Disney published a detailed breakdown of the timeline of events that led to Bob Chapek’s exit as CEO, former CEO Bob Iger’s return to the position and activist investor Nelson Peltz’s attempt to join the company’s board in a proxy filing Tuesday.
Per Disney, “The summary below details the significant contacts between the Company and the Trian Group beginning in July 2022 through the date of this proxy statement. This summary does not purport to catalogue every conversation of or among members of the Board, the Company’s management, the Company’s advisors and representatives of the Trian Group and their advisors relating to the Trian Group’s solicitation.
On July 11, 2022, Nelson Peltz, the Chief Executive Officer of Trian Management, met Bob Chapek, then the Chief Executive Officer of the Company, over lunch at the Disney Hotel New York – The Art of Marvel at Disneyland Paris.
On July 15, 2022, Mr. Peltz called Amy Chang, a member of the Board, to convey that he was supportive of Mr. Chapek, and believed he could be helpful to him if he joined the Board.
Also on July 15, 2022, Isaac Perlmutter, an employee and shareholder of the Company who currently serves as Chairman of Marvel Entertainment, and previously served as Chief Executive Officer of Marvel, called Mr. Chapek and Christine McCarthy, the Company’s Senior Executive Vice President and Chief Financial Officer, to encourage consideration of Mr. Peltz as a director. Mr. Perlmutter also called Safra Catz, the Chair of the Company’s Audit Committee, to advocate for adding Mr. Peltz. Mr. Perlmutter said he and Mr. Peltz supported Mr. Chapek, and that adding Mr. Peltz to the Board would help Mr. Chapek counter recent headwinds he had faced, solidify his position as CEO, and preempt any other potential shareholder nominations of director nominees at the 2023 Annual Meeting. He said without Mr. Peltz there, former executives including Mr. Iger, would be back at Disney.
On July 16, 2022, Mr. Peltz called Mr. Chapek to express his desire to join the Board. Mr. Peltz noted that he did not hold an investment in the Company. He said if he was added to the Board he would then make an investment in the Company. On the same day, Mr. Perlmutter and Mr. Peltz had an hour long conversation with Ms. Catz to advocate for Mr. Peltz to be added to the Board.
On July 18, 2022, Mr. Perlmutter called Horacio Gutierrez, Disney’s Senior Executive Vice President and General Counsel, to continue to advocate for Mr. Peltz to be added to the Board.
In August 2022, Dan Loeb, Chief Executive Officer and Chief Investment Officer of Third Point, contacted Mr. Chapek and Ms. McCarthy and noted that Third Point had recently reinvested in Disney and shared his views of the Company’s strategy. In addition to engagement on the elements of his thesis, Mr. Loeb also offered suggestions of potential independent director candidates for consideration. In early August, Mr. Peltz also contacted Ms. McCarthy several times to reiterate his desire to join the Board, also noting they had served together on the Procter & Gamble board. Third Point made its investment thesis public in mid-August and continued to engage with Mr. Chapek and Ms. McCarthy as to potential independent director candidates.
On August 29, 2022, at a special meeting of the Board called for this purpose, the Board discussed the various approaches from Mr. Peltz, Mr. Perlmutter and Mr. Loeb, the thesis put forward by Third Point, the lack of a thesis put forward by Mr. Peltz and the status of the Board’s ongoing refreshment process and independent director search, which included consideration of potential candidates to succeed Susan Arnold, the current Chairman of the Board, who would reach the 15-year term limit for non-management directors under Disney’s Board tenure policy at the 2023 Annual Meeting. The Board determined to continue discussions with Third Point regarding potential independent director candidates and other matters.
On September 21, 2022, Mr. Chapek, Ms. McCarthy and Alexia Quadrani, the Company’s Senior Vice President, Investor Relations, met with Mr. Loeb and other Third Point executives at their offices in New York City to discuss his investment thesis.
On September 28-29, 2022, the Board discussed the status of discussions with Third Point and the ongoing Board refreshment process including in respect of potential successors to Ms. Arnold as Chairman.
On September 29, 2022, the Company appointed Carolyn Everson as a director, and following a productive engagement process, entered into a support agreement with Third Point, pursuant to which, in consideration of the Company’s appointment of Ms. Everson
as a director and her inclusion as a director nominee for the 2023 Annual Meeting, Third Point agreed to customary standstill, voting and other provisions through the 2024 Annual Meeting.
In October and November, members of the Board met numerous times to discuss governance and leadership matters, including concerns that had been emerging about Mr. Chapek’s leadership and strategic vision and whether he should continue as CEO, as well as succession candidates for the Chairman role. The Board had approached Mark Parker, a member of the Board for seven years and the current Executive Chairman of NIKE, to ask him to consider taking the Chairman role, and those discussions were ongoing as was consideration of other potential candidates from the Board. The Board viewed Mr. Parker as highly qualified for the role because of his business acumen and experience as CEO of NIKE, which is built around creative talent and a brand experience, as is Disney; his expertise gained from building a highly successful direct-to-consumer business; and his successful transition from CEO to Executive Chairman several years earlier.
On November 8, 2022, the Company conducted its full fiscal year and fourth quarter 2022 earnings call. Afterward, Mr. Peltz called Mr. Chapek to inform him that the Trian Group had acquired a position in the Company totaling approximately $500 million, with the intent of increasing this position to up to $1 billion. Mr. Peltz subsequently called Mr. Chapek and informed him that the Trian Group intended to nominate a slate of nominees at the 2023 Annual Meeting unless the Company agreed to add Mr. Peltz to the Board.
On November 10, 2022, Mr. Perlmutter again reached out to Ms. Catz, Mr. Chapek, Ms. McCarthy and Mr. Gutierrez to advocate for Mr. Peltz to be added to the Board.
Following the Company’s earnings call, Mr. Peltz invited Mr. Chapek to have lunch with him in Palm Beach, Florida. On November 12, 2022, Mr. Chapek met separately in Palm Beach with each of Mr. Peltz and Mr. Perlmutter, and they continued their discussions to encourage the addition of Mr. Peltz to the Board and again expressed support for Mr. Chapek.
In the post-earnings call time period, Mr. Peltz also had several conversations with Ms. McCarthy in which he repeated that if he was not added to the Board, he would run a proxy contest. Ms. McCarthy offered to meet with Mr. Peltz in New York City on November 28, 2022, along with Mr. Gutierrez, but Mr. Peltz was not available then and asked for November 23, 2022.
On November 17, 2022, at a special meeting of the Board called for this purpose, the Board met to discuss the ongoing approaches from Mr. Perlmutter and Mr. Peltz. The Board determined that to ensure that the Board was able to guide the discussions with Mr. Peltz, from that point forward, Ms. McCarthy and Mr. Gutierrez would be the designated points of contact with Mr. Peltz and should both be involved in any further conversations with him.
On November 20, 2022, the Board made the decision to terminate Mr. Chapek and appoint Bob Iger as the Company’s Chief Executive Officer and as a member of the Board. The Company announced these changes on the evening of November 20, and following such announcement, it became public in various news articles that Mr. Peltz had amassed a stake of over $800 million in the Company, was seeking a seat on the Board and, according to some news outlets, did not support Mr. Iger’s return as CEO.
On November 23, 2022, at Mr. Peltz’s request, Mr. Iger, Ms. McCarthy and Mr. Gutierrez had a video meeting with Mr. Peltz, his son Matthew Peltz (“Mr. M. Peltz”), and Brian Schorr of the Trian Group. Mr. Peltz reiterated the Trian Group’s intention to mount a proxy contest if Mr. Peltz was not added to the Board. During the conversation, Mr. Iger and Ms. McCarthy inquired as to whether Mr. Peltz would be open to exploring a mutually acceptable independent director to add to the Board, and Mr. Peltz responded that he would only accept the addition of himself to the Board. Mr. Peltz did not provide any actionable ideas for Disney other than his Board candidacy. Mr. Iger told Mr. Peltz that this would ultimately be a Board decision and his request would be reviewed with the Board.
Following the conversation with Mr. Peltz, Mr. Gutierrez called Mr. Schorr to inform the Trian Group that there was a regularly scheduled meeting of the Board on November 30, 2022, and the Board would be discussing these matters. At such meeting, the Board discussed the engagement with Mr. Peltz and Mr. Perlmutter over the last five months and Mr. Peltz’s request to join the Board, concerns about introducing further disruption to Disney’s management team nine days into Mr. Iger’s return and the need to provide runway for Mr. Iger to address the challenges in the media business environment. The Board also focused on the fact that Mr. Peltz
did not have relevant media or technology industry experience to offer that would further that key objective for the Company. The Board concluded not to offer Mr. Peltz a Board seat but to continue to explore whether there could be a mutually acceptable outcome as had been reached with Third Point. Mr. Gutierrez communicated the Board’s decision to Mr. Schorr.
On November 28, 2022, Mr. Iger held a “town hall” meeting with Disney employees where he articulated some of his key priorities, including re-organizing the Company to restore control, responsibility and accountability to the Company’s creative businesses; driving profitability in streaming; and reducing costs across the Company.
On December 1, 2022, a representative from the Trian Group delivered a letter to Mr. Gutierrez, informing Disney that the Trian Group intended to nominate Mr. Peltz (the “Trian Group Nominee”) for election as director to the Board at the 2023 Annual Meeting in opposition to the nominees recommended by the Board. The notice also purported to nominate Mr. M. Peltz as an alternate nominee for election as director to the Board at the 2023 Annual Meeting in the event that the Trian Group Nominee is unable (due to death, disability, ineligibility or otherwise) or becomes unwilling to serve as a director.
On December 15, 2022, a representative from the Trian Group sent Mr. Gutierrez a demand letter pursuant to Section 220 of the Delaware General Corporation Law (the “DGCL”) requesting that the Trian Group be provided certain information regarding the Company’s shareholder base.
On December 20, 2022, Mr. Gutierrez and Mr. Schorr spoke twice regarding various matters. During their conversation, Mr. Schorr complained that Mr. Peltz had not been invited to present to the Board. Mr. Gutierrez responded that the Trian Group had not made a request to present to the Board, but now that they had he would canvass the Board to make an arrangement. Mr. Gutierrez subsequently advised Mr. Schorr that the Board would convene after the holidays for a special Board meeting on January 10, 2023, to meet with Mr. Peltz and hear his presentation.
Also on December 20, 2022, Mr. Peltz and Mr. Iger spoke. Mr. Peltz informed Mr. Iger that if he was not given a Board seat he intended to mount a proxy fight that would challenge Mr. Iger’s legacy.
On December 22, 2022, legal counsel for the Company sent a response to legal counsel for the Trian Group acknowledging receipt of the Trian Group’s demand pursuant to Section 220 of the DGCL and stating that the Company would comply with the requests in the demand letter once the Trian Group agreed to customary confidentiality and expense reimbursement arrangements.
On January 8, 2023, legal counsel for the Trian Group sent Mr. Gutierrez the materials that Mr. Peltz intended to present to the Board, which were transmitted to the Board.
On January 10, 2023, a joint meeting of the Board and the Governance and Nominating Committee was held for Mr. Peltz, Mr. M. Peltz and Ryan Bunch of the Trian Group to deliver a presentation regarding the Trian Group’s assessment of Disney. The Trian Group representatives were in Burbank at Disney’s corporate offices with Mr. Iger, Ms. McCarthy, Mr. Gutierrez and other members of the executive leadership team and the other members of the Board participated by video.
Mr. Peltz opened the presentation and reviewed his history and experience with Heinz, DuPont and Procter & Gamble, his negative view of the acquisition of 21st Century Fox, and his overall assessment of Disney as underperforming under Mr. Iger’s leadership. Mr. M. Peltz then reviewed Disney’s financial performance under certain metrics that he asserted established Disney’s underperformance over Mr. Iger’s and the Board’s tenure. Mr. Bunch then reviewed certain corporate governance matters and provided observations on the Board’s decisions in such matters.
At the conclusion of the session, Mr. Peltz said he did not want to fire Mr. Iger but he did want to be in the Board room. Mr. Peltz re-iterated the Trian Group’s intention to initiate a proxy contest if Mr. Peltz was not added to the Board and that he wanted the Board’s answer by the next morning. Ms. Arnold thanked the Trian Group representatives for their presentation and said that the Board would discuss the content of their presentation and the request for Mr. Peltz to be added to the Board.
Following the departure of the Trian Group representatives, the Board (including all members of the Governance and Nominating Committee) discussed their presentation as well as Mr. Peltz’s candidacy, including in executive session with and without Mr. Iger
present. After Mr. Iger left the meeting, the Governance and Nominating Committee and then the Board, by unanimous vote of all directors present, determined not to recommend Mr. Peltz and to instead recommend the Company’s existing directors as nominees to be included in the Board’s slate of director nominees for the 2023 Annual Meeting (other than Ms. Arnold who was ineligible to stand for re-election to the Board).
In deciding not to recommend Mr. Peltz, the directors considered a number of factors, including that despite months of engagement, Mr. Peltz had not, and the Trian Group representatives at the meeting had not, actually presented a single strategic idea for Disney, that their assessment of Disney seemed oblivious to the secular change that had been ongoing in the media industry, as well as the impact of the pandemic on each part of the Company’s business from production, to exhibition, to leisure travel. The Board also considered that Mr. Peltz’s experience, as recounted in his own presentation, was primarily in commodity consumer packaged goods businesses and not the media or technology sector nor any other industry that is driven by creative talent or creating unique customer experiences. The Board considered the many changes Mr. Iger was implementing, Mr. Iger’s deep knowledge of the media industry and track record of having transformed Disney through the acquisitions of Pixar, Marvel and Lucasfilm, the ongoing imperative to continue to realize the benefits of the Fox acquisition, whose prospects had been delayed by the pandemic impact, and concern about disruption to Mr. Iger and the management team at a crucial juncture for the Company if Mr. Peltz were added to the Board. Among the drivers for such concern was the combination of Mr. Peltz’s lack of media or technology industry experience coupled with his repeated focus in his presentation on successful approaches from businesses like Heinz, Procter & Gamble and DuPont which have little in common with Disney. In determining to recommend the nominees in the Board’s slate, the Board considered, among other factors, the ability of the prospective nominees to represent the interests of the shareholders of the Company, the extent to which the prospective nominees contribute to the range of talent, skill and expertise appropriate for the Board and the extent to which the prospective nominees help the Board reflect the diversity of the Company’s shareholders, employees, customers and guests and the communities in which it operates.
On January 11, 2023, Ms. Arnold and Mr. Gutierrez called Mr. Peltz to thank him again for his time and that of Mr. M. Peltz and Mr. Bunch the previous day and express that although the Board did not agree with his data sets utilized to assess Disney’s financial performance or his perspective on the Company, the Board wanted to find a path for constructive engagement that would avert a proxy contest. Ms. Arnold noted that Mr. Iger had only returned to the Company as Chief Executive Officer seven weeks earlier, there were significant changes occurring at the Company and that the Board believed the management team under Mr. Iger’s leadership should be afforded time to execute and was concerned about disrupting management from the task ahead with the addition of Mr. Peltz as a director at this time. Ms. Arnold said that in the hope of reaching a compromise, the Company would be prepared to enter into an agreement with Mr. Peltz that would offer him the opportunity to receive nonpublic information and meet with management and the Board quarterly to discuss strategy and other issues so that they could establish some mutual understanding about the Company’s business and strategy. Ms. Arnold noted such an arrangement had been successful between the investment firm ValueAct and a large public company she identified to Mr. Peltz. Ms. Arnold said each party could reassess the arrangement prior to the opening of the director nomination window for the 2024 Annual Meeting, at which time the Trian Group would be free to choose instead to mount a proxy contest. There was no reference or offer of a board observer seat and the word observer was never uttered by Ms. Arnold or Mr. Gutierrez. Mr. Peltz rejected this offer and said he would not be muzzled and that the Trian Group would be proceeding to a proxy contest immediately.
On January 11, 2023, the Company issued a press release announcing receipt of the Trian Group’s nomination and the Board’s recommendation that shareholders vote for the Company’s slate of director nominees. The press release also announced that Mark Parker would succeed Ms. Arnold as Chairman of the Board following the 2023 Annual Meeting. The Trian Group also issued a press release announcing the nomination of the Trian Group Nominee to the Board.”