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In 2004, Roy Disney — Walt’s nephew — summoned Disney shareholders to the company’s annual meeting, asking them to oust then-chairman and CEO Michael Eisner, who had been running the place for 20 years. Roy had Walt’s face, and his “Save Disney” movement brought emotional Disney-loving individual shareholders of all ages to chilly Philadelphia, some leaning on canes and others with babies in strollers. After a stunning 43 percent voted against re-electing Eisner to the board, a new chairman was named immediately and Eisner, despite vowing to remain as CEO until the end of his contract in 2006, departed in 2005.
At age 80, Nelson Peltz is old enough to remember one of the most successful shareholder revolts in corporate history. Presumably, he also knows that he is no Roy Disney and CEO Bob Iger, back on the job only since November 21, is nothing like the increasingly imperious and isolated Michael Eisner of 2004.
But together he and his friend Ike Perlmutter, the former Marvel Entertainment CEO who has some scores to settle with Iger dating back to 2015, represent a tenacious, expensive and distracting problem for Iger and the Disney board at a time when the entertainment company faces the same massive challenges as other legacy entertainment companies. The development adds pressure as the company faces a two-year ticking clock to find a successor for Iger, an effort led by Disney’s new chairman, Nike exec Mark Parker. It may also restrict Iger’s ability to maneuver as he might have wanted.
At this point, Peltz’s demands are far more modest than the dramatic changing of the guard sought by Roy Disney — the man is just asking for a board seat. But Disney is putting up stiff resistance. Peltz is raising some valid questions: Aside from the succession problem, for example, it’s stating the obvious to say that streaming costs have to be reined in. But Iger also has some cards to play, aside from his reputation as one of the best executives in business. He’s already moved to respond to the sense that Disney (under ousted CEO Bob Chapek) was price-gouging at the theme parks. Avatar: The Way of Water is still rolling — just the kind of megahit that can drive many aspects of Disney business (and there are more sequels ahead). And China just agreed to give valuable release dates to Marvel movies generally. (Not only are we extremely unlikely to see any Chinese villains, but presumably the talent will be well-schooled to watch their words.)
Peltz could hardly have intended his challenge to come at a time when Disney fans are still rejoicing in Iger’s return. He started chatting with Chapek in Paris last July and maintained a dialogue in the ensuing months.
It was also in July that Perlmutter began lobbying for his pal, calling Chapek, Disney CFO Christine McCarthy, and Disney board member Safra Catz less than a week after Peltz dined with Chapek in Paris.
At the time Peltz approached Chapek, he was dealing with a CEO who had been absolutely convinced just a month earlier that he was about to face execution by the Disney board. (Instead a divided board agreed to extend his contract, though it was backdated, giving him less than a three-year term. The board then presented this result as “unanimous.”) It’s understandable that, at the time, Chapek might have felt that he could use a friend or two, and that seemed to be on offer. “Mr. Perlmutter said he and Mr. Peltz supported Mr. Chapek, and that adding Mr. Peltz to the Board would help Mr. Chapek counter recent headwinds he had faced, solidify his position as CEO, and preempt any other potential shareholder nominations of director nominees at the 2023 Annual Meeting,” Disney wrote in its preliminary proxy filing Jan. 17. “He said without Mr. Peltz there, former executives including Mr. Iger, would be back at Disney.”
Peltz is more known for targeting blue chip companies like consumer-product giant Procter & Gamble and the Wendy’s fast-food chain. But of course, his friend Perlmutter was very familiar with Disney — had in fact been one of its largest individual shareholders. Recall that the penny-pinching, gun-toting Perlmutter seized control of Marvel in 1997 and sold it to Disney in 2009. He remained as Marvel Entertainment’s CEO, but in 2015, Iger decreed that Kevin Feige, then running Marvel films, would no longer report to Perlmutter but to then-film studio chief Alan Horn. In his memoir, Iger wrote that Perlmutter had stood in the way of Marvel’s first films with Black and female leads. “I called Ike and told him to tell his team to stop putting up roadblocks and ordered that we put both Black Panther and Captain Marvel into production,” Iger wrote. Feige sealed his control over Marvel when he took on responsibility for television, animation and print editorial operations in October 2019.
Peltz and Perlmutter have more in common than their age (Perlmutter is also 80) and Palm Beach addresses. They have shared pursuits in philanthropy and politics, from sending turkeys to the Salvation Army at Thanksgiving to backing Donald Trump’s Oval Office bid. (Peltz publicly apologized for supporting the former president’s re-election after the Jan. 6 assault on the Capitol.) Peltz’s Trian Group declined to comment, as did Perlmutter.
Disney had attracted the attention of another activist shareholder in recent history; Chapek settled with Dan Loeb in September, making a deal that included giving former Meta executive Carolyn Everson a seat on its board. What wasn’t know then is that at the same time Loeb was publicly facing down Disney, Peltz and Perlmutter were privately doing the same. At an Aug. 20 board meeting the Disney board “discussed the various approaches from Mr. Peltz, Mr. Perlmutter and Mr. Loeb, the thesis put forward by Third Point, [and the] the lack of a thesis put forward by Mr. Peltz.” The following month, Disney representatives met with Loeb, leading to Everson’s appointment.
Peltz, after months of haranguing in private, pounced after Disney reported earnings that dramatically missed market expectations on Nov. 8, 2022, acquiring a $900 million stake in the company. As Disney’s share price plummeted, Peltz called Chapek to ask for a formal meeting and a board seat. On Nov. 12, Chapek ventured to Palm Beach, where he met with both Peltz and Perlmutter, and the two “continued their discussions to encourage the addition of Mr. Peltz to the Board and again expressed support for Mr. Chapek.” Eight days later, Chapek was dismissed. With the news that Disney’s board had reinstalled Iger as CEO, Disney’s share price rallied more than 6 percent. The picture at Disney had changed, but Peltz and Perlmutter persisted.
Peltz’s Trian Fund initially opposed Iger’s return as CEO, suggesting that Peltz may have had another candidate in mind. The activist investor has dropped that argument while continuing to push for a board seat, telling Disney’s board earlier this month “he did not want to fire Mr. Iger but he did want to be in the Board room.” But still, the asks seemed simple: While other activists have challenged Disney to make bold moves like spinning off ESPN and ABC, Peltz was asking for a bit more fiscal restraint, a move the company already appears to be making.
At this point, Iger still seems to be solidifying his control over Disney. Conveniently, board chair Susan Arnold, who had backed Chapek despite the misgivings of fellow board members, is at the end of her term. Iger’s relationship with Arnold had started to fray even before he left Disney in December 2021. Following his departure, they didn’t speak at all until Arnold had to make that November call, asking Iger to return as CEO.
Arnold’s replacement as chairman is Parker, an Iger ally who is said to have gifted Iger six pairs of bespoke Nikes when he retired (temporarily, as it turned out) a year ago. The two fitness buffs are close in age — Parker is 67 and Iger is 71 — and Iger is said to respect Parker’s creative roots (he started in and still has a hand in shoe design).
Iger lost no time in purging Chapek’s deputy, Kareem Daniel, who he dismissed at 6:30 a.m. after the surprise Sunday-evening announcement that Chapek was out. And some sources with knowledge of Disney politics believed he was not done. They believe that Iger wanted to ease out CFO Christine McCarthy — but much more gently than Chapek and Daniel. Press reports have portrayed her as the one who raised alarms about Chapek’s management with the board in September and who subsequently called Iger to gauge his interest in returning. But some veterans of the company’s wars don’t buy that scenario. “The board didn’t know until she told them? It smells fishy to me,” says one, who notes that this version of the story makes the board look very innocent and certainly not responsible for the bad things that happened when Chapek was CEO.
In the wake of Iger’s return, some sources believed McCarthy was vulnerable for having backed Chapek too enthusiastically until she didn’t. The reorganization that gave Daniel the power of the purse increased her sway as well — all the various divisions’ chief financial officers reported to her and Daniel. One Disney veteran believes she was positioning herself to expand her influence still further. As The Wall Street Journal reported in December, McCarthy had spearheaded a move to hire the consulting firm McKinsey last year to explore cost-cutting measures. McCarthy’s passion for cutting costs had already led to some clashes with creative executives, whom Iger most wants to protect.
McCarthy “reveled in the expanded power of corporate,” says one Disney veteran. “She had probably enjoyed more power and influence in the company than at any time in her career. The hiring of McKinsey was her idea, and they hired McKinsey with an absolute agenda.”
McCarthy has long-standing relationships on Wall Street in her favor, and with Peltz pounding on the door, Iger is likely to find that a united front is best. When and how he may further reshuffle the executive deck remains to be seen, but he quickly ordered a group of top executives to undo the Chapek reorganization that so empowered Daniel and McCarthy. Of necessity, McCarthy is part of the team working on that, which also includes Dana Walden, chairman of Disney General Entertainment Content; film studio chief Alan Bergman; and ESPN president Jimmy Pitaro. (The dynamics in those meetings must be interesting.)
With Iger already initiating major changes, it seems likely that shareholders will give him more time to reveal his plans for dealing with the admittedly daunting challenges facing Disney. “We agree with Trian that many of Disney’s wounds are self-inflicted and need to be addressed,” wrote MoffettNathanson’s Michael Nathanson in a Jan. 12 note, but “Iger’s return will force Disney to have an honest and courageous self-examination on what is working and what needs to be fixed. While we think Trian is correct to identify these issues, we believe that given the change in leadership, the company will quickly move to drive better profitability.”
Disney, meanwhile, officially fired back at Peltz on Jan. 17 with a presentation of its own, using his own words on CNBC against him (that he is “not an expert” in theme parks, and answering “Why not?” when asked by CNBC why he is focusing on Disney). In deciding not to voluntarily offer Peltz a board seat, the board came to the conclusion that “despite months of engagement, Mr. Peltz had not, and the Trian Group representatives at the meeting had not, actually presented a single strategic idea for Disney, that their assessment of Disney seemed oblivious to the secular change that had been ongoing in the media industry, as well as the impact of the pandemic on each part of the Company’s business from production, to exhibition, to leisure travel.” Disney stressed Iger, with his experience, could lead the company through the challenges it faces, noting that he is “assisting the Board in identifying, developing and mentoring a successor CEO, a process which has already begun.” (That last bit will fire up some speculation.)
Stressing the secular change in the business is likely to carry weight on Wall Street. In fact, analyst Rich Greenfield had made that point using some of the same language even before the most recent Disney filing. He noted that Disney is hardly alone in facing strong headwinds and that Peltz had entirely neglected that point in his criticisms of the company. “There are major secular challenges facing this entire sector,” Greenfield said. Given that, “it just feels like Peltz doesn’t understand media in 2023.”
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