“I really like Dan Loeb,” a CEO of a major US company told me as we discussed Loeb’s latest activist move, the purchase of a $1 billion stake in Disney with calls to cut costs, shed assets and improve management. “But the last thing I want is Dan snooping around my company. The fox in the henhouse never plays nice.”
Of course, activist investors like Loeb aren’t in the business of playing nice. And Loeb is particularly adept at his job — just see the havoc he caused at Yahoo a few years back on the way to a big payday. With his Disney move, he again wants to force change and enhance shareholder value, which has been noticeably missing from the company recently. The stock is down more than 23% year-to-date and more than 30% in the past 52 weeks.
Cable cord cutting is eating into Disney’s linear businesses, including its still-profitable sports cable network ESPN. The Disney+ streaming service is growing, but still losing money. ESPN along with decent theme-park attendance is why the company posted strong third-quarter results. Disney is betting big on streaming but it may not be the magic bullet many industry pros hoped for, or Netflix wouldn’t be missing performance targets.
Then there are the unstated reasons Disney is in trouble, the one that industry executives, investors and rivals will tell you when they’re not being quoted by name: Woke don’t sell, particularly when it comes to a company trying to sell kid-oriented programming and theme-park experiences to Middle America.
In his letter to Disney CEO Bob Chapek, Loeb didn’t say any of this. (He also declined to comment for this column.) His letter stated explicitly he wants an outright sale of ESPN to pay down debt and allow ESPN to make up for the cord cutting and fully flourish in the sports gambling business, which doesn’t fit with Disney’s family-forward image. He’d like to totally suspend the dividend and buy from rival Comcast the remaining 33% stake of the Hulu streaming service it doesn’t own.
Being woke could hurt Disney’s sales, especially with Middle America.Getty Images
A growth albatross
But Loeb, in my opinion, also more than hinted at wokeness being a growth albatross for the “House of Mouse.” He wants more experienced board members to fill “gaps in talent and experience” that he described as “strengths in technology, advertising and consumer engagement, as well as proven track records of leading large, complex organizations and creating shareholder value.”
So I did a little digging through the company’s 2022 proxy statement — a type of annual report that investors, including presumably Loeb, pore through to understand management’s priorities, strategic direction, shareholder votes and what it looks for in its board members — the men and women whom management must report to.
You would be amazed how Disney — a company known for, among other things, Mickey Mouse and making movies that are supposed to appeal to the so-called silent majority — is openly bragging to investors about its embrace of every woke fad imaginable.
The terms “diversity” and “ESG,” the acronym for Environmental, Social and Governance, appear on nearly every page. Management diversity is a worthy goal, but real academic research on diversity and shareholder value shows no correlation.
Florida passed legislation that took away Disney’s special tax status earlier in 2022. Getty Images
The proxy says management has created various initiatives to increase the diversity (aka wokeness) of Disney’s programming. Where’s the research that those programs sell? I couldn’t find any.
Now let’s turn to the company’s board members — the people Loeb wants to oust because he thinks they’re not cutting it. In the proxy, Disney has a checklist of what it considers key attributes for board members.
Members are graded on executive management, marketing, brand enhancement and risk but also diversity and “ESG experience,” neither of which are on Loeb’s list. You will be happy to note that Chapek received strong marks on most of these, though he received only a passable grade for ESG (maybe he uses his gas-guzzling corporate jet too often) and he flunked “diversity” because, you guessed it, he’s a white dude.
That’s apparently negative in the “Woke House of Mouse.”
Now if this stuff sold, Loeb wouldn’t now be bearing down on Chapek. The stock would be higher and the latest “Buzz Lightyear” animated movie would have been a smashing success instead of a near-flop after some woke nitwit limited its appeal by editing back into the final cut of this kids’ flick a same-sex smooching scene that turned off many US parents and spurred some nations to ban the film altogether.
Chapek had a good quarter but’s he’s had a tough run since taking over as CEO from Bob Iger two-plus years ago. (A spokesman declined to comment on any of this.) He had to repair Disney after the COVID shutdowns but recall his fumble on the Florida legislation that was inaccurately dubbed “don’t say gay” because it prevented public schools from teaching sex ed to 6-year-olds. He was cowed by his woke employee base to publicly oppose the law. That led Florida Gov. Ron DeSantis to pass legislation that ended decades of favorable tax treatment for Disney in a state it calls its second home.
It was an easy win for DeSantis, and a humiliation for Chapek, who should just start making non-provocative kids’ flicks again or the Dan Loebs of the world will keep coming.