DISNEY BOARD DEFENDS EISNER BEFORE CRITICS.

Byline: Greg Hernandez Staff Writer

The Walt Disney Co. board of directors told state pension fund leaders Friday that it ``remains firm in its view'' that embattled CEO Michael D. Eisner is still the right person to drive the Burbank-based entertainment conglomerate's long-term shareholder value.

At a rare meeting of its kind, six directors, including Chairman George Mitchell, met for more than two hours with representatives of six state funds in New York. The influential pension funds had played an integral part in a shareholder revolt in early March that resulted in Eisner being stripped of his chairmanship.

The roles of chairman and CEO have now been split due to the pressure from the funds and other shareholders.

``The Disney board takes seriously the responsibility to listen to all shareholders. This meeting was part of that process,'' Mitchell said following the meeting. ``Today's meeting included a thorough exchange of views and ideas.''

Eisner was not present at the meeting. He had come under fire for, among other things, continued ratings struggles at ABC and failure to secure a new distribution deal with Pixar Animation Studios, its partner in such hits as ``Finding Nemo'' and ``Monsters, Inc.'' The company was further rocked when Comcast Corp. made an unsolicited takeover bid for Disney that was later dropped after being rejected by the board.

The pension funds, from California, New York, Ohio, Connecticut and North Carolina, have been concerned about Eisner's stewardship of the company and the board's independence.

``They did an outstanding job today of saying all the right things,'' North Carolina Treasurer Richard Moore told reporters in New York. ``What needs to happen in the future though is that some of the talk needs to be backed up by appropriate action.''

Among the topics covered at the meeting were a succession plan for Eisner and other senior executives. Also discussed were Disney's short- and long-term financial performance and trends, a review of Disney's corporate governance guidelines and an ongoing search for a new independent director.

Mitchell pointed to the company's second-quarter earnings report released earlier this month that showed a 71 percent rise in profit compared with a year earlier, thanks primarily to a recovering theme-park business.

``We hope these leaders now have a better understanding as to why the board remains firm in its view that the Disney management team, led by Michael Eisner and Bob Iger, is executing against its strategic plan in order to continue to drive long-term shareholder value,'' he said.

But Mitchell added that the board said it will hold Eisner and his management team accountable for the company's performance.

``We expect this success to manifest itself in, among other things, continued growth in earnings, increased cash flow, and increased returns on invested capital,'' he said.

In addition to Mitchell and Iger, also present were independent directors Judith Estrin, Monica Lozano, Robert Matschullat and Aylwin Lewis.

Disney shares fell 37 cents to close at $22.68 on the New York Stock Exchange.

Greg Hernandez, [phone]

greg.hernandez(at)dailynews.com