Disney's performance over the years Essay

Disney has managed to reach success in its early years, but in the course of time its performance has strongly decreased. This happened mostly due to rigid internal environment and managing style. Movie industry and the interests of audience have shifted from cinemas to television, and the culture has also changed. However, Disney did not change much, and the production of the company was no longer so popular as it was before. In the area of animated films, new dynamically developing competitors with new fresh ideas have emerged, such as Pixar and DreamWorks.
Also, there was only one core area of competence for Disney – animated films. Rapid growth of digital technologies and development in this area, together with the inability of the company to react flexibly to changes, contributed to losing performance since early 1980s.
2. Highlight the weaknesses in corporate governance at Disney.
Inadequate corporate governance strongly determined the loss of performance experienced by the company. Among major weaknesses of corporate governance were accumulation of power by Eisner, his full control of the company, and the principles of forming and working with board of directors. Eisner brought people from his environment to board of directors, and did not accept alternative opinions or solutions. As a result, the board of directors acted only as a supplement for Eisner. Other governance weaknesses were the loss of CEO duality when Wells passed, inadequate succession planning and lack of independence for directors.
3. Identify the causes and consequences of the board of directors’ ineffectiveness.
The main cause of ineffectiveness of the board of directors at Disney is the combination of Eisner’s success and of his autocratic management style. While he managed to make Disney an extremely profitable and successful company, such approach was not effective in the long-term perspective. Eisner was not able to share responsibility and accept alternative solutions. He was unable to delegate enough responsibility to Ovitz, gaining more personal authority instead. Also, due to his overpowered position, Eisner tended to miss important contracts and offers, such as the bid of Comcast.
4. How have governance mechanisms at Disney been used in the past, and what was their effect?
Upon further issuing of stocks, the company was potentially exposes to redistribution of power depending on the decisions of major stock holders (e.g. Steve Jobs). New type of executive compensation was introduced, basing on percentage of profits; this allowed to increase motivation of executives. The attempt to address the ineffectiveness of board of directors was done when the decision to move from three year term of appointment to one-year teams. According to three-class system, all directors stood for election annually. This decision resulted in higher flexibility; at the same time, the unstructured board allowed Eisner to appoint the “right” directors, thus diminishing the effect of this innovation.