The climax of the months-long proxy battle between Disney CEO Bob Iger and activist investor Nelson Peltz is at hand. The outcome, to be revealed at the company’s annual stockholders meeting on Wednesday, will shape the entertainment giant’s trajectory as it navigates an industry in flux.
Peltz, backed by a roughly $3 billion stake in Disney and the influential endorsement of proxy advisory firm ISS, is pushing for board seats for himself and former Disney CFO Jay Rasulo. His mission is to shake up the board and address what he sees as Disney’s staggering loss of shareholder value, disappointing creative content, and declining earnings outlook.
Disney, supported by proxy firm Glass Lewis, defends its current board members, touting their track records and experience. The company also cites ongoing strategic shifts, such as the ad-supported Disney+ tier, park pricing adjustments, and efforts to curb password sharing, as signs of positive momentum. Investors have responded, propelling Disney’s stock upwards by over 30% this year.
Succession: The Heart of the Matter
Amidst the proxy fight, one issue stands out: Iger’s eventual departure. The recent turbulence surrounding former CEO Bob Chapek’s exit highlights the critical importance of a smooth succession process. Analysts emphasize that while Iger’s return has provided short-term stability, the company needs a well-defined succession plan to reassure investors long term. Disney has been vague on the matter, stating that a rigorous selection process is underway but declining to name the internal candidates being considered.
Peltz and his supporters have capitalized on the leadership uncertainty, arguing it’s a driving factor behind Disney’s missteps. In contrast, Disney maintains that it is actively engaged in preparing its next CEO, with Iger providing mentorship and the board conducting comprehensive evaluations.
Battle Lines Drawn: Who’s Backing Whom?
Beyond ISS, Peltz enjoys support from several notable shareholders, including activist firm Ancora and investment firm Yacktman Asset Management. Trian has also revealed backing from CalPERS, the nation’s largest public pension fund, and influential asset manager Neuberger Berman.
Disney, too, has its supporters. ValueAct Capital has publicly backed Disney’s current board, likely due to an information-sharing agreement that aligns its interests with the company. Further, heavy-hitters like JPMorgan CEO Jamie Dimon, filmmaker George Lucas, and Laurene Powell Jobs – the widow of Apple’s Steve Jobs – have all endorsed Disney’s direction under Iger.
Even as the spotlight shines on Peltz, another activist firm, Blackwells Capital, has thrown its hat into the ring. While supporting Disney’s existing board, it advocates for its own three nominees to be added to it.
The Implications
The outcome of this contest has profound implications. One of our analysts suggests that the direction Disney takes will be a bellwether for the entire media landscape, as companies grapple with the challenges and opportunities posed by streaming’s ascendance. A victory for Peltz could signal a broader shift towards greater focus on profitability at the expense of the creative risk-taking that was once Disney’s hallmark. On the other hand, Disney’s triumph would likely reinforce faith in Iger’s vision and the strategic adjustments he’s initiated.
