Disney investors pay twice for half-leadership

NEW YORK (Reuters Breakingviews) - Walt Disney’s poor succession planning is costing its shareholders twice over. The entertainment giant has earmarked around $60 million in pay and severance for former Chief Executive Bob Chapek and his replacement Bob Iger – who is returning for a second go as CEO. It’s a princely sum, at odds with a dysfunctional kingdom.

Executive Chairman of the Walt Disney Company, Bob Iger arrives at the world premiere for the film 'The King's Man' at Leicester Square in London, Britain December 6, 2021.

Chapek, who was fired without cause in November a mere six months after the board renewed his contract, is getting about $20 million in his termination agreement, according to Disney’s annual filing published on Tuesday. That includes salary, pro-rated bonus and restricted stock units. Since Chapek had fulfilled his term as chief executive at the end of Disney’s fiscal year ending September 2022, he gets a compensation package worth $24 million too, giving a grand total of roughly $45 million.

Then there’s Iger, who both picked Chapek in 2020 and replaced him in 2022. The former-current Disney boss was awarded$15 million in compensation last year. That takes Disney to $60 million in total pay for the duo. One comfort is that Iger is this year in line for a more modest $28 million, a little more than half of what he got in 2019.

Lesser companies pay more, it’s true. Warner Bros Discovery, a fraction of Disney’s size, awarded its boss David Zaslav a $247 million compensation package in 2021. But a better comparison would be Apple Chief Executive Tim Cook. He is in line for a downsized $49 million compensation package this year, after the company’s board halved his pay from the previous year, in a nod to keeping shareholders happy. Apple is worth 11 Disneys in terms of market value.

Disney’s challenges jar with its generosity. Iger, as former chairman, is partly to blame for the unnecessarily abrupt changing of the guard that saw Chapek come and then go. Activist investor Nelson Peltz is lobbying for a seat on the board, and all the while the media sector is heading into an advertising recession. Shareholders will get a non-binding say on the company’s pay at its upcoming annual meeting. A “for” vote would require Disney-esque levels of magical thinking.

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Walt Disney allocated $24 million in compensation to former Chief Executive Bob Chapek for the fiscal year ending September 2022, according to its annual shareholder filing published on Jan. 17. Chapek was fired in November. He also received $6.5 million in base salary, a pro-rated bonus of $1 million and $12.7 million in restricted stock units under his termination agreement.

Chief Executive Bob Iger, who both succeeded Chapek and preceded him as Disney CEO, was awarded a compensation package of $15 million for the 2022 fiscal year, the proxy filing shows. For the 2023 fiscal year, his target compensation package in 2023 is approximately $28 million.

Disney urged shareholders to vote for its slate of directors at the company’s upcoming annual meeting. Activist investor Nelson Peltz, through his company Trian Fund Management, has challenged Disney by seeking a seat on the board.


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