Nelson Peltz, the head of Trian Fund Management who is attempting to get a seat on The Walt Disney Company’s board alongside former Disney CFO Jay Rasulo, blasted Bob Iger and the current board for mismanagement.
Nelson Peltz via David Rubenstein YouTube
In a press release, Peltz said, “It is unfortunate that a company as iconic as Disney and with so many challenges and opportunities has refused to seriously engage with us, its largest active shareowner, about board representation.”
He continued, “Instead of having a boardroom that would include directors with an ‘ownership mentality’ that can bring fresh perspectives to the Company’s challenges, Disney is resisting change and asking shareholders to endorse a Board comprised mainly of legacy directors (and their hand-picked successors) who have repeatedly failed to properly plan for CEO succession, misaligned the incentives of management, and failed to oversee or drive a strategy to get the streaming business to profitability or the studios to produce good content.”
Bob Iger via New York Times Events YouTube
Peltz questioned, “Are Disney shareholders really to believe the current Board is able to heal these self-inflicted wounds?”
He then answered his own question, ““We respectfully believe the answer to that question is ‘no’ and we will seek the support of shareholders for meaningful change in the Board’s composition. It is time to ‘Restore the Magic’ at Disney.”
Nelson Peltz via David Rubenstein YouTube
The press release goes on to compare The Walt Disney Company to the S&P 500’s performance as well as its peer. It states, “Despite Disney’s unrivaled scale, unparalleled customer loyalty, irreplaceable intellectual property, and an enviable commercial flywheel, Disney’s total shareholder return is significantly lower than its peers and the broader market over every relevant period during the last decade, and over the tenure of each non-management director.”
Relative TSR Ending October 6, 2023
It then specifically accuses the board as the reason for the underperformance, “Trian believes this underperformance is the result of a Board that has failed to adequately perform its primary responsibilities as stewards of shareholder capital.”
It then details a number of problems that Trian has identified with The Walt Disney Company and how they plan to solve them.
First, they point to the company’s corporate governance and how it has been structured to “preserve as much of the status quo as possible by playing defense — evidenced by limited changes to compensation and succession processes.”
In order to solve this problem, Trian proposes, “Adopt best-in-class governance; finally complete a successful CEO succession; and align management pay with performance.”
Bob Iger attend the Guardians of the Galaxy Vol. 3 Premiere at the Dolby Theatre in Hollywood CA on Thursday, April 27, 2023.
(Photo: Alex J. Berliner/ABImages)
READ: Nelson Peltz Brings Former Disney Executive Into His Takeover Plan, Disney Responds
The second major problem is streaming profitability with Disney and that the company has “no guidance or tangible targets beyond breakeven.”
To solve this problem, Trian states, “Target and achieve Netflix-like margins of 15-20% by FY 2027.”
Third, Trian points to ESPN and notes the service lacks a “tangible business plan or defined cost to shareholders.”
They propose to have Disney “commit to a reasonable, defined payback period and return profile on ESPN Flagship DTC and communicate it in detail prior to launch.”
Brie Larson as Captain Marvel/Carol Danvers in Marvel Studios’ THE MARVELS. Photo courtesy of Marvel Studios. © 2023 MARVEL.
The fourth major problem Trian identifies is studio creativity. In order to solve this problem, Trian proposes a “Board-led review of creative processes and structure to restore leadership accountability and reclaim #1 box office position w/ leading economics.”
Finally, Trian points to the company’s Parks and Experiences Growth and says they will “execute on a clear vision for Parks targeting at least high-single digit operating income growth to ensure adequate returns on ~$60bn of capex.”
Trian Fund Management’s analysis of Disney problems and solutions to fix them
Specifically, Peltz commented on these problems and his proposals to fix them, “We will have much more to say about these goals and the initiatives necessary to achieve them when we release our full presentation to shareholders. But to be clear, Disney needs to again be the beacon of strategic clarity and exceptional execution it once was. No Disney shareholder should be content with the current strategic muddle or have to endure failed execution without accountability.”
Rasulo added, “Nelson and I are not about strategic platitudes or soft goals. As Disney Board members, we would expect to help drive Disney’s financial performance by working with other Board members to set demanding but realistic goals (to which executive compensation will be tied) and provide rigorous oversight to help ensure accountability for operational execution and capital allocation. Disney was founded and built by owners. We believe restoring the magic at Disney starts with a focused, aligned and accountable board, intensely committed to returning an ‘ownership mentality’ to the boardroom. That, and a heavy dose of best-in-class corporate governance is the medicine Disney needs to fix its ailing shareholder returns.”
The Walt Disney Company’s CFO Jay Rasulo leading a business discussion in the Spring of 2014. Photo Credit: Ejalversoniii, CC0, via Wikimedia Commons
Not only did Trian and Peltz put The Walt Disney Company and Bob Iger on blast in their press release, but they also launched their Restore the Magic campaign and website, which also needles Disney.
It asks, “Trian loves Disney, but does Disney leadership love its shareholders and fans? Over the past decade, Disney’s shareholders would’ve been much richer if they’d invested in the S&P 500 OR Disney’s self-selected media peers instead.”
A slide from Restore the Magic
It also calls out Disney’s non-management board of directors and shows how the company’s performance has declined under their leadership and compares it to the S&P 500.
A slide from Restore the Magic
Finally, it points out how The Walt Disney Company’s current board is not invested in Disney’s future by pointing out that they own approximately $35 million in stock, a drop in the hat compared to Trian’s ownership owning around $3 billion.
A slide from Restore the Magic
The Walt Disney Company recently announced they do not want Peltz and Rasulo on the board sharing in a press release, “The Board does not endorse the nominations of Nelson Peltz and James Rasulo put forth by Trian Fund Management, L.P. and its affiliates, led by Nelson Peltz and supported by former Disney executive Isaac Perlmutter (collectively, the “Trian Group”). ”
The press release added, “The Board recommends that shareholders do not vote for the Trian Group nominees, and that they reject a related proposal from the Trian Group to amend the Company Bylaws.”
HOLLYWOOD, CALIFORNIA – APRIL 27: (L-R) The Walt Disney Company Chief Executive Officer Bob Iger and Chris Pratt attend the Guardians of the Galaxy Vol. 3 World Premiere at the Dolby Theatre in Hollywood, California on April 27, 2023. (Photo by Charley Gallay/Getty Images for Disney)
What do you make of Peltz’s move against Bob Iger and his Board of Directors at The Walt Disney Company?
Wonderful article! Looking forward to seeing Disney squirm at the earnings call in February. Kind of hard to perform acrobatics on a crumbling floor.