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--:-- Noelle King: It's Today Explained. I'm Noelle King. It has been a rollercoaster week. Wait, this is a show about Disney. It has been a rock and roller coaster starring Aerosmith, Seven Dwarves, Mine Train week for the Walt Disney Company.
--:-- Noelle King: Successes? They have a very big release in the Black Panther sequel, Wakanda Forever. I have many names. My people call me Akukungan. But my enemies call me no more. Failures. Their latest animation film, Strange World, was a flop. You know, this world, this world we live in today is a pretty strange world, too. All of this as Disney's board ousts a less-than-beloved CEO, Bob Chapek, and brings back the Golden Boy former CEO, Bob Iger. All of the drama of a Disney movie, IRL. Coming up.
--:-- Noelle King: Support for Today Explained comes from Adio. Adio is an AI-native customer relationship management platform that Adio says is built for the next era of companies. A powerful data structure adapts to your business model, syncs in all your contacts in minutes, and enriches your business with actionable data. Adio says it also allows you to create those email sequences, those real-time reports, those powerful automations, which they claim can help you build what matters most, your company. You can go to adio.com slash todayexplained to get 15% off your first year. That's A-T-T-I-O dot com slash todayexplained.
--:-- Noelle King: Support for this show comes from strawberry.me. Be honest. Are you happy with your job? Or are you stuck in one you've outgrown or never wanted in the first place? Sure, you can probably list the reasons for staying, but are they actually just excuses for not leaving? Let a career coach from strawberry.me help you get unstuck. Discover the benefits of having a dedicated career coach in your corner. Go to strawberry.me slash unstuck to claim a special offer.
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--:-- Noelle King: Okay, here I come. We're working for a better tomorrow. Today! Explained. Oh, my gosh. This news was so shocking and it was such a guarded secret. Kim Masters is editor-at-large for The Hollywood Reporter and host of The Business from KCRW. My colleague, my friend Matt Bellany, who's on my show with me, The Business, he saw someone had posted, another journalist had posted the Disney press release and said, I think you've been hacked because he thought it wasn't real. So it was a major stunner.
--:-- Kim Masters: And what did the news say exactly? What was Disney announcing? That Bob Chapek, who had been the CEO since, I guess, February 2020, had been ousted. And Bob Iger, who had been the chairman and CEO of Disney for many years, was returning. He had been away for most of the year and had said repeatedly that he was never going back to Disney. and then he went back to Disney.
--:-- Noelle King: Bob Iger, you know, he's one of the most respected executives in general business anywhere. So he's a huge, towering figure. You wouldn't envy anybody who had to follow him in that job at Disney. As Disney's sixth CEO, Iger oversaw tremendous growth. New toys! Acquiring Pixar, Marvel, and Lucasfilm, expanding the Disney universe to include Star Wars. The force will be with you.
--:-- Kim Masters: Supposedly, the board had issued a statement of backing Bob Chapek a few months ago in June. Breaking news from Disney. The company's board voting to extend CEO Bob Chapek's contract for three more years. In a statement, Disney chair Susan Arnold saying that, quote, Disney was dealt a tough hand by the pandemic, yet with Bob at the helm, our businesses from parks to streaming not only weathered the storm, but emerged in a position of strength.
--:-- Noelle King: It was a complete 180. Obviously Disney is one of the most high profile entertainment companies, probably the most, and beloved and people have strong emotions about it. So it just was, as I said, a stunner. Who was responsible for this move? You mentioned Disney's board. Did they make the call ultimately? They're the only ones who could make that call, and they did make that call.
--:-- Kim Masters: The statement of confidence in Bob Chapik, we are now told, was not unanimous, and there had been conflict on the board as far back as June as to whether to keep him around. He had steered the company into a number of public controversies that were not helpful. There were massive losses going on. This is a very challenged time in the entertainment business generally.
--:-- Noelle King: Support for Today Explained comes from Chime. Nobody likes fees and complicated banking, says Chime. And Chime gets that, says Chime. Chime is a financial technology company that says they understand that every dollar counts. So when you set up direct deposit through Chime, they say you get access to fee-free features, such as free overdraft coverage, getting paid up to two days early, with direct deposit, so much more. Chime says with qualifying direct deposits, you can be eligible for free overdraft, up to $200 on debit card purchases and cash withdrawals.
--:-- Noelle King: Okay, let's get back to our story. Kim Masters is editor-at-large for The Hollywood Reporter and host of The Business from KCRW. What were the things that Bob Chapek did that would have made Disney's board say, nah, this is not about the industry, this is about what this man has done, he's got to go?
--:-- Kim Masters: There were several conflicts that arose. Scarlett Johansson, the star of the Marvel superhero film Black Widow, is suing the Walt Disney Company over its simultaneous release of the movie in cinemas and on its streaming service. Which led to a conflict with CAA, which is the most powerful agency with many star clients that nobody wants to cross.
--:-- Noelle King: Johansson's salary was based largely on box office performance of the Marvel films that regularly make one billion dollars in global ticket sales each. Insiders say this cost Scarlett Johansson $50 million. That sort of thing everybody in the town felt right away would not have happened under Bob Iger.
--:-- Kim Masters: I mean, I should say, Bob Chapek had spent many years at Disney, but he had been in theme parks and consumer products and not as a creative executive who understands this very delicate nuance of how to navigate Hollywood It something that is very very difficult This is not a business like a widget-making business. You have to assemble talent, you have to inspire talent, and talent can be very tricky to handle.
--:-- Noelle King: So Bob Chapek got into this this very public spat. And again, right away, people who were like veterans in this town said this would never have happened if Bob Iger had been in charge. He would have found a way to handle this dispute. And then, of course, infamously, there was the Florida Don't Say Gay, so-called Don't Say Gay law. Disney employees plan to put their discontent on full display, planning to walk out in protest of Florida's Don't Say Gay bill, or so it's called.
--:-- Kim Masters: Disney CEO Bob Chapek initially refused to release an official statement on the bill. Many cast members have been doing mini walkouts every day during their breaks. You know, it was no secret in the town here that Bob Iger did not think much of what Bob Chapek was doing at this company. And he actually tweeted his opposition to this Florida law. He said he supported President Biden's position. It's about right and wrong.
--:-- Noelle King: So I happen to feel, and I tweeted an opinion about the Don't Say Gay bill in Florida. To me, it wasn't politics. It was what is right and what is wrong. And that just seemed wrong. Which, to me, I knew right away that was going to put Bob Chapik on the spot. Because Bob Chapik, first of all, is believed to be a far more conservative politically person than Bob Iger.
--:-- Kim Masters: Again, something that doesn't play that well in Hollywood because it's mostly a progressive community. Once Bob Iger tweeted his opposition, of course, the spotlight swiveled. I swiveled. I called Bob Chapek's communications guy. And I was initially told he is not we don't take positions and we're not going to take a position.
--:-- Noelle King: Now, when that got out into the broader world and the company, which is a lot of gay employees or LGBTQ employees and a lot of progressive employees, the morale plummeted like a stone. I know I got bills to pay, but working for this company has been so, has made me so distraught. And I hate, I hate having moral quandaries about how I feed myself and how I support my loved ones.
--:-- Kim Masters: Bob Chapik had to do a complete flip-flop on that and take a position, which, you know, then incensed Ron DeSantis, the governor of Florida, who attacked Disney very publicly. If this was such an affront, why weren't they speaking up at the outset? And then for them to say they're going to actively work to repeal substantive protections for parents as a company that is supposedly marketing its services to parents with young children, I think they crossed the line.
--:-- Noelle King: And then this last earnings call was a mess because he's apparently a very chipper and talking about attractions that were upcoming at the parks or whatever. and then announces, oh, by the way, we lost over a billion dollars on our streaming service in the last quarter and missed our targets. The losses here were just mind-boggling.
--:-- Kim Masters: I mean, when you're going over the quarter, it's stunning. He's got to be fired. And a few days later, sent out a note with apparently people being very ill-prepared at the company saying hiring freeze, layoffs. It became uncomfortable on so many levels. The chief financial officer was not comfortable with that call. I mean, her reputation was also involved.
--:-- Noelle King: So one thing and another, you know, piled up. It just piled up of mishandled things and, you know, a crisis of losing money in a dramatic way. Disney, the company, plummeting another 13 percent, missing on key numbers across the board after reporting earnings last night as direct-to-streaming losses accelerated to a whopping $1.5 billion this quarter compared to $1.1 billion in Q3.
--:-- Kim Masters: I don't know that Bob Iger has a clear plan. He's just been in a town hall and said there will be some hiring freeze and clearly there are going to be some cuts. But Bob Iger can do things that Bob Chapek could not. Wasn't Bob Chapek himself the man that Bob Iger picked to succeed him?
--:-- Noelle King: Yes and no. I mean, it's very common for people to say he's the handpicked successor, and I always roll my eyes a little when I see that. The board, as they should have, they leaned on Bob Iger. Bob Iger had postponed his retirement multiple times. He's now 71 years old. Very fit, but he's 71.
--:-- Kim Masters: I used to say I failed retirement. He kept saying, I'm going to retire. No, I'm not. I'm going to retire. No, I'm not. So come on, when will you be ready to step down? I don't know. Five? Five years? Ten. Ten? Seriously? And meanwhile, people who were seen as this possible successor, in one case, Tom Staggs, it seemed that he was actually pretty much designated the successor and then seen those people get ejected from the company.
--:-- Noelle King: That happened on multiple occasions, but the likely successor suddenly no longer around, possibly because Bob Iger wanted to postpone his retirement again. So as Bob Iger approached 70, as I understand it from my sources, the board was saying, you got to do something about this. And when they pushed this last time, I think in a somewhat petulant way, I think Iger said, okay, fine, have this guy who really was kind of the only possible option left, but not a great option as I think Bob Iger well knew.
--:-- Kim Masters: So that's how I see it. It's not really hand-picking as so much defaulting to. I don't want to ask you to speculate too much, but do you think that Bob Iger knew this wasn't going to work out?
--:-- Noelle King: Oh, not only did he, I think, believe it wouldn't work out. Well, I don't want to be quite that harsh. I think he believed it was not likely to work out. I'll put it that way. But he had made it clear that he did not think much of what Bob Chapek was doing. And by the way, you know, long-time hardcore Disney fans really disliked Bob Chapek.
--:-- Kim Masters: Then I saw walking over from the Small World gate what I am 99% sure was Bob Chapek. I am so surprised that that man would step foot in Disneyland when he knows that guests here do not like him and call him things like Bob Paycheck and Bob Cheapskate. They thought he was doing what he does do which is to cut costs and raise prices Wow that crazy It almost like when you charge more for less people aren as excited to do it They felt like he was gouging. They felt like the things that the parks weren't as well-maintained as they should be.
--:-- Noelle King: So he was broadly unpopular. And there's no other company in entertainment where there's that kind of connection between the fans and the company and the CEO. I mean, I don't know that anybody out there knows who the CEO of Paramount is. But people really knew Bob Iger, and Disney fans knew Bob Chapek. So, yeah, he was not winning hearts and minds.
--:-- Kim Masters: So being a shareholder of Disney in a public company, they're allowing me to vote on the board of directors. Naturally, the board recommends Bob Chapek for the board of directors. Even more naturally, I recommend against. Bye, Bob.
--:-- Noelle King: Now that Iger is back, what do you expect? Good question. I mean, he has said that this came together very quickly, that he was sort of sitting around telling people he was never coming back to Disney, and then he got a call just a few days before announcing that he was coming back to Disney. Does he have a plan? I raised the question myself. You know, have you thought this through? Have you thought about how you will approach the streaming losses?
--:-- Kim Masters: You know, meanwhile, I should mention, Wall Street has turned on those subscriber numbers as a metric. They're no longer so impressed by the big numbers. They now want to see somebody making some money. And none of the big companies except Netflix is managing to make money. And even Netflix, it's just such a challenging business because you constantly have to have fresh original content that works, that draws people to your streaming service.
--:-- Noelle King: You know, if you're not watching anything on Netflix for a while, you may decide to drop the service and churn out. Or same thing for Disney+. They have to keep coming up with the fresh thing. that requires just throwing a ton of spaghetti at the wall, expensive, expensive spaghetti, and hoping that some of it sticks.
--:-- Noelle King: Support for Today Explained comes from Chime. Nobody likes fees and complicated banking, says Chime. And Chime gets that, says Chime. Chime is a financial technology company that says they understand that every dollar counts. So when you set up direct deposit through Chime, they say you get access to fee-free features, such as free overdraft coverage, getting paid up to two days early, with direct deposit, so much more. Chime says with qualifying direct deposits, you can be eligible for free overdraft, up to $200 on debit card purchases and cash withdrawals.
--:-- Noelle King: Okay, let's get back to our story. Chris Bingham has spent time studying it. I am a professor of strategy and entrepreneurship at UNC's Keenan-Flagler Business School, and I study innovation and growth. Along with some colleagues, Chris looked into what happens to a company when a CEO is brought back. There are actually lots of examples of boomerang CEOs.
--:-- Chris Bingham: Most famously, as it neared collapse, Steve Jobs returned to Apple to retake the reins of the company he had created. I started the company with Steve Wozniak in my parents' garage, you know, 22 years ago. And so there's a definite place in my heart for this. I'm drawing a salary of, I think, a dollar per year. I very much want to see Apple get turned around, and I think it's going to.
--:-- Noelle King: And through a series of brilliant changes and innovations, Jobs helped refocus and rebuild Apple, which ultimately became one of the largest and most powerful companies in the world. But Jobs is not alone. Many other large and high-profile organizations have turned to former CEOs, often called boomerangs, as I mentioned, in times of need.
--:-- Chris Bingham: These include Dell, Enron, Google, Twitter, Snapchat, Best Buy, Starbucks. Yes, the list continues. Yahoo, DuPont, Procter & Gamble, JCPenney, Reddit, Bloomberg, Urban Outfitters, and Charles Schwab. All of these organizations had former CEOs return to lead their organizations.
--:-- Noelle King: When a company brings a CEO back, Chris, what's usually the reason or the reason they give the public? They'll often turn to former CEOs in times of crisis. This usually means that the successors have gotten into trouble and either resigned or been fired abruptly.
--:-- Chris Bingham: But one of the best arguments for bringing back former CEOs is that they're just frankly a known quantity, an attribute often important to employees and investors looking for reassurance that a company can quickly get back on track. And this maybe leads to a different reason, and that is companies elect to bring back when they want a leader who can hit the ground running Say they been down the learning curve they know what they doing they know the landscape pretty well
--:-- Noelle King: Give me an example of when this has worked well. Howard Schultz returned to Starbucks after an eight hiatus when the company's stock price was really suffering.
--:-- Chris Bingham: What had happened was that we were doing everything humanly possible to feed the beast. And we were measuring sales per hour, transactions per hour, and doing everything we can for growth. And there's nothing wrong with that if it's balanced with making sure that the customer is at the center of everything you do. And that wasn't the case.
--:-- Noelle King: The successors had made a series of changes, such as introducing automatic espresso machines and more sterile store designs that frankly degraded the higher touch, higher class Starbucks experience. And by refocusing on the company's core principles that had originally made the premium brand successful, Schultz was able to help customers and employees fall back in love with Starbucks, ultimately leading its share price to more than triple during his second tenure.
--:-- Chris Bingham: He's actually just more recently come back again for a third stint. He came back in April, and the stock seems to be doing okay. So I think that's a good example.
--:-- Noelle King: Give me an example of when it did not work so well. Well, I think there are a number of examples when it didn't go well. I think AG Laughley returned as CEO of Procter & Gamble after the company suffered under its successor. with investors hoping for a Steve Jobs-like sequel. But unfortunately, this sequel never occurred.
--:-- Chris Bingham: P&G experienced lackluster performance under Lafley's second tenure and the company's stock price dramatically underperformed compared with competitors as the company lost market share. And of course, you can't forget Ken Lay, whose second sin to Enron included one of the most surprising and devastating failures in corporate history.
--:-- Noelle King: Certainly, we're surprised. I think probably more appropriately to say we're shocked. Certainly this was not the outcome we expected. You mentioned some successes and some failures. What usually happens? Are there more successes or more failures?
--:-- Chris Bingham: Our analysis suggests that these success stories, like the jobs, are often the exception rather than the norm. Actually, the differences in our data were quite striking. Boomerang CEOs indeed performed significantly worse than other types of CEOs.
--:-- Noelle King: Yeah, actually, on average, what we found is the annual stock performance of companies led by Boomerang CEOs was more than 10% lower than their first stint counterparts. And these results actually held true even when we compared them with other non-Boomerang CEOs who were hired in times of crisis.
--:-- Chris Bingham: So yeah, overall, Noelle, boomerangs seem to hurt rather than help. Why? Were you guys able to figure it out?
--:-- Noelle King: Well, we have a couple of thoughts. You know, one is that many boomerang CEOs barely recognize the company upon returning. And that's often because business conditions differ dramatically from those of their first stint as CEO.
--:-- Chris Bingham: Between the times when they leave and return, changes inevitably occur in consumer preferences, competitors, suppliers, demographics, or even the broader economy. And these changes are especially pronounced and problematic in dynamic and fast-changing industries in which boomerang CEOs perform much worse, per our data, as the value of the boomerang CEO's accumulated experience depreciates much more quickly.
--:-- Noelle King: Our evidence suggests that this is a really hard thing. Most CEOs think they can do it coming back, but the landscape has just fundamentally changed.
--:-- Chris Bingham: So what do you think about Bob Iger coming back to Disney? Do you have any predictions?
--:-- Noelle King: Well, I wish I could look into my crystal ball and make some predictions. I think actually there's reason for hope on this one. And the reasons are, one, Bob is not a founder. We found that boomerangs who are founders actually perform significantly worse.
--:-- Chris Bingham: I mean, again, they have a very significant mental model of how they want the business to proceed. And so it's harder to get rid of those prior views of how the organization should move forward. So he's not a founder. Two, he hasn't been gone that long. And then perhaps third is he seems to have a plan for how to move forward.
--:-- Noelle King: And so, again, for those three reasons, I'm hoping Disney has some positive news ahead for them.
--:-- Noelle King: Support for Today Explained comes from Macy's. It's almost fall, and that means it's time to cycle your wardrobe to the cold setting. Because while everyone loves a breezy summer outfit, let's be real, layering is even more fun. That's why Macy's Fall Fashion Guide has everything you need to piece together the perfect look for you.
--:-- Noelle King: Okay, let's get back to our story. What generally happens to that CEO? They look for a way to regain their status and credibility and legitimacy. So look for Bob to not sit quietly on the sidelines, but to help the markets know that that was a mistake by Disney.
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--:-- Noelle King: Today's show was produced by Hadi Moagdi and edited by Matthew Collette, who is on his way to vacation in a Disney park. It was engineered by Afim Shapiro. It was fact-checked by Laura Bullard. I'm Noelle King. It's Today Explained. Thank you.
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