Trian Fund Management CEO Nelson Peltz launched a widely publicized campaign to earn a seat on the Disney board of directors and address various corporate governance issues, but the longtime investor does not appear to have plans to reverse the company’s social and political activism.
Trian, which holds a stake in Disney worth approximately $900 million, noted that shares are currently trading near an eight-year low even as the company benefits from robust branding and intellectual property advantages. If he clinches a board seat, Peltz said he would confront poor succession planning for management, excessive compensation, and lackluster cost discipline.
“Disney has an incredible legacy as one of the leading and most successful consumer entertainment companies in the world, having built some of the most celebrated consumer brands and an unparalleled content portfolio that resonates with audiences of all ages across the globe,” Peltz said in a statement. “But in recent years, the company has lost its way resulting in a rapid deterioration in its financial performance from a consistent dividend-paying, high free cash flow generative business into a highly leveraged enterprise with reduced earnings power and weak free cash flow conversion.”
Missing from the announcement is any mention of Disney issuing public stances with respect to controversial social matters. The company opposed legislation in Florida last year that prohibits instruction about sexual orientation and gender identity for students between kindergarten and third grade, causing a loss of trust among some consumers. Around 33% of Americans view Disney in a positive light, according to a poll from NBC News, marking a significant decline from 77% approval recorded one year earlier in a survey commissioned by The Daily Wire.
A spokesperson for Trian declined to comment when The Daily Wire asked whether the company’s activist campaign will seek to remedy the alienation of Disney customers by executives’ involvement in political debates.
Among other concerning metrics, Disney has reported a significant slowdown in new domestic subscriptions for streaming service Disney+ after leaping into the fray of contentious social issues. The movies “Strange World” and “Lightyear,” both of which featured same-sex attraction and were nevertheless oriented toward young children, witnessed failures at the box office.
Strive Asset Management President Anson Frericks said in an interview with The Daily Wire that the shakeup at Disney would be “more successful” if Peltz works to reverse the activist trajectory of the entertainment conglomerate.
“Disney has a real cultural problem right now as their customer approval ratings have plummeted,” he said. “I think there’s a huge opportunity for Trian to put a philosophy into Disney that is focused on excellence, not wading into any political controversies that have continued to sink the trust consumers have with them.”
Trian is a proponent of the environmental, social, and corporate governance movement, also known as ESG. The investment philosophy contends that businesses have a moral imperative to leverage their power to promote racial diversity, decrease carbon emissions, and achieve other sociocultural objectives deemed desirable by management. Trian has encouraged a number of its portfolio companies to adopt various ESG initiatives.
Critics say the ESG movement prompts companies to shift focus away from the maximization of returns and toward activism that is often harmful to companies’ bottom lines. Frericks, whose asset management firm encourages companies to focus solely on profitability, added that cultural matters “should be handled by politicians and not necessarily by investment firms.”
“I do not think a lot of investors are aware of the risks posed by ESG. There is definitely an echo chamber in Wall Street,” he commented. “We hope that more firms will move away from ESG mandates that might satisfy folks in California and New York, but might not be in the best interest of states like Florida, Texas, or Ohio.”
Disclosure: The Daily Wire has announced plans for kids entertainment content.