The Compound and Friends - The Battle for Disney With Professor Jeffrey Sonnenfeld

Episode Date: February 6, 2024

Join Downtown Josh Brown and Professor Jeffrey Sonnenfeld for a live discussion about the coming shareholder fight for the soul of Disney. Will Nelson Peltz and the activist hedge funds have their way or will CEO Bob Iger hold them at bay? Who should and should not be on the board of directors of Disney this year? What will the outcome of the proxy vote mean for stockholders? Hear from one of the leading authorities on shareholder activism and corporate board, Yale Professor Jeff Sonnenfeld. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

All right, all right. It's downtown Josh Brown. Welcome to the compound. Tonight we are doing the battle for Disney. And man, do I have an illustrious guest to help me figure out what's going on. So I assume many of you out there are shareholders in Disney. Even if you don't know you are, you probably are by virtue of your mutual funds, your index funds.

But many of you are shareholders and you have been for a long time. And this has been a battleground stock and it hasn't always been that way. But right now there's a lot happening. And here to talk about it is Professor Jeff Sonnenfeld. Jeff is currently the Senior Associate Dean for Leadership Studies and the Lester Crown Professor in Management Practice at the Yale School of Management. Jeff is also the founder of the Chief Executive Leadership Institute, a nonprofit educational and research institute focused on

CEO leadership and corporate governance. Professor, thank you so much for joining us this evening. I appreciate it. Oh, wait, we're muted. Mute, mute, mute. And now you're. Oh, great. Now we got it. I'm never shy either. So that was a moment of frustration. He said that's the most silence we're going to get out of Jeff the entire experience, I promise you. I know. So many people would love to mute me too. I think my wife must have hit that button when I wasn't looking. considered one of the foremost authorities on things like CEO succession and shareholder activism and how boards of directors deal with activists. And you've written eight books, over 100 articles. You've got a column at Fortune. People have seen you on CNBC. Is this particular battle something that you feel has been a long time coming?

Or were you surprised? Because a year ago, it looked as though Disney had fought off Nelson Peltz and Tryon, and he was going to go away, and the company was going to right the ship. And then a year later, here we are back with, I think, an even more heated version of what we had seen in 2022. What's your take on how we got here? The take is, and by the way, thank you for that fantastic CV bio sketch. I think a third of your viewers, listeners have already decided to hate me. In fact, I started to dislike myself a bit as you went through those credentials. Thank you so much for those kind words.

This is an incredibly special time of all things. I mean, it's amazing you have this time for tonight as the shareholders, of course, will vote in April. And it's a pivotal point. They have a clear choice between the real wizard of the Magic Kingdom and this kind of fake illusionist that's smoke and mirrors. With earnings coming out, I guess, this Wednesday after market close, February 5th, that's now, is the date of record for anyone who wants to vote at this annual meeting in that first week of April. So this was an especially, I think, exciting moment. And it's a grudge match, a one-sided grudge match. It's a vendetta motivated by the grandiosity and the lack of much for Nelson Peltz to do. You know, if we weren't being recorded,

I would suggest that maybe somebody should suggest that this octogenarian pick up a shuffleboard or bingo or something. But I wouldn't say something like that because I'm a longstanding member of the National Council on Aging and I don't want to make an ageist comment or we won't have any presidential candidates yet.

But I think this is a guy who has time to kill and he's leveraging other people's money. Jeff, can I, so can I, well, no. So I want to, I want to give people some idea about maybe from the other, from the other side, why there's an activist. There are multiple activists in the stock, why they're there to begin with. So Bob Iger became the CEO in 2005 and had one of the greatest runs of all CEOs of this company going back to Walt Disney himself. I believe the stock appreciated something on the order of 600%. And in that same period of time, the S&P 500 looked more like 200%. And Iger really went out on top. In 2019, they were talking about doing Disney+, the pandemic hit.

And before the end of that year, they had really ramped it into the second largest streaming platform. And they launched it globally. And it was a huge success. And Bob Iger had stepped down, handed the reins to the successor. And it looked like he got the happy ending after his, I don't know how many years that is, 16 year tenure as CEO. But it didn't go that way. And the company ended up struggling in the post pandemic period because building out that streaming service was really expensive. And then of course, questions about

the linear networks and ESPN and the stock got cut in half. And that is the, that is the, the, the, the reason why we have activists in the stock. And that's the reason why anyone is listening to them. That's a fair, you would say that that's a fair setup for, for what's happened so far. That, that absolutely is a fair setup. That's why in fact, Iger came back in.

That's true too. Everything that you just said about the underperformance of those two years after he left were the two years after he left. He is, you know, Iger had, I don't know, 16 or 17 of the biggest box office, all-time box office movies in 2019. He had like a dozen or so, maybe a dozen and a half billion dollar plus films. Just that one year alone, his last year, Iger didn't cross a billion in any film. And all those disasters of this past summer, Star Wars or

whatever, it's JPEC who greenlighted them. So that's why Pelts came in. He created a highly centralized structure, choking off decision-making. People were frustrated that it was destroying the creative zest of the place. But as soon as Iger came in, three days, Josh, three days after Iger came in, uh, Peltz was already calling him nonstop, uh, you know, no less than 24 times, uh, last year that he, he wouldn't take no for an answer 24 times. He wanted to push his way on the board. What does this guy have to bring to the board? He has no expertise in this area. He's offered not a single idea. Uh, and it just complaining about, uh, uh, Iger's underperformance literally three days onto the job. Is it fair, though, Jeff, to say Bob J. Pick was the handpicked successor of Bob Iger?

Therefore, this string of box office flops, the creative strangleholds, some of the decisions made about raising prices at the parks, the creative stranglehold, some of the decisions made about raising prices at the parks, some of these issues currently plaguing Disney indirectly stem from Iger's succession process from his first tenure. Is it like, is it fair to go back and Monday morning quarterback that situation? No. Okay.

Why not? It's not. We might've said that in the old days, No. Okay. Why not? We might have said that in the old days, but you couldn't even say that about Michael Eisner, who after Bob Iger is the third greatest person, media baron probably, since Walt Disney. Michael Eisner, as you recall, of course, was the mentor, tour mentor of Bob Iger. And when he ran it for about 20 years, his first 10 were fantastic and his last two weren't bad, but he had a terrible eight years in the middle and the board took charge of

the succession process. And in fact, one of the nicest gifts that Michael Eisner could have given Bob Iger was to throw him under the bus. People would have thought he's a suit who was a toady to Eisner. He wasn't. He was his own guy, as he proved very quickly. But Eisner, in his own autobiography, trashed Iger. So that was a great gift to make him his independence, to be his own guy. And in fact, similarly now, is that Chapek was the board's candidate. Bob Iger did not ram this through.

This is unfortunately boards don't always get it right. But this day and age is very rare to see somebody who's pushed in there as a protege on the coattails. In the past, you know, I wrote a book I would love to sell people on called The Hero's Farewell. Well, it was about for 11 minutes, a bestseller. Before this came out, it used to be, I would talk to CEOs three generations back, I'm that old, who would tell me, our succession plan, I have it right here in the drawer. It's locked.

And if something happens to me, the board can unlock it and find out who my successor is. Those days are long gone. This Bob Chapek was the board's choice, and he's a very nice guy. He was a bad choice. He wasn't the right guy to run a very creative global business with complex consumer issues and a volatile technology. So I was going to ask you about that. Chapek, I guess, had become well-known and well-respected within the company and by shareholders because of the success

of the parks, which he primarily oversaw. The parks, other than COVID, were not the issue here. In fact, you could argue they are currently the best functioning part of Disney. The real issues here involve technology, programming, the film slate, the budgets. And these were things that JPEG really was not running firsthand. So maybe that's the original sin in the succession. They just, it was the wrong person. Is there some merit to that idea? Yeah, I think that's exactly right. It is. There was a time where they had a wild mix of businesses, Arvider Real Estate and things like that, that part of Michael Eisner's greatness was getting out of things they should never have been in.

It was a period of time where consulting firms filled with MBAs were teaching people to diversify the portfolio of the businesses they were in, instead of recognizing that every shareholder can diversify their own portfolio and that people who know a business should invest in that business. So Eisner got them back focused in the media business. And of course, we know that all these sort of creative Lucasfilm, Lucasfilms, that nobody else could have woven that together other than Bob Iger with Kevin Mayer while working with him as his protege to weave these things together, is these were brilliant. And so the creative side is something that's very different, though, than the safety and predictability and stability of the institutional, of the park side. It's a whole different kind of factory-like business. But to have that cross-pollination, as only Iger could do, is to magically, so far, to create something new and exciting when you

have new films coming out, a new franchise, whether or not it's Frozen or whatever, start to build rides and entertainment and activity around that in the parks. to start to build rides and entertainment and activity around that in the parks. And it was something that wasn't JPEG's strength. Now, Tom Staggs was very good on that area and very much to Iger's credit. Amazingly, he brought Staggs back in now, which is something that every investor should celebrate, as well as bringing in Kevin Mayer, who was the genius behind the launch of Disney+, as it was originally planned. And obviously, JPEG overbuilt it and pumped out way too much that the public couldn't digest and they got confused. But the creation of Disney+,

and then weaving together, of course, of LucasArts and Pixar and Marvel, as you were pointing out before. Kevin did a lot. So it was incredible to have the magnetism to pull that kind of talent back in, along with Alan Bergman and some of the other fantastic stars that he has on the team. It's an amazing mix. It's an amazing mix of talent. It occurs to me, Jeff, there have been activists involved in Disney before. And when you're dealing with new technology and new methods of distribution, everyone has an opinion. And I remember during the building of Disney+, Dan Loeb, who at the time at Third Point had a stake in Disney and wrote an open letter. And he wanted everyone to see what his advice was. had a stake in Disney and wrote an open letter. And he wanted everyone to see what his advice was.

And it was, I think, cut the dividend and triple down on streaming. Spend as much money as you have to. And in fairness, that was the 0% interest rate era. And that logic did make sense, maybe four or five years ago. But that was the course they ended up taking. They didn't quite cut the dividend yet,

but they did take that path of, you know what, we need to build this as large as possible, as fast as possible, so that we are one of only two or three streaming apps that people will pay for. And then all of a sudden, the interest rate picture changed. So my question to you is, was the strategy the wrong one at first or was strategy always the wrong one or was it the right one? And then they didn't pivot quickly enough for market conditions because it's rare for this stock to be in a 50% drawdown and to stay in a 50% drawdown for as long as it has is almost unheard of. it's the answer is is yes and yes they were it was right to get in in a big way and disney plus is the second biggest player in that

streaming space that's right however however um uh they did over expand and they started to push out quality quantity over quality and what eiger has brought in is much more of a quality focus. So they've been rationalizing a lot. They've been not just cutting staff dramatically, but he also has been focusing content and product. And they've had to do that, not only because the pipeline couldn't take the confusion all that was coming out there so much under Bob J. Peck. But obviously, it's gotten a lot more competitive with all the other streaming platforms out there that this has been an incredible transformation. And I think they're responding to that appropriately. His plan is to have streaming profitable by the end of 2024, improve the quality of movies, content, turbocharging growth in parks. And I think he's on the trail to do all that.

Amazingly, the stock is up 5%. You might think, well, is that a lot to brag about? Name any other turnaround that anybody listening or talking to us right now would point to. Who do you want? Michael Dell, Howard Schultz, Steve Jobs. You didn't see this, those remarkable turnarounds in this period of time. Just in the first year, Michael Dell, who is, I have to admit, is a personal friend of mine. I'm a big fan of his. He was down over 17.5% his first year in the turnaround.

Iger's up 5%. Now, in three years, he had a three times return over Dell, which is fantastic. Similarly, if you take a look at Howard Schultz, Howard Schultz has been a friend too. He was down by almost half. He was down by 48.5% the first year, but he was up by 63% after three years. So these kinds of turnarounds, when somebody comes back in, in this book that I was just hawking for you, it was a very old book, so you don't have to buy it, but it was Oxford University Press. It's just, you had to know somebody to find out where they were selling it. It was like on the cover of Sports Illustrated, when we used to have Sports Illustrated.

It was the featured book in the Fortune 500 issue of Fortune, and yet the publisher was bragging that they were out of stock. It's crazy. But these people who come back in, I've classified them as generals. They come back in. They hit the ground running. The Second World War is a triumph of these kind of generals, MacArthur, McCartney. Jeff, let me quote you because I read the book this weekend in preparation for this. You said in The Hero's Farewell, a returning general brings opportunities and perils, but that is not unique to media business. The Allied success in World War II was a triumph

of returning general types from mothballed retirement back into active service. The callbacks to duty of generals MacArthur, Patton, Montgomery, and De Gaulle and retired statesmen like Winston Churchill provided confidence and wisdom as they hit the ground running. And you draw the parallel to Steve Jobs, Michael Dell, Larry Page, and Howard Schultz in their respective companies. and Howard Schultz in their respective companies. What is it about the returning general that maybe is not being appreciated here? Because I agree with you. It's been one year.

We want to turn around a Dow 30 company in 12 months. And when you look at the comps, they're even worse. You look at Warner Brothers, Paramount is on fire as we speak. So, you know, I know you want Netflix to be the comp. We would all like that to be the comp. It's probably much further away than the other names I just mentioned. as the yardsticks. Netflix didn't have the whole inherited legacy business base and everything that we see with Paramount. I'm a big fan of what they're trying to do at Paramount and, of course, Warner Brothers Discovery,

but they're very hard. And Disney, compared to those peers, it's transformative. It still is the preeminent entertainment company. And being up 5% is notable in the midst of this turnaround. So I think it's quite impressive. I'm thrilled to tears that you actually did read The Hero's Farewell and quoted from it so accurately. And Josh, this is our longest conversation ever,

but this can't be our last because I've always been a huge fan of yours, of course, but I can't believe you've read my dusty read my, uh, that's the old work. I am. I am very thorough. And, uh, we take this, we take this stuff really seriously. And, and I, I actually liked, uh, I liked the book a lot. So it was not a labor, uh, by any stretch. I want to talk about, I want to talk about, uh, I want to talk about the vote now. Um, so, I want to talk about the vote now. So that's how we've gotten here.

Okay. So Nelson Peltz is a billionaire hedge fund activist. He has been involved in many high-profile activist situations. Some he's triumphed. Some he's been turned back by the corporation. And you have chronicled this probably more meticulously than anyone I could think of. You've written several columns on why you think that he does not bring to the table what he claims to bring to the table. But his involvement here, we thought he was gone last year. Iger comes back. You say within three days, he's on the phone.

I need board seats. So far, I don't think publicly anyone has heard specifically what Tryon would do with those board seats. What is the strategy that they are recommending relative to the turnaround that you believe Bob Iger already has in place. Do I have that right? Is that the current situation? Yeah, I'd love to see that. You know, we haven't even seen a slide deck here. And this is now the close of when you can register to vote. Where's the slide deck?

Where are the ideas that Nelson Peltz have other than let me sit there and join your meetings? They've tried different ways to placate him, which I think is unfortunate. They've suggested other candidates that can join. They've offered him an observer seat on the board. They've given him a consultant advisory arrangement, which I think is crazy. I can't see what he would add.

That's sort of the way- Well, he told Andrew Ross Sorkin a few weeks ago, special advisor doesn't vote. So there's something about he and Jay Rasulo, who is the former CFO, he would also like a board seat for. There's something about having the vote. And it's a large board. So I'm not sure. It's not a deciding vote, but there's something about having that vote he believes would force them to listen to him. No, it's what he wants. He wants to be on the coattails of greatness. He can see that we are in this hockey stick curve, that this thing is about to take a big upswing, that Iger knows exactly what he's doing. As you said, these returning generals, they know where the bodies are buried. There's a reason why we go back to these people that know the land in a time of crisis like the Second World War and other times we went to those great heroes. And Peltz just wants to glom onto the credit because he's going to see a Michael Dell or a Howard Schultz or Steve Jobs type return here. And he wants to be on the coattails of that. His own performance,

as you hinted at, has been miserable. Nobody ever holds Peltz responsible. And I even ran my numbers past him, and he just said back to me in an email, Jeffrey, just check your numbers. But he's never disputed them months later. If you take a look at him, Peltz has dramatically underperformed the S&P 500 by an average of 6% on the majority of the boards on which he's served. Wendy's, Unilever, MSG Sports, Mondelia, Cisco, Janice, Henderson, Legg Mason, they've been disasters under him. You know, if you have a non-Pelts family member, some other try-on representatives are, you know, GE, his son-in-law,

BNY Mellon, Family Dollar, they've performed terribly. In fact, he tries to claim credit for having pushed out Jeff Immelt. He was Jeff Immelt's biggest backer, and that became Tryon's biggest stake. When he joined at the time in 2015, he said, Jeff Immelt is executing a bold transformation October 2015. We have a longstanding relationship with Jeff M. Outt, and we believe that investor skepticism towards management has created a mispriced security. Today, GE is Trion's largest investment ever. Well, that's just ridiculous. This is crap. He basically tries to rewrite history, but his history is terrible. I don't know an activist

who has the track record as bad as this or any investor listening that so consistently has underperformed. But there's a lot of this locker room bravado and making a lot of smoke and mirrors. He distracts away from his own poor performance. He's shuttering his own funds, circling the drain at the shutdown, his European funds and other things. And even his son-in-law has left and said there's not much for them to do anymore. So that's pretty pathetic. So that's why he's looking. It's not his own money, of course.

It's Ike Perlmutter's money that he's trying to represent. So I want to get into that. There's a couple of things. The first is Ike Perlmutter, was he the chairman of Marvel who sold it to Disney? Do I have that right? Yeah, he came in basically as almost an activist of sorts and had a pretty custodial reign selling this into Disney

and was certainly intimidating. He's a polarizing figure internally at Disney for a long time. And, you know, there were some things about some – oh, you got muted again. Yeah. Sorry. I was just going to say, Kevin Feige, not to use names, but here among friends and family, the brilliant head of Marvel was really being worn down and intimidated. Iger had to protect him.

And thankfully, he survived the two years that Iger was away and they got Perlmutter out of there. Frankly, if I was to criticize Iger for anything, he should have pushed Perlmutter out of there years earlier. It had a corrosive effect on the creative culture there. Just like, as we see on any boards where Peltz is sat, by the way, Peltz is a very charming person, but he can be like a dripping faucet on these boards. People on the Procter & Gamble board told me the only thing he ever advised, suggested they do is to move the headquarters out of Cincinnati. When they asked him why, he said, well, I don't know. It's just, you know, it's something to do. There's been point to any suggestions he had for GE or for, you know, Mondelez or for any of these

poor performers that he's had. And, uh, he's even the subject to an activist himself coming after him for his mismanagement of Wendy's. I want to, uh, uh, so I want to ask the 25 million shares that Ike Perlmutter has, uh, in Disney. It's a, it's a pretty big standalone stake. It's bigger than most of the funds, the individual funds that own Disney. It's bigger than most of the funds, the individual funds that own Disney. It's bigger than their stakes. And those votes are going with Nelson Peltz. So he's got some kind of a deal openly with Ike Perlmutter for the voting of those shares.

Outside of those 25 million shares, how many more votes does he currently have? I don't know. But Ike is but that sounds like a lot of shares. I have to put that in context. Josh, that's only 2% of Disney's outstanding shares. So I don't know if Iger's got all 98%, but I don't think those 2% matter all that much despite all the noise. I'm trying on 7, so 25 and 7. Okay. But I don't think those 2% matter all that much despite all the noise. Try in on seven. So 25 and seven. Okay.

And there isn't a listener right now, if their life, in fact, if your life depended on it, that could say that they know anybody who's come to Ike Perlmutter support. Nobody had, you know, have any of these large institutional investors or other investors had anybody voiced any support for Perlmutter? No, there's not a plan to support there. They know that it is just some grudge match between some retirees looking to try to get a last flicker of the candle. This is as Peltz melts down. Peltz said that one ofney's primary arguments against his having a board seat is that he doesn't have media experience his response is i don't claim to have any but

disney just broke a record its last five movie releases in a row lost money is there is there some merit to the argument that maybe what's needed here is not another disney imagineer maybe it's somebody that's a another Disney Imagineer. Maybe it's somebody that's a little bit more focused on the business performance and not an expert on which actor to cast or which title to green light. Disney under Iger produced 11 of the 12 biggest box office hits all time. And under JPEG, we had the disasters of Star Wars, the overpromoted Black Widow, Encanto, Thor, Love, Thunder, Pinocchio, Black Panther, One Cotta. This is, Perlmutter is, JPEG was Perlmutter's guy.

So what's the creative success there? It's pretty weak. In fact, so Kevin Feige, these are great talent to have. There's a very strong team of creatives that they have in the organization. They have a very effective business management team that's come together. And they're just starting to do the right things now at Disney. So I can't see how putting people on the board that are non-creatives. He's, you know, Iger canceled 12 of JPEG's movies that he started. There's such disasters.

But, you know, but who does Disney have on the board? Well, Mary Barra. I mean, I can't think of a better CEO in the country. Look at the – even despite the strike, the great returns that she's brought into General Motors, deep experience and strategy and innovation in cybersecurity. James Gorman. James Gorman. Morgan Stanley, who just pulled off his own succession, it seems fairly well. You have Amy Chang, a former EVP of Cisco, who's got tremendous insights there.

I think Safra Katz, of course, is a great strategy, cybersecurity, and all that expertise. A former CEO of Sky, Jeremy Darich, Karen Everson, a former board president of Instacart. And, you know, Dan Loeb is representative on the board, by the way, doing really well. Former U.S. trade rep, Michael Froman, who that it was a very difficult succession that he went through at Nike, succeeding a very creative founder, Phil Knight, that didn't work out first time for Phil Knight. Pelt's successor has lauded what Mark Parker did as an extraordinary job of developing markets in Europe and China and all the rest and creating the women's lines for Nike and everything else. It really knows consumer goods extremely well. Former EVP of CVS, Dorico Rice. I mean, these are a lot better than any of the drones that Iger is packing in there. I mean, that they're being advanced by, that Iger is packing in there. I mean, that,

that, that they're being advanced by, you know, by pelts. I mean, these are. Russell, Russell is the former CFO and Disney was highly profitable during his tenure

as CFO. Is there no benefit at all to bring someone back in who was a part of Bob Iger's heyday to, to maybe just look at what's look at what's happening and offer comment? Or is there something about Rassolo that makes that not make sense anymore? I don't know Rassolo personally. I have no reason to disparage him other than the fact that, Josh, people distort the Rasolo career trajectory. He's been out of there for almost a decade.

He's been out of there for almost a decade. 2015. 2015. So here we are at 2024. Rasolo left on bad terms after Tom Staggs won a power struggle with him. So it's another kind of vengeful effort. And again, I don't see anything wrong about Jay Russullo, but he was a candidate to succeed Iger at one point. So many people thought so.

And so I think that's what's going on there. The guy's been out of there for about a decade. He was there for some of the really good times, but not all the best times. I mean, those years after he left were fantastic. but not all the best times. I mean, those years after he left were fantastic. So I don't know why he's been recruited to come back in, but certainly the talent they have is sufficient

without bringing Jay's unfulfilled career agenda back in. I want to have you react to something that Bill Cohen wrote at Puck. He said, I guess the fact that Pelts and Rosullo would be speaking for 32.4 million Disney shares worth some $3 billion, about 200 times the number of shares owned by the non-Disney management on the board could account for some moral suasion. But I confess, I've never quite understood the theory about waging an expensive proxy battle. You spend millions of dollars if you win. What are you left with? Two seats on a 12-member board for one year and a whole lot of acrimony. Since it's one vote per person on a corporate board, how do you get your way having only two

seats when you've pissed off the other board members? That's not enough votes to get anything done that he wants to get done, meaning Nelson Peltz. Do you agree with that? Is the whole thing just a waste of time and money? I agree with almost everything that Bill Cohan says. His analysis of the lacrosse team crisis back at Duke, and he wrote a massive book about that. He was a great Lazard investment banker. He's an old friend of mine, I have to say. And I think when he takes a look at media, he's absolutely brilliant. He's a terrific writer. He's one of the best financial writers out there. And I think everybody on this call should know that Bill Cohan has flipped

against Peltz and Ike, Ike Perlmutter, as you have seen, and the way you've implied there. And he thinks it's all about Peltz's ego, and he's right. So walk us through what's about to happen. Today was the record date. So if you own Disney shares as of today's close, you have a vote. But most of these votes will be cast by institutions. And in this day and age, a lot of those votes will be cast by passive investors, ETFs, index funds. What do you think we're about to witness as we get closer to April in terms of Peltz's campaign, which is called Restore the Magic, and in terms of Disney's counteroffensive, and especially what they're going to want to talk about on the earnings call

in two days? Map out your expectations for us. My expectation, what my hopes would be, is that the kinds of names that people whisper about, we're going to see that you could almost close your eyes and reach into Iger's management team, and any one of them is the high likelihood of being a fantastic successor in a crisis or in a planned succession. And that those people like Hugh Johnson, Hugh Johnson is, I can't think of a better CFO in the country. He did, as you know, a fantastic job at PepsiCo. My only complaint about Hugh Johnson is that nobody asked me if he would be the perfect pick to come in as CFO and Iger and the board came up with this all on their own.

I wish I could take some credit for it. Hugh Johnston is fantastic. He speaks like a general manager though, too. You know that in every earnings call, it wasn't the current CEO of PepsiCo we were hearing from. It was Hugh Johnston. He could speak about all the beverage and strategy and global affairs issues and ESG, whatever it is. he is a great business leader. That's Hugh Johnston, Dana Walden, Alan Bergman of Disney Entertainment. Dana Walden, of course, is a television judge. Tomorrow from Disney theme parks, Jimmy Pitaro with a difficult job at ESPN. These are fantastic. In addition to Tom Staggs and, as we mentioned, Kevin coming back in. Kevin was an old student of mine

at the Eagle Harvard Business School, so I'm partial to Ken, but it's a great group. And that we're going to see more of how that talent is working. And I would think at the shareholders meeting, there's going to be a lot to brag about, about the view that this group has and where they're going. I mean, it's a joke. Peltz has very little skin in the game himself. Of his 30 million shares, 25 million actually belong to Ike Perlmutter. What is he doing? He's just riding the coattails of somebody else. And I think that it's inconceivable that this board isn't going to be fortified by the shareholders and the shareholders are going to feel they're on the right track. And they should know that it takes about three years for a returning general to perform these kind of turnarounds.

And you ask anybody in the media business if there's anybody better than Bob Iger out there. There isn't. It's hard to think of somebody. And he also, by the way, in this personality-infused business, is a refreshingly low ego. Is he without ego? No. But he's somebody who's a problem solver. He can work with creative talent. He can work with financial executives. He's strategy-minded. He has great operational skills. It's an unusual blend. Now, the mix of people that he has on his team, there are a lot of them there that could do elements of that. And there'd be some complimentary mix of those people who would probably be the ideal successor to Bob Iger. But they're there right now on that team is that

group we ran through. Again, you could reach anyone. So I wanted to ask you, so one of the things that the activists have said and analysts have said is that perhaps 71 billion dollars for 21st century fox was not the greatest price paid for an acquisition you have pushed back and said actually they sold the regional sports network at the top which is now bankrupt uh great sale they um brilliant timing brilliant so they sold they they got they got a they got a stake in Hulu. They sold, they sold some assets. It's not really 71 billion. It's probably closer to 30 or 40 billion, but they also did get really important content

for the launch of Disney plus they had the Simpsons on day one. That's a major coup. That's a ton of, that's a ton of content. And they had a lot of other things like that. They also got Dana Walden, who is, I think, the chief executive of Disney's television business. Is that a likely successor? Is that the kind of person that Bob Iger should be playing up as they wage this proxy fight going into the vote? Well, Bob Iger and the board.

I think Dana Walden, of course, Alan Bergman, Josh DeMauro, these are all great people. And again, the finance nerd is not a finance nerd. Hugh Johnston is a great general manager potential. But Dana Walden, I think she would do a fantastic job. But you're absolutely right. People like Peltz regularly like to misclassify that 20th Century Fox deal. $71 billion, no. $11 billion to Sinclair right off the top, selling off the regional sports network. And that was fantastic, bringing down the deal. And as you mentioned, it didn't go bankrupt.

That was Diamond? Yes, that became the Diamond Sports Network that just declared bankruptcy. So good for them for getting out of it. And Comcast, you know, selling the sky to Comcast for 16 billion, the $30 billion, 30% value of Hulu worth 12 billion. These are fantastic. And yes, the Avatar franchise is very, very valuable. The Simpsons, National Geographic, intensifying their exposure to India. They already had a very good reach in India, better than anybody in the media business, unlike anybody else in media. And I knew the head, in fact, the current head of India Disney. It isn't Disney India, it's India Disney. They don't just take European fables. They go back

to the Mahabharata and all this folklore from India's ancient history. And in Bollywood, folklore from India's ancient history. And in Bollywood, Disney is a very significant Bollywood player. And this only happens- That's the hottest market on earth. That's what Tim Cook is trying to do with Apple is to reorient toward the Indian consumer, the Indian business customer. It's a huge, huge market. And you put five times or six times multiple on the earnings they have by actualizing $3 billion in cost cuts and things. This deal has already paid for itself several times over. It doesn't take fuzzy math to see that this was a brilliant deal.

And it would worry me about any financier that's trying to take a run at this company that doesn't understand that. It just shows they really don't understand the media business and don't understand these assets at all and has no strategic mind. I, I really would worry. I want to go, I want to go down one more Avenue Avenue with you, and then we'll, we'll get your prediction and I'll, I'll, I'll let, I'll let you go for the night. And by the way, this has been spectacular. I just want to thank you so much for the time that you've given us all. Thank you for all the homework you've done.

I'm so flattered by your platform. Of course. I, I, uh, I want to ask you about the, the, uh,

the social aspect of some of Disney's problems and whether or not you feel Iger has handled it well in the past and is equipped to continue to handle it because this stuff is not going away or getting easier. Uh, we, we saw the battle between Ron DeSantis and Bob Iger. We've seen all sorts of other brands having problems with Twitter activists from one side or the other. Obviously, the most notable case in the last year was Bud Light over trans rights issues. Disney has had issues trying to, at first, not stand up for the gay and lesbian community, then pivoting, but pivoting too late. So they got no credit from anyone.

This stuff's really hard. And I don't know that Nelson Peltz necessarily has the answer to it. I know there are people on one side who would say Disney has to stay out of politics and social issues, period. Easier said than done when you're employing and working with creatives. Easier said than done when you're trying to appeal to the younger generation where they really do care about this stuff. Is Iger the right guy and can he pick the right successor for a world in which the politics, the social politics, are inevitably going to be in a clash with entertainment and large multinational corporations? How does the board think that through? How does Iger think that through?

I think this is a board that has a diverse politics on it from Mary Barra and Safra Kotze and across the board. You have quite a wide range of ideologies, politics, and the rest. But when it comes to understanding the role of a great American icon in the global market and understanding who this company stands for in terms of principles, patriotism, but also enlightened self-interest is Alexis de Tocqueville came to this country in 1840,

wrote the book, Democracy in America. And in there, he talked about that it isn't the tightness of our laws that he studied to take back to France, it's the looseness, It's because you have business leaders and clergy and other people in the community as civic leaders that stand up to fortify what the laws stand for. That's all Iger's ever done. That's what Michael Dell does. That's what, I mean, you look at Apple, you look at any, JP Morgan, what the investments they've been putting into social investments into Detroit and elsewhere, is that the top performing companies, including social media companies

that, of course, have been soaring in the markets, have been very forceful on social impact issues, very successful. If you take a look at the alt-right investments, whether or not it's Strive or Truth Social or whatever your American conservative values, is they're disasters. The alt-right economy has been a fiasco. Did Target and Anheuser-Busch trip over the execution? Yeah, their execution was imperfect. But look at all those other companies. It's not just Patagonia. It's all these other companies that are our top performers have not moved a dime off of this front. But they do take a look at the social issues that matter. Michael Dell is a matrix of 100 issues that they track. What are the ones that matter most to their

constituencies? That's what Bob Iger does. When the 130 companies signed on to this don't say gay petition and Bob Chapek vacillated and then pulled out and misadvised by his government affairs guy, they brought a spotlight onto themselves. So their employees were picketing, certain groups of customers were happy. And that's when the trust plummeted in the Edelman Trust Survey. I've looked at the Disney specific data, not from, I got it from Edelman, not from Disney. And it plummeted when Iger started, because then he said, oh my goodness. Then he did a pivot and decided they're going to sign on. And he said that Governor DeSantis had made a backdoor deal with him that the legislation

wouldn't be as restrictive as it was. And DeSantis said, what are you talking about? We never had a lunch, a dinner, a meeting, an email. Show me any correspondence. A tweet, nothing. We've never spoken, which is pretty amazing. The largest employer never spoke with the governor, but that's a different issue. And so it was like JPEG was standing between moving trains. That's when the trust indices fell. What's happened since, it soared under Bob Iger coming in there because he said, we stand for something. He said, I remember a period of time when companies were, and business leaders just watched as a demonic forces tore a

country apart. Talking about Second World War, of course, and things that happened in Germany. He said, we need to take a stand when it's appropriate, when it affects our shareholders' interests. And what this reminds us, and this is what all business leaders just about did in January 6th. They're not doing it right now because there's no reason they have to. They don't want to be partisan players. They're not in there as politicians. But if something tears apart the fabric of society, then they speak out. It's in their enlightened self-interest to not have angry shareholders. Jeff, so there are voices that say some of the content coming not just from Disney but from mainstream media in general is partially at fault for tearing society apart because it's getting too far into these lanes that are controversial.

I suppose it's impossible to, to make films and television shows that never offend anyone. I just, I guess, I guess it's gotten much harder. I guess what I would say. A good, a good issue.

He, a very good point that never discussed in this debate. We're the first ones to talk about it, I believe, is that Bob Iger will get involved in a controversial decision about what should be greenlighted in terms of content and pulling out Roseanne Barr for all of her hate speech in their number one ABC show, the number one show on television at that moment. He killed it. And people were horrified. How could he do that? And he said, because this was harmful to American society and it's going to ultimately hurt the Disney brand. Roseanne Barr is still screaming mad about that. Sony, around that same time,

had come out with a film that was making a joke about shooting the dictator running, I think, North Korea, whatever it was. It's just like things that led to this big email cybersecurity attack and everything else on Sony. And Iger said, you know, we don't need to do stuff like that. He shows remarkably good judgment, and he's instilled that in his people about when to get involved, which is to be responsible. And what he reminds us is that doing good is not antithetical to doing well. All these different constituents don't need to be at war with each other. And that was the founding generation of the business roundtable. They were created.

I knew that whole generation well. Tom Watson of IBM, Irving Shapiro of DuPont, and Reginald Jones, Jack Welch's predecessor at GE, they believed that they have a license to operate from society. And if they violate the terms of that license, they can be torn up. Who else agreed with that? Milton Friedman. Believe it or not, at that same time, everybody loves to quote this 1971 New York Times Magazine article that the only responsibility of business is the bottom line.

They didn't read that article. On page, I think it's paragraph 23 of that long New York Times Magazine column article essay. He calls it social amenities, what the rest of us would call ESG, which is a troubled term and troubled issues. But it's corporate social impact. Even Milton Friedman recognized that it has long-term value for shareholders. So let's not start creating these caricatures and things. And Iger is not some wild-eyed leftist, and he's not a demonic right-winger. He cuts it right down the center, and that's where most of the American business community is. In fact, I even hate the term

progressive because it's been destroyed by the media and politicians in the last decade. The progressives from the 1920s onward were a very centrist group. That's who the business community was, like Jane Addams with Hull House and immigration support and the greening of the American beautification programs, environmentalism. Gifford Pinchot was a Republican appointee, the first head of the national park system in the Department of the Interior. It was under Teddy Roosevelt, a Republican at the time. These were progressive spirits. In fact, the last national ticket on a progressive ticket was a Republican and a senator working side by side as a president, vice president ticket.

They're very centrist. So that's where the business community is. And they are not isolationists. They are not xenophobic. They're not protectionists. They're trying to figure out how do we, and they don't feel that either party maybe quite answers what they need. And Bob Iger is the kind of person, you know, that helps guide things down the center. I wish he was running for president. He would have done awfully, awfully well. Maybe getting through the primaries would have been a little bit crazy, but he would have governed very well. So I really, I really appreciate that take. And I genuinely believe that that conflict, uh, that all of us

in, in business, uh, have to, we'll, we'll have to face that down more so as the years go by. And we'll have to, in most cases, resist the urge to necessarily come down on one side or the other of every social issue. And of course, we've got stakeholders that apply pressure. We've got shareholders, we've got employees, we've got customers. So it's not easy for anyone. You're right. The social change of the 1960s was civic leaders. Business leaders were there and the business roundtable joined them, but they weren't at the very front of join them too? They're not the only ones that have to speak out. They're not politicians. I like that. I like that concept a lot. It shouldn't start. It shouldn't start necessarily with a publicly traded company CEO. All right. I want to ask you before

we head out, what do you think is going to happen here? So we'll have the proxy vote, we think, sometime in March. Have they set a date? Excuse me, April? Have they set a date or not yet? It'll be in April, and I believe they have set a date. The date for this, I think, is April 15th, an ominous day, right? Yeah. Oh, April 5th, I think.

I'm sorry. Not tax day. April 5th. So a lot to save for date. Yeah. So who's voting with the activists? Not which funds in particular, but is there a constituency that you think wants to do something different or have board representation from hedge fund managers? Does that constituency even exist or probably not?

What do you think? I don't think there is a constituency. I think they see Pelts and Perlmutter as an entertaining sideshow. And if it wasn't for just a few media players that give them a spotlight, they'd be completely ignored and sent back to the shuffleboard. Okay. And you think the turnaround at excuse me, the turnaround at Disney is already in progress. There were some big strategic things they're going to have to figure

out with ESPN, but broadly speaking from your writing, it sounds as though you think this turnaround is not still to come. It's in progress on a number of crucial fronts. And you seem to think the shareholders will agree with that assessment. So much so that I haven't been buying Disney right now. I wish I had been because all the sell-side analysts that you would know better than I, Wall Street sell-side analysts are expecting great things on Wednesday. Maybe their expectations are too high, but they're expecting great things. I don't see anybody lining up with the activist investors are going to be deactivated pretty soon on this front. And I do think that there is a lot to do there. They're certainly not out of the woods. They've got plans and partnership ideas. You've seen what's coming along for ESPN. I mean, you look

at the demise of Sports Illustrated, you just realize how crowded space have gotten. But if you take a look at the, you know, we had six sets of activists this time last year coming after Salesforce. What did Benioff do? He just blew them away. He didn't antagonize them, but he is up 160% or so. And it's- He did the playbook. He cut, he cut costs. He, you know, he, I think he, I think he added to the buyback.

He did, he did the thing that's working for all of these tech giants and a Disney in fairness in 22, they put through a $7 billion cost cutting program. So it's not as though they, they haven't been listening. They got discipline on the production of, of, of content.

I mean, I don't know. I feel like the turnaround is already at work. It doesn't appear in the share price, but that'll be the last place it shows up, I guess. No, we see it creeping up in the share price, unlike other great turnarounds where the share price has plummeted at this early date, one year in, but we're already seeing very encouraging signs. So I do think we're going to see great things here. And it is, you know, our most admired media baron is at the helm and he's pulled together the best of, I mean, it's amazing. He brought in people that you might've thought some of them would have been resentful by bringing back some like, like Kevin Mayer or Tom Staggs. And what a great sign it is that they have, that he has such magnetism to bring people like that back who actually know the space. They know

what the triumphs were. They know what the plans were. The Paramount, which I really love leadership Paramount, but it's down $30 to $14 over last year. And, you know, Warner Brothers. Yeah, this situation is not that for sure. Yeah. Jeff, I want to. $15 down to $10 from last year. So it's quite a contrast Disney is.

They're the strongest performer in the space of a legacy media company. Jeff, I want to thank you so much for your time and for educating us all on what's going on with Disney. I really appreciate it. Will you come back after the vote for a, I guess, to look at what the actual results were and where Disney stands? Can we do that this spring?

I'd eagerly come back and talk about that or talk about Boeing or talk about the governance of Harvard University or talk about Boeing or talk about the governance of Harvard University or anything you want to talk about. I'm up for you, Josh. Your questions were the best ever. I never ran into somebody with this much insight. It was a little scary. Thank you so much for joining us. Ladies and gentlemen, Professor Jeff Sonnenfeld. Jeff, thanks again. We will check in with you later this spring. Really appreciate it. And thanks to all of you for watching. Make sure you go ahead and smash

that like button. Don't feel shy about leaving a comment. And we will see you all very soon. Thank you. and interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.