Disney Defends Board, CEO Robert Iger Against Nelson Peltz's Criticisms

Disney Defends Board, CEO Robert Iger Against Nelson Peltz’s Criticisms

The entertainment company on Tuesday fired back against activist investor Nelson Peltz, offering shareholders a 16-page slide deck that defends its Chief Executive Robert Iger against a monthslong campaign by Mr. Peltz to “challenge Mr. Iger’s legacy.”

“Nelson Peltz does not understand Disney’s business,” the company said.

Mr. Peltz and his hedge fund Trian Fund Management LP launched a bid last week for a board seat at Disney in an attempt to fix what he is calling a series of self-inflicted wounds that have hobbled the company’s recent performance.

Disney sought to debunk Mr. Peltz’s assertions in the presentation by noting total shareholder returns have outperformed other media companies. He also said the company plans a reorganization that will cut costs and lead to profitability. Disney defended its acquisition track record.

Most of all, he said Mr. Peltz does not have what it takes to get the board seat he has wanted for months. Mr. Peltz “lacks the skills and experience to assist the board in delivering shareholder value in a rapidly shifting media ecosystem,” Disney said.

The dust-up comes a week after Disney replaced its board chair Susan Arnold with Nike Inc.

chairman Mark Parker, a move that Mr. Peltz has dinged as a rubber stamp for the return of Robert Iger. Mr. Iger returned to Disney as CEO in November when the company’s board fired Bob Chapek from the top job.

Mr. Peltz’s Trian, in a presentation posted last week on its website, highlighted what it described as mistakes made by the board, and compared Disney’s shareholder returns to the broader market during the tenure of each director.

Nelson Peltz and his hedge fund Trian have launched a bid for a board seat at Disney.


Tasneem Alsultan/Bloomberg News

“There are still several current directors and members of management who overlook and approved some of Disney’s worst corporate governance and strategic failures,” Trian wrote.

Disney shares were up 1.5% at $100.97 in early trading Tuesday. They are down by about a third over the past year.

Disney’s materials offer fresh details on Mr. Peltz’s prolonged campaign against what he sees as the company’s mismanagement. It began in the summer of 2022, when the investor met with Mr. Chapek at Disneyland Paris, and progressed to the point that Mr. Peltz or one of his surrogates contacted Disney leadership 20 times to inquire about joining the board. He called Disney executives, board members and even enlisted a high-ranking employee, Isaac Perlmutter.

The involvement of Mr. Perlmutter, the chairman of Marvel Entertainment, presents a new twist in the corporate saga. A secretive and reclusive executive, Mr. Perlmutter advocated several times on Mr. Peltz’s behalf, joining him for an hourlong call with director Safra Catz, according to the Disney presentation. He also lobbied Mr. Chapek and Disney Chief Financial Officer Christine McCarthy to put Mr. Peltz on the board.

Their campaign heated up in November, according to the Disney materials, following a disastrous earnings call for Mr. Chapek, during which he missed analyst expectations and played down concerns about massive losses in Disney’s streaming division. On Nov. 12, Mr. Peltz and Mr. Perlmutter put Mr. Chapek in Palm Beach to again advocate for Mr. Peltz to become a director.

Mr. Peltz didn’t let up even after Mr. Chapek’s firing in November, the Disney presentation said. That month, he met with Mr. Iger and Ms. McCarthy, and in December told Mr. Iger he would mount a proxy fight if not granted a board seat.

As Disney’s response Tuesday put it: “he would start a proxy fight to challenge Mr. Iger’s legacy.”

Mr. Iger, the company argues, created significant value during his first tenure as Disney CEO, increasing its market capitalization from $49 billion at the start of his tenure in 2005 to $231 billion when he initially stepped down in February 2020.

Mr. Iger’s first time atop Disney was marked by a string of acquisitions that put Pixar Animation, Marvel Entertainment and Lucasfilm Ltd. under one roof. Mr. Peltz has taken aim on the fourth major deal of Mr. Iger’s time atop Disney: the $71.3 billion acquisition of the entertainment assets of 21st Century Fox. (Fox’s corporate sibling, News Corp,

owns The Wall Street Journal.)

In Mr. Peltz’s view, Disney overpaid for the assets and is now saddled with debt and absorption costs. Disney on Tuesday said the trio of acquisitions that preceded the Fox deal were similarly tagged as “overpaid.” The Fox deal, Disney said, allowed it to expand its direct-to-consumer offerings around the world and broadened its portfolio of properties to include movies like “Avatar” and TV shows like “The Simpsons.” The company also noted that subsequent asset sales from the deal brought the cost to Disney down to about $57 billion.

Bringing back a CEO is a strategy many companies have attempted over the years, some more successfully than others. WSJ looks at three so-called boomerang CEOs and how their companies did after their return. Photo illustration: Adele Morgan

“Disney shareholders must carefully analyze Peltz’s statements to differentiate facts from fiction,” the company notes.

Disney reiterated in its official proxy materials, also released Tuesday, that it doesn’t support Trian’s campaign.

“Please note that this year, your proxy card looks different,” the material noted, taking pains to spell out which voting cards it wants shareholders to use.

The company warned shareholders to toss Mr. Peltz and Trian’s blue-colored materials that may have been sent to them, and to vote to reinstate Disney’s board members using its white voting card.

Disney’s board also addressed a recurring criticism in how Mr. Iger has handled succession planning. When he returned as CEO in November, Mr. Iger said he would give priority to finding a successor.

Disney said in its proxy materials that a Succession Planning Committee created by the board will meet at every regularly scheduled board meeting to review internal and external candidates, as well as receive reports from external search firms. The board will also reserve time at every meeting to discuss succession planning without Mr. Iger present.

Mr. Iger retired from the company effective Dec. 31, 2021. He was eligible for a 2022 prorated salary per his employment agreement for his services during fiscal 2022, which was $1,096,154, Disney’s proxy said. Mr. Iger was CEO of Disney for the second time starting on Nov. 20 of last year. The committee awarded him a bonus of $4,370,000.

Mr. Iger’s total compensation for 2022, including salary, cash bonuses, stock and options, totaled nearly $15 million.

Mr. Chapek earned a total of $24 million in 2022. As part of his termination, he is entitled to about $6.5 million in the remaining base salary of his nearly three-year contract, and a $1 million target bonus for fiscal 2023, the proxy said.

Geoff Morrell, who served as Mr. Chapek’s communications head for about four months, is due to receive a payout of about $4 million. Mr. Morrell’s compensation at Disney totaled about $8.4 million in fiscal 2022.

Mr. Morrell left after helping orchestrate a response to Florida’s “Don’t Say Gay” legislation, which angered employees internally and made Disney the target of Florida Gov. Ron DeSantis. The Parental Rights in Education bill prohibits instruction on sexual orientation or gender identity for kindergarten to third-grade students and limits it in later grades.

The cost of Disney’s management woes could give more ammunition to Mr. Peltz, who has criticized what he calls “over-the-top” executive compensation and a sloppy track record by the board when it comes to succession planning.

Write to Erich Schwartzel at erich.schwartzel@wsj.com and Dean Seal at dean.seal@wsj.com

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