UNION WON'T BACK EISNER CALPERS EXPRESSES LITTLE CONFIDENCE IN DISNEY'S CHIEF EXECUTIVE.

Byline: Greg Hernandez Staff Writer

BURBANK - Embattled Disney Chairman and Chief Executive Officer Michael D. Eisner will not have the support of the California Public Employees' Retirement System in his bid next week for re-election to the board of directors of The Walt Disney Co.

``We have lost complete confidence in Mr. Eisner's strategic vision and leadership in creating shareholder value in the company,'' Sean Harrigan, the president of CalPERS' board said in a statement Wednesday.

CalPERS owns nearly 10 million shares in Disney, valued at more than $235 million. The statement called Disney's performance over the past five years ``dismal'' and said the system has a lack of confidence in the long-term strategic vision of the company.

The announcement from the largest U.S. public pension fund came just hours after Wall Street adviser Glass Lewis & Co. recommended against re-electing Eisner and three other directors at Disney's annual shareholder meeting March 3 in Philadelphia.

Eisner has been at the center of an escalating corporate storm since Feb. 11, when Philadelphia-based Comcast Corp., the nation's largest cable company, made a hostile takeover bid for Disney.

The all-stock bid, now valued at $47 billion, would produce the world's largest media company, with revenues of $46 billion in 2003, enough to edge past Time Warner's $40 billion.

But with the value of Comcast stock falling and Disney's surging, the bid was immediately viewed as far too low and Disney's board of directors unanimously voted last week to reject the proposal.

Shortly after the Comcast bid was made public, independent corporate governance analyst Institutional Shareholder Services recommended that shareholders vote against re-electing Eisner to the board citing governance issues and the company's refusal to split the positions of chairman and CEO.

In his only lengthy interview since the Comcast bid, Eisner said on CNN's ``Larry King Live'' last week that he had been through rough times before but believed this period, too, would pass.

``I am confident that, in the end of this, I will still have three great children and a great wife, and the Disney company will prevail,'' he said. ``Whether I will be running the Disney company or not is up to our board, up to my health and up to my continuing enthusiasm, which, as of this moment, are there.''

Glass Lewis, an independent adviser to Wall Street and institutions on casting ballots in shareholder votes, said in a report that the Disney board ``has been notoriously insular, famously gullible and blindly loyal to Mr. Eisner.''

``Given the control Mr. Eisner is accustomed to, we are troubled that he still wields tremendous power over the operation of this board,'' the report stated.

Disney spokeswoman Zenia Mucha called the report ``a side show'' and labeled Glass Lewis ``an upstart company that is trying to grab publicity that diverts attention from the fact that Disney's record of building value is indisputable.''

Mucha said in a statement that not only was The Walt Disney Co. well- managed, but that its governance was ``world-class.'' She said building shareholder value was on track for earnings growth from continuing operations in excess of 30 percent this year and double-digit growth through 2007.

``This report is laced with one-sided allegations and opinions that have not been subjected to any objective test of truth, and should be viewed as such,'' Mucha stated.

The campaign to oust Eisner is being led by dissident shareholders and former board members Roy E. Disney and Stanley Gold, who said the Glass Lewis recommendation ``provides another important validation of our position that significant change is needed at The Walt Disney Co.''

``We are obviously pleased and gratified with the 'vote no' momentum that is building as we head toward the March 3 Disney annual meeting in Philadelphia,'' they stated Wednesday.

CalPERS, the 29th-largest single shareholder of Disney, said its vote does not endorse or oppose the messages sent by the dissident groups seeking reforms to Disney.

Greg Hernandez, [phone]

greg.hernandez(at)dailynews.com