Wall Street Grudgingly Sides with Iger, But…
During the Annual Shareholders Meeting, Bob Iger claimed the victory he needed, the one he thought he’d gotten a year ago.
Wall Street investors and other shareholders voted with the CEO of The Walt Disney Company. That’s only where the story starts, though.
Wall Street has grudgingly sided with Iger, but many investors gave him a Code Red along the way.
In truth, Bob Iger’s greatest failing as Disney CEO finally caught up with him.
Here’s what we just learned and what it means for Disney and Iger’s future.
Iger’s Reckoning
In late March, billionaire Nelson Peltz earned newfound attention for an odd reason.
The activist investor was trying to force his way onto Disney’s Board of Directors.
On March 21st, Peltz’s campaign appeared likely to fail until help came from an unlikely source.
One of the proxy advisory firms, Institutional Shareholder Services (ISS), supported Peltz and only Peltz for Disney’s Board.
That decision hinted at two things. The first was that investors viewed former Disney executive Jay Rasulo as a non-starter.
Unsurprisingly, Rasulo only managed a small fraction of the vote, losing by a ratio of 7 to 1 in his attempt to join forces with Peltz and gain a Board seat.
Still, that one ISS decision dramatically elevated Peltz’s chances. Simultaneously, it came across as a slap in the face to Iger.
While Disney’s CEO lined up a murderer’s row of endorsements from respected sources, he didn’t get a clean sweep here.
Instead, some people whose interests ostensibly aligned with Iger’s still voted against him for a simple reason.
Many of the Peltz voters in this ridiculous skirmish didn’t care about Peltz himself.
No realistic person believes an 81-year-old without media experience can suddenly add value to the Board of a media company.
Instead, this was a protest vote against Iger for his past sins.
A Dish Served Cold
Not that long ago, Iger vanished under the cloak of darkness as he suddenly declared Bob Chapek his successor as CEO.
After many years of answering public questions regarding succession, Disney didn’t just announce Chapek.
Instead, Iger, who was Chairman of the Board and CEO at the time, chose to promote Chapek immediately.
There was no real insight or early warning given to investors, and many money managers have long memories.
On March 30th, 2024, we reported that the California Public Employees Retirement System (CalPERS) had voted for Peltz.
Here’s a quote from a Deadline interview yesterday:
“For one, it could have done a better job talking to CalPERS — “and not two months ago, two years ago. … It’s largely an inward-focused board.”
Now, the source of that quote is a consultant from The Activist Investor.
So, they have *ahem* some bias toward activist investors. Still, you shouldn’t miss the point.
Iger didn’t give CalPERS a heads-up on his succession plan, so the fund found out at the same time as everyone else.
Now, when Disney’s CEO needed to win a vote, CalPERS went against him.
Similarly, the quotes from ISS focused on Disney’s succession plan rather than any specific positive about Peltz.
Here’s the quote from the report:
“Dissident nominee Peltz, as a significant shareholder, could be additive to the succession process, providing assurance to other investors that the board is properly engaged this time around.”
Reading between the lines, that’s ISS saying that if Peltz had joined the Board, Iger really would have left in 2026.
In fact, that’s the undertone of everything we’re discussing.
The Peltz battle evolved into a wide-ranging critique of Iger’s repeated failures with succession.
Iger in the Crucible
I’ve probably come across as a raving lunatic when speaking about Peltz vs. Iger II.
There’s a reason for that. To his credit, Iger has done a remarkable job in managing Disney over the past 17 months.
Yes, it feels like dog years, but Iger’s second Disney tenure only started on November 20th, 2022.
We’re not even a year and a half into his comeback, although it seems much longer.
In that time, Iger has reinvigorated a company that definitely struggled under former CEO Bob Chapek.
Iger deserves some of the blame for that, as Chapek was ultimately his decision.
Then again, a global pandemic played a significant role as well.
Whenever you notice a chart from someone showing Disney’s losses, it inevitably starts with the high point in 2021.
That’s when investors were irrationally exuberant about Disney becoming a digital business. Later, they realized streaming wouldn’t make money anytime soon.
Under Chapek, Disney’s stock had plummeted to $91.50 the Friday before Iger returned.
The day before the Annual Shareholder Meeting, Disney closed at $122.89.
I can guarantee that no other executive whose stock had increased 34.3 percent in 17 months faced the scrutiny Iger has suffered recently.
As I said in a recent article, all the data suggests Iger is performing exceptionally well.
Wall Street has placed Iger on trial over the perceived crimes he committed in 2020…and long before then.
A Referendum on Iger and Succession
As a final last-ditch attempt to help Peltz, the Wall Street Journal posted an article and chart demonstrating Iger’s many contract extensions.
I’d argue that over the years, LeBron James has gotten a lot of contracts as well.
When you’re among the best in the world, people want you around.
Not coincidentally, one of those contract extensions wasn’t even one that Iger wanted.
Disney’s CEO had eyed a run for President. Rupert Murdoch wasn’t willing to sell Fox’s assets to Disney unless Iger stayed.
From Murdoch’s perspective, he wanted someone in charge whom he trusted to maximize the assets. His shortlist was Iger and Iger alone.
If Comcast had outbid Disney for Fox, who knows whether we’d even be having this discussion? Iger might have left sooner.
That’s a theoretical, though. The reality is that Iger discouraged succession as much as possible because Disney is his dream job.
Not coincidentally, Disney only recently started hyping its internal CEO candidates.
In fact, CNBC, who has happily tossed Peltz assistance throughout this process, posted this flattering piece about Dana Walden.
That’s how Disney showed Wall Street that succession is in progress.
However, the WSJ article described the Peltz vote as a referendum on Iger, bringing us to another hard truth.
Many shareholders love Iger and didn’t want him to leave. Then, they celebrated when he returned.
Since fans own as much as 40 percent of all Disney stock, their vote matters.
What Happens Next for Iger and Disney
Iger can claim now that he won the referendum and possibly even justify a longer stay.
Meanwhile, Peltz will likely do what he did last year, profit-take from the increased stock value and plan again.
This year’s Board battle proved shockingly acrimonious compared to the last one.
Peltz and his friend, Isaac Perlmutter, are clearly harboring a grudge from Iger for firing the latter individual.
While I thought that move was ruthless and hysterical at the time, I also warned that Iger had made a powerful enemy.
Those chickens ultimately came home to roost, which was a predictable outcome.
The fallout led to this second faceoff with Peltz, and Wall Street just provided Disney with substantial feedback.
Many of those comments fall into the category of, “You’re doing great, but stop picking stupid fights.”
Disney’s short-term future depends on Iger achieving that goal.
With the Florida Feud over and Peltz defeated for a second time, Iger has a six- to nine-month runway to improve the business.
However, should Disney stock return to lower levels, Peltz or some other activist investor, possibly a more qualified one, will pick another fight.
Wall Street just sided with Iger this time, but he knows he narrowly averted disaster here.
Iger and Disney need a strong calendar 2024 to avoid similar nonsense in the weeks leading up to the 2025 Annual Shareholder Meeting.
None of us wants Peltz/Iger III next year.
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