Disney CEO Iger faces big challenges in return to company – Orlando Sentinel

Walt Disney’s Co.’s decision to oust CEO Bob Chapek and reinstate former longtime CEO Bob Iger for two years surprised many when it was announced late Sunday, but analysts say the move was a long time in coming.

“There’ve been disconcerting issues that have been in existence within the company, and I’m sure the board has been discussing this,” said Dennis Speigel, CEO of International Theme Park Services in Cincinnati. “It just didn’t happen overnight, and I do think that the [Nov. 8 fourth-quarter and year-end] earnings call was the final trigger.”

Chapek, appointed to succeed Iger in February 2020, has received praise for steering Disney through the financial devastation of the COVID-19 pandemic but criticism in other aspects of his management.

Among other issues, investors have slammed him for failing to quickly lead Disney’s streaming services to profitability as Disney’s stock price fell; Disney employees, fans and Florida politicians decried his initially meager, then more forceful response to Florida’s so-called “don’t say gay” bill in March, leading to a public feud with Gov. Ron DeSantis; and fans have blamed him for Disney’s parks losing their “magic” as prices rise and the values of their vacations fall.

A recently leaked memo from Chapek warning of impending company-wide layoffs as the streaming service struggled added to concerns about his leadership. Disney did not respond to a request for comment Monday.

News of his departure comes less than five months after Disney’s board unanimously extended his contract by three years and awarded him a performance-based bonus of at least $20 million. SEC filings on Monday show Disney ended Chapek’s employment without cause and he resigned from the company’s board of directors. He will receive separation benefits.

Disney’s board decided Chapek had to go after determining “they were losing the heart and soul of the company,” a longtime Disney observer told the Los Angeles Times.

“This may have seemed quick, but the creative community has been saying that it was just a matter of time. The situation just wasn’t tenable,” said the company insider, who reportedly was not authorized to comment publicly.

Disney’s stock price soared by 9% in before-market trading between Sunday night and Monday morning after Chapek’s departure was announced. It had plunged to close at $86.75 after the Nov. 8 fourth quarter and year-end earnings call, just 99 cents above its March 23, 2020 low as the first surge of the pandemic forced the company to shut down its theme parks.

The stock closed about 6% higher at $97.58 a share.

Analyst and writer Jim Hill said his contacts within Disney told him the losses discussed in Disney’s recent earnings call, coupled with Chapek’s cost-cutting memo, spurred Disney’s board to action.

“There was just a certain level of terror at the board, supposedly: ‘If we don’t get out ahead of this guy, there’s no fixing this,’” said Hill, who discusses Disney’s business and history on his website Jim Hill Media and in his Disney Dish podcast.

Len Testa, a Disney analyst who runs vacation planning site Touring Plans, said he has heard “nothing but relief” from employees about Chapek leaving.

“I don’t think Bob Chapek’s strength was relationships,” said Testa, who co-hosts the Disney Dish podcast. “It wasn’t something he was great at the way Iger was, and I think that the cast members saw that too.”

Many employees who previously worked under Iger are welcoming him back, but people appointed by Chapek are concerned for their jobs, Hill said. Iger is reaching out to people who left under Chapek’s leadership to ask them to return, he and Testa said.

Speigel said he had expected Disney’s board would move to unseat Chapek soon due to long-standing internal issues, including Chapek’s October 2020 reorganization of the company’s divisions to focus on streaming. However, he thought it would wait until after the busy holiday period for its theme parks.

He said Chapek had “big shoes” to fill “during the most difficult time in the history of our industry.”

“I don’t think anybody could have survived through the issues that [Chapek] had to deal with,” Speigel said.

Iger previously called rumors he would return to lead Disney “ridiculous,” telling the New York Times in January, “you can’t go home again. I’m gone.”

Analysts say there was no one better suited to help right the company’s current path. But Speigel said he is concerned Disney is using Iger as a “one-trick pony” in a desperate effort to correct course.

“How many times can you bring back Bob Iger to resuscitate the company like Disney has?” He asked. “… No disrespect to Bob Iger. He’s been amazing for that company and the greatest leader they’ve ever had.”

Iger, 71, previously led Disney as its CEO and chairman from 2005 to 2020. After selecting Chapek as his successor, Iger served as executive chairman of Disney and chaired its board through 2021. His career at Disney spans over four decades, and he was also its president and chief operating officer from 2000 to 2005.

SEC filings show Iger is under contract until Dec. 31, 2024. He will receive an annual base salary of $1 million. He can also receive an annual performance-based bonus equal to his salary and a separate “long-term incentive award” worth $25 million at the end of the fiscal year.

Before succeeding Iger in 2020, Chapek’s nearly 30-year Disney career included leading the consumer products and theme parks divisions, and he led the segment that combined both under Iger in 2018.

Iger now faces the formidable tasks of repairing relationships that Chapek damaged or neglected, determining Disney’s future direction and searching for the next person to lead the entertainment company, all within a two-year deadline, analysts said.

Factors such Disney’s strained relationship with DeSantis as he gears up for a presidential bid and Universal’s upcoming rival theme park, Epic Universe, opening in 2025 further complicate Iger’s job.

The company also must deal with the future of Disney World’s Reedy Creek Improvement District, which DeSantis and the Legislature dissolved, effective next June, after the battle over the “Don’t Say Gay” law erupted. Lawmakers are expected to come up with a new structure for the district next spring.

“There’s a lot of people in the financial community who are breathing a sigh of relief, but at the same time, it’s going to be more about, ‘OK, this is nice, now show us what you actually intend to do,’” Hill said. “Iger’s going to be under a microscope unlike any other time during his previous tenure at Disney.”

krice@orlandosentinel.com and @katievrice on Twitter

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