Entertainment giant Walt Disney Company, on Wednesday night decided to remove Michael Eisner as the chairman of the embattled company while allowing him to retain management control as the chief executive officer.

The decision was taken soon after the annual general meeting ended where Eisner had bid for re-election as chairman. While 57 per cent of the shareholders supported Eisner, 43 per cent withheld. Wednesday's verdict was seen as the biggest set-back in Eisner's 18-year tenure as chairman and CEO of Walt Disney.

In an unanimous decision the board also decided to appoint former US Senator George Mitchell as a non-executive chairman. Mitchell is currently presiding director and the most senior "independent member".

The number of shares withheld was higher than expected, and was seen as a victory for shareholder activists Stanley Gold and Roy E Disney, two former board members who led the shareholder revolt against Eisner. 

After the meeting, they said: "The resounding no confidence vote cast by shareholders has sent a clear and undeniable message that dramatic change is needed now and that Michael Eisner must go."

Analysts feel shareholders' dissatisfaction may persuade the Disney board to take bold steps like separating the chairman and CEO roles.