How the Sudden Exit of Disney’s CFO Complicates CEO Bob Iger’s Succession Plans | Analysis

The sudden departure of Disney chief financial officer Christine McCarthy from her role citing family medical leave poses complications for both filling that role permanently and succession plans to install a new CEO to replace Bob Iger, according to Wall Street analysts and industry experts.

McCarthy’s exit creates a domino effect that not only prolongs the search for her replacement until Iger is able to choose a successor but may push the chief executive to extend his contract beyond its initial two years in order to ensure the company is stable.

“It slows everything in the near-term because they have to do a search for the new CFO which has to include external parties,” Laura Martin, senior entertainment and internet analyst at Needham & Company told TheWrap. “So a lot of times to replace a CFO of this caliber, it takes a year.”

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McCarthy, who has been well-respected on Wall Street and a close lieutenant of Iger, was tapped as CFO in 2015. She has helped the entertainment giant navigate through milestones like the launch of Disney+ in 2019 and challenges including the COVID-19 pandemic in 2020, a proxy fight with activist investor Nelson Peltz, the company’s ongoing restructuring designed to cut $5.5 billion in costs and the legal battle with Florida Gov. Ron DeSantis.

According to the Wall Street Journal, she also played a major role in the ousting of former CEO Bob Chapek, paving the way for Iger’s return as CEO in November. The Journal reported on Friday that McCarthy has since butted heads with Iger and other top executives over the company’s spending on content and restructuring strategy. In May, McCarthy said Disney planned to spend around $30 billion on content in 2023, but noted that could change depending on the impact from the Writers Guild of America strike.

She’s been “a straight shooter with the sellside/buyside and a strong operator for the upcoming focus on [direct-to-consumer] margin improvement,” while interim CFO Kevin Lansberry is “not yet well known by Wall Street,” Wells Fargo analyst Steven Cahall said in a Friday note to clients.

The Kevin Lansberry factor

Lansberry, a Disney veteran with over 35 years of experience in finance, business development, alliances and operations, most recently served as executive vice president and chief financial officer of the Parks, Experiences and Products division. He will inherit a host of challenges from his predecessor when he assumes McCarthy’s position on July 1.

“At $93 per share, we think investors see more risks than opportunities in the medium term for [Disney]. These include one, Parks growth softening from the macro (e.g. pricing, wage inflation); two, time and outlook for DTC margin improvement (arguably the biggest issue); three, impact of taking ESPN fully DTC (plus NBA); and four, the purchase of the minority stake in Hulu,” Cahall explained. “Separately these are speed bumps to the stock. Together they’re obstacles.”

McCarthy will continue as a strategic adviser through the end of her contract on June 30, 2024 and assist with the process of identifying and onboarding a long-term successor to ensure a smooth and successful transition.

When Disney reports its third quarter earnings for fiscal 2023 in August, Wells Fargo expects that she and Lansberry will share the CFO role and deliver “limited new [long-term] info” with investors and analysts on the conference call. Additionally, Disney will hold an investor summit in Orlando from Sept. 18-20, which Cahall expects will offer “far more color.”

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More Bob Iger

Dr. Ann Murphy, a business professor at Stevens Institute of Technology, told TheWrap that a new CFO will “likely want to know who they will be working for,” which presents a problem with appointing someone for the post until Iger’s successor is determined. That may mean that Lansberry keeps the post, at least for the foreseeable future, she said.

“With all this leadership in flux, it may not bode well for making the changes needed to achieve Disney’s ambitious $5-plus billion cost savings goals and address the issues with its streaming services, underperforming stock, and beyond. The political mess in Florida with presidential hopeful Ron DeSantis essentially waging war against Disney doesn’t help either,” Murphy added. “At a minimum, it is a distraction from what the company needs to do to get back on track.”

A drawn out process to find a permanent CFO could potentially prompt Iger to extend his contract in order to “steady the ship and make sure that all the restructuring and all of the cost cuts are actually implemented and going as planned,” Bloomberg Intelligence analyst Geetha Ranganathan said.

A spokesperson for Disney didn’t immediately return TheWrap’s request for comment on whether Iger and the board of directors would extend his current contract.

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But Wall Street likes stability

Despite the CFO transition adding “another wrinkle to an already complex story,” Cahall believes it’s an opportunity for upside on Disney stock, but that there’s “no doubt it will take time for the pieces to come together.”

Meanwhile, KeyBanc Capital Markets analyst Brandon Nispel believes that the move, while unexpected, will be “neutral” to Disney stock.

“With McCarthy stepping down for nonbusiness-related reasons and Lansberry having been leading DPEP under McCarthy since 2017, we would expect a straightforward transition and would not expect any changes strategically, with no changes mentioned to financial targets,” Nispel said.

Disney stock, which closed at $91.32 per share at the end of Friday’s trading session, is up approximately 2% year to date.

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