Disney’s CEO still has time to be a hero

Leading role. A good corporate board ought to make the company’s chief executive feel a little uncomfortable. For that reason, investors in Walt Disney would be smart to vote activist Nelson Peltz onto the $200 billion entertainment firm’s board when they get the chance on April 3. And if Peltz loses, as looks increasingly likely, Disney boss Bob Iger could do worse than invite him onto the board anyway.

The home of Mickey Mouse and the Avengers has fought a bitter battle in recent months to discredit Peltz, a professional cage-rattler who argues Disney has needlessly underperformed under the long-serving Iger. This week, Glass Lewis took the company’s side. Sure, Disney has stumbled, says the influential proxy adviser. But since Peltz doesn’t have any better ideas, why should he have a board seat? That is, in part, Disney’s argument, too. Last week it argued that Peltz doesn’t have media experience or the skills the company needs.

Step back, and what’s at stake is something bigger: The question of what a board is for. It’s not to run the company. Instead, it’s to keep tabs on management, to make sure they come up with a good strategy, and execute it. On that score, Disney’s board has failed. Iger has had decades to invigorate the media titan. The fact that directors brought him back from retirement in 2022 shows they dropped the ball on their other job: getting a solid succession plan together. Shareholders ought to want nominees who will deliver home truths, about the executives and the other board members if needed.

Disney understands this, a bit. It is proposing James Gorman, former CEO of Morgan Stanley, as a new director, and he is not likely to be a pushover. And even as the company dismisses Peltz as a media lightweight, it supports other members without media-industry expertise, like General Motors boss Mary Barra. That suggests the real objection is to Peltz’s methods more than his resumé.

But in fighting the irascible Trian boss, the Mouse House is missing a trick. The best-run companies embrace discomfort. Activists have been poking around Disney for years, and while the company continues to rebuff its critics, the gadflies will keep circling. Iger by now will no doubt realize that. Better to have Peltz yelling in the boardroom at his fellow directors than shouting in public at anyone who’ll listen.

(Article co-authored by Lauren Silva Laughlin)