All the pension funds, which manage more than $500 billion in assets, declined to support Mr. Eisner in Disney's annual board election on March 3, when 43 percent of all shares were withheld from the vote on Mr. Eisner, who has led Disney for 20 years.
His solution is to withhold voting rights from anyone who buys shares in a takeover target until the battle is over.
States have the authority to withhold voting rights from anyone with a criminal conviction, under the Fourteenth Amendment of the Constitution.
Instead, shareholders must vote for (or withhold votes from) management's hand-picked slate of directors or, if they wish to nominate their own candidates, undertake the costly, burdensome process of a separate proxy solicitation.
This year, earmarks were withheld from certain lawmakers who voted against appropriations bills.
The two are expected to face an uphill fight, but under old corporate rules they could have survived as directors with only a plurality of the vote since negative votes were merely registered as votes withheld from ratification.
The institutional shareholders also said they might also decide to withhold votes from other directors from the AOL side of the merger.
Calpers, the California state employees fund, has announced that it will withhold votes from members of audit committees that vote to allow the company's auditing firm to also provide tax advisory services.
With 43percentt of shareholder votes withheld from Mr. Eisner, the board is well over the minimum threshold.
Correction: April 26 , 2004 Monday The Floyd Norris column in Business Day on Friday, about the power of institutional investors, misstated the percentage of votes withheld from Michael D. Eisner during the election of directors for the Walt Disney Company.
