two late 2004 hits, including the Pixar Animation-Disney computer animation flick "The Incredibles." Revenues are up too at its Florida and California theme parks.
Indeed, Disney shares have outperformed its chief competitors, including CNN/Money owner Time Warner (up $0.03 to $18.00, Research), in recent months. Disney shares edged higher to a 52-week high Tuesday. The stock is up 43 percent since hitting a year-low in August.
Disney and Gold appeared Tuesday to be acknowledging the rebound.
"Lest there be any confusion, by withholding our vote, we are doing precisely that, no more and no less," their statement said. "We are withholding our vote because we are withholding final judgment. In recent months, the board has been saying the right words. We now await its actions."