In a Disney snub, Nelson Peltz lands major endorsement in proxy fight

Rejecting the Walt Disney Co.’s bid for boardroom stability, an influential corporate research firm has recommended that shareholders add billionaire Nelson Peltz to the Disney board, raising the stakes for next month’s proxy showdown.

On Thursday, Institutional Shareholder Services Inc. — which advises the large institutional funds on corporate governance matters — recommended that investors vote to give the vocal Trian Fund Management founder a coveted seat on Disney’s board of directors. ISS made its recommendation, in part, by citing Disney’s bungled succession planning.

The recommendation adds to the challenges facing Disney Chief Executive Bob Iger, who has struggled to set Disney onto a strong financial path after returning as chief executive in November 2022 after a brief retirement. The company has had numerous setbacks during the last four years, including COVID-19 related closures that ravaged the company’s theme parks, cruise lines and theatrical business and a tumultuous tenure by former chief executive Bob Chapek.

Last year’s dual strikes by actors and writers also left big gaps in the programming pipeline. Audiences’ shift to streaming and rampant cord-cutting has eroded Disney’s profitable linear TV business.

“Iger’s return may have been sufficient to plug the holes, and management has since taken several actions to plot a better course. With any luck, the favorable winds of renewed cinematic success should convince shareholders that Disney is again headed for safer ports,” ISS said in its report. “What remains missing is tangible progress towards succession to give investors sufficient confidence that the company will not run aground after Iger departs, and in doing so, avoid future mutinies.”

The firm was alluding to the internal coup that toppled Iger’s hand-picked successor, Chapek, after about two and a half years in the CEO job. Senior Disney executives worked behind the scenes to bring Iger back to replace Chapek.

The board election will be decided at Disney’s annual shareholders meeting April 3.

ISS, however, declined to endorse Trian’s second candidate for Disney’s board — Jay Rasulo, a former Disney chief financial officer. New York-based Trian Fund Management beneficially holds $3.5 billion in Disney stock, including the shares of former Marvel Entertainment Chairman Ike Perlmutter, an Iger foe.

“[W]e strongly believe that ISS reached the wrong conclusion in its recent report when it comes to adding Nelson Peltz to the board,” said Mark Parker, chairman of Disney’s board. “In contrast to Glass Lewis, ISS fails to acknowledge the breadth of perspective and expertise Ms. Lagomasino adds to the Board. The strong recent performance and results overseen by the Disney Board demonstrate our focus on long-term shareholder value creation and succession planning and our commitment to good governance practices.”

ISS recommended that shareholders select Peltz over Maria Elena Lagomasino, who has been a member of Disney’s board since 2015. A longtime banker, Lagomasino is the CEO and managing partner of WE Family Offices, a firm that serves high net worth families. She also serves as the lead independent director of the Coca-Cola Co.

Iger has received public support from JPMorgan Chase CEO Jamie Dimon and the heirs of company founders Walt and Roy Disney, including Abigail Disney, Walt’s grand-niece and a critic of the company’s executive compensation practices in the past. Earlier this week, another corporate governance advisory firm Glass, Lewis & Co., endorsed Disney’s nominees.

“We struggle to see many of Trian’s intentions as representing a likely net gain for investors,” Glass Lewis said.

ISS said that since Iger returned, the company has announced several initiatives and other measures to “reverse some of the decisions and actions taken during Chapek’s CEO tenure.”

The stock has rallied by more than 30% over the last six months.

“Iger’s turnaround plan, while somewhat scant on specific guidance, may have reassured investors that these challenges are being addressed,” ISS said. “Nevertheless, the key decision points that led to the company’s challenges over the past five years, not to mention multiple activist campaigns, can be traced to the board. The most obvious of these was the failed succession in 2020.”

Disney’s board is looking at four candidates to replace Iger when he retires in 2026: ESPN chief Jimmy Pitaro; co-chairman of entertainment Dana Walden, who oversees television; Alan Bergman, co-chairman of Disney Entertainment, who runs the company’s film studios; and Disney Experiences Chairman Josh D’Amaro, who leads a portfolio that includes the theme parks, cruise lines and Disney Imagineers.

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