09/09/2006 12:08 pm ET Updated May 25, 2011

The Iger Sanctions: Disney's Shareholders Should Be As Angry As Democrats

We've heard a lot of moral outrage about the politically-motivated lies ABC and its parent Disney plan to broadcast about 9/11, and rightfully so. But Democrats and viewers aren't the only aggrieved parties. Robert Iger's actions are inflicting serious damage on his company. Disney shareholders should be demanding corrective action from him, and shouldn't hesitate to take the appropriate steps if they don't get it.

A lot of people have described the offensive nature of the documentary itself, and Matt Stoller has given a excellent perspective on the political context behind Disney's move. Anyone who's ever been an executive for a publicly-traded company knows there's yet another dimension to this controversy: the harm it will do to Disney's stock prices, now and in the future.

If I were to hazard a guess, there won't be any immediate precipitious decline in stock prices. There may be some continued moves toward a boycott, but progressives haven't mounted an effective one since the Cesar Chavez days, and it's hard to demonstrate the impact of a boycott on a media company like Disney.

The real damage is longer-term, and it's already happening. The term "goodwill" is used to describe the intangible assets that add to a company's value. "Goodwill" typically includes client relationships, unique intellectual products (e.g. software or fictional characters), brand identification, and customer loyalty.

Disney's stock value depends more on goodwill than does the average company's, and certainly more than most media companies. The brand is the asset: Mickey Mouse, Disneyland, childlike innocence, and fond memories of the avuncular Walt Disney (although not for all of us: guys my age may remember being turned away from Disney theme parks for having long hair in the sixties!)

Iger is running roughshod over his brand, and therefore his goodwill, through his mismanagement of this crisis. A strong executive, reading the public reaction, would step in and state publicly that this program was created without his knowledge, that it's not consistent with Disney values, and that it's being pulled until it can be corrected. He still has 24 hours to do the right thing, but there are no signs that he will.

Every day that passes batters Disney's goodwill. While there may not be a devastating boycott, millions of Americans are being exposed daily to the image of Disney as a cynical company pandering to Dick Cheney and the other shady politicians now in power. These impressions have a lasting effect, even among those who don't hold strong political views of their own.

Disney executives are guilty of cynicism is allowing this hack job of a film to be created, but - from a management point of view - that's not even their most egregious error. They've badly misread the zeitgeist. A media executive's job is to know what the market wants.

This is not 2003 or 2004. The public isn't sitting up and begging like a trained chihuahua every time you feed it pro-Bush propaganda. Polls are telling us that the public is overwhelmingly angry with the way things are going, and that most Americans believe our current war was a mistake. Disney executives have made a major blunder in promoting this partisan (and apparently badly done) film.

I suspect they'll try to patch over their error by providing a tepid introduction that says "not all scenes are based on documented facts," or something else that resembles their statements so far. That doesn't cut it when it comes to protecting their goodwill. It's just be an acknowledgement of their own cynicism.

Thomas Kean has already cheapened the value of his 9/11 Commission report by participating in this travesty. Robert Iger is now costing his shareholders untold millions in goodwill. If I were a major Disney shareholder, I'd be working the phones right now - not out of moral outrage, but to protect my investment.

A Night Light