Top investor lays siege to Disney’s magic kingdom for ‘over-the-top’ executive compensation and big spending

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Walt Disney began girding itself against a challenge from activist investor Nelson Peltz, who nominated himself to the board in what could become a highly public debate over Chief Executive Officer Bob Iger’s leadership.

Mark Parker, the executive chair of Nike Inc., will take over as chairman from Susan Arnold, who is stepping down at the company’s next annual meeting, Disney said Wednesday. Parker will also lead a new succession planning committee to advise Iger, who has been criticized for failing to groom a replacement.

Disney said it rejected a proposal from Peltz’s Trian Partners LP to name its leader to the board, but “remains open to constructive engagement and ideas that help drive shareholder value.” 

The moves pit one of the most notorious activist investors in corporate America against one of the most revered CEOs in media. Peltz is known for working his way onto the board of companies such as Mondelez International and Procter & Gamble Co. with plans to make them more efficient, sometimes forcing his way in through bruising proxy battles. Even when he’s unsuccessful, as with a campaign to put Trian nominees on the board of DuPont, his campaigns have led to changes in management and cost-cutting.

In a blistering statement, Trian — which holds a $900 million stake in Disney — noted that the stock is near an eight-year low, a reflection of what it said was failed succession planning, “over-the-top” compensation practices and a lack of cost discipline. Among the issues, Trian said Disney overpaid when it bought Fox’s entertainment assets in 2019 for $71 billion.

“Disney’s recent performance reflects the hard truth that it is a company in crisis,” Trian said.

While the investor called Disney’s problems self-inflicted, Trian said it wasn’t looking to remove Iger or break the company up. Instead Peltz is in favor of de-leveraging Disney and restoring the company’s dividend by 2025. The firm launched a website, Restore the Magic, to get its message out.

The battle is an unusual rebuke of Iger, who became one of the most popular CEOs in media when he first ran Disney between 2005 and 2020. He delayed his retirement repeatedly as he struggled to appoint a successor, and several candidates seen as possible replacements left the company. Iger eventually handed the title to Bob Chapek shortly before the Covid-19 pandemic became a major crisis in the US.

Last year Disney’s board renewed Chapek’s contract, even after a number of high-profile missteps, including a public spat with the governor of Florida. Just five months later, the board fired Chapek and rehired Iger, which analysts and corporate governance experts saw as a sign of poor succession planning. 

In its statement Disney said it has spoken to Peltz several times about his nomination, and other changes he is seeking to the company’s bylaws. The company remains opposed to his appointment to the board.

Disney also pointed out that under Iger’s previous tenure the stock rose a market-beating 554%. Iger has taken “decisive steps” to realign the company’s traditional TV and streaming business, the company said. Disney’s direct-to-consumer unit recorded a $1.47 billion loss during Chapek’s last quarter as CEO.

Arnold was the first woman to serve as chairman of the entertainment giant. The former Procter & Gamble Co. executive has been a director since 2007 and was named chair after Iger, who is now 71, retired in December 2021. 

Disney said Arnold had reached the board’s 15-year term limit for directors. The annual meeting, which marks the end of her tenure, hasn’t yet been scheduled.

The company’s stock has gained 10.9% this year through Wednesday’s close. It rose 1.4% in after-hours trading.

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