FINANCIAL MANAGEMENT OVERVIEW: DISNEY
Overview of Financial Management-Disney
Management's primary goal is to maximize stockholder wealth. Firms often award stock options and bonuses on the basis of management performance, thus linking management's personal wealth with the firm's financial performance. The better the job managers do in maximizing share price, the greater their compensation.
Walt Disney's CEO, Michael Eisner, draws a compensation package in part based on the net income and return on shareholder equity of The Walt Disney Company. In 1994, he attracted a lot of attention when he exercised stock options on 5.4 million Disney shares for a net profit (after taxes and brokerage expenses) of around $127 million. At the time, he had also earned another 8 million stock options, then valued at about $161 million. Year after year, Eisner ranks among the most highly compensated CEOs in America. In 1998, Michael Eisner's total compensation from Walt Disney Co. totaled $590 million in salary and stock options. He was forced to step down as Chairman and CEO of Disney in 2003.
Let's see if Mr. Eisner deserves such generous bonuses and stock options. Look at Disney's 2013 Annual Report on the web at HYPERLINK "https://corporate.disney.go.com/investors/index.html" https://corporate.disney.go.com/investors/index.html to answer the following questions:
Select "Financial Review" from the drop down menu "Introduction", and proceed to the "Recent Performance" section. Identify and describe Disney's four main business segments. What percentage of Disney's 2014 revenue can be attributed to each of the four business segments?
Describe Disney's portfolio of businesses.
Describe Disney's portfolio of businesses.
What types of goals have been set by management to improve efficiency in operations, and have those goals been met?
If you had invested $1,000 in Disney stock when Michael Eisner took office as chairman and CEO of Disney in 1984, what would your investment be worth as of December 31, 2014?
How does the compound annual return on your Disney stock during this 20-year period compare to the return earned on the S&P 500 during this same period?
Visit finance.yahoo.com and obtain a current stock quote for Disney (ticker symbol: DIS). Request a "Profile" of the company from the menu of options. What is the current 52-week change in stock price? What is the current 52-week change in stock price relative to the S&P 500?
On the basis of the company's performance through 2003, do you think that Mr. Eisner and his management team have done a good job? Has this impression changed based on the company's recent performance?