Written by Melissa Weinstein
Since its foundation in 1923, the Walt Disney Company has stood as an entertainment and media giant. Walt Disney and his brother Roy O. Disney came together in Hollywood, California to create their brotherhood cartoon studio after Walt was able to sell a short film titled Alice’s Wonderland (History.com, 2019). Little did their project would turn into a global conglomerate encompassing not just films, but television, theme parks, and now streaming services. Disney has also gone on to acquire large name companies such as ABC, ESPN, Pixar, Marvel Studios and Lucasfilm (History.com, 2019). However, in recent years Disney has not just been making headlines for its creative endeavors, but also for its corporate governance. The most recent news to put Disney in the spotlight was a board vote that held significant implications for its future direction. While the vote may have been decided in early April, the outcome exemplified the intricacies of corporate governance and the fine balance between shareholder activism and management prerogative in order to make balanced and profitable future company decisions.
In early January of 2024, Disney’s battle for control of leadership began. The board, which would go on to have a three month build up before the vote, involved Nelson Peltz and Bob Iger. Nelson Peltz is an American billionaire businessman and investor who is CEO of the Trinian Group. The Trinian Group currently owns 32.3 million shares of Disney stock, worth approximately $3.5 billion. Prior to the vote, the fund was attempting to persuade CEO of Disney Bob Iger to make significant changes to the company. Iger returned for his second run as CEO of the company in November 2022, coming out of retirement at the request of Disney’s board of directors. Peltz believed that Iger and the board had not been upholding their promises of developing an effective succession strategy. Another main reason for their challenge of leadership was the claim that Disney’s earnings and stock have underperformed (McColl, 2024). If Peltz were to win the board vote, he would bring former Disney CFO Jay Rusalo with him. While the vote itself did not take place until April, there were tensions for months as large companies and investors quickly began taking sides in the “fight.” Disney entered a confidentiality agreement with ValueAct Capital Management L.P. that served as a consulting contract and ValueAct backed the board slate of candidates (McColl, 2024). However, the support was not all for the Disney-recommended board as Blackwells Capital LLC then gave notice of its intent to nominate three individuals for election to the board on a separate ballot (McColl, 2024). Blackwells has supported Iger in the past, so this came as a shock to many.
In the end, on April 3rd, shareholders voted to elect all 12 board members nominated by Disney, including CEO Bob Iger. The outcome was seen as a landslide, bringing an end to a months-long proxy battle between the company and activist investors (Buchanan, 2024). Reporting to many sources that same day, Peltz warned that he would take up the move again if Disney did not follow through on its pledges, specifically noting the vow to move quickly on a CEO success process to name a replacement for Iger, whose contract extension is up at the end of 2026 (Buchanan, 2024). The outcome of the board vote holds great importance for Disney and its stakeholders. The victory for Disney’s board nominees signified shareholders’ enforcement of the current leadership and corporate strategy. The resolution of the battle with activist investors underscored the company’s ability to maintain focus on growth and value creation for shareholders without distractions.
This recent board vote carries significant implications for the company’s future trajectory. Keeping CEO Bob Iger’s leadership provides continuity and stability for Disney’s strategic activities and growth plans. Iger’s strategic activities included cost-cutting measures, strategic investments such as the partnership with Epic Games (creator of Fortnite), and restructuring efforts within the struggling movie division (Chmielewski , Dawn, et al, 2024). Furthermore, Iger reported that Disney’s streaming segment is on track to reach profitability by the end of the 2024 fiscal year. Through combining Disney+ and Hulu to expand the company’s streaming library, Disney is now able to better compete with other streaming giants such as Netflix (NFLX) and HBO Max (Buchanan, 2024). Another Iger led acquisition that will allow Disney to expand is working on a sports package through ESPN in a partnership with Warner Bros Discovery (WBD) and Fox (FOXA) that will offer a new streaming service to bring together the collective portfolios of sports channels. (Buchanan, 2024). Finally, expansion plans in Disney’s parks segment demonstrate the company’s commitment to enhancing its experiences business, which serves as a key growth driver and differentiator. The company reported that it is working to bring a Frozen theme to its Paris park, a “Fantasy Springs” to the Tokyo location, and an Avatar-themed attraction to the well-renowned Disneyland in Anaheim, California (Buchanan, 2024). These strategic endeavors signal great strides towards profitability, expansion, and innovation across various companies segments that were made possible by affirming Iger’s leadership.
Additionally, the outcome of the board vote holds significant implications for Disney’s stock (DIS). At first, investors had some concerns after the stock experienced a 2.5% decline on the day of the shareholder meeting (Smith, 2024). However, the drop in the stock reflected short-term market fluctuations and the successful defense against activists’ investors’ bids to gain board seats suggests a positive outlook for long-term investor confidence in Disney’s management and strategic direction. The next day, Thursday April 4th, Disney shares were moving high (Smith, 2024). With the acquisition plans, theme park expansion activities, making streaming profitable, and creating an Iger succession plan, value creation is expected for shareholders. Looking back on how the Disney stock has performed at the end of 2023 and prior to the vote, it is important to note the double bottom analysis that occurred this past October. A double bottom is a classic technical analysis charting formation that demonstrates a major change in trend and momentum reversal from a prior down move in market trading (Chen, 2022). A double bottom is significant in that it analyzes the intermediate to longer term view of a market and suggests either an important low or a strong level of support (Chen, 2022). After last year’s double bottom the Disney share price has only moved higher and had gains that accelerated after the 50 day moving average crossed above the 200 day moving average; this is a strong buy signal. As of 2024, Disney’s stock has gained over 30%, indicating continued upward momentum following the board vote re-electing the Disney slate.
In conclusion, the recent Disney board vote that occurred at the annual meeting will have profound implications for the company’s future direction and its impact on stakeholders. With the vote culminating in a decisive victory for sitting CEO Bob Iger and incumbent board members, Disney’s charted course forward appears to be strong, focusing on stability for strategic growth initiatives and expansion in new areas such as streaming. It is clear that Disney’s future remains bright as it continues to navigate the evolving landscape of entertainment and media.
References
Buchanan, Naomi. “Key Takeaways from Disney’s Shareholder Meeting.” Investopedia, Investopedia, 3 Apr. 2024, www.investopedia.com/key-takeaways-from-disney-shareholder-meeting-8624259#:~:text=Shareholders%20voted%20to%20elect%20all,the%20company%20and%20activist%20investors.
Chen, James. “What Are Double Bottom Patterns?” Investopedia, Investopedia, 13 Oct. 2022, www.investopedia.com/terms/d/doublebottom.asp.
Chmielewski , Dawn, et al. “Disney Prevails over Peltz, Ending Bitter Board Battle |.” Reuters, 3 Apr. 2024, www.reuters.com/business/media-telecom/disney-poised-claim-victory-bitter-peltz-board-fight-2024-04-03/.
History.com, Editors. “Walt Disney Company Is Founded | October 16, 1923.” History.Com, A&E Television Networks, 22 July 2019, www.history.com/this-day-in-history/walt-disney-company-founded.
McColl, Bill. “Disney Receives Support from Two Investment Firms in Fight with Peltz.” Investopedia, Investopedia, 3 Jan. 2024, www.investopedia.com/disney-8421698.
Smith, Timothy. “What’s next for Disney Stock after PROXY VOTE WIN – Monitor This Key Chart Level.” Investopedia, Investopedia, 4 Apr. 2024, www.investopedia.com/what-s-next-for-disney-stock-after-proxy-vote-win-8624604.