A Marvel mogul’s revenge plot is the reason behind Disney’s conflict with activist investors.

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Walt Disney’s nephew Roy Disney called the Disney shareholders to the company’s annual meeting in 2004 and requested that they remove Michael Eisner, the company’s 20-year chairman and CEO, from office. Roy had Walt’s visage, and his “Save Disney” effort attracted tearful Disney enthusiasts of all ages to frigid Philadelphia, some relying on canes and others pushing strollers full of young children. A new chairman was appointed almost after and Eisner left his position as CEO in 2005 despite promising to do so until the end of his contract in 2006 after a startling 43 percent of shareholders voted against his re-election to the board.

Nelson Peltz, who is 80 years old, can recall one of the greatest shareholder uprisings in corporate history. He probably also realises that he is not Roy Disney and that CEO Bob Iger, who has only been back on the job since November 21, is not the increasingly tyrannical and reclusive Michael Eisner of 2004.

But when combined, he and his friend Ike Perlmutter, the former CEO of Marvel Entertainment who has unfinished business with Iger dating back to 2015, can pose a tenacious, pricey, and distracting issue for Iger and the Disney board at a time when the entertainment business is dealing with the same enormous challenges confronting other legacy entertainment companies. The news puts further pressure on Disney, whose new chairman is Nike executive Mark Parker, as they race against time to identify Iger’s replacement within the next two years. It may also make Iger less mobile than he might have liked.

Peltz is now only requesting a board seat, which is far less demanding than Roy Disney’s demands for a fundamental change in the status quo. Disney, though, is putting up a strong fight. Peltz poses several important queries: In addition to the succession issue, for instance, it goes without saying that streaming expenses need to be controlled. But in addition to his standing as one of the top CEOs in business, Iger also possesses some other assets. He has already taken action in response to the perception that Disney (under former CEO Bob Chapek) was overcharging for tickets to its theme parks.There will be additional sequels to Avatar: The Way of Water, which is the type of megahit that can support many sectors of Disney company. And China just consented to provide important release dates for Marvel films in general.

Peltz couldn’t have possibly planned for his challenge to arrive while Disney fans are still celebrating Iger’s homecoming. He began conversing with Chapek in Paris in July of last year, and they continued to do so for several months.

Additionally, in July, less than a week after Peltz had dinner with Chapek in Paris, Perlmutter started advocating for his friend by phoning Chapek, Disney CFO Christine McCarthy, and Disney board member Safra Catz.

Peltz was dealing with a CEO who had been completely convinced a month prior that the Disney board was poised to execute him when he met Chapek. (Instead, a split board decided to renew his contract, however it was retroactive and gave him a shorter period than three years. This decision was subsequently announced by the board as “unanimous.” It seems sense that Chapek thought he could use a buddy or two at the moment, and that was what seemed to be available.Disney stated in its preliminary proxy filing on Jan. 17 that Mr. Perlmutter and Mr. Peltz “said he and Mr. Peltz supported Mr. Chapek and that adding Mr. Peltz to the Board would help Mr. 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.” He said that previous executives, including Mr. Iger, would return to Disney if Mr. Peltz was absent.

Peltz is better known for going after blue-chip corporations like Wendy’s and the prodigious Procter & Gamble. But it goes without saying that Perlmutter, a close friend of his, knew a lot about Disney and was formerly one of its biggest individual stockholders. Remember how the gun-toting, penny-pinching Perlmutter bought Marvel in 1997 and sold it to Disney in 2009. He remained the CEO of Marvel Entertainment, but in 2015 Iger ordered that Kevin Feige, who was in charge of Marvel movies at the time, would now answer to Alan Horn, the head of the studio, rather than Perlmutter.Iger said in his autobiography that Perlmutter had prevented Marvel from producing its first movies with Black and female stars. Iger writes, “I phoned Ike and instructed that we put both Black Panther and Captain Marvel into production. I also urged him to tell his crew to cease creating obstacles. When he assumed control of the television, animation, and print editorial divisions in October 2019, Feige cemented his hold over Marvel.

The similarities between Peltz and Perlmutter go beyond their same 80-year-old ages and residences in Palm Beach. They have common interests in politics and philanthropy, from supporting Donald Trump’s White House candidature to Thanksgiving turkey donations to the Salvation Army. (Peltz apologised in front of the nation for having voted to keep the previous president in office during the assault on the Capitol on January 6). Both Perlmutter and Peltz’s Trian Group declined to comment.

Another activist shareholder had recently expressed interest in Disney, and Chapek and Dan Loeb came to an agreement in September that included granting former Meta CEO Carolyn Everson a seat on the board. What wasn’t known back then was that while Loeb was openly opposing Disney, Peltz and Perlmutter were doing the same behind closed doors. The Disney board “examined the different approaches from Mr. Peltz, Mr. Perlmutter, and Mr. Loeb, the thesis put out by Third Point, [and the] the absence of a thesis put forward by Mr. Peltz” at a board meeting on August 20. The nomination of Everson was made possible by Loeb’s meeting with Disney executives the following month.

After months of yelling in private, Peltz jumped on Disney on November 8, 2022, when the firm posted profits that drastically failed market forecasts, buying a $900 million share in the business. Peltz contacted Chapek to request a formal meeting and a board position as Disney’s stock price fell. In a meeting with Peltz and Perlmutter on November 12, Chapek travelled to Palm Beach. There, the two “continued their discussions to urge Mr. Peltz’s inclusion to the Board and again voiced support for Mr. Chapek.” Chapek was fired eight days later. The announcement that Disney’s board had reinstated Iger as CEO caused the company’s stock price to increase by more than 6%. Peltz and Perlmutter continued despite the fact that Disney’s perception had shifted.

Iger’s re-appointment as CEO was initially challenged by Peltz’s Trian Fund, raising the possibility that Peltz had other candidates in mind. While still pursuing a board membership, the activist investor has abandoned that claim, telling Disney’s board earlier this month that “he did not want to oust Mr. Iger but he did want to be in the Board room.” However, the requests sounded straightforward: Peltz was calling for a little more financial discipline, which the corporation already seems to be taking, while other activists have pushed Disney to make risky decisions like selling out ESPN and ABC.

Iger still appears to be establishing his authority at Disney at this moment. Susan Arnold, the board’s chair, who had supported Chapek despite the reservations of her fellow board members, is conveniently nearing the end of her tenure. Iger and Arnold’s friendship had already begun to deteriorate before Arnold departed Disney in December 2021. They didn’t talk at all after he left until Arnold had to make the call in November requesting Iger to take over as CEO.

Parker, an Iger supporter who is replacing Arnold as chairman, is alleged to have given Iger six pairs of custom Nike sneakers when he resigned a year ago (temporarily, as it turned out). Parker and Iger, both fitness enthusiasts, are close in age at 67 and 71, respectively. Iger is reported to revere Parker’s creative background (he started in and still has a hand in shoe design).

Iger wasted no time in getting rid of Chapek’s deputy, Kareem Daniel, whom he fired at 6:30 a.m. following the unexpected revelation that Chapek was out on Sunday evening. And other insiders who are familiar with Disney politics thought he wasn’t finished. They think Iger intended to let CFO Christine McCarthy go more gradually than Chapek and Daniel did. According to press accounts, she was the one who phoned Iger to inquire about his interest in returning after raising concerns about Chapek’s management with the board in September.However, several combatants from the company’s conflicts disagree with that theory. The board was unaware until she informed them, One observes that this version of the events makes the board appear quite innocent and undoubtedly not accountable for the negative things that transpired while Chapek was CEO, adding, “It smells fishy to me.

After Iger’s return, several sources thought McCarthy was exposed because she had supported Chapek too fervently up until that point. She and Daniel were now in charge of all chief financial officers for the various divisions, thanks to the restructuring that gave Daniel control over the purse. One former Disney employee thinks she was setting herself up to increase her power even further. McCarthy was the driving force behind the decision to work with the consulting company McKinsey last year to look at cost-cutting options, as The Wall Street Journal revealed in December. McCarthy’s obsession with cost-cutting has already caused some conflicts with creative leaders, whom Iger is most keen to defend.

One Disney veteran claims that McCarthy “revelled in the growing authority of corporate.” She had probably never before in her career had this much influence and authority within the organisation. She proposed employing McKinsey, and they did so with a clear objective in mind.

McCarthy benefits from established connections on Wall Street, and with Peltz knocking on the door, Iger is probably going to decide that a unified front is preferable. It is unclear when and how he would further reshuffle the executive deck, but he promptly gave a group of top executives the command to reverse the Chapek restructure that gave McCarthy and Daniel such authority. McCarthy is, by necessity, a member of the group working on that, along with Dana Walden, chairman of Disney General Entertainment Content, Alan Bergman, the head of Alan Bergman Studios, and Jimmy Pitaro, president of ESPN.

Iger has already started making significant adjustments, so it seems probable that shareholders will allow him more time to outline his strategies for addressing Disney’s undoubtedly difficult problems. According to Michael Nathanson of MoffettNathanson, “We agree with Trian that many of Disney’s wounds are self-inflicted and need to be addressed,” but “CEO Iger’s return will push Disney to undertake an honest and bold self-examination on what is working and what needs to be rectified.” While we agree that Trian has identified these problems, we also anticipate that the organisation will act swiftly to improve profitability given the change in leadership.

On January 17, Disney formally retaliated against Peltz with a presentation of its own, citing his statements to CNBC (that he is “not an expert” in theme parks and responded “Why not?” when asked why he is concentrating on Disney) against him.”Despite months of engagement, Mr. Peltz had not, and the Trian Group representatives at the meeting had not, actually presented a single strategic idea for Disney, that their assessment of Disney seemed oblivious to the secular change that had been taking place in the media industry, as well as the impact of the pandemic on each part of the Company’s business from production, to exhibtion,” the board concluded in reaching its decision not to voluntarily offer Peltz a board seat.The board of Disney said that Iger is “assist[ing] the Board in choosing, developing and mentoring a replacement CEO, a process which has already begun,” and that Iger would use his experience to guide the company through the hard time it is currently experiencing. (That last sentence will lead to some conjecture.)

Stressing the business’s secular transition will probably be taken seriously by Wall Street. In fact, even before to the most recent Disney filing, analyst Rich Greenfield had made that claim using some of the same phrasing. He pointed out that Peltz had completely overlooked that fact in his critiques of the firm and that Disney is not the only corporation dealing with significant headwinds. This entire industry faces significant secular problems, according to Greenfield. Given that, “it just feels like Peltz doesn’t understand media in 2023,” according to the author.

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