Walt Disney's Mr Michael Eisner, hobbled by a powerful shareholder revolt, was removed as chairman of the board on Wednesday but will remain chief executive, an arrangement certain to keep controversy swirling around the famed entertainment company.

The board's unanimous decision to strip Mr Eisner of the title he has held for nearly 20 years came after a raucous annual shareholder meeting on Wednesday that closed with a dramatic announcement: Eisner had failed to carry 43 per cent of shares cast for his re-election to the board.

The magnitude of the number surprised company executives and Wall Street experts, who promptly said so many shareholders had lost faith in the company's management that sweeping changes were needed. Usually board members are elected with barely a whisper of protest.

Installed as Disney's chairman late on Wednesday was former US Senator Mr George Mitchell (broker of the Northern peace process), the board's presiding director, who helped craft the strategy to separate the jobs of chairman and chief executive. Mr Mitchell's elevation drew immediate fire from critics because shareholders also had delivered a blow to his credibility. He failed to win 24 per cent of the votes cast, also an unusually high number.

Dissident shareholders question Mr Mitchell's ability to oversee Mr Eisner because of his vocal support of the executive. He also has drawn fire from critics for having business ties to Disney in the past while sitting on the board.

Some observers say that by relinquishing the chairmanship, Mr Eisner's historically strong grip on day-to-day management will be weakened. Critics argue that the move is merely cosmetic and that nothing short of his departure from the company would end the controversy.

"It's not about fence mending," said Mr Patrick McGurn, senior vice president of Institutional Shareholder Services, which advised stockholders to vote no. "They have to rebuild an entire dam. The flood waters have washed over it."

Mr Christy Wood, chief investment officer for the California Public Employees Retirement System, which withheld its 9.9 million shares from Mr Eisner, agreed: "It's too little, too late. It's not enough. Shareholders are making a bigger statement."

But the board, in its statement, made clear that Mr Eisner would not be pushed out the door of the kingdom he has ruled, at times, with the sheer force of his personality.

"While making this change in governance, the board remains unanimous in its support of the company's management team and of Michael Eisner, who will continue to serve as chief executive officer. The board has confidence in the strategic direction of the company," the statement said.

A source close to the Disney board said Mr Eisner agreed to step aside as chairman and that some directors initially questioned how shareholders would react to appointing Mr Mitchell chairman. Mr Mitchell also expressed some reluctance, according to the source, who said the board ultimately believed he was "the best man for the job".

The shareholder vote ended several weeks of bitter campaigning by Mr Eisner's backers and his chief detractors, former directors Mr Roy E. Disney and Mr Stanley Gold. The two sides spent millions of dollars wooing large institutions and small shareholders.

Many stockholders, who feel the company's reputation and economic vitality have been tarnished by bad management moves, latched onto the grass-roots campaign that began with a modest SaveDisney Website created by Mr Gold and Mr Disney.

Company executives badly miscalculated the potential strength of the movement, which drew momentum from the timing of two major blows: the break-up of the prosperous relationship between Disney and Pixar Animation Studios as well as the unsolicited takeover bid by cable giant Comcast Corp.

On Wednesday, Comcast executives said they would not sweeten their bid but did ask to meet Disney's independent directors, those who do not hold management jobs in the company.

Comcast said the vote against Mr Eisner and Mr Mitchell showed that shareholders believed Disney would be better served by new owners.

The board's decision to replace Mr Eisner as chairman followed a shareholder gathering that, for the first time, brought together the combatants.

"I don't care what the current management may tell you," Mr Disney said. "The plain fact is, you can't fool all the people all of time, nor can you succeed in business trying to get by on the cheap."

Mr Eisner and Disney executives defended the company during their lengthy presentations, although they acknowledged that ABC's prime-time ratings have been a disappointment, as have Disney's retail stores, many of which are now for sale. - (Los Angeles Times Service)