The Walt Disney Company released the official vote counts on April 4th from its 2024 meeting of shareholders held April 3rd - much faster than it usually takes to do so, we were happy to note - where they said “investors decisively defeated” the campaign by activist investor Nelson Peltz to win two seats on its board.
Here are our own “key takeaways” from the contest, ranked roughly in order of importance… except for the last three and most important points:
Most notably, the two truly outstanding directors that were added to the board in November, well before the proxy materials went out, were a major factor in the victory, we think. Morgan Stanley Executive Chairman James Gorman got 98% approval and former Sky CEO Jeremy Darroch clocked in at 96% of the shares voted for directors.
Chairman Bob Iger – who was not one of the directors “targeted” for votes-no by the activists - and wisely so - logged a very hefty 94% approval rating – with almost all of the votes-no coming from Peltz himself it seems - indicating clearly that investors are basically happy with the job he has been doing of late – not only in significantly strengthening the board but in beginning to turn the ship around – and the stock price too – and promising to prioritize a succession plan - although some would argue that the improvements to date have been very much due to Peltz’s pugnaciousness. (The stock lost 3% on the day following the release of results, indicating to us that many stockholders were kind of sorry in the end to see Peltz not seated.)
Peltz himself received a surprisingly small 31% of shares voted in his favor, while Jay Rasulo, the former Disney CFO whom Trian had nominated for a board seat – and who did not receive an endorsement from any of the major vote-rating agents - won a mere 12% of votes cast in his favor. (We ourselves think that had the Disney Employee Ownership Plan Trustee NOT voted the unvoted Plan shares proportionately, as we believe they did, Peltz’s margin would have been significantly bigger, although still short of a winning one. We feel that while the Trustee was ‘entitled’ to do so, they should not do so in a contested election, (a) because normally, it puts a thumb heavily on the Management’s side of the scale, as we’re sure it did here and (b) because the handsomely-paid Plan Trustee has a clear “conflict of interest” we think, as former fiduciaries ourselves, when the proportionally allocated votes – which we believe they are not obliged to vote - favor the management slate, and (c) it’s simply not RIGHT for a Trustee to vote the shares of investors who have chosen not to exercise their franchise on an important matter such as a contested election of directors.)
A MAJOR TAKEAWAY, we say - the vote clearly puts to death the myth that ISS - which recommended a vote for Peltz - somehow, singlehandedly “controls” proxy voting results because big investors slavishly follow their advice.
The three Disney nominees with the lowest vote totals for their reelection were the two incumbent directors targeted by Peltz’s group for removal — Maria Elena Lagomasino who received only 63% of the shares voted – and even fewer without the ESOP’s proportional vote in favor, we bet. But either way, a clear vote of no-confidence, we’d say, and nothing to crow about. Michael Froman, who had also been targeted by Trian came in with 88%of the votes cast, as did Disney’s Independent Chairman Mark Parker, which was something of a surprise, and which took some of the heat off Froman.
Speaking of dumb things to do, as we noted in our last issue too, the three candidates nominated by Blackwells Capital, received only 2% of votes cast in their favor. What in the world were they hoping to accomplish?
As to the day-to-day proxy-war tactics, the Disney camp totally outclassed Peltz & Co in our book: Every day as we looked at the news headlines on our iPhone there were several items of news from Disney, touting their turnaround and their bold-sounding new plans, and slamming Peltz – rather unfairly we thought. (Our youngest son, for example, used his profits from Trian’s Snapple deal to finance about 12 years of exploration and an aquaculture business in the Pacific Islands. Our entire family benefitted big-time from his activism at Heinz – and even bigger from his proxy fight at P&G which galvanized them to action after years of sleepiness and where the stock went up by 50% during his years on the board.) Disney focused on Peltz activities that have not (yet) paid off – but no investor bats 1000 100 percent of the time.
Normally, ad hominem attacks tend to backfire. But Peltz’s rejoinders in the press were surprisingly weak from our perspective. And, although we thought his slogan “Restore the Magic” would resonate well with many retail investors, he did a poor job when it came to explaining how he’d do so and getting his story out there. Not so stupidly, as it turned out, Peltz seems to have spent most of his time on one-on-one meetings with the major investors.
We also can’t help mentioning that we found Disney’s frenetic cartoon, featuring Donald Duck’s supposed uncle, “Professor Ludvig Von Drake” telling us over and over, in a wackily-delivered German accent, to “vote the white card” and “rip up the opposition cards” to be a rather demeaningly-dumbed-down thing to aim at retail shareholders. Totally stupid, we thought, to think shareholders would take advice from a carton duck…But knowing Disney’s marketing savviness, and looking at the outcomes, maybe it helped their cause after all.
The most surprising thing, however, is that the massive PR campaigns by both sides (where Disney spent an estimated $40 million, Trian an estimated $25 million and Blackwells, whose entire stake was worth only $15 million, spent $6 million) – and the many predictions all around that retail voters would be critical to the outcomes – and the monstrous piles of money spent on “retail outreach” efforts - came, literally, to naught!
Compared to last year, where the Quorum clocked in at 76.55% of the shares outstanding, this year’s Quorum went DOWN – significantly – to a mere 68.95% - a drop in voting of a whopping 124,712,724 votes vs. last year – where, by the way, Peltz had withdrawn his proxy fight plan well before the meeting. Actually, retail voters may indeed have been critical to the outcomes here – by being “totally turned off” by the fight, and by the barrage of mailings and phone calls, as they appear to have been – and deciding, it seems, to ‘leave it to the big investors to fight it out.’
Readers should take note of the fact that virtually all of the 31% of the shares that were not voted belong to ‘retail investors’ who, as we have been warning, have been voting less and less frequently year after year – proxy fight or no.
Another key takeaway - one could easily argue that Peltz WON the fight – having racked up over $300 million in stock-price appreciation since he began his quest – net of his $25 million investment in the fight. And clearly, Disney shareholders have been winners too, even after the $40 million Disney spent on the fighting.
Lastly, we all need to note that Disney stock-price is still a far way away from its all-time high of three years ago - and Peltz has promised to stay on the case: “We will watch like we did last time,” Peltz said in an April 4 interview on CNBC. “We’ve got a new set of promises, and I hope they keep them… but if they don’t, you’ll see me again.”
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