Disney in a fairy tale proxy fight​

By Jake Rickman
Image credit - nikkimeel / Shutterstock.com​

What do you need to know this week?

As the FT reported in a twin series of articles last week, Disney is now embroiled in a proxy fight following the current board of directors’ refusal to nominate infamous activist investor Nelson Peltz to the board.

Peltz is the founder and CEO of activist investment fund Trian Partners, which is one of the most notorious “corporate raiders" famous for its role in the turnaround of pharmaceutical giant Proctor & Gamble, among others.

Now, Trian is knocking on the gates of the Cinderella Castle, which follows on from the board’s recent reappointment of legacy CEO Bob Iger in November. Iger retook control of the media giant a mere 33 months after the appointment of his supposed replacement, Bob Chapek, under whose rule Disney struggled. Within the span of a fiscal year, the company went from an all-time high market valuation to an eight year-low.

Why is this important for your interviews?

The emerging proxy war between Iger on the one hand, representing Disney’s current management, and Peltz on the other, is reminiscent of the HBO drama Succession, given Disney’s status as one of the top media groups in the world and question marks over the current CEO’s succession plan. In real life, as well as in the Shakespearean echoes of Succession, proxy battles encapsulate the high-stakes strategic manoeuvring that can happen at the board level of publicly traded companies.

Both in-house counsel and private practice firms are instrumental in navigating proxy battles because there are various factions and affected stakeholders whose rights and obligations to one another can come into dramatic conflict. Lawyers involved in proxy battles tend to come from corporate and board advisory backgrounds. Therefore, if you are interested in this area of business and law, this is a development worth keeping your eye on.

According to the proxy statement Trian released on 12 January 2023, Trian owns 9.4m shares in Disney, which represents a mere 0.516% of Disney’s outstanding shares. Nonetheless, it is throwing its weight around in trying to convince Disney’s shareholding public to back its campaign — dubbed “Restore the Magic” — and vote to install Peltz on the board.

At the centre of Trian’s campaign message is that under the current board’s leadership, Disney lacks an “effective succession plan”, employs poor corporate governance measures, and pursues misaligned strategies, of which the overvalued acquisition of 21st Century Fox from Rupert Murdoch’s media empire beginning in 2017 is proof. Restore the Magic points to the company’s 10-year underperformance relative to the S&P 500 by 116% and deteriorating free cash flow as evidence of its poor leadership.

Under Mr Peltz’s direction, he intends to target Disney’s:
  • corporate governance by developing an “effective succession plan” and aligning compensation with performance;
  • strategy and operations by eliminating excess costs (among other pursuits); and
  • capital allocation so as to reinstate dividend payments by FY 2025, which have been suspended since last year.