June 18, 2024

Why an Imagineer, Olaf, George Lucas & Michael Eisner Back Bob Iger & Disney in Proxy Fight

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As the Walt Disney Company's proxy fight with activist investor Nelson Peltz and his Trian Group enters its home stretch, CEO Bob Iger has received strong showings of support from the former President of Imagineering,




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As the Walt Disney Company’s proxy fight with activist investor Nelson Peltz and his Trian Group enters its home stretch, CEO Bob Iger has received strong showings of support from the former President of Imagineering, Star Wars creator George Lucas, and his predecessor (no, not Chapek) Michael Eisner. This shares their letters and offers a quick(ish) summary of the ongoing battle for the board, and our thoughts.

This comes ahead of the Walt Disney Company’s 2024 Annual Meeting of Shareholders on April 3, 2024, and as all of the various parties prepare for battle, proxy style. For its part, Disney has sent a letter to shareholders pleading its case as to why the current board has the right strategy for success, explaining how they’ve made substantial progress against objectives to make the business more efficient and effective.

The company has also launched the website VoteDisney.com, which details how to vote (and not vote) via a fun video by Ludwig von Drake. The fact that Disney has felt the need to fend off the challenge with its own website and leaning on the star power and expertise of Ludwig von Drake suggests the company is taking it seriously.

Trian Group has its own website, RestoretheMagic.com, and represents the only viable challenge to Disney thanks to the higher profile of its campaign as well as the number of shares held by Peltz, Trian, and its allies (primarily former Marvel top boss, Ike Perlmutter). The most interesting part about Trian’s challenge is the push for former Disney Parks Chair Jay Rasulo to have a board seat.

We definitely do want more people with experience in Parks & Resorts (or who take the division seriously), given that the company plans to spend $60 billion over the next decade on Walt Disney World, Disneyland & other parks. However, Rasulo is probably not the right “answer” for that. His tenure at the top was marked by aggressive cost-cutting, and even the New Fantasyland project that eventually was greenlit under him started without Seven Dwarfs Mine Train.

In the last couple of weeks, both campaigns have gotten increasingly hostile towards one another. Peltz and Rasulo have done interviews and roundtables, becoming less deferential to Bob Iger and striking a far less cordial tone. Part of this is certainly Disney’s own doing, as the Mouse has taken the gloves off, so to speak, with their own videos and collateral that cast aspersions on Peltz and Rasulo. Suffice to say, it’s been an interesting home stretch of the proxy fight, and there’s still a week to go!

It’s also worth noting that although Bob Iger and the current board have secured high profile endorsements from those associated with Disney in the past or present, Nelson Peltz and Trian racked up a rather big victory this week. That’s because the influential advisory firm Institutional Shareholder Services (ISS) has recommended that its clients vote to add Peltz to Disney’s board of directors.

The ISS recommendation is relatively restrained, taking a measured and middle ground approach (although Disney definitely doesn’t see it that way) in recommending Peltz but not Rasulo, and to withhold a vote for current Disney board member Maria Elena Lagomasino. ISS points out that the company has made positive changes that have been well received by the market, and that some shareholders may feel that the company has sufficiently course corrected as a result.

However, ISS points out that “given the major missteps and severe consequences of the failed 2020 succession, particularly for a company that already had a history of succession drama, it may be difficult for others to simply trust that the board, albeit refreshed, will get it right this time. These shareholders may be concerned about post-Iger DIS. Our analysis favors this latter view.”

ISS argues that Peltz “could be additive to the succession process, providing assurance to other investors that the board is properly engaged this time around.” The report also contends that Peltz could also help evaluate future capital allocation decisions. ISS continues by raising concerns about current board member Lagomasino’s role in failed succession planning.

The recommendation by ISS is highly influential among institutional shareholders. Ironically, Iger himself explained this well in Ride of a Lifetime:

As we struggled to collect ourselves together, another wave hit that we didn’t see coming. A company called Institutional Shareholder Services (ISS) is the biggest company in the world providing proxy and governance advice to investors—largely mid-sized funds—on how they should assess corporate governance and cast their proxy votes. ISS typically influences more than a third of the voting shares in a proxy election, and that morning they issued a public recommendation in support of Roy and Stanley’s campaign to vote against Michael. The proxy votes wouldn’t be announced until March, but we already knew to expect a large vote of no confidence.

As we left Michael’s suite to go to the investors’ meeting, we were now facing two massive crises. I remember thinking that it was like we’d entered a conventional war with Roy and Stanley and Steve, and now another party had launched nuclear weapons. We did our best under the circumstances to defend ourselves to the investors, but serious concerns about the future of the company had been raised in very public ways. We held our heads high, touting our recent returns and walking them through our future plans, making the best case we could under the circumstances. It was a tough meeting, though, and there was no way around it: Things were only going to get tougher.

As for Iger, he has the backing of ISS: “The decision to bring Iger back was the right one given his track record, as well as investors’ confidence in his understanding of the business and decisionmaking related to company strategy. While it is clear that Iger is the right CEO for DIS at the moment, there are lingering questions about the board’s ability to properly oversee the next CEO transition, whether it happens in 2026 or in later years, and the significant strategic changes the company is undertaking, particularly given the ongoing challenging industry environment.”

The Peltz endorsement was a big blow to Disney, which has otherwise had a pretty strong run in the last few weeks with the stock price rebounding following a couple impressive quarterly earnings calls. The company also secured votes of confidence from the grandchildren of Roy and Walt Disney.

In the last week, a few more high-profile endorsements have rolled in–first came one from legendary filmmaker George Lucas. As part of Disney’s $4.05 billion purchase of Lucasfilm, the Star Wars creator received 37.1 million Disney shares; he’s currently the largest individual investor in Disney as a result. Here’s what Lucas wrote in his statement:

“Creating magic is not for amateurs. When I sold Lucasfilm just over a decade ago, I was delighted to become a Disney shareholder because of my long-time admiration for its iconic brand and Bob Iger’s leadership. When Bob recently returned to the company during a difficult time, I was relieved.”

Lucas continued: “No one knows Disney better. I remain a significant shareholder because I have full faith and confidence in the power of Disney and Bob’s track record of driving long-term value. I have voted all of my shares for Disney’s 12 directors and urge other shareholders to do the same.”

Olaf has also weighed in on the proxy fight, with Josh Gad writing on Instagram:

“What [Bob Iger] has done and continues to do for the Disney Company is unprecedented since the days of Walt himself dreamed the impossible into life. I am fortunate to have seen some of the plans Bob Iger and his incredible team have in store for the future and that future could not be in better hands. Fellow shareholders, join me in supporting Bob and his entire Disney team by voting for them today. Don’t leave magic to people who only understand it as dollars and cents.”

It’s potentially notable that Josh Gad is currently in Hong Kong Disneyland to visit World of Frozen. I say that not to contend he’s biased (of course he is–that should be obvious without me saying it), but as a reminder that Gad probably does know the future of the franchise–he’s the tease that he’s “seen some of the plans” Iger and co. have in store for the future. That’s likely true of both the movies and future World of Frozen lands (both plural).

Next came former Walt Disney Imagineering President Bob Weis, who “retired” at the end of 2022, who posted the following statement of support on Instagram:

I have been in this business for almost four decades. Bob Iger is a mentor and guiding North Star for me.

Disney exists because of a synergy between story and art and place making and experience and quality. Weave those together and they form a successful business plan, because people have a high expectation, and an emotional connection that needs to be respected, fostered and expanded.

As Walt himself said, “we keep moving forward.” Bob Iger has kept us moving forward by investing in talent and ideas, respecting the past but insisting on an innovative future, and being willing to experiment even when the odds sometimes look tough.

Without this level of leadership grounded in storytelling, experience, art, talent recognition and moving ahead, it’s a rudderless ship; enormous potential with no ability to steer. I was grateful for each meeting I had with Bob, however challenging he might have been with us, and I remain grateful the company I care so much about continues under his steady hand. He makes it look easy—but no one should make the mistake of thinking it is.

Last but not least, former CEO Michael Eisner, who departed Disney after the SaveDisney campaign referenced above in Iger’s memoir, is the latest high-profile Disney name to throw his support behind CEO Bob Iger and the current board. Here’s what Eisner had to add:

“[I]n 1983, Disney was under attack by corporate raiders trying to take over the company. That would have ended the Disney Company as we know it, for the studio, theme parks, and hotels were suggested to be sold off. The board turned to me and Frank Wells, and a different story was written, one that was continued by Bob Iger and his executive team.”

Eisner continued: “Today, a similar situation exists, so let’s remember the lessons from 40 years ago. Bringing in someone who doesn’t have experience in the company or the industry to disrupt Bob and his eventual successor is playing not only with fire but earthquakes and hurricanes as well. The company is now in excellent hands and Disney shareholders should vote for the Disney slate.”

It’ll be interesting to see how the proxy fight shakes out. While ISS is undoubtedly going to sway at least some institutional shareholders, it’s also worth noting that Disney has an atypically large (for a company of its size) number of individual shareholders–mostly Cast Members and fans who believe in the company, its values and mission. Some of these people undoubtedly are disappointed by Bob Iger and the current direction of Disney. This is indisputable–we hear from them regularly. They’re quite vocal about their disappointment!

However, just like the fandom itself, there are also many others who are unequivocally pro-Disney on all matters and plenty of other ‘fence-sitters.’ I would hazard a guess that the endorsements from Roy and Walt’s grandchildren, as well as George Lucas, Bob Weis, and Michael Eisner will sway the undecideds in Disney’s favor. Whether that’s enough to beat Trian, Peltz and Rasulo? We shall see!

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YOUR THOUGHTS

What do you think of the letters of support from Olaf, the former President of Imagineering, ex-CEO Michael Eisner, and Star Wars creator George Lucas? Think any of that will sway individual investors? What about the ISS recommendation and institutional shareholders? Agree or disagree with them? What about the “Restore the Magic” Campaign or Jay Rasulo as a board candidate? Think the proxy fights stand a chance of succeeding after this? Do you agree or disagree with our assessment?




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