Succession saga will keep heat on Bob Iger after proxy fight

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Succession saga will keep heat on Bob Iger after proxy fight

The minutes are ticking down to the end of Disney’s bitter proxy fight with Nelson Peltz, whose attempt to take over the board is a direct challenge to CEO Bob Iger.

Barring any outstanding disputes, the results of the voting for members of the Board of Directors will be revealed at the company’s annual shareholder meeting on Wednesday at 1 pm ET/10 am PT. (Voting officially closes tonight at 11:59 p.m. ET.) Iger fought back, and authorized $40 million in spending to oust the meddling activist investor, but win or lose, he did so by thwarting the succession. Invited a fight.

Disorderly regime change became Peltz’s rallying cry, far more compelling than his views on strategy. That’s why the race was so hotly contested. ISS, the most influential proxy advisory service, dealt perhaps the biggest blow to the company by endorsing Peltz by reminding then-CEO Michael Eisner of his recall vote during the last epic annual meeting in 2004.

This time, the company largely cited the failed succession process of 2020, when Iger abruptly resigned just as Covid began to turn the world upside down, and named company lifer Bob Chapek as CEO. The board endorsed that baton pass, “not following the process that is outlined for the current succession strategy,” ISS said, adding that board members “simply followed Iger without doing more hard work.” Trust the decision.” Another strange decision was that Iger remained as executive chairman to oversee the creative side of the business, predictably leaving Chapek behind.

One Wall Street analyst says, “Disney is very well planned, telegraphed and seems to have foisted it all on us.” “It still really bothers me.”

ISS said Peltz’s presence could reassure other investors that the board is doing its job properly this time.

Iger has garnered support for the company’s slate of directors from a dazzling list of powerful people, including JPMorgan Chase CEO Jamie Dimon, Eisner, George Lucas, Laurene Powell Jobs and the Disney family. However, in addition to ISS, Peltz has won over top pension fund CalPERS as well as Egan-Jones, a smaller proxy advisor.

Reports indicated that Disney had the lead in the vote. However, with the competition being much stiffer than anticipated, the buzz in many showbiz circles is that the company will have to reveal who will be the next CEO soon after the proxy dust settles. Iger’s contract, having already been extended once since his return in 2022, is set to run until 2026. Four internal candidates have been identified: entertainment division co-heads Dana Walden and Alan Bergman; Parks Division Chief Josh D’Amaro; and ESPN President Jimmy Pitaro. There’s also a theory that Disney could reach outside the company and acquire a big name from the tech sector, especially since it’s repositioning itself for streaming. Regardless of who is anointed, some damage has been done.

A rival studio executive says, “Iger is wounded by this, it makes him look arrogant and indecisive and it hurts Disney.” “All the people who were let go, the Chapek disaster, the contract extension (last year), they now have to allow the board to do its job,” the C-suiter said.

Another industry insider put it more bluntly: “Someone needs to tell Bob this, no one is irreplaceable.”

For some observers, that someone could be James Gorman, who took part in the succession process at Morgan Stanley last year when he handed over the reins just before joining Disney’s board in February.

A banking executive at the upper levels of the city is seen as someone Iger considers his equal and to whom he listens. “Whether he agrees or not, Gorman knows the board is charmed by Iger and will not cross him,” says one industry mandarin.

Last week, Gorman told CNBC, “When I joined the board, the thing I was focused on was that they had a rigorous succession process.” Noting that the succession committee, run by Disney Chairman Mark Parker, convened in February and “is scheduled to meet eight or nine times this year,” Gorman said, “I’ve come through a big succession process at Morgan Stanley, I “I’m impressed by the process.”

The succession problem predates Chapek, who was ousted with Iger returning as chief executive in November 2022.

Wall Streeter analysts are still ambivalent about former CFO and COO Tom Staggs, who was groomed for succession before moving on, having initially pitted him against Jay Russulo, who was also passed over by Iger. . Rasulo left Disney in 2015. Staggs dropped out in 2016. (Peltz’s Trian Fund Management also nominated Russulo to the board, but he didn’t get the same traction.) Two years later, Disney’s streaming chief and strategic planning vet, Kevin Mayer, was widely touted as a potential successor to Iger. Chapek, who was considered to be in power, was ousted in 2020 after getting the top post. “I’m sure they would have picked Kevin Mayer,” the analyst said.

It is about “succession and rule”. It’s not just a case that once they know who the new CEO should be, they can pat themselves on the back and say, ‘Good job,’” Michael Levin of consultancy The Activist Investor told Deadline. . Given the name of his company, it’s clear where he’s going on this issue, but he’s hardly alone in his criticism, which has been voiced by many investors over the last decade and a half.

“There needs to be some change in how this board views its role,” he said. For one, it could have done a better job talking to CalPERS — “and not two months ago, two years ago. …It’s largely an internally-focused board.”

This proxy fight “should be a real wake-up call to this board that they need to take a lot more control.”

“You can see shareholders are conflicted,” says another analyst. Succession will now be “a much more intensive process… I think they’ll have to learn it the first time.”

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