Disney War Continues: ‘Disney I know and love has lost its way’

Ike Perlmutter, Nelson Peltz vs Bob Iger and the Disney board.

Disney War Continues: 'Disney I know and love has lost its way'

The Disney war between Ike Perlmutter, Nelson Peltz, and Bob Iger and the board continues as Peltz’s Trian Partners has nominated two candidates for board seats.

The Perlmutter-backed Peltz is attempting to take over Disney in an ongoing proxy fight, which in business terms involves a group of shareholders soliciting proxies from other shareholders to gain enough voting power to replace the current board of directors or influence specific corporate actions.

Ike Perlmutter is Disney’s largest stockholder.

As part of the announcement regarding the two candidates, in a new press release (read below), Trian “Believes the Disney Board’s Lack of Focus, Alignment, and Accountability Has Resulted in Chronic Underperformance at One of the World’s Most Iconic Companies.”

The two candidates nominated for a board seat include Nelson Peltz himself and James A. (“Jay”) Rasulo who was once seen as the heir to CEO Bob Iger and who worked at Disney for over 30 years before leaving in 2015.

“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 in a statement.

“The Disney I know and love has lost its way,” said 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.”

Disney has also again officially responded to the nominations in a press release (read below) of its own confirming that “Trian’s previously disclosed partnership with Isaac Perlmutter pursuant to which it obtained beneficial ownership of Mr. Perlmutter’s Disney shares, has provided notice of its intent to nominate two individuals for election to the Company’s Board of Directors at the 2024 Annual Meeting of Shareholders.”

You can read the two press releases below.

Press Release

TRIAN NOMINATES TWO CANDIDATES TO THE WALT DISNEY COMPANY BOARD

Believes the Disney Board’s Lack of Focus, Alignment, and Accountability Has Resulted in Chronic Underperformance at One of the World’s Most Iconic Companies

NEW YORK AND PALM BEACH, FL., December 14, 2023 – 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.

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.

Unfortunately, the Board and CEO appear to have no conviction that things will get better. The nonmanagement 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.

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 longtenured CEO and too disconnected from shareholders’ interests. 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 bestin-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.”

“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.

walt disney company

Press Release

Statement From The Walt Disney Company

BURBANK, Calif., December 14, 2023 – The Walt Disney Company (NYSE: DIS) confirmed today that Trian Fund Management, L.P., alongside certain affiliates, including Trian’s previously disclosed partnership with Isaac Perlmutter pursuant to which it obtained beneficial ownership of Mr. Perlmutter’s Disney shares (collectively, “Trian”), has provided notice of its intent to nominate two individuals for election to the Company’s Board of Directors at the 2024 Annual Meeting of Shareholders.

Disney has an experienced, diverse, and highly qualified Board that is focused on the long-term performance of the Company, strategic growth initiatives including the ongoing transformation of its businesses, the succession planning process, and increasing shareholder value.

The Governance and Nominating Committee, which evaluates director nominations, will review the proposed Trian nominees and provide a recommendation to the Board as part of its governance process.

The Company expects to file preliminary materials with respect to the 2024 Annual Meeting of Shareholders with the Securities and Exchange Commission (“SEC”), which will include the Board’s recommended slate of director nominees. Disney shareholders are not required to take any action at this time.

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