Nelzon Peltz has recruited former Disney CFO Jay Rasulo in his proxy battle with Disney CEO Bob Iger and The Walt Disney Company. Peltz and Rasulo are both seeking seats on the Disney Board. Rasulo said that “The Disney I know and love has lost its way”. Here’s the full press release:
Trian Fund Management, L.P. (together with its affiliates, “Trian”, “our” or “we”), which beneficially owns $3 billion of common stock in The Walt Disney Company (NYSE: DIS) (“Disney” or the “Company”), today submitted a notice of its intention to nominate two independent director candidates for election to the Disney Board of Directors (the “Board”) at the Company’s 2024 Annual Meeting of Shareholders (the “2024 Annual Meeting”).
Disney is one of the most iconic companies in the world with unrivaled scale, unparalleled customer loyalty, irreplaceable intellectual property (“IP”), and an enviable commercial flywheel. However, Disney has woefully underperformed its peers and its potential.
Earnings per share (“EPS”) in the most recent fiscal year were lower than the EPS generated by Disney a decade ago and were over 50% lower than peak EPS despite over $100 billion of capital invested. Margins in both Disney’s Direct-to-Consumer business and its consolidated media operations significantly lag peers despite Disney having scale and superior IP.i
For shareholders, this subpar performance has destroyed value. Disney stock has underperformed the stocks of Disney’s self-selected proxy peers and the broader market over every relevant period during the last decade and during the tenure of each non-management director. Furthermore, it has underperformed since Bob Iger was first appointed CEO in 2005 – a period during which he has served as CEO or Executive Chairman (directing the Company’s creative endeavors in this role) for all but 11 months. Disney shareholders were once over $200 billion wealthier than they are now.ii
Unfortunately, the Board and CEO appear to have no conviction that things will get better. The non- management directors collectively own less than $15 million of Disney stock, and Mr. Iger has sold the vast majority of his ownership stake built up primarily through share-based compensation – more than $1 billion of Disney stock – leaving shareholders alone to face the daunting reality of a complex turnaround in a rapidly evolving industry.iii
And, that turnaround does not appear to be materializing. Since Mr. Iger’s first earnings call after returning as CEO:
- Tens of billions of shareholder value has been lost;
- Consensus EPS estimates for fiscal years 2024 and 2025 have fallen meaningfully, even as the Company claims to be cutting billions of costs; and
- Studio content continues to disappoint consumers, slowing the speed of the flywheel and threatening future earnings growth.
More generally, Disney appears no closer to adequately addressing the compensation misalignment, governance, and succession issues that have plagued the Company for decades.
The root cause of Disney’s underperformance, in our view, is a Board that is too closely connected to a long- tenured CEO and too disconnected from shareholders’ interests.iv The Board, we believe, lacks objectivity as well as focus, alignment, and accountability. Although the recent appointment of two new directors to the Disney Board is a step toward greater Board objectivity (and a belated acknowledgement by the Company of the need for change), this reactive Board self-refreshment on the eve of a proxy contest is insufficient in our opinion both because the new directors were chosen without shareholder input and because they seemingly do not own meaningful amounts of stock. “As Disney’s largest active shareholder, we can no longer sit idly by as the incumbent directors and their hand-picked replacements stand in the way of necessary change, and peers and competitors continue to outperform,” said Nelson Peltz, Trian’s Chief Executive Officer and a Founding Partner. “In our view, Disney’s Board has failed to fulfill its essential responsibilities – overseeing the development of an effective strategy, planning for orderly succession, aligning executive pay with performance, and ensuring accountability for operational execution. Shareholder-led board refreshment with focused and aligned directors who are accountable to the owners of the company is long overdue.”
Trian’s director candidates are dedicated, experienced, and positioned to help address the Company’s considerable governance, strategic, financial, and operational challenges.
Trian’s director candidates are:
- Nelson Peltz. Nelson is Trian’s Chief Executive Officer and a Founding Partner and has served as a director on more than a dozen public company boards, including at world-class companies with best- in-class brands such as Procter & Gamble, Unilever, H. J. Heinz, Mondelēz and Ingersoll-Rand. Mr. Peltz’s experience is unparalleled among public company directors as is his track record for prompting bold action to drive operational turnarounds, transformations, effective leadership succession processes, and value creation across numerous industries.
- James A. (“Jay”) Rasulo. Jay spent three decades at Disney and served as Senior Executive Vice President and Chief Financial Officer of the Company from 2010 to 2015. During his tenure as CFO, the Company delivered compound annual returns for shareholders of approximately 27% and compounded EPS at a rate of approximately 20%, paid a consistent and generous dividend, and Disney’s share price appreciated over 250%. Before being appointed CFO, Jay was Chairman of Walt Disney Parks and Resorts Worldwide from 2005 to 2009 and was President of Walt Disney Parks and Resorts from 2002 to 2005, delivering compounded high single-digit revenue and segment operating income growth annually. Bob Iger called Jay “a vital contributor to Disney’s success” with “strategic acumen and savvy insight.”v
“To resolve the malaise and crisis of confidence among Disney shareholders, the Board needs fresh perspectives from truly independent directors selected by the shareholders themselves,” Mr. Peltz added. “Jay and I have the strategic, operating, financial, and governance expertise to help Disney and are committed to working with the other members of the Board and management team to address the fundamental issues underlying the Company’s continued poor performance. There is much that can be done to revive Disney and restore the confidence of Disney shareholders, and Trian looks forward to discussing these opportunities with our fellow shareholders over the coming months.”
“The Disney I know and love has lost its way,” said Jay Rasulo. “As independent voices in the boardroom, Nelson and I are confident that the combination of my decades of experience at Disney, Nelson’s significant boardroom skills and history of driving positive strategic change, and our combined consumer brands expertise and financial acumen, will be additive to the Disney Board. With a shareholder mandate, Nelson and I look forward to helping the Board and management reorient the Company towards delighting its consumers again and driving significant value for its owners.” Trian expects that the 2024 Annual Meeting will take place in the Spring of 2024. Shareholders do not need to take any action at this time.
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How exactly do massive shareholders whose wealth depends in large part on the company they want to oversee constitute “independent voices in the boardroom”?
The sharehold economy is ruinous.