HOW ETHICAL LEADERSHIP MADE DISNEY PIXAR INTO A ...

Introduction
HOW ETHICAL LEADERSHIP MADE DISNEY PIXAR INTO A
SUSTAINABLE LEARNING ORGANIZATION *
JAMES M. HALEY* and MOHAMMED H. SIDKY**
This paper examines how ethical leadership develops organizational
learning based on mutual trust and teamwork. Roy Disney, the
nephew of Walt Disney, is an excellent example of how an ethical
leader can transform an organization. Without him the successful
merger of Pixar and Disney would never have happened. The box
office successes of Disney Pixar such as the Academy Award winning
Toy Story 3 shows that the merger is working, when most mergers fail.
We believe that this applied research about ethical leadership and
organizational learning at Disney Pixar provides many lessons to be
learned by MBA students and business leaders about how to create a
sustainable organization.
In our view, ethical leadership is required to organize a team of leaders such that a merger can
become a sustainable learning organization. What is ethical leadership? According to Johnson
(2012):
―(It) …. Is a two-part process involving personal moral behavior and moral influence… Both
components are essential. Leaders must demonstrate such character traits as justice, humility,
optimism, courage, and compassion… They are also responsible for ethical behavior of others…
Leaders act as role models for the rest of the organization.‖
The merger of Disney Pixar is an example of a new and larger animation organization that ethically
combines the traditions of Disney with the talent and technologies of Pixar. Before Disney and
Pixar could learn this lesson to combine into a learning organization, they had to share space just to
talk to each other. Ironically, the Disney Pixar merger almost never happened because for a time
there was little trust between the organizations.
Roy Disney was an ethical leader who transformed the Walt Disney Company by making
management accountable. He wanted the Disney Chairman and CEO, Eisner replaced because he
� This paper extends the research, conducted about Exxon Mobil’s successful merger by Haley
(kapuncensko51@comcast.net) and Sidky (msidky@pointpark.edu), first presented at the 2006 Strategic
Management Society (SMS) Conference in Vienna, Austria and then presented at the 2007 International
Business Research Conference in Sidney, Australia, included new research about the early success of the
Disney Pixar merger.
� Research updated by Michael DeSantis, MBA. (Mldst12@yahoo.com)
*,Ph.D. & MBA, POINT PARK’S H.J. HEINZ ENDOWED, CHAIR OF MANAGEMENT
**Ph.D. PROFESSOR OF MANAGEMENT, POINT PARK UNIVERSITY

lacked the necessary vision to lead the company. One of Roy’s concerns was Eisner’s failure to
build constructive relationships with creative partners, especially Pixar. Disney was forced to resign
from the company’s board of directors. In his attached resignation letter in Appendix 1, Disney
called for Eisner’s resignation. Roy believed that Eisner made Disney ―…rapacious, soulless and
always looking to make a quick buck.‖
After Disney resigned as a director, he rallied investors to withhold 45 percent of the votes cast for
Eisner remaining as director of the company. This vote of ―no confidence‖ is unprecedented and it
forced the board to eventually strip Eisner of his role as Board Chairman. He then resigned as
Chief Executive in 2005, a year before his contract was up. This led to a change in leadership
provided by the new company President and CEO, Bob Iger.
Since Iger succeeded Eisner, he extended an olive branch to Steve Jobs, the founder of Apple,
which ultimately led to the $7.4 billion merger with Pixar, now making Jobs the largest investor in
Disney Pixar but also a leader that Iger could work with to ensure a smooth transition to integrate
Pixar with Disney. Clearly, unifying organizational leadership based on shared values is necessary
to integrate different organizations. That is why it was helpful for Iger to state his core values. Iger
promised to do what was right, not simply what was legal. But more steps had to be taken beyond
opening communication to ensure that organizational learning emerged from the new organization.
Iger was able to fix many of Disney’s problems in animation by working more closely with Pixar.
John Lasseter, Chief Creative Office for Walt Disney and Pixar Animation Studios, gives credit to
Roy Disney for fostering creativity at Disney Pixar because he puts his heart and soul into
preserving Disney’s legendary past, while helping move the art of animation into the modern age of
embracing new technology.
Mergers are one means to acquire the operational knowledge that is specific to the new
organization, making the strategic vision of the merger a reality. This creative change has been
encouraged at the new Disney Pixar organization. Senior management led by CEO, Iger, has
pledged to work with Lasseter, the creative leader of Pixar, (see Policies in Appendix 2). This
committee was contractually committed to preserve and promote the brain trust that is the creative
learning team of Pixar, headed by Lasseter (See Exhibits 1 &2). Thus a learning process emerged
that so far has avoided the mistakes leading to failure of most other mergers.
Why Most Mergers Fail
According to Lundberg (2001) corporate combinations fail to achieve their anticipated benefits
70% of the time. Research conducted by Harding and Rovit (2004) involving over 50 case studies,
15 years of merger and acquisition data, and surveys of 250 senior executives found a 70% failure
rate. The response rates for failure are as follows:
1. Ignored potential integration challenges (67%)
2. Over-estimated synergies (66%)
3. Had problems integrating management teams and/or retaining key managers (61%).
(Harding and Rovit 2004).

If the failure rate is so high, why do businesses (80% of the Fortune 100 over the past 20 years)
continue to engage in mergers and acquisitions? Harding and Rovit consider M&A’s as a
necessary growth option for many companies: ―Unless you have a killer business model ... it's
virtually impossible to build a world class company without doing deals.‖ (Harding and Rovit
2004)
According to some estimates, 85% of merger failures are related to the mismanagement of cultural
issues. Awareness of cultural differences is then seen as an issue of primary concern when merging
organizations. According to Miller (2000):
―Once you develop an understanding of the current culture, and have compared that with
the goals of the merged organization, it is time to think through what it will take to
implement that strategy. This process requires consideration of a number of factors,
including organizational structure, operating and decision-making apparatus, reward
systems, and people related issues.‖
At the very center of this lies the task of creating a culture of learning, based on shared values,
where continuous interaction with internal and external environmental changes take place and
necessary adaptations made.
Apparently, this learning process was never put in place at the merger of AOL and Time Warner.
For example Time Warner Cable’s high speed Internet services, Road Runner, as part of its
profitable cable operations was never integrated with AOL. Case (2005) explained:
―At the time we felt that broadband was the most important strategic challenge for AOL, and
a merger with Time Warner would help accelerate AOL’s transition to broadband…In my
view AOL should have replaced Roadrunner as TW’s cable broadband 5 years ago. That
didn’t happen, but partnerships with other high speed providers like DSL were made more
difficult because people assumed AOL was in the cable camp. So instead of accelerating
AOL’s broadband push, it slowed it. Obviously, this was a big disappointment for me and
others who believed in AOL and believed in broadband.‖ (Case 2005)
The first AOL Time Warner Annual Report in 2000 claimed that it was fostering ―… a nimble,
entrepreneurial culture‖ that recognizes that it can only succeed if everyone supports the new
organization based on a, ―shared set of values and common goals.‖ But the team-work necessary to
integrate the two companies never happened, because Case, as Chairman of AOL Time Warner,
was not a ethical leader, since he failed to provide a clear vision of what the merger should be. In
fact he now admits the merger was a mistake and should never have happened. This failure was
avoided in the merger of Disney Pixar. The integration of these two organizations preserved the
―Pixar culture‖ and vision as a key objective of the steering committee in order to create a
sustainable learning organization (see Appendix 2).
Sharing a New Strategic Vision
A bigger learning organization emerges if there are diverse learning teams embedded throughout
the organization led by a team of leaders sharing a strategic vision that creates a sustainable
competitive advantage. Then it becomes possible to manage the increased complexity of economies

of scale and scope in a unique way that is hard for competitors to easily copy. Mergers and
acquisitions represent a means to accelerate this process. Often competitors merge without creating
market power but still profit by leveraging the combined propriety knowledge of the merged firms.
By combing different companies, each business organization saves both time and money, learning
what the other firm knows about the technology, production, and marketing of expanded operations
that result from the merger. The evolution of a business learning to be more efficient and effective
is complex. It is thus difficult to copy another organization's proprietary knowledge. It is thus easier
acquire another firm’s organizational learning by simply buying the company (Haley, 1986).
Whether a learning organization emerges from a merger of two firms critically depends on team
learning by corporate directors and senior managers leading the new business combination. Senge
(1990, p.236) defines team learning as ―…the process of aligning … the capacity of a team to
create the results its members truly desire. It builds on the discipline of developing shared vision. It
also builds on personal mastery, for talented teams are made up of talented individuals.‖
To make a merger work requires more than a team of leaders. Success depends on the emergence of
learning teams throughout the new organization that is committed to implement the strategic vision
of the merger. Our research reveals the following conditions for the successful combination of
separate business organizations (Haley and Sidky 2005):
1. The catalyst that begins the integration of proprietary knowledge, resulting from mergers
and acquisitions, is the organizational leadership provided by a team of leaders including
directors and senior managers, which develops a shared strategic vision of how the newly
combined organization should change to create a competitive advantage.
2. Continuity of management must be achieved, which includes keeping key managers and
other knowledge workers from both merging organizations in order to preserve and
combine everyone's essential know-how.
3. Product and process technologies of each organization should be similar or compatible
enough for the new organization to integrate the shared proprietary knowledge that creates
greater economies of scale and scope.
4. The combined business must organize a new system and culture for managing the people,
products, and technologies which the competing organizations had been too small or
undercapitalized to exploit by themselves.
5. The merged organization must be able to internalize the learning process, such that learning
is no longer limited to reacting to change, but also in anticipating and planning for potential
changes. The creation and institutionalization of many learning teams throughout the new
company should have the potential for the emergence of a bigger learning organization.
If these necessary operating conditions exist, effective and efficient learning can take place, as well
as the potential for greater competitiveness. On the contrary, if these operating conditions do not
exist, then failure of a business combination is almost guaranteed. Successful mergers and

acquisitions enjoy a sustainable advantage that is difficult to copy, because it is generally too hard
to make most business combinations work.
Acquiring Organizational Learning
By merging, each business organization can save both time and money, learning what the other
firm knows about the technology, production, and marketing of expanded operations that result
from the merger. The dynamics of organizational learning to achieve increased efficiency and
effectiveness is computationally complex. This makes it difficult to copy another organization's
proprietary knowledge (Haley, 1986). So it might be better to acquire what a competitor knows.
A merger is a cooperative strategy for integrating the learning process between firms through the
sharing of firm-specific experience. This promise of synergy from merging critically depends on
each organization's willingness to share what it knows. ―Being open to the realities of ... the needs,
interests, and perspectives that exist in (competing organizations) may allow managers to search for
organizational forms, and relations that more effectively accommodate (the merger's) people and
processes...‖ (Sidky & Kersten, 2001).
Traditional economic theory and the resource-based view of business strategy do not effectively
address these issues. Then importance of firm-specific knowledge is recognized as either a factor of
production or a resource that creates value. According to a resource based view of competitive
advantage, counting, copyrights, trademarks, patents, manufacturing plants, stores, employees and
market share, are better measurements of success. So M&A activity should be like playing
monopoly such that companies accumulate things that are tangible. Then why not simply count the
number of deals that a company does? Clearly this view misses the point, because most deals fail.
The resource based view (RBV) of a firm’s performance has evolved to incorporate intangible
resources that possess inimitability, variety, and nontradability (Cho & Pucik, 2005:556). But
empirically it is hard to find confirmation of this more sophisticated RBV model of sustainable
competitive advantage, which is limited by its mostly static framework of the firm’s organization
(Newbert, 2002). Competitive advantage is a dynamic, not a static concept. The failure of these
competing paradigms is that they do not explain how individuals, teams, and organizations actually
learn.
Creating a Learning Organization: Single-loops and Double-loops
In our view, a more useful perspective can be found using a systems approach to organizational
learning. Argyris and Shon (1978) distinguished between what they called single-loop and doubleloop
learning processes.
Single-loop learning involves the ability to detect errors and make corrections relative to preestablished
operating norms. Dodgeson (1993:8) considers single-loop learning as related to
activities which ―add to the knowledge base or firm-specific competencies or routines of the firm
without altering the nature of their activities.‖ Firm-specific competence is seen as ―individual to
the particular firm, and is a crucial factor in affecting their competitiveness.

Double-loop learning on the other hand, adds an additional step to the learning process by
incorporating means and methods though the operating norms of an organization can be questioned.
(Dodgeson, 1993:8) sees double-loop learning as involving ―changing the firms specific
competencies and routines. In double-loop learning, the organization must have the ability to ask
serious questions regarding their operating norms.
Morgan (1997:92-93) presents some of these questions:
1. What business are we in, is it the right business?
2. Can we create fundamentally new products and services?
3. Can we redefine the boundaries between different industries and services so that new niches
emerge?
4. Can we structure our organization around business processes that reflect a customer
viewpoint rather than the influence of traditional department structures?
5. Can we redesign business processes in a way that will increase the quality of production and
reduce costs?
6. Can we replace our organizational hierarchy with a network of self-managing teams?
Morgan (1997:83) says that ―all these questions contain a double-loop learning potential because
they invite the questioner to examine the status quo and consider alternative modes of operation.
They encourage us to understand the key organizational attributes from the standpoint of a new
frame‖. Or as Peter Drucker first said: ―What is our business and what should it be?‖ Rockefeller’s
initial answer to these questions, when he controlled only 10% of oil refining after America’s civil
war, was first to create the world’s largest refinery company. Standard Oil, by merging with other
competing refineries, eventually gave him 95% control of refining. Once he achieved this mission
he then realized that Standard Oil should become the world’s first, vertically-integrated oil
company by backward integrating into oil production and distribution. Mergers and acquisitions
again made this vision of the strategic control of oil possible.
Is Disney-Pixar Creating a Culture of Learning?
A modern merger that so far is creating similar ―synergies‖ is Disney’s acquisition of Pixar,
involving $7.4 billion in stock. Clearly, this combination is seeking to backward integrate Disney’s
distribution and production of traditional animation with Pixar’s advanced technologies. To
successfully manage this change Disney wants Jobs, the head of both Pixar and Apple, to join
Disney as a corporate director and Disney’s largest shareholder. Commenting on Jobs and the
Disney Pixar merger, Safo, a director at the Institute for the Future says: ―He’s the only guy who
has applied systems thinking to media, he’s the only person who bridges both hardware and
software,‖ (The New York Times, January 21, 2006, p. B6).
Interestingly, the new company is formally developing a team of leaders to integrate the Pixar with
Disney. For example the merger will make Pixar Vice President, Lasseter, the chief creative officer
of the Pixar and Disney animation studios. He will have the authority to ―green light‖ films for
both studios, although Disney CEO Iger has the final approval. To ensure these two leaders work
with each there is a steering committee that includes Iger, Jobs, and Lasseter, whose job is to
oversee feature animation at both studios, and to help maintain the Pixar ―culture‖, among other

duties. Obviously this is a formal way to unite the leadership of both organizations with a new
shared strategic vision of what Disney Pixar should be. (See Exhibit 1).
Pixar’s ―brain trust‖ of seven directors and creative executives were also listed as company assets,
and the agreement requires that a majority of them agree to join the combined company. Those
employees include ―Finding Nemo‖ director Andrew Stanton; ―Monsters, Inc.‖ director Pete
Docter; ―The Incredibles‖ director Brad Bird; director/writer Bob Peterson; story artist Brenda
Chapman; Editor Lee Unkrich; and sound designer Gary Rydstrom.
The merger also sets up a ―steering committee‖ whose job is to oversee feature animation at both
studios, and to help maintain the Pixar ―culture,‖ among other duties. The committee must meet at
Pixar headquarters at least one full day every other month. The agreement protects Pixar’s right to
eschew employment contracts, and mandates that the studio continue to be called Pixar. The
branding of films made after the merger is finalized will be changed to ―Disney Pixar.‖ The
groundbreaking animation company will, however, stay in Emeryville, California, with a sign at its
gate that ―shall not be altered‖ from ―Pixar,‖ the agreement said‖ (Keating, 2006).
So far it appears that Disney is enhancing, and integrating the technology of Pixar’s creative talent
by protecting their autonomy from the rest of Disney. In this way the animation hits should keep
coming from the brain trust whose creative culture is preserved by being structurally separated
(Puranam & Srikanth, 2007; Haspeslagh & Jemison, 1991).
Teamwork, leadership, and integration are continuing to make the Disney Pixar merger work.
Disney has been working with Pixar for years distributing box-office hit movies such as Toy Story,
Monster’s Inc., and Finding Nemo to name a few. (See Exhibit 3). So Disney and Pixar know how
to work with each other as they are now learning to integrate on many levels and still preserve their
identities. For example, Pixar’s smash hit Cars characters are available for purchase on
Disneystore.com and can be found as main attractions at Disney’s theme parks. (See Exhibit 4).
Steve Jobs, former CEO and current Chairman of the Board at Apple and acting member of the
board of directors at Disney Pixar, brings proven leadership and additional integration ideas to the
newly merged company and makes it possible for a synergy between Disney, Pixar, and Apple to
occur. The Disney owned TV network ABC has made many of its hit television shows available
exclusively on Apple’s subscription download site, iTunes. Walt Disney Records is making its
music, as well as its soundtracks from both classic Disney films and Disney Pixar animated films
exclusively available on iTunes.
Leaders Learning to Change the Future
Ethical leaders are necessary to create a learning organization that encourages creative thinking and
creative problem solving. They recognize the central importance of knowledge workers in their
acquisition of competing firms and businesses. According to Crossan & Vera (2004):
―Leadership of organizational learning requires strategic leaders to frequently perform roles
involving … the development of high levels of learning … across the organization.‖

In fact the research shows that there are different leadership styles that facilitate different types of
organizational learning. For example, transformational leadership provides a clearer vision of the
future that encourages the organization to change more rapidly to meet the challenges of new
competitive environments (Tichy & Ulrich, 1984; Crossan & Vera, 2004).
Conventional management practice establishes a top-down, bureaucratically controlled approach
which encourages a narrow focus, limiting learning to achieve pre-determined objectives. A
learning organization however, while requiring a sense of direction, also creates a ―space in which
many possible actions and behaviors can emerge including those that can question the limits being
imposed.‖(Morgan, 1997:95). Successful mergers and acquisitions, which bring together
competing organizations, need to find this ―space‖, in order to determine which organizational
norms are necessary for the continuing growth and development of the new organization, and
which norms have to be pushed aside.
The merger between Disney and Pixar has also created what seems to be an evolving partnership
between Disney and Apple that provides more space to collaborate. Disney now has agreements in
place to sell hit ABC prime time shows, such as ―Desperate Housewives‖, as well as content from
ABC sports and ESPN on Apple’s popular iTunes music and video store. The 2006 Disney Pixar
annual report states, ―With our groundbreaking deals last year to make our television shows and
movies available on iTunes, as well as our new on-demand services provided through ABC.com
and DisneyChannel.com, we have been at the forefront of responding to the consumer‖
When the merger first occurred there was uncertainty about whether the initial success of this
merger could be sustained. So far learning teams have emerged throughout the new company
creating the magic of Disney animation on movie screens, DVDs, the internet, toys, and theme
parks around the world? Keeping Pixar’s creative talent together was critical to ensure a learning
process emerged that continues to create a new line of Disney animated characters that are as
captivating as Mickey Mouse, Donald Duck, and Snow White. Clearly Pixar is putting the magic
back into Magic Kingdom.
Conclusion
From the outside looking in, creating a learning organization by mergers and acquisitions seems so
intangible and too vague to explain. But if you are a participant in combining organizations
success or failure is very real. For example, the absence of a shared strategic vision and poor
communication ensures almost immediate failure. The loss of key employees undermines longterm
success.
Mergers and acquisitions can make an organization that is willing to learn become aware that new
and better ways of doing business are possible. In order to sustain the advantage of a learning
organization so called intangibles like leadership, ethics, strategy, team work, and organizational
communication still matter.
At this writing however, the near future seems promising. Disney Pixar continues to be an example
of how a learning organization becomes sustainable. A lesson that MBA students and business
leaders should learn.

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Exhibit 1 *
Disney Steering Committee
� John Lasseter, Chief Creative Officer.
� Steve Jobs, Disney Board of Directors
� Robert Iger, Disney CEO
� Dick Cook, Walt Disney Studios Chairman
� Tom Staggs, Disney Chief Financial Officer
� Edwin Catmull, President of Pixar and Disney
Animation
* Policies for Management of the Feature Animation Businesses, Exhibit 99.1, Filed with the Securities Exchange
Commission as of January 26, 2006, 1:34 PM ET. Found at http://www.secinfo.com/d14D5a.vCAq.c.htm.

Exhibit 2 †
Pixar’s Brain Trust
� Finding Nemo director, Andrew Stanton
� Monsters, Inc. director, Pete Docter
� The Incredibles director, Brad Bird
� Director/Writer, Bob Peterson
� Story artist, Brenda Chapman
� Editor, Lee Unkrich
� Sound Designer, Gary Rydstrom
� Writer, Michael Ardnt
† Policies for Management of the Feature Animation Businesses, Exhibit 99.1, Filed with the Securities Exchange
Commission as of January 26, 2006, 1:34 PM ET. Found at http://www.secinfo.com/d14D5a.vCAq.c.htm.

Exhibit 3 ‡
Disney Pixar Academy Awards and Movie Revenue
� Toy Story (1995)- Worldwide Gross $358 Million
o Special Achievement – John Lasseter
� A Bug’s Life (1998)- Worldwide Gross $362 Million
� Toy Story 2 (1999)- Worldwide Gross $483 Million
� Monsters, Inc. (2001)- Worldwide Gross $524 Million
o Best Original Song- ―If I Didn’t Have You‖
� Finding Nemo (2003)- Worldwide Gross $850 Million
o Best Animated Film
� The Incredibles (2004)- Worldwide Gross $629 Million
o Best Animated Film
o Best Sound Editing
� Cars (2006)- Worldwide Gross $461 Million
� Ratatouille (2007)- Worldwide Gross $621 Million
o Best Animated Feature Film
� Wall-E (2008)- Worldwide Gross $521 Million
o Best Animated Film
� Up (2009)- Worldwide Gross $731 Million
o Best Animated Feature Film
o Best Music (Original Score)
� Toy Story 3 (2010)- Worldwide Gross $1.063 Billion
o Best Animated Feature Film
o Best Original Song- “We Belong Together”
� ‡ Pixar, 2011. Feature films. Found at http://www.pixar.com/featurefilms/index.html.
� ‡Disney, 2011. Disney Animated Movies Academy Award nominations and wins. Found at
http://www.disneyclips.com/newsinfo/awardnom.html.

Exhibit 4 §
Pixar Themed Attractions at Disney Parks
� Walt Disney and Disneyland Resorts
o Monsters Inc. Laugh Floor
o Finding Nemo-The Musical
o The Seas with Nemo and Friends
o Block Party Bash
o Finding Nemo Submarine Voyage
o A Bug’s Land
o Monsters Inc., Mike and Sulley to the Rescue
o Pixar Play Parade
o Turtle Talk with Crush
o It’s Tough to be a Bug
o Buzz Lightyear’s Space Ranger Spin
o Buzz Lightyear Astroblasters
§ Wow, They Noticed! April 10, 2008. WDW News Today. Found at http://wdwnewstoday.com/archives/643.

November 30, 2003
Mr. Michael D. Eisner, Chairman
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Dear Michael,
Appendix 1 **
Roy Disney’s Letter of Resignation
It is with deep sadness and regret that I send you this letter of resignation from the Walt
Disney Company, both as Chairman of the Feature Animation Division and as Vice
Chairman of the Board of Directors.
You well know that you and I have had serious differences of opinion about the direction
and style of management in the Company in recent years. For whatever reason, you have
driven a wedge between me and those I work with even to the extent of requiring some
of my associates to report my conversations and activities back to you. I find this
intolerable.
Finally, you discussed with the Nominating Committee of the Board of Directors its
decision to leave my name off the slate of directors to be elected in the coming year,
effectively muzzling my voice on the Board — much as you did with Andrea Van de
Kamp last year.
Michael, I believe your conduct has resulted from my clear and unambiguous statements
to you and the Board of Directors that after 19 years at the helm you are no longer the
best person to run the Walt Disney Company. You had a very successful first 10-plus
years at the Company in partnership with Frank Wells, for which I salute you. But, since
Frank's untimely death in 1994, the Company has lost its focus, its creative energy, and
its heritage.
As I have said, and as Stanley Gold has documented in letters to you and other members
of the Board, this Company, under your leadership, has failed during the last seven years
in many ways:
** Text of Roy Disney’s Resignation Letter, 2001. USA Today. Found at
http://www.usatoday.com/money/media/2003-12-01-disney-letter_x.htm.

1. The failure to bring back ABC Prime Time from the ratings abyss it has been in for
years and your inability to program successfully the ABC Family Channel. Both of these
failures have had, and I believe, will continue to have, significant adverse impact on
shareholder value.
2. Your consistent micro-management of everyone around you with the resulting loss of
morale throughout this Company.
3. The timidity of your investments in our theme park business. At Disney's California
Adventure, Paris, and now in Hong Kong, you have tried to build parks "on the cheap"
and they show it, and the attendance figures reflect it.
4. The perception by all of our stakeholders — consumers, investors, employees,
distributors and suppliers — that the Company is rapacious, soul-less, and always
looking for the "quick buck" rather than the long-term value which is leading to a loss of
public trust.
5. The creative brain drain of the last several years, which is real and continuing, and
damages our Company with the loss of every talented employee.
6. Your failure to establish and build constructive relationships with creative partners,
especially Pixar, Miramax, and the cable companies distributing our products.
7. Your consistent refusal to establish a clear succession plan.
In conclusion, Michael, it is my sincere belief that it is you who should be leaving and
not me. Accordingly, I once again call for your resignation or retirement. The Walt
Disney Company deserves fresh, energetic leadership at this challenging time in its
history just as it did in 1984 when I headed a restructuring which resulted in your
recruitment to the Company.
I have and will always have an enormous allegiance and respect for this Company,
founded by my uncle, Walt, and father, Roy, and to our faithful employees and loyal
stockholders. I don't know if you and other directors can comprehend how painful it is
for me and the extended Disney family to arrive at this decision.
In accordance with Item 6 of Form 8-K and Item 7 of Schedule 14A, I request that you
disclose this letter and that you file a copy of this letter as an exhibit to a Company Form
8-K.
With sincere regret,
Roy E. Disney
cc: Board of Directors

Appendix 2 ††
POLICIES FOR MANAGEMENT
OF
THE FEATURE ANIMATION BUSINESSES
The following sets forth certain policies and principles which shall be adopted and
implemented with respect to the management and operation of the Disney and Pixar Feature
Animation Businesses, all of which are subject to the authority of the Disney Chief Executive
Officer to take such actions as are in the best interests of the shareholders of Disney.
Management Responsibilities
Edwin E. Catmull shall be the President of Pixar and Disney Animation, heading the
combined animation businesses of Disney and Pixar, reporting directly to Robert A. Iger and
Richard Cook jointly.
John A. Lasseter shall be the Chief Creative Officer of Pixar and Disney Animation and Walt
Disney Imagineering, reporting to Robert A. Iger. John A. Lasseter will have ―green lighting‖
authority for Disney and Pixar feature animation productions, subject to final approval by Disney’s
CEO.
Steering Committee
Upon the effective date of the Disney – Pixar merger, a Committee (―Committee‖) shall be
immediately established to help provide oversight to the Feature Animation Businesses of Disney
and Pixar.
The principal objectives of the Committee are: (i) to help maintain the Pixar ―culture,‖ (ii) to
help supervise Pixar and Disney Feature Animation, (iii) to oversee Pixar compensation practices
and (iv) to approve the film budgets of Pixar, all subject to final approval by Disney’s Chief
Executive Officer.
The Committee shall initially consist of the following members: Edwin E. Catmull, John A.
Lasseter, Robert A. Iger, Richard Cook, Thomas O. Staggs, and Steven P. Jobs.
It is intended that the Committee will meet at the headquarters of Pixar in Emeryville for at
least one full day during every other calendar month.
†† Policies for Management of the Feature Animation Businesses, Exhibit 99.1, Filed with the Securities Exchange
Commission as of January 26, 2006, 1:34 PM ET. Found at http://www.secinfo.com/d14D5a.vCAq.c.htm.

Pixar Compensation Practices
Pixar shall retain its existing compensation philosophies and practices, including not using
employment contracts, the granting of employee stock options, the maintenance of executive
employee bonus plans and employee medical benefits and other fundamental human resource
policies and practices for at least five years or such shorter period as the Committee may decide.
Branding Arrangements
Location
Pixar will continue to be called ―Pixar‖.
The branding of Pixar’s previous films and products will not be altered.
Future films produced by Pixar will be branded Disney Pixar.
Pixar’s operations will continue to be based in Emeryville, California. The Pixar sign at the
gate shall not be altered.