By Richard Torrenzano
The challenging nature of marketing products and services to the masses, managing investor sentiment and reaction, and playing in the political sandbox created turbulence and was eventually catastrophic for former Disney CEO Bob Chapek.
On Nov. 20, Disney’s Board made a surprising announcement. It fired Chapek (Bob #2) and appointed its former CEO of 15 years, Bob (#1) Iger, for a “pivotal period.”
So blindsiding was the board’s declaration, that Bob #2 canceled at the last minute his appearance at an Elton John farewell concert that same night, which was live streamed on Disney, from Dodger Stadium in Los Angeles.
Speaking to a Town Hall meeting Monday morning with about 400 invited in attendance and broadcast to employees globally, Bob Iger, the boomerang CEO tried to reset Disney’s “future world” after a week of uncertainty.
He uplifted employee enthusiasm–but delivered the need to cut costs, maintained a hiring freeze in effect since Nov. 1, empowered creative teams, and prioritized profitability over growth.
Iger also said he would reorganize the corporate structure and was not looking to make any big-ticket acquisitions. The lack of specificity seemed to push Disney Stock ending down about 3% for the day.
Obviously, the board got fed up and ditched Chapek (Bob #2) over staggering and steady stumbles and tumbles.
The last straw was the dismal fourth quarter earnings and investor call. It was so poorly positioned by the company that during CNBC’s Squawk Box, Jim Kramer (also an acquired taste) rightly called for the firing of CEO Chapek on air.
Specifically, he said Chapek was “delusional” in his characterization of the quarter. Disney streaming showed a $1.5 billion loss, missing Wall Street expectations, nearly double the loss of the previous year.
Declining equity value
In the last year, under Bob Chapek leadership, investors voted with their feet, dramatically devaluing Disney stock from $154.00 on Nov. 19, 2021, to less than $92.00 on Nov. 18, 2022, a difference of approximately -40% (compared to the Dow loss of about 5% for the same period).
Activist investors appear
Train Fund Management, led by Nelson Peltz, after good analysis and smelling blood in the water, assembled a sizable equity position of $800 million in Disney and is seeking a board seat. Activist investor Dan Loeb’s Third Point took a new position, after liquidating stock ownership earlier this year.
Public relations disaster
Whether or not you agreed with Disney’s position on Florida’s school law, there is little dispute that Disney’s late actions were bungled–and drew enormous attention and trouble.
Disney became the case study on how to quickly disconnect from stakeholders. Its self-inflicted wounds continued, as Disney seemed to not recognize the need to stop, evaluate and only then, proceed.
Disney, by not de-escalating, created an ongoing hornet’s nest of trouble. In a matter of days, the Florida legislature stripped Disney of special privileges in place for almost a half century, which had granted Disney quasi-governmental authority over its Florida properties.
Additionally, there are quiet discussions in Washington about Disney’s expiring copyrights, which could have an impact on future earnings and positioning. Management and board agita has meant time away from running the business to focus on dealing with a very public crisis, continuous negative national media and social commentary, as well as new significant costs, particularly legal.
Lost fans and parent goodwill
Reactions could impact park attendance, streaming services, as well as other revenue streams.
Several increases in park admissions prices have changed visitor demographics. Eliminating benefits in Disney World and Disneyland and implementing new systems have made it difficult for loyalists to use annual passes.
Disney+ and ESPN charges have also increased. A new ride, Star Wars: The Galaxy’s Edge, did not live up to company hype. And just this week, Disney’s animated movie Strange Word was their second flop of the year, following Lightyear.
Rumors of discontent
No surprise, with all that was happening, news reports began surfacing that Disney executives were not happy with Chapek’ s strategic direction. In the background, these executives had personal pain, considering how much they lost in their company stock options value.
All this is telling. Brands can be bruised–and being an iconic brand is not beyond being markedly damaged in a short time.
While all this was happening, Bob Iger’s saw it destroying his outstanding performance of growth at the Mouse House. And for the first time in 25 years he was on the outside looking in. Or was he?
Bob Iger, was named president of Disney in 2000 and succeeded Michael Eisner as CEO in 2005, until his contract expired in 2020. He then served as executive chairman until his retirement from Disney in December 2021.
Iger’s contract was extended before: once in 2017 after he had announced a 2018 retirement–and then in December 2019 with a 2021 expiration.
Note that he was executive chair, not non-executive chair–an important distinction. An executive chairman has a full-time position that leads the board and has a direct role in day-to-day management. A non-executive chairman chairs the board and provides advice to a chief executive and others but stays out of management.
So do you think Bob Chapek was happy with this arrangement? How about the ongoing relations between the two Bob’s? Agreeable and comfortable?
Think about it, Bob Iger, after 25 years, in less than a year of retirement, really never left the company, knew the board as CEO and as chair, and had to watch Bob Chapek’ s fumbling and stumbling.
Purported insiders who spoke to the media went to great lengths to give a behind-the-scenes story, according to which all this change at the board level happened in two days.
“The lady doth protest too much, methinks” is a glaring comment about human behavior from the play Hamlet by William Shakespeare. What I think really happened: Bob Iger saw his baby being destroyed and orchestrated his return.
People who have been around deals long enough know things do not happen in days, but weeks–and take months to position and set up.
To help get the company back on track, returning CEOs are not that unusual. Some have been successful, some not. Since 2010, 22 CEOs returned to their old positions according to executive search firm Spencer Stuart.
So, who’s to blame? Well, obviously Chapek’s disastrous strategy and leadership–but also the board and Iger, who put Chapek in place as CEO.
Iger was an outstanding CEO for investors, employees, customers, the industry–pretty much all constituents. However, he and the board might have failed in their responsibility to groom and appoint a successful successor.
With Bob Iger in charge, shareholders seem to be relieved and focused on the future. But there are enormous strategic challenges and priorities Iger faces in the next year:
Wall Street investors notoriously have little patience and demand instantaneous results. Bob #1 has some runway–but he will be expected to deliver on these and other issues for various stakeholders.
What will Disney look like–or will it even exist in its current structure–when the new-old CEO Bob Iger’s two-year contract is complete? Read my next article
Richard Torrenzano is the CEO of The Torrenzano Group, which helps organizations take control of how they are perceived. For nearly a decade, he was a member of the New York Stock Exchange management (policy) and executive (operations) committees. Richard is a sought-after expert and leading commentator on financial markets, brands, crisis, media, and reputation.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.