Activist Investor Jockeys to ‘Restore Magic’ at Disney Amid Proxy Fight

House of Mouse beware the machinations of Batman and Robin.

Activist investor Nelson Peltz, CEO of Trian Fund Management and a longtime agitator of brand-name corporations, has launched a campaign to “restore the magic” at the Walt Disney Company. Key to Peltz’s plan are seats on Disney’s board of directors for himself and former Disney Chief Financial Officer Jay Rasulo. Peltz says the duo will serve as a corporate version of the Caped Crusader and Boy Wonder – unafraid to ask the questions necessary to turn around Disney’s fortunes.

Comic book aficionados might wonder why Peltz chose characters from DC Comics, a Warner Bros. Discovery Inc. property, to symbolize his role in the battle, rather than fictional inhabitants of the Disney-owned Marvel universe. Chalk it up to an oversight, as Peltz and his company, which controls nearly $3 billion worth of Disney shares, have spent recent weeks detailing the shortcomings of Disney CEO Bob Iger. Additionally, they’re drumming up publicity for a forthcoming white paper that will purportedly provide numerous suggestions for improvements at Disney, such as simplifying its management structure and forcing the company to release more details about cost reductions and budgeting. In discussing his plans for the company, Peltz even detailed a reconnaissance trip that he and several Trian employees recently took to Disney World in Florida.

“All the employees were smiling, and that’s probably in large part because they didn’t own any Disney stuff,” Peltz said. “That’s the problem here. This company is just not being run properly. The board oversight is awful.”

According to Trian’s website RestoretheMagic.com, the firm would right Mickey Mouse’s ship by working with management to “help drive Disney’s outperformance with tangible targets, goals, and true accountability.” Its objectives for the company sound like a corporate reformer’s version of a first-time visitor’s to-do list at a theme park. They include:

• Adopting “best-in-class” governance;
• completing Iger’s succession as CEO;
• aligning management pay with performance;
• achieving “Netflix-like” profit margins of up to 20% by fiscal year 2027;
• creating a new business plan for ESPN; and
• reclaiming dominance at the box office with “leading economics.”

Unsurprisingly, Disney and Peltz disagree over whether the company has underperformed in recent years. For example, Disney noted in its 2022 proxy statement that its 10-year total shareholder return outperformed the S&P 500’s by 192%. For its part, Trian pointed out in its proxy statement that the company’s total shareholder return fell below industry peers and the S&P 500 during the one-, three-, five-, and ten-year periods ending on October 6, 2023. And proxy advisory firm Glass Lewis said in its 2024 Benchmark Policy Guidelines that it “may recommend voting against directors who served throughout a period in which the company performed significantly worse than peers and the directors have not taken reasonable steps to address the poor performance.”

In fact, Trian was reportedly planning to meet with proxy solicitors Glass Lewis and ISS this month. That would be followed by a campaign of lobbying Disney shareholders to rally support for its plan.

Disney in January announced its own nominees for positions as directors on its board, consisting of current members. The company also released a statement recommending that shareholders not vote for Peltz or Rasulo for seats on the board. Complicating matters, activist investor Blackwells has now entered the fray, recommending three of its own new directors for the Disney board to help the company “explore all strategic possibilities with cold eyes.”

Despite the pushback, Peltz seems convinced he’s Disney’s Fairy Godmother. We should find out in a few months if shareholders believe he can transform the company.