Disney battle heats up as Trian nominates Peltz and Rasulo for board

Source: Disney

The battle for the future of Disney between the company’s management led by Bob Iger and activist investor Nelson Peltz’s Trian Partners is heating up.

Trian has announced that it will nominate two candidates to the Disney board – Peltz himself and former Disney executive Jay Rasulo, who at one time was mooted as a potential successor to Iger, at the company’s annual shareholder meeting next year.

In its statement, Trian reiterated its criticism of Disney’s current management, pointing to the alleged underperformance of its stock and the broader market, and low margins for its streaming and media operations “despite Disney having scale and superior IP”.

Attacking Iger directly, the investment outfit said Disney had “underperformed since Bob Iger was first appointed CEO in 2005” leaving Disney shareholders US$200 billion down in aggregate.

Trian also criticized the lack of stock held by Disney’s non-management directors and the fact that Iger had sold “the the vast majority of his ownership stake built up primarily through share-based compensation – more than $1 billion of Disney stock – leaving shareholders alone to face the daunting reality of a complex turnaround in a rapidly evolving industry”.

“The root cause of Disney’s underperformance, in our view, is a Board that is too closely connected to a longtenured CEO and too disconnected from shareholders’ interests. iv The Board, we believe, lacks objectivity as well as focus, alignment, and accountability,” Trian said.

While it praised the appointment of outgoing Morgan Stanley CEO James Gorman and former Sky CEO Jeremy Darroch to the board, it said this was insufficient “because the new directors were chosen without shareholder input and because they seemingly do not own meaningful amounts of stock”.

Perlmutter shares

Disney has countered, pointing to Peltz’s reliance on “Trian’s previously disclosed partnership with Isaac Perlmutter pursuant to which it obtained beneficial ownership of Mr. Perlmutter’s Disney shares”, referring to the former Marvel chief fired by Disney earlier this year, who owns 78% of the shares over which Peltz claims beneficial ownership

Disney said it had “an experienced, diverse, and highly qualified Board that is focused on the long-term performance of the Company, strategic growth initiatives including the ongoing transformation of its businesses, the succession planning process, and increasing shareholder value”.

It said its governance and nominating committee, which evaluates director nominations, would review the proposed Trian nominees and provide a recommendation to the board as part of its governance process.

Trian has sought to strengthen its hand by enlisting Rasulo, who served as senior EVP and chief financial officer of Disney from 2010-15.

“To resolve the malaise and crisis of confidence among Disney shareholders, the Board needs fresh perspectives from truly independent directors selected by the shareholders themselves. Jay and I have the strategic, operating, financial, and governance expertise to help Disney and are committed to working with the other members of the Board and management team to address the fundamental issues underlying the Company’s continued poor performance. There is much that can be done to revive Disney and restore the confidence of Disney shareholders, and Trian looks forward to discussing these opportunities with our fellow shareholders over the coming months,” said Peltz.

“The Disney I know and love has lost its way. As independent voices in the boardroom, Nelson and I are confident that the combination of my decades of experience at Disney, Nelson’s significant boardroom skills and history of driving positive strategic change, and our combined consumer brands expertise and financial acumen, will be additive to the Disney Board. With a shareholder mandate, Nelson and I look forward to helping the Board and management reorient the Company towards delighting its consumers again and driving significant value for its owners,” said Rasulo.