Abigail Disney, whose grandfather co-founded The Walt Disney Company nearly a century ago, is poised to mount a legal battle to challenge and perhaps even claw back some of CEO Bob Chapek’s annual pay, according to three individuals familiar with the matter.
The heiress has spent the last three months quietly courting institutional investors to support a shareholder-backed salvo against Chapek at next year’s annual meeting, multiple insiders told TheWrap. The entertainment giant has been under fire for doubling Chapek’s annual compensation to $32.5 million in 2021 amid a slew of corporate fumbles that include a public legal battle with “Black Widow” star Scarlett Johansson, a botched response to Florida’s “Don’t Say Gay” law and this month’s abrupt firing of TV content boss Peter Rice.
The strategy Abigail Disney laid out in at least three meetings is that her name recognition and the company’s recent missteps would amplify a wider strategy to give shareholders more clout in challenging Chapek’s compensation. The brewing proxy fight marks a major escalation in her relentless criticism of the company, injecting a dramatic flair to Hollywood’s reputation of lavishly rewarding top executives at the expense of rank-and-file workers.
Her push also comes nearly two decades after her father, Roy E. Disney, successfully led a shareholder revolt that led to the 2004 resignation of then-CEO Michael Eisner after years of financial underperformance — and the ascendance of his successor, Bob Iger.
While the nature of Abigail’s Disney complaint is novel in terms of shareholder proxy fights, Disney’s recent disappointing performance under Chapek — the company’s stock price is down by more than 40% this year — gives the issue considerable heft. “You would have rolled your eyes if a shareholder wanted to challenge compensation — it ain’t never gonna happen,” said one Wall Street analyst who declined to go on the record for fear of reprisal from Disney. “But, this is Disney vs. Disney and who isn’t going to watch a fight between a corporate politics underdog and a veteran who can’t seem to land a punch?”
A spokesperson for Disney declined to comment. Abigail Disney declined to comment through her chief of staff.
One institutional investor who had a meeting with Abigail Disney described the exchange as a “very informal discussion that was very serious” despite being arranged last minute on the sidelines of an event the two were attending. Another investor, a mutual fund manager, said their discussion was preliminary and seen more as a way to take the temperature of investors as a whole.
“Fund managers run into each other at industry events all the time and talk shop,” the mutual fund manager said. “And Abigail wanted to know what they thought, what the mood was. She seemed mostly interested in if this was that perfect opportunity for something like this.”
That perfect opportunity comes as entertainment companies are reporting lackluster financial results yet at the same time handing out sky-high compensation packages to top executives. For Abigail Disney, it also represents a unique historical opportunity as an activist shareholder for the company founded by her grandfather, Roy O. Disney, and his brother Walt Disney.
Hollywood hit a new record this year when it comes to the lucrative compensation packages awarded to the chiefs running all the nation’s major television, movie and streaming businesses. Warner Bros. Discovery CEO David Zaslav took home $246 million in pay for 2021, higher than the combined paychecks paid to the CEOs of Disney, Netflix, Paramount, Comcast, Lionsgate and Fox.
The jaw-dropping amount triggered a renewed backlash against the industry’s long-standing reputation for excessive paydays. And analysts believe it may cause a day of reckoning over how much studios pay its top leaders.
Disney helped instigate the compensation arms race by paying executives exorbitant amounts of money as it became the entertainment industry’s most powerful player. Chapek earned 644 times more than the median Disney employee in 2021, and about three times more than the average American CEO of a publicly traded company, according to a report from executive data provider Equilar.
Meanwhile, shares of Disney during the same period plunged amid all the negative headlines and as investors ducked for cover amid a worsening economic picture. Disney shares opened Tuesday at $94.12, while the stock price is off fully 46% from its 52-week high.
“I feel Bob has been penalized significantly, sometimes unfairly, and this isn’t going to help,” said Jessica Reif Ehrlich, senior U.S. media and entertainment analyst for Bank of America Securities. “If this wasn’t a Disney, if the stock was higher and performing, then this would not be a topic of conversation.”
Abigail Disney, a documentary filmmaker who said she owns “only a small number of shares” in the namesake business, has been openly critical of the the company’s bonus schemes since calling former CEO Robert Iger’s $65.6 million compensation “insane” in 2019.
She continued to rebuke Disney’s pay practices when Chapek took the helm two years later, suggesting that shareholders take action as top executives were paid lucrative bonuses while 100,000 employees were furloughed or took pay cuts due to coronavirus-related shutdowns. Her 2022 documentary “The American Dream and Other Fairy Tales” takes a harsh look at the topic by examining the lives and financial situations of workers at Disney theme parks and resorts.
“The challenges are existential, even. But that does not constitute permission to continue pillaging and rampaging by management,” Abigail Disney wrote in a 2020 post on Twitter. “In fact, if a bonus reflects performance, we might want to claw back some of those millions given how they have managed cash.”
The Securities and Exchange Commission’s “Say on Pay” law gives shareholders the ability to call a vote on compensation-related issues like clawbacks, but the results are non-binding and used in an advisory capacity for the board of directors. Clawbacks typically apply to bonuses received through ill-gotten means, such as compensation tied to box office returns that were only met because some of the numbers were exaggerated.
“There are good reasons for shareholder votes not being mandatory — it would emasculate the board and make it difficult for them to carry out their responsibility,” said Charles Elson, a corporate governance expert and founding director at the University of Delaware’s Weinberg Center. “But, boards also need to listen to their shareholders. If you get into the 30% to 40% range in approving a shareholder proposal, then the board of public companies can’t ignore that.”
Or boards can ignore those results at their own peril. Elson said one way that shareholders can get their non-binding votes approved by the company’s board is to pursue campaigns to oust the directors.
Last year, after ExxonMobil’s board rejected the activist hedge fund Engine No. 1’s push for the oil giant to consider more initiatives on climate change, the fund began courting bigger institutional investors like BlackRock Inc. to side with them — and managed to elect three new board members more receptive to environmentally friendly shareholder proposals.
Regardless of whether a shareholder vote passes or not, two influential groups do pay attention to the margins in even losing votes — large institutional investors who manage retirement funds and Wall Street analysts who rate the stock.
“Every pension fund and retirement fund managers have billions and billions of dollars to invest, and decisions aren’t just made on financial modeling that plots the stock price with future revenue projections,” said a top executive who works for one of the nation’s biggest pension funds, and was among those who has had a discussion with Abigail Disney. “We have investment requirements that look at things like succession, any ethical questions and other issues. A board that doesn’t listen to their shareholders doesn’t get our money.”
Disney is one of the nation’s most widely held stocks, routinely landing in the top 50 that mutual fund managers put into their portfolios. Vanguard Group Inc. is Disney’s biggest shareholder with about $15 billion in stock holdings; BlackRock Inc. is second with $8.2 billion and State Street Corp. has about $8 billion.