Question: How much influence do stockholders wield over decisions made by and about the board of directors? Many stockholders of Walt Disney have been pushing for more say in key corporate governance issues such as how the board of directors is chosen and how corporate officers are supervised. Little by little, their voices have been heard. Disney has made a number of changes to the way directors are elected, reduced the size of its board, increased the number of independent members, and separated the role of chairman of the board from the role of chief executive officer. Stockholders were looking forward to new leadership and new ideas when Michael Eisner was named CEO of Disney in the mid- 1980s. The company's earnings were down, and its movies weren't drawing the huge audiences that management had hoped for. Eisner and his management team supercharged the theme park business, brought the company into the television industry by buying Cap Cities ABC, and put the magic back into Disney movies. More than a decade into Eisner's revival of the Magic Kingdom's fortunes, however, some stockholders were grumbling. Disney had to write off millions that it had invested in its go.com Internet initiative as it changed its online strategy. Profits at the ABC Network were not up to par, and theme-park attendance was down following the terrorist attacks of 2001. Roy Disney, the last member of the Disney family to serve as a director, complained publicly about Eisner's management and the company's lagging share price.

Eventually, he and another director resigned from the board and continued to push for management changes. Eisner came under even more pressure when the cable company Comcast launched an unsolicited acquisition bid for Disney. As the company struggled against this unwanted takeover attempt-which it ultimately rebuffed-stockholders showed their displeasure with the CEO's performance. Eisner was running unopposed for reelection to the board, usually a routine event for a CEO who is also serving as chairman of the board. At this annual meeting, however, the CEO received a "withhold" vote from 45 percent of the shares. Shareholders' voices were heard: The Disney board took the chairman's title away from Eisner that night, although he remained a director. No longer would the CEO be able to chair Disney's board of directors. Within months, Eisner announced he would soon retire. In preparation, the board scheduled a meeting with officials of major pension funds, which own sizable blocks of Disney stock, to hear their concerns about corporate governance and to discuss choosing Eisner's successor. In the next few months, the board cut the total number of directors and added a new director considered to be independent of the company's management. It committed to rotating members among the board's committees to bring new viewpoints to such key areas of corporate governance as executive compensation.

And most important, it changed the voting rules to require any director who receives a majority of "withhold" votes to submit a letter of resignation. George J. Mitchell, who replaced Eisner as chairman of the board, said in announcing the new voting rules: "Today's action is the latest in a series of steps we have taken to further strengthen Disney's corporate governance practices." Meanwhile, capping months of debate over choosing a new CEO, the board finally named Robert A. Iger, who served as president under Eisner. More than two decades after taking the helm, Eisner stepped down as CEO and simultaneously resigned from the board. Iger quickly made peace with Roy Disney, who was named director emeritus and announced that he would support the new CEO. What will stockholders say as the new Disney era unfolds?16 For more information about this company, go to www.disney.com.

1. Generally, stockholders of a large corporation such as Disney are fairly complacent with existing management. And yet, these same stockholders eventually changed the way that Disney was managed. In this case, what actions provoked stockholders to become so vocal?

2. After Michael Eisner received such a high percentage of "withhold" votes, do you think the Disney board should have taken additional steps beyond taking away his chairmanship title?

3. Do you agree with the Disney board's decision to meet with the managers of large pension funds that own sizable blocks of Disney stock? Why or why not?

4. Why is it important for a board to have a certain number of directors who are not corporate officers and have no personal connection with corporate officers? What can board members who are outside the corporation contribute to the overall management of a large corporation?