Walt Disney Company Board Sends Letter To Shareholders Asking Them To Vote Them Back In. But Should They?

Now that it is February, things are heating up with the proxy battles for seats on the Walt Disney Company Board. Today, the current board issued a press release and sent out letters to Shareholders asking them to be sure and vote them back in instead of backing Trian Group’s nominees Nelson Peltz and Jay Rasulo and Blackwell nominees Craig Hatkoff, Jessica Schell, and Leah Solivan.

Call this a bit of an op-ed because I have some comments to add about the performance of the current board.

They don’t want the shareholders to replace them and don’t endorse the other candidates. However, the idea that only the current board possesses “the appropriate range of talent, skill, perspective and/or expertise to effectively support the Board’s ongoing efforts to drive profitable growth and shareholder value creation in the face of continuing, industry-wide challenges” is questionable. 

Most of the members of the current board have been in the position for years and were there when bad choices put the company into a tailspin. From theme park price hikes to Genie+ and Disney+, the overspending on the Fox acquisition, the strip mining of Pixar, “Star Wars,” and Marvel, a year of box office flops, etc., all happened while most of this board was in place. 

The status quo isn’t working, and they are desperate to get shareholders to keep it as it is. 

Here is some of the letter they sent out to shareholders:

(My comments are in bold.)

“February 1, 2024

Dear Fellow Shareholders,

Thank you for your investment in The Walt Disney Company and your commitment to its enduring legacy as the leading name in global entertainment. Disney has an unparalleled portfolio of valuable businesses, brands and assets, and a best-in-class management team who, in close coordination with your Board, have made substantial progress executing on the strategic transformation of the Company. As a result, Disney has overcome one of the most challenging periods in its history and a new era of building is well underway to drive meaningful growth and shareholder value creation long into the future.

That is why your vote using the WHITE proxy card FOR the election of ONLY your Board’s 12 nominees at this year’s upcoming Annual Meeting is particularly critical. As detailed in Disney’s proxy statement, two hedge funds, Trian Fund Management, L.P. and Blackwells Capital, are each seeking to replace a portion of your Board with their own separate nominees, all of whom your Board believes do not possess the appropriate range of talent, skill, perspective and/or expertise to effectively support the Board’s ongoing efforts to drive profitable growth and shareholder value creation in the face of continuing industry-wide challenges. Your Board believes that the attempts by the Trian Group and Blackwells are likely to derail Disney’s progress as election of any of their less qualified nominees would hinder the transformation efforts underway.

ELECT THE BOARD BEST QUALIFIED TO CREATE SUSTAINABLE SHAREHOLDER VALUE“

I agree. We need a board that is qualified to create sustainable shareholder value. The current board hasn’t done that. Under this board, the stock prices have hit 10+ year lows. 

“Just one year after initiating a strategic overhaul of the Company to restore creativity to the heart of its businesses and establish a more efficient, cost-effective and streamlined approach to operations, the Board and management team of The Walt Disney Company are now intensely focused on building for the future. This building plan, which is already showing strong results as described below, is designed to position our streaming businesses for sustained growth and profitability, reinvigorate the Company’s film studios, fortify ESPN for the future and turbocharge growth in Disney’s Experiences business over the long term.”

One year. The stock was record high just a couple of years ago and not it’s hitting lows. Universal Orlando has just unveiled more of Epic Universe and Disney’s reskin of Dinosaur, a new “Zootopia” projection show on the Tree of Life, and an IP-laden “Country Bear Jamboree” will not cut it. 

They continue:

“Delivering on Disney’s significant growth potential will require leadership that has a deep understanding of the Company’s current strengths and assets and entertainment industry expertise – particularly in navigating the myriad disruptive forces that are unique to the media industry today. The Disney Board and management team fully meets these requirements, being comprised of engaged, diverse and dynamic leaders, whose skillsets are closely aligned with the key drivers of our business, including media and entertainment, direct-to-consumer expertise, strategic transformation, technology and innovation and 360-degree brand activation.”

If having a “deep understanding of the Company’s current strengths and assets” were key to “sustainable shareholder value,” we would see that right now, but we aren’t. While the stock has bumped up above the 52-week low of $78.73, it is still nowhere near the highs of 2021-mid-2022 or even the 52-week high of $118.18.  

“With its powerful brands, truly unique portfolio of high-performing businesses, Bob Iger at the helm alongside a seasoned group of world-class executives and a Board committed to creating sustainable value for all shareholders, we believe that Disney has tremendous underlying strength. We have accomplished a remarkable amount of work in a brief amount of time, moving from a period of fixing to a period of building.”

The powerful brands they had have been massively devalued after mismanagement. Pixar is barely holding on. Star Wars and Marvel are in a steep decline. Brands they acquired with Fox like “Home Alone” have been duds. The only “powerful brand” they still have is “Avatar.” 

The period of building has only been necessitated by the previous board’s mismanagement leading up to the period of correction. 

“Disney’s directors possess significant expertise in implementing strategic priorities while creating superior, sustainable shareholder value at some of the most iconic American companies, and have the skillsets, experiences and professional backgrounds representing a diversity of perspectives and characteristics that are particularly relevant to the Company’s business and strategic objectives.”

But they haven’t created superior, sustainable shareholder value. That is the issue. They have one of “the most iconic American companies” that they still ran it into the ground in time for 100-year anniversary. 

I’m sorry but the board is stale and change is needed. 

But that’s just my opinion. 

You can read the entire letter here.