At the annual shareholder meeting on Wednesday, Disney shareholders decisively rejected board nominees associated with activist investor Nelson Peltz, effectively concluding a protracted proxy battle that revolved around the company’s response to the tumultuous onset of the streaming era.
Instead, the majority of shareholders threw their support behind Disney’s proposed 12-person slate of board nominees, as announced by the company. Trian Partners, led by Peltz, had utilized its significant stake in Disney to spearhead a highly publicized campaign critical of the company’s growth strategy, particularly pressing for a plan regarding the succession of current CEO Bob Iger, aged 73.
Speaking at a recent investor conference hosted by Morgan Stanley, Iger addressed the activist push by highlighting Disney’s robust stock performance and dismissing Peltz’s efforts as a mere distraction.
Acknowledging the disruptive impact across various business sectors, Iger emphasized the need for profound knowledge, time, and focus to navigate such challenges effectively.
Peltz, aged 81, had sought board seats for himself and former Disney Chief Financial Officer Jay Rasulo, advocating for their inclusion at the expense of current board members Maria Elena Lagomasino and Michael Froman. This proxy battle unfolded against the backdrop of a seismic shift towards streaming, which has significantly altered the landscape of the media industry.
Despite facing challenges such as cord-cutting and declining movie theater attendance, Disney has witnessed growth in its streaming services, including Disney+, Hulu, and ESPN+. However, profitability from these ventures remains elusive.
Trian Partners, through its “Restore the Magic” campaign website, called upon Disney to articulate a clear streaming strategy capable of achieving margins akin to those of Netflix. The proposed reforms included cost reductions, a comprehensive review of the creative process, and a focus on acquiring new intellectual property.
Iger maintained that Disney was actively transforming its operations to address the streaming challenge highlighted by Peltz. Disney+ has garnered 111.3 million subscribers since its launch approximately five years ago, though a slight decline in subscribers was reported in the final quarter of 2023. Despite this, Disney managed to reduce streaming-related losses by $300 million in the same period, with plans to slash $7.5 billion in costs by the end of fiscal year 2024.
While cost-cutting measures have contributed to a 23% increase in Disney’s stock price since a recent low in October, the stock still lags 30% behind its peak in March 2021.
Succession planning has emerged as another focal point of contention in the proxy battle. Despite initially agreeing to step down in 2024, Iger’s tenure as CEO was extended through 2026, prompting calls from Trian Partners for a transparent succession process and an extensive search for Iger’s replacement.
In response, Iger reiterated his commitment to a smooth transition, emphasizing the board’s rigorous evaluation of internal and external candidates for his eventual successor.
