We are just weeks away from the Disney Annual Shareholder Meeting and the Proxy battle for Walt Disney Company board seats. The current Disney board is being challenged by two activist investor groups, Trian Partners and Blackwell Capital. Ahead of the meeting, Trian nominees Nelson Peltz and Jay Rasulo discussed what Disney means to them and answered some investor-submitted questions.
I have compiled some of the highlights of the “town hall” presentation.
Peltz discusses how he tries to help companies that lost their way, and both men discuss how much they want Disney to be restored to what it once was. Former Disney CFO Jay Rasulo says it’s not too late. They also make sure to remind people that Disney is a great company and the board is made up of good and smart people but they need someone to “speak the truth.”
First, both Peltz and Rasulo discussed why they care about Disney:
Peltz said, “We want Disney to be great again. I grew up with Disney. I have 10 kids. They all grew up with Disney. I have such great fond memories of Disney. Not just the parks but the movies. All the other wonderful things that they have to offer. And it’s a company that is iconic….That’s what this company is and it has truly lost its way.”
Later on Petlz will even say that “Disney is part of America. Disney is America.”
Rasulo offered these thoughts, saying, “I’ve spent 30 years of my life working at the Walt Disney Company. It was a joy. Every day it was a pleasure to know that you were creating part of the magic and distributing and offering that magic to families around the world. In my last 15 years at the company, I spent 10 years running the theme park division around the world. Prior to that I was at Euro Disney and in my last five years I was chief financial officer (CFO) of the company, which was incredible to experience all the businesses beyond the parks…”
The answered questions throughout the presentation. Here are some of those questions:
What if I don’t get a blue card? How should I vote to support Trian?
Rasulo answered saying, “You can vote for Nelson and Me on any card, white, blue, or green. And we are asking you to withhold votes from Ms. Lagomasino and Mr. Froman, and also all of the Blackwell candidates.
What do Nelson and Jay bring to the Disney board?
Peltz discussed his experience with being on previous boards and stressed that the current board themselves do not own much Disney stock, and shareholders need someone who has ownership in mind.
Rasulo said they bring “Independence, experience, a sense of urgency, and incredible passion for this company. I am so passionate about this company, the only thing I don’t like about my Disney experience has been in the last five years when old friends and colleagues call and say ‘What’s going on at Disney?” I say, ‘Don’t ask me. It’s killing me.‘”
During the conversation, Peltz said that the investor “say on pay” is important and that the executive pay at Disney is not on par with the shareholder returns.
They are focusing on replacing Ms. Lagomasino tied to this. As far as Mr. Froman, he is in “governance” and the succession plans for current Disney CEO Bob Iger have been “awful.” They also feel that both board members only possess one of the six skills that Disney identifies as being key to their central strategy.
What are Nelson and Jay’s plans for Disney as board members?
Jay Rasulo answered by saying, “First and foremost, I think we believe in delighting Disney fans, and that delight…creates an incredible commercial flywheel. It is unique to the company. It generates enormous returns for shareholders when it’s working…” He continues about ways to accomplish this, including through “corporate governance and accountability” and later he mentions “transparency” as well.
This can be accomplished by “accelerating media profitability.” He reminds shareholders that the parks bring in 70%, and the other divisions are doing “far worse” than their competitors.
Streaming, in particular, only brings low returns, while competitors bring 15-20% and over 20% at Netflix, while Disney only brings 7%. Peltz mentions that “Netflix did over $30 billion in revenue and generated about a 22% margin…Warner did about $40 billion in revenue, and they got about the same margin that Netflix did….Disney. They’re the big daddy, they did about $55 billion in revenue…7% margin. There’s a little room for improvement.”
Rasulo added “Nelson and I really want to be the voice for the fans of Disney, something I did for my whole career. And also the voice of the shareholders in the board room.”
Do Nelson and Jay want to fire Bob Iger?
Peltz immediately says, “No!!…never once have I come in to fire the CEO…We’re not here to fire anybody. We’re not here to point fingers. We just want this company to start to do what it’s meant to do.”
Rasulo added “I worked closely alongside with Bob for 15 years. I don’t think we ever had a cross word between us. I’m certain I can work with Bob Iger again.”
When asked about if they would be disruptive like Disney claims?
Peltz said they don’t come on to argue but they will make sure to review all the documents thoroughly with legal teams and analysts to make sure everything looks good. If not they will question it.
Rasulo mentioned that six of the Disney board members are active CEOs or chairs of big companies. They are busy with their own issues and Disney needs board members that can put more focus in to try and fix the issues.
What about the argument that you are just stand-ins for Ike Perlmutter and there’s just too much animosity to function together?
Peltz claims that it is a “silly argument” that “doesn’t even hold water.” Rasulo jumped in and said that they are their “own people” and they don’t carry on grudges for others. He added “I have absolutely no animosity towards anyone on that board. I don’t actually know any of them….I did not overlap with a single board member other than Bob, and not a single one has reached out to me…asking me what I think I can add…no contact from the Disney board.”
Then Petlz discussed the current status of Disney films. This is a big one!
“..We’ve got to give people what they want to see. When people go into a movie they want to escape. You go to a movie theater or you turn on the television, you got an hour, hour and a half, you want to get lost. You don’t want to hear about all of the issues of the day, that’s your one place to escape.”
What is your strategy to turn Disney studio back to creating new and original…films rather than an endless slew of remakes?
Jay Rasulo points out that Walt was not a remake guy. When he was at Disney there were many new and creative ideas that showcased “the love of the company, the love of the brand, and that commercial flywheel….”
He discusses that he doesn’t know how they lost their way but “with five losers in a row at the box office they certainly have lost their way….Undoubtedly lost their place at the most treasured place in animation.” He suggests a board-led review of the process and people that includes a review of studio operations and culture.
He stresses that this is not the first time this happened at the Walt Disney Company and it is fixable.
Regarding the $60 billion in park investment, Rasulo said that there wasn’t any timing or what was coming.
He pointed out that people don’t get excited hearing the number. Guests get excited about new attraction announcements or updates. That brings the excitement. However, he points out most of their announcements have to do with “pricing schemes, you know we used to have FastPasses and now you got to pay for them with this new system Genie+, but you have to pay for it, and it feels like guests and many people I know…felt like they were nickle and diming me, and that leaves a bad taste in people’s mouths because it fights the magic.”
They were asked if they would restore the family content and timeless stories that made Disney famous.
Rasulo said that when he was at the company and since 1928, the Disney name on a film, they never had to ask if it was family friendly. It was guaranteed. He said Iger himself has said that they’ve moved too far away from entertainment to delivering messages.
Peltz later discusses how Disney needs to get the excitement back in regard to the box office. Disney needs to return to making films people want to see and not messages in place of entertainment.
The difficulty with managing Disney vacations was also brought up.
Rasulo also discussed how difficult it is with the “mechanics” of visiting the parks. “It’s become very cumbersome to visit the park.” During his comments, he acknowledged that a lot of it was put in place to improve the experience but it isn’t necessarily in balance with “the magic.”
Nelson Peltz mentioned how it is becoming too expensive for families and said “That is not the way it was meant to be.” He mentioned the alternatives that are newer and often more affordable.
They were asked about the “toxic” work environment at Disney.
Both Rasulo and Peltz talked about the amazing cast members and people who work at Disney and how clarity and structure are important. But as we have often pointed out, the cast members are who make Disney magical. Rasulo stressed how important the people who work at Disney parks are because he always got letters about the cast members and what great things they did, and that’s what people remember.
You can watch the entirety of the video on Restore the Magic.
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