Normally, shareholder votes for company board administrators have all of the suspense of a Soviet-style election.

More often than not, director candidates are backed by the corporate, and so they run unopposed — profitable election or reelection in a landslide. In 2022, solely 75 board-endorsed candidates at firms within the Russell 3000, lower than 0.5% of just about 17,500 board members on the poll that 12 months, did not get elected by shareholders, per an evaluation by the Harvard Regulation Faculty Discussion board on Company Governance (which additionally famous that, whereas small, the quantity had dramatically risen vs. 2017).

For Disney, the 2024 shareholders assembly is completely different.

Traders are voting on three competing board candidate slates — Disney’s personal beneficial 12-member lineup, together with CEO Bob Iger; two nominated by Trian Fund Administration, which is headed by activist investor Nelson Peltz (Peltz himself and ex-Disney CFO Jay Rasulo); and three from one other funding agency that has entered the fray, Blackwells Capital. The showdown has formed up because the priciest proxy combat in U.S. historical past: Disney disclosed that expects prices for the board battle to be within the neighborhood of $40 million; Trian estimates it may spend upwards of $25 million on the marketing campaign and Blackwells expects to spend round $6 million.

Disney’s 2024 annual assembly of shareholders will likely be held Wednesday, April 3, beginning at 10 a.m. PT. Eligible shareholders can take part within the digital assembly at this hyperlink; Disney is also internet hosting a stay webcast at this hyperlink. Traders have been capable of solid their votes previous to the assembly, the place the vote counts will likely be tabulated and introduced.

Right here’s the background on what might be a momentous change for the Mouse Home.

Why Does Nelson Peltz Need to Shake Up Disney’s Board?

Peltz desires Disney’s inventory value to go up — and he believes new considering is required on the Mouse Home’s board to perform that. “Disney fell from its No. 1 place on the field workplace, was late to enter the streaming enterprise and doubled down on linear TV on the unsuitable time,” Trian stated in a letter directed to Disney shareholders. Within the final a number of years, Trian alleges, Disney “has woefully underperformed its potential and its friends, costing shareholders greater than $200 billion in worth.” In 2023, Disney’s inventory was up 35% 12 months so far as of March 28 — however Trian has argued that “the stress of our proxy contest pushing Disney to carry out” was a part of the explanation for the rebound. Furthermore, Trian has questioned whether or not the corporate can execute on not too long ago introduced strategic plans, together with hitting double-digit streaming margins.

And extra particularly, Trian argues the Disney board “botched its most vital job — CEO succession — by putting in Bob Chapek in that function seemingly with out acceptable vetting or oversight. The board then renewed Mr. Chapek’s contract simply months earlier than firing him for poor efficiency. In the end, the board needed to name Bob Iger out of retirement to fill the void.”

“We consider that reelecting the prevailing board could have the predictable impact of resulting in extra of the identical: questionable strategic and capital allocation selections, poor government compensation alignment and suboptimal succession planning,” Trian stated in a March 25 assertion.

Peltz factors to his observe document as a board member in serving to to show round firms like H.J. Heinz and Procter & Gamble. He says he desires to “Restore the Magic” at Disney (as Trian has dubbed its proxy marketing campaign) and his agency has referred to as Disney “essentially the most advantaged client leisure firm on the planet.”

Does Peltz Need to Oust Bob Iger?

Not precisely, nevertheless it’s sophisticated. Peltz’s Trian issued a press release final week saying the agency “helps Mr. Iger as a candidate for the board and as CEO” — nevertheless, the funding agency has withheld its votes for Iger’s board candidacy. (Requested for clarification, a rep for Trian declined to remark.)

Iger commented on Peltz’s proxy combat at a Morgan Stanley convention final month, saying, “This marketing campaign is designed to distract us. I’m working actually laborious to not let this distract me, as a result of after I get distracted everyone who works for me will get distracted, and that’s not an excellent factor.”

What Is Disney’s Response to Peltz?

Disney has referred to as Trian’s proxy combat “disruptive and harmful” and stated Peltz’s “quest additionally appears extra about vainness than a perception in Disney.” The corporate has characterised Trian’s marketing campaign as fueled by a “longstanding private agenda” harbored by ex-Marvel Leisure chairman Ike Perlmutter towards Iger, who final 12 months fired Perlmutter. Trian controls roughly $3.5 billion value of Disney inventory (about 32 million shares), 79% of which is owned by Perlmutter. Disney has about 1.83 billion shares excellent.

Disney has informed shareholders that Peltz “brings no media expertise and has introduced no strategic concepts for Disney” and the corporate highlighted an interview Peltz gave to CNBC during which he stated, “They stated I’ve no media expertise — I don’t declare to have any.” Concerning Rasulo, Disney says his perspective “is stale given he left Disney in 2015 and has not held any government positions within the {industry} since.” The corporate additionally has famous that Trian up to now six months has bought 500,000 Disney shares, an try to painting Peltz as on the lookout for fast cash-outs slightly than being invested in Disney’s long-term monetary success.

“The Walt Disney Co. has turned a nook and is targeted on creating lasting, long-term worth,” the corporate stated in a video posted to its shareholder marketing campaign portal. Among the many factors it cited: Disney’s board has approved $3 billion in inventory repurchases in fiscal 12 months 2024 and elevated the money dividend to shareholders to 45 cents/share payable in July (up 50% from the January dividend).

Disney says the board’s succession planning committee is “led by profitable CEOs with current, extremely praised succession expertise” who’re conducting a “diligent and thorough succession planning course of” to determine a successor to Iger, whose CEO contract expires on the finish of 2026. James Gorman, the previous CEO of Morgan Stanley who was named to Disney’s board final fall and is on the succession committee, not too long ago informed CBNC, “I simply got here via an enormous succession course of at Morgan Stanley. I’m impressed by the method [at Disney].”

What Are the Possibilities Peltz Will Win?

Whereas Iger has dismissed Peltz’s proxy combat as a “distraction,” Trian may probably pull off an upset and get the votes to safe no less than one seat on the board.

In an enormous win for Trian, influential advisory agency Institutional Shareholder Providers (ISS) beneficial shareholders elect Peltz to the Disney board (however not Rasulo). In its report, ISS cited Disney’s “failed” CEO succession planning and stated Peltz “might be additive to the succession course of, offering assurance to different traders that the board is correctly engaged this time round.” ISS beneficial shareholders vote for present Disney director Michael Froman however abstain from reelecting Maria Elena Lagomasino, CEO and managing accomplice of WE Household Places of work (and a former senior government at JP Morgan Non-public Financial institution and Chase Manhattan Financial institution and a present director of the Coca-Cola Co.). Disney chairman Mark Parker, who can be government chairman of Nike, responded that “we strongly consider that ISS reached the unsuitable conclusion.”

Final week, Peltz acquired one other supporter: Egan-Jones Scores Co., a credit score rankings and proxy advisory agency, which beneficial Disney shareholders vote for Peltz and Rasulo (over Lagomasino and Froman). As well as, CalPERS, the big California pension fund that owns 6.65 million Disney shares, voted its firm shares for Peltz and Rasulo.

On the shareholder assembly, Disney’s administrators will likely be elected on a plurality foundation. That signifies that the 12 director nominees receiving the best variety of “for” votes solid will likely be elected; “withhold” votes and any dealer non-votes won’t be counted as votes solid.

Who’s Supporting Disney?

Glass Lewis, one other influential proxy-advisory agency, endorsed Disney’s slate of administrators and Iger’s management. Disney “is enterprise what we take into account to be a reputable effort to shift key operational priorities below the management of one of the vital well-respected CEOs within the {industry},” the agency stated. Disney and Iger even have acquired public help from George Lucas (Disney’s largest particular person shareholder), former Disney CEO Michael Eisner, giant shareholder Laurene Powell Jobs (widow of Apple co-founder Steve Jobs), the grandchildren of Walt Disney and his brother Roy O. Disney.

“Bringing in somebody who doesn’t have expertise within the firm or the {industry} [i.e., Peltz] to disrupt Bob and his eventual successor is enjoying not solely with fireplace however earthquakes and hurricanes as effectively,” Eisner wrote in a March 22 publish on X. “The corporate is now in glorious arms and Disney shareholders ought to vote for the Disney slate.”

What Is Blackwells’ Beef With Disney About?

Blackwells typically helps Disney’s present path (and opposes Peltz’s “contrived marketing campaign that’s disconnected from the wants of Disney stakeholders”) however asserts Disney’s board wants extra administrators with media-industry expertise. Its three candidates are: Jessica Schell, a former Warner Bros. and NBCUniversal exec; Tribeca Movie Pageant co-founder Craig Hatkoff; and TaskRabbit founder Leah Solivan.

Blackwells additionally alleges Disney has a battle of curiosity with funding agency ValueAct Capital, which introduced an “info sharing” cope with Disney and its help for the corporate’s beneficial slate of board nominees on the 2024 annual assembly. Beneath that settlement, Disney will seek the advice of with ValueAct on “strategic issues,” together with via conferences with the Disney board and administration. Blackwells sued Disney final week in Delaware chancery court docket, in search of “books and data so as to decide whether or not wrongdoing, mismanagement or breaches of fiduciary obligation, together with potential violations of disclosure obligations below the federal securities legal guidelines, have taken place in reference to Disney’s dealings with and disclosures associated to ValueAct Capital Administration.” In keeping with the Blackwells swimsuit, ValueAct was accountable in 2022 for managing greater than $350 million in Disney pension fund property and was paid “maybe as a lot as $95 million in charges for its money-management providers to Disney.

In response to the lawsuit, a Disney spokesman stated, ““The claims made by Blackwells Capital are baseless, and that is merely their determined try to realize consideration for his or her slate of director candidates. No Disney pension plan funds are at the moment invested with ValueAct nor had been they managing any Disney pension plan funds on the time of their coming into into an information-sharing settlement with the corporate. Previous to Blackwells submitting this litigation, Disney supplied to fulfill with them and supply documentation confirming these information, however Blackwells declined the assembly.”

What Else Is Up for a Vote on the Disney Shareholder Assembly?

Nothing as dramatic because the board election. There are some typical proposals (which Disney recommends voting for): ratification of the appointment of PwC as the corporate’s impartial registered public accountants for fiscal 2024 and consideration of an “advisory vote” to approve government compensation packages. (Trian helps the PwC renewal however not the manager comp.)

There are additionally numerous shareholder proposals (which Disney recommends voting towards), together with one in search of to cap “golden parachute” exec pay packages; one that might drive Disney to reveal political expenditures and one other that might require Disney to reveal charitable contributions; and one requesting a board report addressing the corporate’s advantages regarding “dysphoria and de-transitioning care throughout gender classifications.”

As well as, a Trian proposal seeks to repeal Disney’s amended bylaws adopted by the board in November 2023 that added new necessities for board candidates nominated by outdoors events. Blackwells is in search of an advisory vote “to trigger the board to extend its measurement” by the variety of Disney-backed nominees in the event that they fail to get extra votes than Trian’s or Blackwells’ nominees and have these administrators appointed to the board. (Disney opposes each of these.)

Who Are Disney’s Greatest Institutional Traders?

As of the top of 2023, they’re: Vanguard (8.3% of excellent shares), BlackRock (6.7%), State Avenue (4.1%), Morgan Stanley (2.6%), State Farm Mutual Auto Insurance coverage (2.0%), Geode Capital Administration (1.9%) and Trian Fund Administration (1.8%). General, particular person Disney shareholders personal greater than one-third of excellent shares, making them a large drive in deciding the board election.

Has Disney Been Challenged by Dissident Traders Earlier than?

Sure. In 2003, Roy E. Disney (Walt’s nephew) and fellow dissident director Stanley Gold had been kicked off the board and the duo led a “Save Disney” shareholder revolt towards Eisner. On the 2004 Disney annual assembly, shareholders delivered an unprecedented rebuke to Eisner by withholding 45% of votes solid for his reelection to the board. Roy E. Disney and Gold additionally opposed Eisner’s choice of Iger as CEO (calling Iger’s appointment on the time a “sham”) earlier than Iger was capable of settle the hostilities in 2005. Greater than a decade earlier, in 1983, company raider Saul Steinberg staged an in the end unsuccessful hostile takeover of Disney.

In the meantime, Peltz in January 2023 launched a marketing campaign threatening a proxy combat. Nonetheless, by Feb. 9, Trian Peltz suspended the bid for a board seat after Disney unveiled a broad restructuring of operations after Iger’s return as CEO.

Pictured above: Disney CEO Bob Iger; Trian’s Nelson Peltz