A Case Study on Disney

A Corporate Financial Analysis of Disney June 1997

This is a corporate financial analysis of Disney. I do not expect you or want you to replicate this analysis, but you can use it to get a sense of how I would answer the project questions. In doing this analysis, I was constrained because I was looking at only one firm. If you are as a group looking at a number of firms, I would strongly recommend that you try to integrate your analysis. (In other words, doing separate reports for each company is not only repetitive, but it also robs you of some interesting comparisons that you can make across these companies.) For instance, in the first part, when I have a graph on corporate governance and show Disney alone, you could show more than one firm on the same graph. In other parts, where I have tables that compare Disney to the entertainment industry, expand the tables to include all your firms. In the discussion parts, focus not only on what is unique about your firm but also on what it has in common with other companies in the group. Finally, there will be parts of this analysis where you will have more information or less information than I do, or where the information you have from different sources is not consistent. Work with what you have. Be creative, be bold and do not let yourself be constrained by conventional wisdom. Above all, have fun. I appreciate the effort .

I. Corporate Governance Analysis

A. Management and Stockholders Balance of Power:

At Disney, the power clearly resides with the incumbent management, and in particular, with the CEO, Mr. Michael Eisner. This power emanates not from any stockholdings that Mr. Eisner and other top managers have - they own less than 1% of the outstanding stock - but from the fact that the board of directors is composed almost entirely of insiders and people who are close to Mr. Eisner. (See Exhibit 1 for a listing of the directors, and their relationships to Mr. Eisner or Disney.) Note that

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Insiders...