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Disney Blankets Social Media, Ad Pages to Defeat Nelson Peltz
(Bloomberg Law) -- Professor Ludwig Von Drake, the know-it-all uncle of Donald Duck, is very sure he knows what’s best for Walt Disney Co.‘s investors.
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He’s taken to social media to tell investors to vote for Disney’s slate of board directors at its annual meeting April 3 and to mark big red X’s beside five nominees—led by activist billionaire investor Nelson Peltz—who’ve been nominated by two shareholder groups aiming to shake up the entertainment giant.
“It’s important you vote only for Disney’s 12 nominees using the white proxy card,” the narrator of a video featuring the eccentric cartoon duck instructs. “DO NOT vote for the Trian Group or Blackwell nominees. Voting this year is critical—no matter how many or how few shares you may own.”
The amount and length of effort the Mickey Mouse empire has deployed to counter Peltz shows how seriously it views the threat. Peltz, the CEO of Trian Management LP, spent a record $60 million seven years ago in a successful proxy fight to land a seat on Procter & Gamble’s board, and his fight against Disney could turn out to be even more expensive, according to Dorothy Lund, a Columbia law professor.
Disney is fighting not just for blocks of votes from institutional investors, but retail ones as well, building votedisney.com and resurrecting a character that debuted in Disney cartoons in 1961. “This is where these gimmicks are coming from: You’re trying to get some mom-and-pop shareholder who’s sitting at home who wouldn’t usually vote to be inspired to think this is a big deal,” Lund said.
If hedge fund magnate Peltz wins, he plans to force changes up and down each Disney business line, from theme parks to studio operations. Peltz argues Disney’s profit margin lags behind those of big media brands like Netflix and Warner Bros., largely because its movies and streaming services continue to struggle to make money.
“I think they’re overly confident that they’re gonna win,” Peltz said in a brief interview with Bloomberg Law. “Only time will tell, but we’re overly confident that they’re not doing the right job.”
Disney declined to respond to questions about its campaign.
Totes and Toons
It’s not unusual for companies to mobilize to gain favor with shareholders ahead of shareholder meetings. Insurance giant Prudential Financial Inc. has been sending tote bags or planting trees “in your honor” to its voting shareholders since 2010.
But Disney’s cartoon and subsequent political-campaign-like advertising video posted to votedisney.com—with the venerable professor absent—directly attacks Peltz and Jay Rasulo, Disney’s former chief financial officer, who is on Trian’s slate. It also targets Ike Perlmutter, former head of Marvel during the early years of the Marvel Cinematic Universe, describing him and Rasulo as “disgruntled former employees” whose presence on the board could be dangerous if their slates win.
“This sort of personal animus in the boardroom is more than disruptive, it can be destructive,” a narrator on the Disney video says as a red line falls down a chart, presumably alluding to company performance.
Peltz has set up his own site, restorethemagic.com. He also published a manifesto outlining Disney’s missteps under current CEO Bob Iger. Peltz and Rasulo criticized Disney’s board for allegedly rubber-stamping Iger’s decisions.
At a March conference in Washington, Rasulo said Disney’s studios including Lucasfilm, Pixar and Marvel all need structural changes. A board doesn’t need to review movie scripts, he said, but should hold management accountable when blockbuster movies like The Marvels and Wish bust at the box office, which Iger admitted himself at a New York Times Dealbook Summit late last year.
“There hasn’t been a lot of change in the studio in the key positions: the head of Marvel Studios, head of Lucasfilm, head of animation—those have not changed,” Rasulo said. “And I think the board should be asking questions about why that is and what can be done structurally to change what’s going on.”
Disney countered with a 67-page slide deck published this month pointing to growth strategies like an ESPN flagship streaming service coming next year and a “robust lineup of franchise titles” in fiscal-year 2024.
Similar to a political campaign, the company has lined up A-list endorsements for Iger and the current board, including from the Disney family and JP Morgan Chase CEO Jamie Dimon.
“Putting people on a board unnecessarily can harm a company,” Dimon said in a statement to CNBC on March 13. “I don’t know why shareholders could take that risk, especially given the significant progress the company has made since Bob came back.”
Structural changes at the top of the company are necessary, said Hillary Sale, a Georgetown University Law Center professor. The board brought Iger back in 2022 after a fallout with former CEO Bob Chapek. If there aren’t changes at the board level—with or without Peltz—history bears repeating itself, she said.
“Disney never seems to have a great succession plan in place, and it’s hard to diagnose why that is,” she said. When the proxy fight is over, the board’s nomination and governance committee “really need to figure out a three-deep succession plan for a company that needs it, and they need to avoid eating their young again.”
How to Win
Another complicating factor could be a Securities and Exchange Commission rule finalized in 2021 that requires companies to present shareholders the full slate of board nominees—not just the company’s recommendations—on the same card. The rule, known as the universal proxy card rule, has applied to all shareholder meetings involving director elections since August 2022.
When every shareholder’s vote counts in an expensive and extensive campaign to elect board members, that may test whether the rule helps or hurts companies, Columbia Law’s Lund said.
“I think this is why people are spending so much money because it’s confusing,” she said. “and you’re hoping to get someone’s attention and get them to, buy your narrative. And in order to do that, you’ve got to spend.”
Until April 3, Disney projects all the confidence of its know-it-all cartoon duck. Like Disney, Von Drake confidently projects in a House of Mouse episode featuring a wager between himself and Mickey Mouse:
“Bring it on.”
To contact the reporter on this story: David Hood in Washington at dhood@bloombergindustry.com
To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; Bernie Kohn at bkohn@bloomberglaw.com
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