I like Dan Loeb, a CEO of a significant US company explained once we discussed Loebs latest activist move, the purchase of a $1 billion stake in Disney with calls to spend less, shed assets and improve management. However the last thing I’d like is Dan snooping around my company. The fox in the henhouse never plays nice.
Needless to say, activist investors like Loeb arent available of playing nice. And Loeb is specially adept at his job just start to see the havoc he caused at Yahoo a couple of years back on the path to a large payday. Along with his Disney move, he again really wants to force change and enhance shareholder value, which includes been noticeably missing from the business recently. The stock is down a lot more than 23% year-to-date and much more than 30% previously 52 weeks.
Cable cord cutting is eating into Disneys linear businesses, including its still-profitable sports cable network ESPN. The Disney+ streaming service keeps growing, but still losing profits. ESPN alongside decent theme-park attendance is the reason why the business posted strong third-quarter results. Disney is betting big on streaming nonetheless it might not be the magic pill many industry pros wished for, or Netflix wouldnt be missing performance targets.
Then you can find the unstated reasons Disney is in big trouble, one that industry executives, investors and rivals will let you know when theyre not being quoted by name: Woke dont sell, particularly if it involves a company selling kid-oriented programming and theme-park experiences to Middle America.
In his letter to Disney CEO Bob Chapek, Loeb didnt say some of this. (He also declined to comment because of this column.) His letter stated explicitly he wants an outright sale of ESPN to cover down debt and invite ESPN to create up for the cord cutting and fully achieve the sports gambling business, which doesnt match Disneys family-forward image. Hed prefer to totally suspend the dividend and purchase from rival Comcast the rest of the 33% stake of the Hulu streaming service it doesnt own.
A rise albatross
But Loeb, for me, also a lot more than hinted at wokeness being truly a growth albatross for the home of Mouse. He wants more capable board members to fill gaps in talent and experience he referred to as strengths in technology, advertising and consumer engagement, along with proven track records of leading large, complex organizations and creating shareholder value.
THEREFORE I did just a little digging through the companys 2022 proxy statement a kind of annual report that investors, including presumably Loeb, pore to understand managements priorities, strategic direction, shareholder votes and what it searches for in its board members the women and men whom management must are accountable to.
You’d be amazed how Disney an organization known for, among other activities, Mickey Mouse and making movies which are supposed to interest the so-called silent majority is openly bragging to investors about its embrace of each woke fad imaginable.
The terms diversity and ESG, the acronym for Environmental, Social and Governance, appear on just about any page. Management diversity is really a worthy goal, but real academic research on diversity and shareholder value shows no correlation.
The proxy says management has generated various initiatives to improve the diversity (aka wokeness) of Disneys programming. Wheres the study that those programs sell? I couldnt find any.
Now lets turn to the companys board members individuals Loeb really wants to oust because he thinks theyre not cutting it. In the proxy, Disney includes a checklist of what it considers key attributes for board members.
Members are graded on executive management, marketing, brand enhancement and risk but additionally diversity and ESG experience, neither which are on Loebs list. You may be happy to remember that Chapek received strong marks of all of the, though he received just a passable grade for ESG (maybe he uses his gas-guzzling corporate jet all too often) and he flunked diversity because, you guessed it, hes a white dude.
Thats apparently negative in the Woke House of Mouse.
Now if these things sold, Loeb wouldnt now be bearing down on Chapek. The stock will be higher and the latest Buzz Lightyear animated movie is a smashing success rather than a near-flop after some woke nitwit limited its appeal by editing back to the ultimate cut of the kids flick a same-sex smooching scene that switched off many US parents and spurred some nations to ban the film altogether.
Chapek had an excellent quarter buts hes had a hardcore run since overtaking as CEO from Bob Iger two-plus years back. (A spokesman declined to touch upon some of this.) He previously to correct Disney following the COVID shutdowns but recall his fumble on the Florida legislation that has been inaccurately dubbed dont say gay since it prevented public schools from teaching sex ed to 6-year-olds. He was cowed by his woke employee base to publicly oppose regulations. That led Florida Gov. Ron DeSantis to pass legislation that ended decades of favorable tax treatment for Disney in circumstances it calls its second home.
It had been a straightforward win for DeSantis, and a humiliation for Chapek, who should just start making non-provocative kids flicks again or the Dan Loebs of the planet could keep coming.