Bob Chapek’s removal, Bob Iger’s return, an investor lawsuit, and an upcoming proxy battle — the Walt Disney Company has had to face a number of critical issues lately.
From the outside, it can be difficult to know exactly what or when things happened. But now we’re pulling back the curtain and taking a look at just how the sausage got made — or in this case, how some of the biggest events in Disney’s recent corporate battles took place.
In November of 2022, Bob Chapek was ousted from his CEO position at Disney and replaced by Bob Iger.
But that’s not all, Disney is now facing a proxy battle when it comes to its Board of Directors. The Cambridge Dictionary defines that as a situation when a group of investors wants to take control of a Company and tries to persuade shareholders to vote in such a way that will help the investors get what they want.
In this case, the battle is coming from Trian Management (or really the Trian Group as a whole) and their CEO Nelson Peltz. CNBC calls Train Partners an “activist firm” and notes that they own about 9.4 million shares in Disney. Peltz has been fighting to get a seat on Disney’s Board because Trian Group feels that Disney has “lost its way, resulting in a rapid deterioration in its financial performance.”
Peltz attributes some of the struggles to the Fox acquisition but has also suggested that Disney either sell Hulu or get out of streaming totally. And Peltz has raised issues with corporate governance, Disney’s compensation practices, and “failed succession planning.”
Disney strongly opposes Peltz’s nomination on the Board, and we’ve shared more about that here. But now we’ve got even MORE details about just what has been going on behind the scenes when it comes to Chapek’s exit, Iger’s return, and the Peltz drama.
The Chronology and What It Reveals
You see a bit of the chronology here from one SEC filing from Disney, but this relates more to Nelson Peltz and the proxy battle the Company is facing. Peltz originally met with Bob Chapek back in July of 2022, and thereafter had some calls with Chapek in July and November of 2022. But in November of 2022, Peltz meets with Disney’s returning CEO, Bob Iger.
A greater chronology is revealed, however, in Disney’s statement to shareholders (another SEC filing). Again, it’s all within the context of the Peltz battles, but it does add some context to the Iger/Chapek situation and clues us into just how long Chapek’s role had been in jeopardy.
Here are some of the key points:
Peltz met with Chapek back on July 11th, 2022, over lunch at the Disney Hotel New York – The Art of Marvel at Disneyland Paris. And, around that time, Peltz was very supportive of Chapek. He even called a member of the Disney Board of Directors (Amy Chang) on July 15th, to say that he thought he could be helpful to Chapek if placed on the Board.
On July 15th, Chapek was contacted by Isaac Perlmutter, an employee and shareholder of Disney — currently Chairman of Marvel Entertainment — who wanted to encourage the consideration of Peltz as a director. Perlmutter also contacted another Disney executive to suggest that adding Peltz to the Board could help 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.”
Reportedly, Perlmutter said that “without Mr. Peltz there, former executives including Mr. Iger, would be back at Disney.”
In the end, Peltz didn’t get added to the Board (at least, not yet) and Iger did return.
Then, on August 29th, 2022, there was a special meeting of Disney’s Board of Directors where they “discussed the various approaches from Mr. Peltz, Mr. Perlmutter and Mr. Loeb [Dan Loeb, the CEO of Third Point, which had recently reinvested in Disney], the thesis put forward by Third Point [on Disney’s strategies], the lack of a thesis put forward by Mr. Peltz and the status of the Board’s ongoing refreshment process and independent director search.”
At that point, the Board decided to keep discussing potential independent director candidates and other issues with Third Point.
A meeting then took place on September 21st, 2022, between Chapek, other executives from Disney, Mr. Loeb, and other Third Point executives. On September 29th, 2022, Disney decided to bring on Carolyn Everson as a director and eventually entered into a “support agreement with Third Point.”
Then things get really interesting. The SEC filing indicates that in October and November of 2022, “members of the Board met numerous times to discuss governance and leadership matters, including concerns that had been emerging about Mr. Chapek’s leadership and strategic vision and whether he should continue as CEO, as well as succession candidates for the Chairman role.”
This gives us just a peek into what appeared to be a very sudden change in leadership for those on the outside. Though it seems that the ultimate decision to remove Chapek and bring back Iger was done relatively quickly, some of the steps appear to have already been in place. It may not have been until mid-November that Christine McCarthy (Disney’s CFO) reportedly went to board chairperson Susan Arnold and threatened to resign if Chapek “was not cut loose immediately,” but it looks like discussions were already underway (at least partially) about some changes.
At that point, discussions were also ongoing with Mark Parker, a member of the Board and Executive Chairman of NIKE, to see if he would take over the Chairman role. In 2023, Parker would ultimately be announced as the new Chairman of Disney’s Board of Directors. He will take over after the next Annual Meeting of Shareholders.
Then we get to November of 2022.
Disney held its full fiscal year and fourth-quarter earnings call on November 8th, 2022, which many point to as the real beginning of the “end” for Chapek considering the financial standing revealed during the call and Chapek’s handling of it.
After that earnings call, Peltz actually called Chapek to let him know that Trian Group had acquired a position in Disney “totaling approximately $500 million, with the intent of increasing this position to up to $1 billion.” In another call, Peltz told Chapek that “Trian Group intended to nominate a slate of nominees at the 2023 Annual Meeting unless the Company agreed to add Mr. Peltz to the Board.”
More calls and talks continued, with Chapek even meeting Peltz and Perlmutter separately in Palm Beach on November 12th, 2022.
After that earnings call, Peltz also reportedly had several conversations with Christine McCarthy where he indicated that he would run a proxy contest if he was not added to the Board. The Board later determined that McCarthy and Horacio Gutierrez (Disney’s Senior Executive Vice President) would be the ones to meet with Peltz and handle future conversations with him. This was done on November 17th, 2022.
And then comes the fateful day. On November 20th, 2022, the Board officially decided to terminate Chapek and bring back Iger as CEO and as a member of the Board. The changes were announced that evening. It was later publically revealed that Peltz had amassed a stake of over $800 million in Disney and was seeking a seat on the Board, and “according to some news outlets, did not support Mr. Iger’s return as CEO.”
In November of 2022, Peltz’s conversations with Iger began. He had a meeting with Iger on November 23rd. There, Peltz again reiterated that he’d mount a proxy contest if he wasn’t added to the Board. Iger and McCarthy asked whether Peltz would be open to maybe appointing a mutually acceptable independent director to the Board, but Peltz said he’d only accept his appointment to the Board.
Disney notes that Peltz didn’t “provide any actionable ideas for Disney other than his Board candidacy.”
Soon thereafter, the Board discussed “the need to provide runway for Mr. Iger to address the challenges in the media business environment,” and Peltz’s lack of “relevant media or technology industry experience.” They decided not to offer him a Board seat.
Thereafter, Iger held a town hall (November 28th, 2022) with Disney employees where he commented on a variety of things including Park Passes, structural reorganizations within the Company, the need to reduce costs, rumors of an acquisition by Apple, Disney’s Florida legal battles, and more.
Then, Trian Group reached out to a Disney executive (on December 1st, 2022) and said that Trian Group intended to nominate Mr. Peltz for election as a director on the Board at the 2023 Annual Meeting in opposition to the nominees recommended by the Board.
On December 20th, Iger spoke with Peltz, at which point Peltz reportedly “informed Mr. Iger that if he was not given a Board seat he intended to mount a proxy fight that would challenge Mr. Iger’s legacy.”
That brings us to January 2023.
On January 10th, 2023, when a meeting of the Board and the Governance and Nominating Committee was held for Peltz to give a presentation about the Trian Group’s assessment of Disney.
During the presentation, Peltz discussed his own experience (with Heinz, DuPont and Procter & Gamble), as well as his negative view on the Fox acquisition, and his assessment that Disney is “underperforming” under Iger’s leadership.
At the end of the presentation, Peltz shared that he did not want to fire Iger, but he did want to be in the Board room. He also re-iterated the “Trian Group’s intention to initiate a proxy contest if Mr. Peltz was not added to the Board and that he wanted the Board’s answer by the next morning.”
The Board discussed the presentation (both with and without Iger present). After Iger left, the Governance and Nominating Committee and the Board, “by unanimous vote of all directors present, determined not to recommend Mr. Peltz and to instead recommend the Company’s existing directors as nominees to be included in the Board’s slate of director nominees for the 2023 Annual Meeting (other than Ms. Arnold who was ineligible to stand for re-election to the Board).”
The Board determined that Peltz had not presented a single strategic idea to Disney, their assessment of Disney seemed “oblivious to the secular change that had been ongoing in the media industry,” and they felt Peltz did not have the media or technology experience needed.
The Board also reportedly looked at the changes Iger is implementing, his knowledge of the media industry, and his track record of “having transformed Disney through the acquisitions of Pixar, Marvel and Lucasfilm,” among other things.
On January 11th, 2023, Disney executives called Peltz to thank him, inform him of their decision not to place him on the Board, and express their desire to “find a path for constructive engagement that would avert a proxy contest.” They also agreed to offer Peltz the ability to get some non-public information about Disney and meet with “management and the Board quarterly to discuss strategy and other issues so that they could establish some mutual understanding about the Company’s business and strategy.”
Peltz rejected this offer and said they would proceed to a “proxy contest immediately.”
On that same day (January 11th), Disney issued a press release on the nomination, and Trian Group also released a press release on their nominee to the Board.
And that leads us to the present! On January 17th, Disney filed 2 documents with the SEC about the Trian Group’s nomination and proxy battle, as well as general shareholder information ahead of the 2023 meeting. In the documents, Disney defends Iger and his success with the Company, insists that Peltz does not understand the Company fully and does not have the skills needed to help the Board, and advises shareholders to NOT vote for Peltz.
We are keeping a close eye out for more updates and will let you know what we find. Thus far, Disney has shared that the shareholder meeting will be held virtually in 2023 but the date has not yet been announced. Stay tuned for the latest updates and to see what ultimately takes place during the meeting and whether Peltz’s proxy battle is successful.
Click here to see one shareholder’s lawsuit about certain actions Disney took related to the “Don’t Say Gay” bill
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What do you think about this whole situation? Tell us in the comments.
I’m voting my shares for Pelz. Iger went on a spending spree to acquire content for Disney Plus which has yet to get close to breaking even. Iger said Disney Plus would be profitable by 2024 as did Chapek back in 2022. If it weren’t for the parks, Disney would be in worse shape.
You left out the renewal of Chapek’s contract which gave him his 3 year golden parachute.
Patti Hughes says
He doesn’t have my vote. What’s his plan? His only concern is getting in the board but has said what he can bring and what his plan is. The soul of what Disney was has been diminished so far it is going to take a lot of hutzpah and o bring it back. Go back to your basics, to Walt’s vision, to what you know…it’ll happen.