Disney Beats Activist Investor in Shareholder Vote

Someone just got bounced out of Mickey’s clubhouse. 

Disney’s epic board seat battle with activist investor Nelson Peltz ended Wednesday at the company’s annual shareholder meeting in a fashion that a film studio exec may note as anticlimactic: Peltz lost in a landslide, and, with the full backing of an all-allied board, CEO Bob Iger continues his reign. But for how much longer?

Close Proximity

Perhaps a proxy fight was exactly the kind of push Iger needed to make changes inside the House of Mouse. In the past few months, Iger has shuffled the c-suite deck in Disney’s film division, bundled Hulu into Disney+, and invested $1.5 billion into Fortnite-maker Epic Games. “If Disney was criticized before as lagging the industry, not being innovative enough, they are certainly now trying to be as innovative as they can be,” Jamie Lumley, sector analyst at Third Bridge, told The Daily Upside.

Still, Disney’s lack of succession planning for Iger’s supposed, eventual, departure — penciled in for 2026 — may have been Peltz’s best argument for disruption. In fact, ahead of Wednesday’s annual shareholder meeting and board vote, influential proxy-advisory firm Institutional Shareholder Services last week recommended investors vote to give Peltz a board seat for this very reason. They argued an outside voice may be necessary to ensure a smooth CEO transition. Shareholders ultimately balked at the advice, voting overwhelmingly to back Iger and Disney’s proposed slate of board members, sources told The Los Angeles Times. But they still need to figure out who’s going to fill Iger’s shoes:

• Among the most-mentioned sorcerer’s apprentices: Dana Walden, Disney’s well-liked TV executive who came from the 21st Century Fox acquisition; Alan Bergman, who has overseen the film division; parks head Josh D’Amaro; ESPN chair Jimmy Pitaro.
• Disney’s massive scope has always created tension in the CEO job search. On the one hand, parks, experiences, and sports generate much of Disney’s profits, giving D’Amaro and Pitaro an edge; on the other hand, creating popular entertainment content drives interest in parks and experiences, and Walden and Bergman are well-connected with Hollywood creators – a skill Iger’s previous successor, the quickly-ousted Bob Chapek, lacked.

“Succession planning is definitely huge,” Lumley said. “And I think that one of the notable things not in the meeting today was any real discussion about where that process is.”

The Bottom Line: Underlying everything is Disney’s still-shaky transition to streaming. The company on Wednesday reiterated its goal of achieving profitability in streaming by the end of this year, but that’s easier said than done. “[Streaming] is what’s been eating into the margin of the business over the last four years. And we’ve heard some skepticism about Disney’s ability to deliver on these metrics, particularly the longer term operating margin targets they’re setting of double digits,” Lumley said, noting the decade-long march it took Netflix to achieve such scale. Where’s one of those wishing stars when you need one?