Disney’s internal fights

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I think it would be fun to work in some sort of middle management role at a big public company and also be friends with a big scary activist investor. Everyone would have to walk on eggshells around you just a bit, and if you ever disagreed with your boss, or if your boss tried to demote you or fire you for something that you did, you could call up your activist buddy to run a proxy fight to get the whole board and management team replaced. “I was not happy with my bonus this year so I had my friend take over the company and fire everyone.” Just a weird dynamic. 

Here is an odd governance dynamics of corporate chief executive officers who are also controlling shareholders: Technically the CEO works for the board, and the board can fire the CEO, but the board works for the shareholders, and the shareholder-CEO can fire the board. There is a standoff; the corporate hierarchy circles back on itself. This would be like that but weirder. You work for your boss who works for the CEO who works for the board who works for the shareholders who work for you.

You don’t see a ton of it, but here is a Wall Street Journal story that is a little like that:

Longtime friends Isaac “Ike” Perlmutter and activist investor Nelson Peltz shared a similar opinion: Walt Disney Co. was spending too much money.

Mr. Perlmutter, chairman of Disney’s Marvel Entertainment unit, was known to be passionate about cost-cutting and once demanded that an action sequence in the 2008 movie “Iron Man” be shot with only three Humvees, instead of the 10 called for in the script. His feuds with Robert Iger during the chief executive’s first tenure over how to run Marvel’s movie studio caused a rift that remains.

Meanwhile, Mr. Perlmutter supported Mr. Peltz and his campaign to get onto Disney’s board and push for significant changes to Disney’s governance and operations, including cost cuts. Mr. Peltz ended that campaign Thursday after Mr. Iger announced plans to remove 7,000 jobs and reduce spending by $5.5 billion as part of a reorganization plan.

Though Disney didn’t respond to all of Mr. Peltz’s demands, the commitment to austerity pleased both him and Mr. Perlmutter. …

Messrs. Iger and Perlmutter have had a tense relationship since 2015, when Mr. Perlmutter’s quarrels with current Marvel Studios chief Kevin Feige over budgets and movie slates grew so intense that Mr. Iger, then in his first stint as Disney’s CEO, intervened and removed Mr. Perlmutter as CEO of Marvel’s movie studio, according to people familiar with the matter. Mr. Iger later stripped Mr. Perlmutter of further responsibilities, including control over Marvel’s television shows, heightening the acrimony between them, these people said.

Is the story here that Iger, the CEO, demoted Perlmutter, the head of a division, so Perlmutter called in an activist shareholder to cut Iger down to size? I mean, no, but a little bit? Disney’s proxy statement for the Peltz proxy fight, filed last week, does begin the story with Perlmutter, “an employee and shareholder of the Company,” bringing in Peltz to support Disney’s previous CEO, Bob Chapek. Actually the paragraph is worth quoting in full:

Early in the summer of 2022, Isaac Perlmutter, an employee and shareholder of the Company, who currently serves as Chairman of Marvel Entertainment, and previously served as Chief Executive Officer of Marvel, called Bob Chapek, then the Chief Executive Officer of the Company, to urge Mr. Chapek to meet with Nelson Peltz, the Chief Executive Officer of Trian Management. Mr. Chapek noted that he had business travel coming up in Paris, France, and thus his schedule near term would not work. Mr. Perlmutter responded that Mr. Peltz was vacationing on his yacht somewhere off the coast of France and so geography would not be an impediment. Mr. Perlmutter told Mr. Chapek he should have a “friendly lunch” with Mr. Peltz in France and it would be a good investment of his time. Mr. Perlmutter’s assistant worked with Mr. Chapek’s office and Mr. Peltz’s office to organize the meeting over a lunch.

“Hey Bob would you like to meet with a famous activist investor?” “Oooh I’d love to, really I would, but I’m gonna be in France, sorry, quel dommage.” “That’s okay, he’s on a yacht somewhere off France, he can come to you.” Imagine being the law firm associate writing that paragraph at midnight in your office. Sounds nice!