Charley Gallay
In 2001 GE (GE) CEO Jack Welch stepped down from his position at the company and turned the reigns over to Jeff Immelt – his hand-picked successor. At the time Welch had left a company on the rise, building its value from $14 billion to over $400 billion… what happened next was something few saw coming.
Immelt’s tenure at GE was rough and it sent the stock tumbling to the point it was de-listed from the Dow Jones Industrial Average
And that was wasn’t even rock bottom.
The GE collapse remains a cautionary tale to the highest degree.
It’s a stark reminder that in this industry no matter how successful you have been – tomorrow is another day.
It’s a reminder that also hit home for Disney (NYSE:DIS) and will weigh on its 2023 plans, as well as the minds of its investors.
First as always, some background.
Last month, in a shock move, Disney ousted current CEO Bob Chapek and re-installed former CEO Bob Iger. This came following one of the worst earnings reports the company had in recent memory. Whether it was the perception that Chapek was under-stating the impact, didn’t understand the impact or that it was Chapek’s leadership that put them in that position, the board decided it needed a change.
Yet, while Wall Street celebrated Iger’s return to the castle, the House of Mouse is still not out of the woods and there’s still a big Dumbo-sized elephant in the room to discuss.
Iger’s initial run as CEO did truly turn Disney into an even bigger juggernaut than many had thought possible. Prior to him taking the top spot, Pixar was still just a partner, the Marvel Cinematic Universe wasn’t a thing and the last new Star Wars film were the controversial prequels.
Fifteen years later when Iger stepped down, Pixar, Marvel and Lucasfilm are all firmly under the Disney umbrella and thriving. And that’s not even including streaming service Disney+ which always was a pet project of the once and current CEO.
Yes, things were going well for Mickey and friends.
While the COVID pandemic delayed Iger’s eventual departure, when he did leave, he turned over a well-oiled machine to Chapek, who was hand-picked for the role. Iger liked Chapek’s style and thought it would be a good contrast to his own, but things took a turn.
While Iger was known for being calm and collective, Chapek seemed to wear his emotions on his sleeve. When investors thought he should be more reserved, he erupted, and when investors wanted him to be firm, he was quiet.
It was not consistent, and between the COVID pandemic, the Scarlett Johansson fiasco and the “Don’t Say Gay” Florida feud with Gov. Ron DeSantis, Chapek zigged when the board would have rather him zagged.
Now to be fair to Chapek, like Immelt, outside events were definitely in play. As you may remember four days after Immelt took over, 9/11 occurred, and when Chapek took over, it was at the height of the pandemic. Those two events are history-defining in size and scope and would make anyone’s job tougher. In these cases though they just couldn’t overcome playing from that far behind.
Chapek’s tenure was rocky, but the board seemed to stand behind him, even extending his contract over the summer. Yet the negative earnings report, which brought on memories of Netflix’s (NFLX) epic collapse, flipped the script quickly and the same board again switched out one Bob for another.
The reaction was instant.
The stock jumped and many cheered that in some ways “daddy was coming home” to the Magic Kingdom.
It was exactly the boost Disney needed.
Although in a few ways investors are putting the cart before the horse.
Personally I like Iger and I’m in awe of what he accomplished over his 15 years as the head of the company. What worries me is not if he can fix Disney (again) – he probably can – but what happens in two years when he leaves? And will he actually leave?
Many forget the road to Bob Chapek wasn’t exactly straight.
Tom Staggs was supposedly being groomed as Iger’s replacement, but when the board wouldn’t make it official, Staggs walked away. Iger would eventually stay on and even after Chapek was named, he didn’t make a quick exit.
Again, COVID… but still.
The problem actually goes back to deeper pre-Iger. We saw this same type of Game of Thrones meets Succession storyline play out before when Michael Eisner took over – and again when he left. Disney’s hierarchy roadmap has never been clear.
What investors hope for in 2023 is that the situation can resolve rather quickly and Iger can right the ship with his successor getting a front-row seat. As for who that successor will be, it’s a mystery but two names do continually come up – and both would mark a major change for the company.
Many have wondered when Disney would name its first female CEO and the time could be drawing near. Considered to be in the mix for the role are current CFO Christine McCarthy and Dana Walden, who oversees Disney General Entertainment Content (DGEC).
McCarthy – as with most CFOs – is largely in the background and makes sure the trains run on time but rarely gets the same exposure as the CEO. Though McCarthy is reportedly the one who helped start the push to oust Chapek, which signals she has eyes on a larger role. She also has a strong internal resume that involves helping with Disney’s big mergers and navigating finances in a COVID world.
On the other hand you have Walden, a journey(wo)man of an executive who was recently installed in the chairman role after the shock firing of Peter Rice – a beloved member of the Disney team. Rice’s exit, another one of Chapek’s controversial decisions, did not sit well with a lot of people, but the blow was softened given Walden’s pedigree. It also started Wall Street’s thinking that Walden could be the one to break the barrier.
Granted nobody thought it would be this soon… and yet here we are.
Whether its McCarthy, Walden or even Rice (whose return in some capacity has been buzzed about), it seems unlikely Iger will make the same mistake twice.
At least that’s the hope.
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