Trian Fund Management has moved forward with its plan to nominate two independent directors to the board of Disney, including its founder Nelson Peltz, citing its “woeful” underperformance against peers.
In a Thursday statement, the hedge fund nominated its founder Nelson Peltz and Jay Rasulo, who spent three decades at Disney and served as senior executive vice president and chief financial officer from 2010 to 2015, for election at Disney’s 2024 annual meeting.
Earnings per share (EPS) in the most recent fiscal year were lower than the EPS generated by Disney a decade ago and were over 50% lower than peak EPS despite over $100 billion of capital invested, Trian asserted while also moving to highlight that margins in both Disney’s “Direct-to-Consumer” business and its consolidated media operations significantly lag peers.
“Unfortunately, the board and CEO appear to have no conviction that things will get better. The non-management directors collectively own less than $15 million of Disney stock, and Mr. [Bob] Iger has sold the vast majority of his ownership stake built up primarily through share-based compensation … leaving shareholders alone to face the daunting reality of a complex turnaround in a rapidly evolving industry,” the statement reads.
Trian argued that the root cause of Disney’s underperformance is linked to “a board that is too closely connected to a long-tenured CEO and too disconnected from shareholders’ interests.” Iger returned in November 2022 having served as CEO and chair from 2005 to 2020, and then as executive chairman and chairman of the board through 2021.
“Jay and I have the strategic, operating, financial, and governance expertise to help Disney and are committed to working with the other members of the board and management team to address the fundamental issues underlying the company’s continued poor performance,” said Peltz.
“The Disney I know and love has lost its way,” commented Rasulo.
In a December 14 statement, Disney said it will review the proposed Trian nominees and provide a recommendation to the board as part of its governance process.
“Disney has an experienced, diverse, and highly qualified board that is focused on the long-term performance of the company, strategic growth initiatives including the ongoing transformation of its businesses, the succession planning process, and increasing shareholder value,” the filing reads.
It’s the second push for Disney board representation led by Trian after first engaging at the beginning of the year, with the activist declaring the fight “over” following an announcement of a series of cost saving measures on February 8.
Walt Disney shares closed at $93.94 in New York on Thursday, up 1%.