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--:-- Host (Noel King): Welcome shareholders. Fade, fade, fade. Wait, what's happening? Friends, relatives, and esteemed chairman, you're probably wondering what we're all doing here today. Now, let's begin.
--:-- Host (Noel King): Oh, right. Disney shareholders are voting on who gets seats on the company board. Professor Ludwig, why don't you tell our shareholders how they can vote?
--:-- Professor Ludwig: Yes, yes. Today, we're going to use the Von Drake method. Ludwig von Drake, Moana, and Iron Man have all been dispatched to get out the vote because CEO Bob Iger is trying frantically to hold off an investment group called Try-An that wants a board seat to make changes to Disney.
--:-- Host (Noel King): Remember, it's important you vote only for Disney's 12 nominees using the white proxy card. Do not vote for the Try-An group or Blackwell's nominees.
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--:-- Host (Noel King): Hey, hey, everybody. It's Today Explained. I'm Noelle King with Alex Weprin of The Hollywood Reporter, who has been covering the fight for the future of the House of the Mouse.
--:-- Alex Weprin: OK, here's the issue. Disney's stock price is up 34 percent this year, which is very good. But it is down almost 40 percent from a record high in March of 2021.
--:-- Alex Weprin: Enter the investor who says he can turn this around. So Disney at the moment is in the middle of a pretty personal and high-profile proxy fight. An activist investor, Nelson Peltz, is seeking board seats at the company, and he's seeking change at the company.
--:-- Alex Weprin: This company is just not being run properly. The board oversight is awful. It really is. You can see it's getting a bit long in the tooth. They need more capital invested now.
--:-- Alex Weprin: And the company's board and CEO, Bob Iger, are kind of fighting back, trying to prevent that from happening.
--:-- Alex Weprin: Focusing my time, my energy, and the time and energy of the entire team is extremely important. Disruption from a force like that is not something that would be healthy to the shareholders of this company.
--:-- Alex Weprin: It's become very high-profile. It's got national, international coverage. And, you know, it could change the future of Disney.
--:-- Alex Weprin: Okay, who is Nelson Peltz and why does he want a board seat so badly?
--:-- Alex Weprin: So Nelson Peltz is this corporate raider. He's an activist investor. We see really companies that we think were once great have lost their way and that we have a plan for them to get back to greatness again. And that's what we do.
--:-- Alex Weprin: His strategy is to accumulate large stakes in companies, then agitate for change. We're not there to leverage up these companies. We're not there to split them up.
--:-- Alex Weprin: He seeks board seats for himself or some of his colleagues at his company, Tri-An Partners. And then when he gets on the board, he kind of tries to press for cost-cutting, for savings, for sweeping changes that can kind of transform these companies.
--:-- Alex Weprin: We're not there to do all the terrible things that typically go along with the term activist.
--:-- Alex Weprin: What kind of changes does he want? In the case of Disney, he's pushing for additional cost-cutting.
--:-- Alex Weprin: He wants to try and make the streaming business profitable, which I will note is also a focus of Bob Iger and the current board.
--:-- Alex Weprin: They are really now committing to streaming profitability. They've given us a timeline. They've said, expect us to achieve profitability by fiscal fourth quarter of 2024.
--:-- Alex Weprin: And he wants changes to ESPN's sports strategy at ESPN, which is the dominant player in sports television, but is on a declining path given where current trends are in cable television.
--:-- Alex Weprin: So Peltz is a powerful guy because he's got money. Does he have allies in this fight to get him on the board?
--:-- Alex Weprin: Nelson Peltz is one very important ally, and that is Ike Perlmutter. He's the former CEO of Marvel.
--:-- Alex Weprin: He's actually the CEO of Marvel who sold the company to Disney for $4 billion. And when he did so, he received billions of dollars in Disney stock, and he actually stayed with the company as chairman of Marvel until he was laid off just last year in cost-cutting.
--:-- Alex Weprin: He said, quote, I can no longer watch the business underachieve its great potential. I urge Disney's board to immediately welcome one or more Tryon board candidates, including Tryon's CEO and founding partner Nelson Peltz, into the boardroom.
--:-- Alex Weprin: I believe Nelson and Tryon can help Disney's leadership better navigate the company's challenges and opportunities.
--:-- Alex Weprin: Nelson Peltz, most of his stake in Disney is actually shares owned by Ike Perlmutter. And so that is his key ally in this fight.
--:-- Alex Weprin: Is one seat on a board really such a big deal?
--:-- Alex Weprin: Well, one seat isn't enough to have dramatic change in a company, but it does give you a seat at the table and it allows you to kind of press for certain changes.
--:-- Alex Weprin: You know, you could introduce a possible CEO successor to Bob Iger. There are certain things you could do.
--:-- Alex Weprin: He is pushing for two board seats. He also wants a guy named Jay Razulo, who's the former CFO of Disney, to also get a seat.
--:-- Alex Weprin: But really, you know, just one seat would be enough to kind of push for change at the company.
--:-- Alex Weprin: Peltz got a lot of attention recently when he gave an interview to the Financial Times about Iger's leadership strategies.
--:-- Alex Weprin: And Peltz was making some noise about Disney programming being too woke or too inclusive however you want to call it.
--:-- Alex Weprin: Is that what Nelson Peltz Takeover is about? You said there some other things underlying what he wants.
--:-- Alex Weprin: How much of this is about Disney's Gone Woke?
--:-- Alex Weprin: That's an interesting thing. In the official documents, if you look at the official paperwork, the white paper that Nelson Peltz has published, there's really nothing about woke programming.
--:-- Alex Weprin: But you're right. In that FT interview he agitated, he complained about the Marvels, which has an all-female superhero cast.
--:-- Alex Weprin: Hi, Captain Marvel. It is so good to see you, Lieutenant Trouble. You too. And it's Captain Rambo now. Right.
--:-- Alex Weprin: He complained about Black Panther, which of course is, you know, a black superhero.
--:-- Alex Weprin: Those are comments that actually mirror comments made by Ike Perlmutter.
--:-- Alex Weprin: Bob Iger in his memoir actually mentioned that Perlmutter was opposed to making a Black Panther movie because he didn't think it would be successful.
--:-- Alex Weprin: And he was opposed to a Captain Marvel movie because he felt that a female superhero wouldn't sell action figures and toys.
--:-- Alex Weprin: So that's, I think, raised a lot of eyebrows at Disney because those comments mirrored some for Mike Perlmutter.
--:-- Alex Weprin: And they're sort of, it's something that a lot of people within Disney are concerned about.
--:-- Alex Weprin: In this interview in the Journal, the ex-Marvel chief says, I have no doubt that my termination was based on fundamental differences in business between my thinking and Disney leadership because I care about return on investment.
--:-- Alex Weprin: Are those comments true?
--:-- Alex Weprin: I mean, Black Panther, in my memory, made a boatload of money.
--:-- Alex Weprin: I don't know about the Marvels. Tell me how much of this is grounded in reality.
--:-- Alex Weprin: So Black Panther, it's enormously successful. It is now the fifth highest grossing domestic film in the history of cinema, not counting for inflation, obviously.
--:-- Alex Weprin: It's also the most successful superhero movie of all time domestically, including North America.
--:-- Alex Weprin: And it's true that the Marvels was kind of a flop.
--:-- Alex Weprin: But the truth is, the last year or two, pretty much every Marvel movie has underperformed.
--:-- Alex Weprin: And the original Captain Marvel was extremely successful.
--:-- Alex Weprin: So really, you know, it's hard to say exactly what this is about.
--:-- Alex Weprin: You know, is he seriously complaining about this? You know, Black Panther was a huge success.
--:-- Alex Weprin: And the idea that they would try to step in and stop it is crazy looking in hindsight.
--:-- Alex Weprin: Because just to remind people, we all sometimes forget, an investor in a company should want that company to make money. Absolutely.
--:-- Alex Weprin: That's the whole point.
--:-- Alex Weprin: So then there is an additional thread that you and others have reported on that is very interesting, which is Bob Iger recently was speaking at a New York Times summit.
--:-- Alex Weprin: And he also made some comments about Disney and wokeness.
--:-- Alex Weprin: What did Iger say?
--:-- Alex Weprin: Iger had said that he had told his creative executives, the executives at the company that kind of oversee the films and television shows, that the focus has to be on creativity, on great storytelling, and that political messaging or any sort of messaging that isn't about storytelling should really be put on the back burner.
--:-- Alex Weprin: It's hard to say exactly what he was talking about in any specific shows or movies.
--:-- Alex Weprin: But I do think that is some of the criticism that has been leveled against Disney is that maybe there have been moments where there's scenes that take away from a show or movie because it feels like it's kind of shoved in there for messaging purposes.
--:-- Alex Weprin: And I don't know if that's true or not, but I think Iger seems to think that it is true.
--:-- Alex Weprin: Keep in mind, the lead time for these movies and shows can be years.
--:-- Alex Weprin: So it's entirely possible that they have axed projects that are just not going to get made because he felt like it was too message-focused.
--:-- Alex Weprin: But I do think Iger is kind of seeing some of the pushback and is adjusting somewhat, even though I think he will defend Black Panther, he will defend Captain Marvel to the end.
--:-- Alex Weprin: Like, you know, he does not think those are woke at all.
--:-- Alex Weprin: I do think he's being conscious of the type of programming that could be perceived as political in nature.
--:-- Alex Weprin: Does Iger have the backing that he needs to win against Peltz?
--:-- Alex Weprin: Does he have what he needs?
--:-- Alex Weprin: I mean, Iger has lined up a murderer's row of supporters.
--:-- Alex Weprin: You know, Laureen Powell Jobs, the widow of Steve Jobs.
--:-- Alex Weprin: She's a philanthropist. She's an investor.
--:-- Alex Weprin: George Lucas, the Star Wars filmmaker who himself sold his company to Disney.
--:-- Alex Weprin: Perhaps most importantly, he's lined up the support of the families of Walt and Roy Disney.
--:-- Alex Weprin: The Disney family, actually, they don't get along very well. This is pretty well known.
--:-- Alex Weprin: And among the people that signed a letter of support for Iger was Abigail Disney, who's Roy Disney's daughter.
--:-- Alex Weprin: And she has actually very publicly, critically criticized him.
--:-- Alex Weprin: Abigail Disney is taking aim at the company that shares her name.
--:-- Alex Weprin: I had to speak out, she writes in today's Washington Post, about the naked indecency of chief executive Robert Iger's pay.
--:-- Alex Weprin: Pointing out that Iger made $65 million in 2018, more than 1,400 times the median pay of a Disney worker.
--:-- Alex Weprin: So to actually have the backing of the Disney family is a big deal.
--:-- Alex Weprin: All right. So Iger's got some powerful people, including the Disney family, and Peltz has got who in his corner?
--:-- Alex Weprin: Peltz has one big backer beside Perlmutter, and that's Institutional Shareholder Services.
--:-- Alex Weprin: It's a third-party proxy advisory firm.
--:-- Alex Weprin: They're very influential. They carry a lot of weight with the institutional investors.
--:-- Alex Weprin: And to the surprise of a lot of people, they actually said they think that Peltz should get a board seat.
--:-- Alex Weprin: On the Disney proxy fight, ISS, they are advising to vote for Peltz.
--:-- Alex Weprin: That was kind of a blow for Disney because they do carry a lot of weight with a lot of investors.
--:-- Alex Weprin: And so that does kind of—it gave Peltz oxygen at a moment when it felt like his activist fight was perhaps beginning to slow down.
--:-- Alex Weprin: So I think that's kind of the big ally that Peltz has on his side.
--:-- Alex Weprin: What does this mean?
--:-- Alex Weprin: So the reason that people care about Disney, even if they are not Disney shareholders or involved with Disney at the highest levels, is that Americans really do love Disney.
--:-- Alex Weprin: What does this fight mean for normal people who just really like Disney stuff?
--:-- Alex Weprin: So look, Disney is in the middle of this moment of transformation.
--:-- Alex Weprin: You know, Iger is trying to transform the company.
--:-- Alex Weprin: He's also trying to figure out who can succeed him as CEO.
--:-- Alex Weprin: Ultimately, if Nelson Peltz or Nelson Peltz and Jay Razulo get seats, they will have say in the future of Disney.
--:-- Alex Weprin: They will have a say in who replaces Iger as CEO.
--:-- Alex Weprin: It could change the company in a way that we don't entirely understand.
--:-- Alex Weprin: So I think that's the big thing.
--:-- Alex Weprin: This fight is for the future of Disney.
--:-- [Sound effects: Upbeat music plays]
--:-- Host (Noel King): That was Alex Weprin of The Hollywood Reporter. The billionaire Nelson Peltz claims credit for turning around some very large, very troubled companies.
--:-- Host (Noel King): He introduced new Snapple flavors.
--:-- Host (Noel King): He turned Heinz into a sponsor of the World Championship Hot Dog Eating Contest
--:-- Host (Noel King): How exactly does his brand of shareholder activism work?
--:-- [Sound effects: Upbeat music continues]
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--:-- Host (Noel King): Where'd the music go?
--:-- Host (Noel King): My name is Lauren Thomas, and I'm a reporter at The Wall Street Journal covering M&A and shareholder activism.
--:-- Lauren Thomas: What is shareholder activism exactly?
--:-- Lauren Thomas: Shareholder activism, it's an interesting concept in the world of Wall Street.
--:-- Lauren Thomas: But effectively, what typically these hedge funds do is they show up at companies.
--:-- Lauren Thomas: They're looking to push for change, agitate for changes that will ultimately boost the stock price.
--:-- Lauren Thomas: Because at the end of the day, these activists are trying to make a nice chunk of change themselves.
--:-- Lauren Thomas: So when Nelson Peltz articulates what he wants to do at Disney, he's saying, I want Disney to make more money to be more profitable.
--:-- Lauren Thomas: And I want to initiate that change.
--:-- Lauren Thomas: How exactly?
--:-- Lauren Thomas: Nelson Peltz is effectively arguing a couple things, but really at the core is that Disney needs to do more, particularly with the streaming operations, to really make those more profitable.
--:-- Lauren Thomas: Secondly, though, you know, a big piece of his argument in this proxy battle is succession planning.
--:-- Lauren Thomas: So you might recall when Bob Iger pretty abruptly announced that he would be returning to the company as CEO.
--:-- Lauren Thomas: He had left and he had handed over the reins to his successor, Bob Chapek, who was there for a brief period of time.
--:-- Lauren Thomas: And then suddenly Bob Iger is back and he says he's back and he's ready to fix things.
--:-- Lauren Thomas: I guess I had a sense of obligation.
--:-- Lauren Thomas: And I also wanted to help them not only transform the company during, I think, a pretty critical time, but I wanted to help them succeed at succession.
--:-- Lauren Thomas: A big part of Nelson's argument is that Disney just hasn't been able to get succession planning right, and he's worried that the company just won't be quick to find a new successor to Iger.
--:-- Lauren Thomas: What does Nelson Peltz know about turning businesses around?
--:-- Lauren Thomas: Tell us about this man.
--:-- Lauren Thomas: So I think it's worth pointing out, I mean, like, you know, a Carl Icahn, for example, Nelson Peltz is certainly a big name in the world of activism, arguably one of the biggest, most well known.
--:-- Lauren Thomas: He's really been at this for decades.
--:-- Lauren Thomas: He really started out, his bread and butter has always been a consumer, you know, so he, back in the day, was working at his dad's food distribution business, ended up kind of turning that around and helping sell it.
--:-- Lauren Thomas: Then he acquired Snapple, the beverage company back in the day with his business partner, ended up making a pretty nice payday a couple of years later when they sold that.
--:-- Lauren Thomas: Snapple made from the best stuff on earth.
--:-- Lauren Thomas: Come around to 2005.
--:-- Lauren Thomas: And that's when the try-in that we all know today was formed with two other business partners.
--:-- Lauren Thomas: And that's really when Nelson Peltz started to make these big splashes in companies, one of their early investments was in Heinz, now known as Kraft Heinz, since gone through some M&A itself.
--:-- Lauren Thomas: But he was really pushing for cost cuts there.
--:-- Lauren Thomas: When we get on a board at Tri-An, we're interested in having management and the board to wear bifocals.
--:-- Lauren Thomas: The near term is important, but to really have your sights set on the long term.
--:-- Lauren Thomas: What is the objective? What's the target?
--:-- Lauren Thomas: Share it with your share owners and tell us the gates that you're going to go through to get there.
--:-- Lauren Thomas: He later waged a proxy battle at DuPont, which ended up merging with Dow.
--:-- Lauren Thomas: He also waged a proxy battle at Procter & Gamble, another big consumer giant.
--:-- Lauren Thomas: So Nelson's background is really in these big well brands he shows up and kind of argues that in large part thanks to his kids He got 10 kids which I think is an important thing to know about him He really has a good read on changing consumer tastes and behavior, spanning multiple generations.
--:-- Lauren Thomas: And that is certainly something that people that have been around Nelson over the years have recognized.
--:-- Lauren Thomas: I think what Disney has argued, though, to bring this back to the Disney fight, is that he hasn't really done much in media before, media and entertainment.
--:-- Lauren Thomas: I think Nelson and Tryon argue that Disney is just like any of these other companies, you know, that he showed up in.
--:-- Lauren Thomas: It's a big household name.
--:-- Lauren Thomas: It's really a house of consumer brands is kind of their belief.
--:-- Lauren Thomas: But I think where Disney has pushed back and argued, of course, that, and we can get into that, but why Nelson shouldn't have a seat on the board is they kind of come at it as he doesn't really have experience at a company in their sector of the world.
--:-- Lauren Thomas: He has not articulated either a vision or even ideas that are of particular value to us.
--:-- Lauren Thomas: Now, some he has, but we were already working on those.
--:-- Lauren Thomas: But he's done, I mean, Heinz and DuPont and Dow, he's run the gamut.
--:-- Lauren Thomas: His investing has run the gamut.
--:-- Lauren Thomas: In the industries where he's done well, where he's helped turn a company around, or where his firm has helped turn a company around.
--:-- Lauren Thomas: How have they done it?
--:-- Lauren Thomas: What's the playbook?
--:-- Lauren Thomas: You know, it's often cost cuts show up and, you know, look for areas within the business where management just hasn't done as good of a job and maybe they just get too emotionally attached for things.
--:-- Lauren Thomas: I think that sometimes when it's easier for these outsiders to come in and push for change is because, you know, they're an outsider and especially when you get involved with these founder-led businesses.
--:-- Lauren Thomas: And so, you know, it's easier for them to show up and have a clearer look on the business and areas for improvement.
--:-- Lauren Thomas: So they do not necessarily wage these proxy battles often.
--:-- Lauren Thomas: Disney is actually only the fourth ever proxy fight that Tryon has waged in its two-decade-plus history.
--:-- Lauren Thomas: You know, they do it when they're really serious and they're really looking to make a difference.
--:-- Lauren Thomas: And that's what they're arguing that they can try to do if they get a seat at the table at Walt Disney.
--:-- Lauren Thomas: I'm thinking about an interview that he gave to the Financial Times that we talked about in the first half of our show.
--:-- Lauren Thomas: Pels was giving this interview to the Financial Times, and he suggested that he thought some of Disney programming had gotten too woke.
--:-- Lauren Thomas: And that raised a lot of questions about what exactly at Disney he wants changed.
--:-- Lauren Thomas: And I wondered whether that was like the rambling of a much older man or whether that was Disney has gotten too woke and therefore it's hurting the bottom line.
--:-- Lauren Thomas: And as an activist shareholder, I want to do something about that.
--:-- Lauren Thomas: What do you think has happened here?
--:-- Lauren Thomas: I do think it's more the latter.
--:-- Lauren Thomas: I do think that he feels that he is like speaking up in this proxy fight for a shareholder base that I'm sure he believes feels the same way.
--:-- Lauren Thomas: And speaking up for sometimes people that feel like they're a bit of a silent minority.
--:-- Lauren Thomas: But no, I think bottom line, anything that Tryon and Nelson is pushing for at Disney, they would view as helping the business just get on better financial footing, help the stock get back up.
--:-- Lauren Thomas: Arguably before Tryon showed up, you know, Disney had really been underperforming and there were a lot of shareholders and investors that had a lot of questions.
--:-- Lauren Thomas: And, you know, now they have announced a lot of changes and strategic initiatives in the past couple of months.
--:-- Lauren Thomas: Is that because Nelson showed up, you know, with some of that sped up maybe because they knew he was knocking at the front door trying to get in?
--:-- Lauren Thomas: That's a great question to be asked.
--:-- Lauren Thomas: But, you know, shares have rebounded some in the past couple of months.
--:-- Lauren Thomas: So that's an optimistic viewpoint, you know, for a lot of people that have been following this saga.
--:-- Lauren Thomas: All right. So the board vote is tomorrow.
--:-- Lauren Thomas: What's going to happen?
--:-- Lauren Thomas: What are you going to be looking out for?
--:-- Lauren Thomas: It really feels like it's down to the wire.
--:-- Lauren Thomas: And again, you know, for those of us who have been following for over 12 months now, you know, it feels like we've been just talking about this forever and now it's nearing an end.
--:-- Lauren Thomas: And, you know, the way that this plays out, you know, a number of votes have already come in.
--:-- Lauren Thomas: It's really tough to get a final read.
--:-- Lauren Thomas: And we typically don't get a great read on this until, you know, everything's said and done, the polls are closed, and the companies will ultimately issue some sort of guidance on what the vote's looking like.
--:-- Lauren Thomas: But with Disney, I think it's important to remember the makeup of their shareholder base, and that's what's making this proxy fight so unique.
--:-- Lauren Thomas: Think of my mom, your brother, the everyday average retail investor, an outsized proportion of Disney shares, over a third actually, which is pretty abnormal for a public company, are owned by these like everyday retail shareholders.
--:-- Lauren Thomas: And so that's very unique for a public company in general.
--:-- Lauren Thomas: But then when you've got a proxy fight, it's really unique and can make for some interesting twists and turns because, you know, it's people like you and I that are, you know, maybe looking to cast a vote, not just the big institutions like a BlackRock, Vanguard, Fidelity.
--:-- Lauren Thomas: And so So the meeting itself will happen, the polls will close, and then it could take a couple days to really get a good look at what the tally is going to be.
--:-- Lauren Thomas: But really, at this point, it's still so up in the air, I think.
--:-- Lauren Thomas: But people are going to be watching very closely.
--:-- [Theme music fades in]
--:-- Host (Noel King): That was Lauren Thomas of The Wall Street Journal.
--:-- Host (Noel King): Hadi Muagdi and Jesse Alejandro Cottrell produced today.
--:-- Host (Noel King): Matthew Collette edited.
--:-- Host (Noel King): Patrick Boyd engineered.
--:-- Host (Noel King): Laura Bullard fact-checked.
--:-- Host (Noel King): The rest of our team includes Halima Shah, Avishai Artsy, Miles Bryan, Victoria Chamberlain, David Herman, Amanda Llewellyn, and my co-host, Sean Ramos-Furr.
--:-- Host (Noel King): Also, supervising editor Amina El-Sadi and EP Miranda Kennedy.
--:-- Host (Noel King): We use music frequently and today by Breakmaster Cylinder.
--:-- Host (Noel King): Today Explained is distributed by WNYC, and the show is a part of Vox, which is completely free thanks in part to contributions from listeners just like you.
--:-- Host (Noel King): You can join us at vox.com slash give.
--:-- Host (Noel King): I'm Noelle King.
--:-- Host (Noel King): This has been Today Explained.
--:-- Host (Noel King): Thank you.
