|
Strange Bedfellows at DIS
We've followed the proxy contest at DIS as avidly as anyone, with particular attention to how UPC affects its process and possible outcomes. We can't ignore, though, some of the other unique aspects of this novel situation.
Here we find an unusual number of very public participants, some of whose views and alliances surprise us. Folks that typically urge the corp gov reforms that Trian advocates support DIS and its famously insular BoD. Others that might feel uncomfortable with an activist like Nelson Peltz now support him. Many that avoid the spotlight now voice opinions on a heated and controversial subject.
Among investors, DIS attracted three prominent activist funds: Trian Partners, Blackwells Capital, and ValueAct Capital. We'd expect them to at least have similar goals, and perhaps disagree about some of the detail. Instead, Trian and Blackwells have fought over everything, leading some (including us) to question what, exactly, Blackwells wants from this.
ValueAct serves as a kind of white knight to DIS, except DIS doesn't confront a hostile acquirer. ValueAct and Trian operate similarly, seeking one or two BoD seats at a portfolio company and working quietly and diligently to improve operations. To our knowledge they have not worked together on a given company, but they easily could. Instead, ValueAct endorsed the DIS BoD pursuant to some sort of advisory agreement; we can't recall an activist doing something like this. We also don't know what investment it has in the company. Blackwells dug up details on the ValueAct relationship to DIS, including how DIS invested hundreds of millions of dollars of pension money with it, paying it tens of millions of dollars in fees.
The Trian team includes former DIS executives Jay Rasulo and Ike Perlmutter. Rasulo is a former DIS CFO and current Trian BoD nominee. Perlmutter is the former CEO of Marvel, who in selling it to DIS became one of the largest shareholders. Perlmutter assigned his voting rights to Trian.
Rasulo is close to Perlmutter. Rasulo left DIS in a reorganization almost ten years ago, after DIS CEO Bob Iger chose someone else as an eventual successor. Perlmutter left DIS just last year after a number of disagreements with Iger about strategy and personnel. Perlmutter and also Peltz are close confidants of Donald Trump. Perlmutter is a top donor and advisor, helping to restructure the Veterans' Administration during the Trump presidency. Peltz also supported Trump over the years, and said he will vote for him in 2024.
Several luminaries endorsed the DIS BoD. It persuaded JP Morgan Chase CEO Jamie Dimon to abandon the traditional neutrality of an investment banker and support the BoD. DIS banking fees probably helped.
Two other significant individual shareholders, George Lucas (sold Lucasfilm to DIS) and Laurene Powell Jobs (husband Steve sold Pixar to DIS) did so, too. Including Perlmutter, the principals of three of the most recent DIS deals have weighed in.
And, it received the blessing from the Disney family, who opposed DIS leadership for many years. Of course, like all shareholders, Lucas, Jobs, the Disney family, and also Perlmutter have seen DIS shares underperform recently, so we'd expect more of an open mind about a fresh perspective on the BoD.
Trian brought in its own luminaries, too. Last week it released a letter from thirteen CEOs of current or former Trian portfolio companies, attesting to Peltz's "sound judgement". Executives routinely watch out for each other, right? None of them can expect an invitation to join the DIS BoD anytime soon, or perhaps other BoDs.
Some independents also have unexpected views. Corp gov doyenne (and Movie Mom, so she knows DIS in many ways) Nell Minow firmly opposes Trian, with postings (here and here) about how she will vote for the DIS BoD. Her protege, Matt Moscardi, who founded a new BoD rating service and calls Minow its "patron saint", hosts our new favorite corp gov podcast, which has dunked hard on Trian in a couple of recent episodes. Minow and Moscardi usually fight hard against entrenched BoDs like the one at DIS.
Neither Yale business school professor Jeff Sonnenfeld nor University of Delaware corp gov professor Charles Elson surprise us. A long-time Trian critic, Sonnenfeld has a nice side gig advising CEOs like Bob Iger. Elson has long advocated for corp gov reforms, and echoes Trian's critique of the DIS BoD.
Finally, the proxy advisors puzzle us. Glass Lewis endorsed the DIS BoD, opposing both Trian and Blackwells. ISS endorsed Peltz, and not Rasulo or the Blackwells nominees. Law professor Ann Lipton asks if ISS supports Peltz as a way to respond to criticism that it promotes corporate ESG efforts too often.
Nell Minow suggests "many if not most" ISS clients will ignore its advice to vote for Peltz, and follow her to support the DIS BoD. Nell was a founder of ISS.
We left off some with strong views about DIS or Trian, but who have not weighed in on their contest, such as Elon Musk or Bill Ackman. We wonder, why do long-time shareholders looking at a declining share price or corp gov authorities who long complain about entrenched BoDs support DIS? Why do establishment CEOs support an activist? We struggle to connect some of the dots here.
| 
