Disney, Trian Blitz Shareholders for Votes in Last Stretch of Proxy Fight

Chief Executive Bob Iger and activist investor Nelson Peltz have spent months of their proxy fight detailing their vision of Disney’s future. For some investors, the deciding factor will be the company’s past.

Several investors casting votes ahead of the company’s April 3 meeting said they are grappling with whether Disney’s board is capable of choosing a strong successor to Iger. They have criticized the board for its role in selecting Bob Chapek in 2020, ousting him two years later and then extending Iger’s contract after he returned.

Neuberger Berman, which has long had a small stake in Disney, says it decided to support the nominees of Peltz’s hedge fund, Trian Partners, in large part because of the board’s past succession-planning issues. Trian is seeking board seats for Peltz and former Disney Chief Financial Officer Jay Rasulo.

“We don’t think it would create undue harm for shareholders to have another couple of independent eyes and ears,” said Joseph Amato, chief investment officer and president of Neuberger Berman, in an interview. The investment firm, which manages $463 billion in assets, owns roughly 0.1% of Disney shares, a stake valued at $254 million, and discloses voting intentions at certain companies it holds.

Disney said in a letter to shareholders this month that its board and succession-planning committee are conducting a “diligent and thorough succession planning process.” It said naming a new CEO with a strong team of senior leaders is a top priority.

Some institutional investors who plan to vote for Disney’s slate said that Iger has already demonstrated a commitment to correcting the company’s course, and that executive talent and strategy going forward are more important than the exact makeup of the board. While Peltz’s campaign might have helped accelerate change, these investors said they don’t think he needs to be part of Disney’s board.

Disney has won support from several big-name shareholders, including “Star Wars” creator George Lucas and Laurene Powell Jobs, the widow of Apple co-founder Steve Jobs. Former Disney CEO Michael Eisner—who stepped down as chairman after a shareholder revolt in 2004—as well as JPMorgan Chase CEO Jamie Dimon and the descendants of Walt Disney and his brother Roy have also publicly supported Disney.

The fight is far from over, and could result in a variety of outcomes. It is always possible the two sides could reach a last-minute settlement ahead of the meeting.

Casting votes

Many of the company’s largest institutional shareholders such as BlackRock and Vanguard have yet to cast their votes and often wait until closer to the deadline. Individual investors are expected to have outsize sway, given that they hold more than one-third of shares.

So far, a minority of shareholders have voted. As of Tuesday, just over 22% of shares had been cast, according to people familiar with the matter, the bulk of them held by individual and other smaller investors.

Among those who have already cast their votes, Peltz leads Disney director Maria Elena Lagomasino, while Rasulo, the other name on the Trian slate, has so far failed to gain much of a foothold with shareholders, these people said.

A spokesman for Disney said leaking an early vote count was “a highly inappropriate attempt to sway votes.”

Most shareholders are able to vote or alter a previous vote until the polls are officially closed, which happens the day of the annual meeting.

Courting shareholders

Disney and Trian continue to dart around the U.S. making their final cases for why shareholders should back their nominees in what has become a tight race.

Iger has personally visited major shareholders in recent weeks, while senior executives including finance chief Hugh Johnston and Alexia Quadrani, executive vice president of investor relations, have met with others. In some cases, Disney board members including Chairman Mark Parker and Lagomasino, who is known as “Mel” and is one of the board members whose seat Trian is contesting, have also attended shareholder meetings.

Disney has told investors in private meetings that it would be problematic and disruptive for the company and Iger if Peltz joins the board and that his presence in the boardroom would slow down decision making. It has also talked about the company’s streaming strategy and focus on revitalizing its studio.

Peltz and his team, which includes his son Matthew Peltz, a partner at Trian, and another young partner, Ryan Bunch, have made dozens of shareholder visits, including trips to Canada and the U.K. Some large shareholders have received multiple visits.

Some major institutional investors are still undecided because they say both sides have made valid points.

While Iger is viewed as a strong CEO, some see value in having an outside voice to raise questions and challenge opinions in the boardroom. Several investors said Disney’s addition of former Morgan Stanley CEO James Gorman to its board was a good sign of its commitment to succession, given the smooth leadership transition he oversaw at his bank last year.

Some investors say they have considered the possibility that Iger might step down from the board should Peltz or Rasulo win a seat.

Iger would be “the first person to tell you that the business he is running today isn’t the same business he was running years ago,” said Michael Cuggino, president and a portfolio manager of the Permanent Portfolio Family of Funds, a small Disney shareholder. “If he decides to leave, maybe it’s a ‘so what.’”

Divided decisions

The two largest and most influential proxy-advisory firms were split in their recommendations to shareholders. Glass Lewis advised investors to vote in favor of Disney’s board nominees, while Institutional Shareholder Services recommended that shareholders vote to add Peltz to the board, but not Rasulo, and support all but one of Disney’s nominees.

A third and less well-known proxy adviser, Egan-Jones, weighed in on Trian’s side on Tuesday, enumerating concerns it had about Disney’s current management and board, including the lack of a long-term succession plan, weak financial performance and distracting forays into “the killing fields of the culture wars,” among others.

Disney delivered a blockbuster first-quarter earnings report in February, packed with announcements including a plan to take an equity stake in “Fortnite” maker Epic Games, an exclusive cut of pop star Taylor Swift’s Eras Tour concert movie that became available on Disney+ in March and a new streaming venture with rivals that could change how fans watch sports.It said the company is on track to make its streaming business profitable by the end of September, a top priority for many shareholders, and in a rare departure from past years, provided guidance for profit expectations going forward, saying earnings per share are likely to increase 20% for the year.

Iger told colleagues before the earnings announcement that he expected the positive announcements to serve as a kind of knockout punch to Trian’s proxy campaign. People who have spoken to Iger in recent weeks have described him as confident and happy with the direction of the company.

He told one associate that he is confident Disney’s will prevail.

—Jessica Toonkel contributed to this article.

Write to Sarah Krouse at [email protected], Robbie Whelan at [email protected] and Lauren Thomas at [email protected]