Bob Iger, the CEO of the Walt Disney Company, received a total compensation of $36.3 million in fiscal year 2017, if all goes well, could earn more than twice that figure this year. The company’s investors, however, have balked at the board’s plan to reward Iger so generously, voting 52–44 percent against a non-binding advisory resolution approving Disney’s executive compensation pan at its annual shareholder meeting, Bloomberg reports.
Three proxy advisors had urged investors to reject the plan, which they said was misaligned with performance, but the board insists that Iger’s compensation package is worth making sure he remains on board through the completion of Disney’s ongoing $52.4 billion deal to purchase 21st Century Fox:
“The board decided it was imperative that Bob Iger remain as chairman and CEO through 2021 to provide the vision and proven leadership required to successfully complete and integrate the largest, most complex acquisition in the company’s history,” Aylwin Lewis, head of the Disney board’s compensation committee, said Thursday.
Bloomberg notes that this is the first time Disney shareholders have pushed back on an executive compensation package since federal regulators began encouraging these “say on pay” votes in the 2010 Dodd-Frank Act. Indeed, such rejections are still a rare occurrence in corporate America generally. Just 1.2 percent of S&P 500 companies had their advisory pay resolutions opposed by a majority of investors in 2017, Reuters reports, citing data from ISS Analytics.
After the sudden announcement that Thomas Staggs, Disney’s chief operating officer and the putative heir to CEO Bob Iger, would be leaving the company this year, Disney’s board now has to scramble to find a new successor. Jena McGregor at the Washington Post explains just what a tricky situation they’re facing:
While Disney may have plenty of talented people on its management team, some say an obvious next-in-line for the CEO job is missing from the lineup now that Staggs is leaving. Jay Rasulo, Disney’s former chief financial officer, departed the company after Staggs was given the COO job last year, which followed a five-year bake-off that included the two executives switching roles. “If anything unexpected happens to Bob Iger, there’s a leadership vacuum at the top of this company,” said Laura Martin, an analyst at Needham Securities who has a “hold” on the company. “There is no plan B.”
A lack of obvious internal candidates, says Noel Tichy, a professor at the University of Michigan’s business school who authored a recent book about succession, makes things particularly challenging for any board. Two years isn’t long enough to groom an internal CEO, he says, while outside candidates typically face long odds. While there are exceptions, such as Alan Mulally’s recent success at Ford or Lou Gerstner at IBM in the early 1990s, “it’s very hard to go outside and get it right.”
This dilemma has raised the possibility that Iger will not retire when his current contract expires in 2018, as he had been expected to do, but stay on until Disney can find and train a new CEO. According to the Wall Street Journal, the board is looking for someone to continue Iger’s strategy rather than take the company in a new direction. Nonetheless, with its top two internal candidates out, Disney’s next CEO may come from outside the organization. Christopher Palmeri at Bloomberg looks at some of the names being mentioned:
Thomas Staggs, a longtime executive at Disney who was appointed its chief operating officer last year, was considered the heir apparent to CEO Bob Iger, who is expected to depart when his contract is up in 2018. That all changed on Monday, when Disney announced that Staggs would step down next month, Daniel Miller reports for the Los Angeles Times:
Disney never guaranteed Staggs, 55, the top job and made clear a year ago that his work would be evaluated by the board. … Nonetheless, the move stunned investors as well as executives inside and outside the Disney empire. “I’m shocked,” said Jim Cora, a former chairman of Disneyland International who left in 2001 and has since consulted for the company. “Whatever happened sure happened quietly.”
Staggs’ impending departure prolongs an already drawn-out succession process. After former Chief Financial Officer Jay Rasulo was passed over for the No. 2 job last year, he left the company. … Now Disney will search for new candidates to succeed Iger. With the notable exception of former Chairman and Chief Executive Michael Eisner, Disney usually selects its chief executive from within. But the departures of Staggs and Rasulo make it more likely that Disney would have to turn to an outside executive to find a person capable of handling such a complicated job, analysts said.
Also in the LA Times, David Pierson and Natalie Kitroeff discuss what it means for an organization to lose its designated or presumptive successor CEO: