It looks as though Roy E. Disney and Stanley P. Gold will get their day in court as the Delaware Chancery Court ruled in favor of their lawsuit against the Walt Disney Co. and certain members of the Board of Directors. The case will move forward with an expedited trial date set for August.
Dissatisfied with the process by which The Walt Disney Co. selected a new CEO, Roy Disney and business partner Gold filed suit on May 9, 2005, alleging that the Board misled shareholders in order to get incumbent Board members re-elected at the 2005 meeting, and to keep Disney and Gold from running an alternate slate of directors.
In addition to The Walt Disney Co., the suit names incoming CEO Bob Iger, outgoing Mouse House topper Michael D. Eisner and Board members Judith L. Estrin, John S. Chen, Aylwin B. Lewis, Monica C. Lozano, George J. Mitchell and Leo J. O’Donovan. Gold and Disney accuse the defendants of fraud and breach of the duty of disclosure.
Disney and Gold allege that only one external candidate was interviewed to replace Eisner, and that she was told that she was not a serious candidate. Furthermore, they contend that Eisner’s presence at interviews was intended to chill full consideration of qualified external candidates.
In his ruling, Chancellor Chandler states, “Should these allegations be proven, plaintiffs could be entitled to the relief they seek because the board’s statements materially misled plaintiffs with respect to the board’s intent to conduct a bona fide executive search process.”
Disney and Gold are asking the court to void the 2005 directors election and hope to compel the company to hold another election for directors after full and fair disclosure of all material facts about the CEO selection process.