In a sudden turn of events, Bob Chapek is no longer Disney’s CEO and Bob Iger has returned to lead for 2 years.
We’ve shared a look at Disney stock values following the news of Iger’s return, a look at why Disney replaced Chapek with Iger, and celebrities’ reactions to the news. But now we’ve got more details about the determination made before Chapek was removed and what his exit payment could look like.
According to the New York Times, Disney’s Board of Directors determined that Chapek had done “irreparable damage to his ability to lead, with a string of missteps resulting in the lost confidence of Wall Street and most senior Disney executives, as well as many rank-and-file employees.” (To be clear, this is a quote from the New York Times about the reported determination of the Board. Disney has stated that Chapek was fired without cause.)
CNBC reports that (according to some sources) Christine McCarthy, Disney’s chief financial officer, was reportedly one of the executives who expressed a “lack of confidence” in Chapek.
According to the Financial Times, some senior executives at Disney actually “led a rebellion” against Chapek in recent weeks. The “covert campaign” reportedly started in the summer. Executives approached the Board to express their concerns, but the final straw was reportedly the earnings release from November 8th (Q4 of fiscal year 2022).
Following Disney’s recent report of a $1.5 billion loss in streaming, stock values went down and CNBC host Jim Cramer called for Chapek’s firing. He said Chapek was “incapable of running a fantastic company.”
Reportedly, Susan Arnold, the chair of the Board of Directors, called Iger late in the week to ask him to consider returning to the company. Ultimately, the Board’s determination led to bringing back Bob Iger as CEO. He will serve a limited, 2-year term.
According to CNBC, Disney “blindsided” Chapek with the decision, and the news caught “Chapek and his inner circle” “off guard.” Chapek was reportedly notified on Sunday night. The Financial Times shares that Chapek reportedly became aware of the moves being made against him but was “caught off guard by the speed of events.”
According to Disney’s report filed with the Securities and Exchange Commission, the Company used its right to terminate Chapek without cause. Chapek also resigned from the Board “pursuant to the terms of his employment agreement.”
The report goes on to note, “Mr. Chapek will receive the separation benefits payable in accordance with the terms of his previously disclosed employment agreement.”
Bloomberg reports that Bob Chapek will be leaving Disney with a number of “exit payments and benefits that could be worth more than $23 million.” This is in addition to the millions of dollars Chapek could also get if the Disney stock price increases in the coming years.
The Financial Times shares that under Chapek’s old contract, “at the end of 2021 he was entitled to an estimated $54mn in cash and stock in the event of early termination.”
Keep in mind that Disney has not released the exact financial terms of Chapek’s departure. Bloomberg reached its number by making some calculations based on disclosures from regulatory filings.
So where do the numbers come from? Well, first, Chapek has a contract that reportedly entitles him to collect a salary for the FULL duration of the contract term, even if he is “ousted prematurely.” Chapek’s contract had been extended through part of 2025. Bloomberg shares that the salary payments from now through that 2025 date would be around $6.5 million.
On top of that, Chapek is entitled to collect the pension he has accumulated during his time with Disney. In October of 2021, some filings from Disney showed that the pension number was $16.9 million. According to Bloomberg, “That money is his, regardless of the circumstances of his departure.”
Bloomberg notes that Chapek will probably get more money too, but it’s not clear just how much he’ll receive. Chapek does have a number of stock options and he also has some stock awards that haven’t vested yet.
It’s not clear how much these things will be worth, given how the stock value has dipped over the past several months. But stock values have jumped up given the news of Iger’s return. It’s possible that Iger will take steps that will improve the stock value. That could make Chapek’s stock and options increase significantly in terms of value.
Chapek also has a “non-qualified deferred compensation plan.” Bloomberg shares that this is “akin to a super-sized 401(k).” About one year ago, Chapek had about $8.5 million in his non-qualified deferred compensation plan, but that number may have changed given the changes in the stock market.
We’ll continue to keep an eye out for more developments on this situation. Stay tuned for the latest updates.
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