Disney Fires CEO – Walt Disney Co. (DIS) shares rose as much as 9% on Monday after the media and entertainment giant fired CEO Bob Chapek and replaced him with his predecessor, Bob Iger. The boardroom coup was announced on Sunday night.
Iger, who is 71 years old and was CEO from 2005 to 2020, has been given two years by Disney’s board to “set the strategic direction for renewed growth and work closely with the board to develop a successor.”
Disney Fires CEO
Even with Monday’s rise, Disney shares are still down about 38% for the year and since the company reported disappointing earnings on November 10. As of November 20, 2022, the stock had dropped 41%. This is Disney’s worst year in decades and one of the three worst among the 30 Dow Industrials this year.
Iger is known in the business world as a master negotiator. He led Disney during a very successful time and oversaw its growth through acquisitions like Pixar, Marvel, and Lucasfilm, which gave the company intellectual property that is still bringing in money from movies and theme parks.
Now, he will have to decide what to do about the growing costs and losses at the Disney+ streaming service for consumers and the falling profits from Disney’s ABC and ESPN TV networks. This year, Daniel Loeb, who runs the Third Point hedge fund, said that ESPN should be split off from Disney.
The Wall Street Journal says that Trian Fund Management, an activist investor group run by Nelson Peltz and his partners, has bought a Disney stake worth more than $800 million since the stock dropped earlier in the month and doesn’t agree with Iger’s appointment. The newspaper said that Trian, which is likely to raise its stake, wants a seat on Disney’s board and deeper cost cuts.
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In a statement, Susan Arnold, chair of Disney’s board, said, “The board has decided that Bob Iger is the best person to lead the company through this crucial time as the industry changes and becomes more complex.” “Mr. Iger has the deep respect of Disney’s senior leadership team, with whom he worked closely until he stepped down as executive chairman 11 months ago. Disney employees all over the world also have a lot of respect for him, which will make it easy for him to take over as leader.”
Lucas Shaw of Bloomberg says that Iger “privately criticised Chapek all year,” but he never hinted that he might want to come back before Sunday.
Senior executives at Disney, who were watching a live stream of an Elton John concert in Los Angeles on Disney+, reportedly found out about Iger’s return from an email in which their new/old boss said he was coming back “with an incredible sense of gratitude and humility—and, I must admit, a bit of amazement.”
Many people say that the relationship between the last two Disney CEOs has broken down since Iger named Chapek as his successor. Iger reportedly didn’t agree with Chapek’s decision to raise the price of a Disney+ subscription at the beginning of next month. Chapek did this to stop the platform from losing nearly $1.5 billion in the last quarter due to rising costs for content and marketing.
After Disney missed profit and revenue estimates for its most recent quarter, Chapek put a freeze on hiring and said that some of the company’s 190,000 employees would have to be let go.
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Problems for Chapek and His Pay
During his time as CEO, Chapek had to deal with the effects of the COVID-19 pandemic on Disney businesses and questions about his ability to lead. In June, Arnold gave Chapek a public vote of confidence on behalf of the company’s board, and in the same month, he gave Chapek a new three-year contract.
Bloomberg says that Chapek’s golden parachute is worth at least $23 million and could be worth more if Disney’s shares go up.
Chapek upset not only Disney investors, who were hurt by the drop in the share price, but also two other important groups within the company. He waited too long to say he was against the “Don’t Say Gay” law in Florida, which limits how lesbian, gay, bisexual, transgender, and queer issues can be talked about in schools. This caused Disney employees in the state to protest, and Chapek had to apologise.
Chapek is also said to have hurt Disney’s relationship with Hollywood actors and their agents when the company accused Scarlett Johansson of having a “callous disregard” for the Ebola pandemic. This was after Johansson sued Disney, saying that putting the movie Black Widow on Disney+ pay-per-view cut into her share of the box office earnings.
Johansson wanted $50 million, but in the end, the case was settled by Disney.
Even though Disney’s theme parks and, to a lesser extent, its movie box office receipts have recovered from the effects of the pandemic, cord-cutting by cable subscribers continues to cut into the company’s high-margin TV revenue. During this month’s earnings call, the company said that its linear networks are likely to lose more money.
Chapek was fired and replaced by Iger after Carolyn Everson was added to Disney’s board on September 30 as part of a deal with Third Point to keep things the same.
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