The entertainment company fired back at activist investor Nelson Peltz on Tuesday, offering shareholders a 16-page slide deck defending its CEO Robert Iger against a months-long campaign by Mr Peltz to “challenge Mr Iger’s legacy”.
“Nelson Peltz doesn’t understand Disney’s business,” the company said.
Mr Peltz and his hedge fund Trian Fund Management LP last week made a bid for a Disney board seat to try to mend a series of self-inflicted wounds that have plagued the company’s recent performance.
Disney attempted to refute Mr. Peltz’s claims in the presentation by noting that overall shareholder returns have outperformed other media companies. It also said the company is planning a reorganization that will cut costs and lead to profitability. Disney defended its acquisition record.
Above all, it was said that Mr. Peltz did not have what it takes to get the seat on the board that he had wanted for months. Mr. Peltz “lacks the skills and experience to assist the board in delivering shareholder value in a rapidly changing media ecosystem,” Disney said.
The dust comes a week after Disney replaced its chief executive Susan Arnold with Nike Inc. chairman Mark Parker, a move Mr. Peltz put as a stamp on Robert Iger’s return. Mr. Iger returned to Disney as CEO in November when the company’s board of directors fired Bob Chapek from his top post.
Mr. Peltz’s Trian, in a presentation posted on its website last week, highlighted what it called mistakes by the board and compared Disney’s shareholder returns to the broader market during each director’s tenure.
Nelson Peltz and his hedge fund Trian have applied for a board seat at Disney.
Photo: Tasneem Alsultan/Bloomberg News
“There are still several current directors and members of management who have overseen and approved some of Disney’s worst corporate governance and strategic blunders,” Trian wrote.
Disney shares rose 1.5% to $100.97 in early trade on Tuesday. They have fallen by about a third in the past year.
Disney’s materials offer new details on Mr. Peltz’s ongoing campaign against what he sees as mismanagement by the company. It began in the summer of 2022 when the investor met with Mr. Chapek at Disneyland Paris and went so far that Mr. Peltz or one of his deputies contacted Disney leadership 20 times to inquire about joining the board. He called Disney executives and board members and even hired a high-level employee, Isaac Perlmutter.
The addition of Mr. Perlmutter, Chairman of Marvel Entertainment, presents a new twist in the company’s saga. A secretive and reclusive executive, Mr. Perlmutter lobbied Mr. Peltz several times, accompanying him on an hour-long phone call with director Safra Catz, according to the Disney presentation. He also lobbied Mr. Chapek and Disney Chief Financial Officer Christine McCarthy to bring Mr. Peltz to the board.
Their campaign heated up after a disastrous profit call for Mr. Chapek in November, according to the Disney Materials, in which he missed analysts’ expectations and downplayed concerns about massive losses at Disney’s streaming division. On November 12, Mr. Peltz and Mr. Perlmutter met with Mr. Chapek in Palm Beach to again advocate for Mr. Peltz to become a director.
Mr Peltz has not let up even after Mr Chapek was fired in November, the Disney presentation said. That month he met with Mr. Iger and Ms. McCarthy and told Mr. Iger in December that if he were not granted a seat on the board he would fight a proxy fight.
As Disney’s response Tuesday put it, “He would start a proxy fight to challenge Mr. Iger’s legacy.”
Mr. Iger, the company argues, created significant value during his first tenure as Disney CEO, increasing its market cap from $49 billion when he began his tenure in 2005 to $231 billion when he stepped down in February 2020 .
Mr. Iger’s early tenure at Disney was marked by a series of acquisitions that included Pixar Animation, Marvel Entertainment and Lucasfilm Ltd. united under one roof. Mr. Peltz has targeted the fourth major deal of Mr. Iger’s tenure at Disney: the $71.3 billion acquisition of 21st Century Fox’s entertainment assets. (Fox’s corporate sibling, News Corp, owns the Wall Street Journal.)
According to Mr. Peltz, Disney overpaid for the assets and is now saddled with debt and absorption costs. Disney said Tuesday the trio of acquisitions that preceded the Fox deal were similarly flagged as “overpaid.” The Fox deal, Disney said, allowed it to expand its direct-to-consumer offering around the world and expand its portfolio of properties to include movies like “Avatar” and TV shows like “The Simpsons.” The company also noted that subsequent asset sales reduced Disney’s costs to approximately $57 billion.
The return of a CEO is a strategy many companies have attempted over the years, some more successfully than others. The WSJ examines three so-called boomerang CEOs and how their companies fared after their return. Photo illustration: Adele Morgan
“Disney shareholders must carefully analyze Peltz’s statements to distinguish fact from fiction,” the company notes.
Disney reiterated in its official proxy materials, also released Tuesday, that it does not endorse Trian’s campaign.
“Please note that your voting card will look different this year,” read the material, which struggled to specify exactly which voting cards shareholders should use.
The company warned shareholders not to throw out Mr. Peltz and Trian’s blue materials that may have been sent to them and to vote with the white voting card to reinstate Disney’s board members.
Disney’s board also addressed a recurring criticism of the way Mr. Iger has handled succession planning. When he returned as CEO in November, Mr. Iger said he would prioritize finding a successor.
Disney said in its proxy materials that a board-appointed succession planning committee will meet at each regularly scheduled board meeting to review internal and external candidates and receive reports from external recruitment firms. The Board will also reserve time at each meeting to discuss succession planning without Mr. Iger present.
Mr. Iger left the company effective December 31, 2021. He was entitled to a prorated 2022 salary under his employment contract for his services in fiscal 2022, which was $1,096,154, the Disney Attorney at Office said. Mr. Iger served as Disney CEO for the second time since November 20 last year. The committee awarded him a bonus of $4,370,000.
Mr. Iger’s total compensation for 2022, including salary, cash bonuses, stock and options, was nearly $15 million.
Mr. Chapek earned a total of $24 million in 2022. As part of his termination, he’s entitled to about $6.5 million of the remainder of his base salary from his nearly three-year contract and a $1 million target bonus for fiscal 2023, the deputy said.
Geoff Morrell, who served as Mr Chapek’s communications director for about four months, is set to receive a payout of about $4 million. Mr. Morrell’s total compensation at Disney for fiscal 2022 was approximately $8.4 million.
Mr. Morrell left the company after helping orchestrate a response to Florida’s “Don’t Say Gay” legislation that angered employees internally and made Disney a target for Florida Gov. Ron DeSantis. The Parents’ Rights in Education Act prohibits teaching about sexual orientation or gender identity in kindergarten for third-grade students and restricts it in later grades.
The cost of Disney’s management woes could provide more ammunition for Mr. Peltz, who has criticized what he calls “excessive” board pay and a board’s sloppy track record of succession planning.
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