News Analysis

Who is Nelson Peltz, and why is he targeting Disney’s governance?

by Dan Byrne on Jan 13, 2023

Who is Nelson Peltz? He’s an activist investor and has his sights set on Disney. 

The global media giant’s governance record over the last twelve months begs the question: what on earth is going on at its top levels?

From a peak share price in early 2021, the company is now flirting with a historic five-year low, and it isn’t short of critics lining up to explain why. Peltz is at the top of the queue.

Who is Nelson Peltz?

He is an activist investor (worth approx. $1.4 billion) with a history of challenging the system in big companies. 

Peltz co-founded the investing firm Trian Fund Management, through which he has previously acquired sizeable stakes in companies like Procter & Gamble and Mondelez International.

He frequently vies for seats on the boards of these companies for more direct influence over their future. He is doing the same at Disney. Often though, his efforts meet opposition.

And a quick recap: what is an activist investor?

It’s a person who wants to change how a company is run or managed and has bought the necessary shares to have a chance of doing it. 

Their impact is debatable, depending on their motives and how much control they have. You can read more about well-known activist investors here.

A company ‘in crisis’?

Back to Disney, and it’s been a big week:

  • On Wednesday, Mark G. Parker was elected chair of Disney’s board. In a statement, the company hailed Parker as a “well-respected leader” whose “vision, incredible depth of experience and wise counsel have been invaluable to Disney.”
  • It was isolated praise, however. A Reuters business piece Tuesday criticised Parker as an “odd choice” and his appointment a “clumsy decision”, considering Parker played a role in specific governance problems. 
  • Trian (and Peltz) are now calling Disney a “company in crisis” due to its tumbling share price and bumpy governance problems, which it says are “self-inflicted.”

So Peltz is an activist investor; what does he want?

Firstly, he wants a seat on the board. So far, others in Disney’s governance circles have voted against this, claiming he lacks experience.

He also wants the company to cut costs and avoid further botched decisions, citing management transitions and the overpayment for 21st Century Fox as examples. 

Separately, he’s anxious for the streaming service Disney+ to turn a profit. Disney+ launched in 2020, at the height of the pandemic, but CFO Christine McCarthy recently said it won’t become profitable before 2024.

Does he have a point?

Share prices speak for themselves in the investing world, and 2022 has been a bad year for Disney in that regard. This is despite a moderate increase in price since the start of this year. 

At the same time, Peltz and Trian’s negativity won’t amount to much without offering alternative solutions. According to Reuters sources, he has done very little of this so far. 

His critiques might not have much of a point if he can’t suggest new paths forward.

What’s his ultimate goal?

Peltz wants the level of influence he deems necessary to bring about change. In this case, that influence is a board seat.

This is very much like his past battles with other companies, and we should note that in those examples, the companies’ fortunes generally improved when he had a say in governance.

Will he succeed?

That depends on his reception among other leaders at Disney. So far, it doesn’t look good. 

Peltz has been denied a board seat due to lack of experience, meaning colleagues either don’t have confidence in his judgement or think they can manage without it. 

Disney has, however, offered Peltz “board observer” status in exchange for the promise to hold back on seeking a board seat. Peltz refused this offer. 

In other words, Disney is trying to halt his activist momentum or at least delay it to the point of irrelevance. 

Behind the scenes, though, the company is beginning to examine changes that respond to Peltz’s criticism, such as a more thorough CEO succession structure. It suggests that while the company is publicly reluctant to engage with Peltz, his points get through to those in charge. 

Whether they’ll attribute any successful change to Peltz’s influence remains to be seen.

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