Contrary to popular media reports, Nelson Peltz did not lose his proxy contest with Disney. While it is true that he and his affiliated candidate did not win election to the Disney board, his real impact on the company was significant. And, in that respect, he ultimately won the war.
Proxy fights are not like basketball games, where one point wins the contest. A good showing by the “loser” has a substantial impact on the contested company's future.
Peltz's interaction with Disney was a multiyear affair. Concerned about performance and direction, he sought a board seat as a way to create greater managerial accountability for investors. Although, if press reports are correct, his initial engagement with the company was cordial, that was not to last very long. His efforts were rebuffed and his exchange with Disney management became quite heated.
His request for a board seat was met with dismissal, and when he then nominated himself and an ally for the board, the company, through CEO Robert Iger, began what can only be described as a particularly hostile contest. While no proxy contests are gentle, this one became especially nasty.
Disney made its campaign more about Peltz and his business history than a defense of its own performance. Peltz, of course, attacked Iger and his board's stewardship and suggested that a Peltz presence would create greater shareholder accountability and value.
The company claimed in response that Peltz's presence would be disruptive. They stated that he had no relevant entertainment industry experience and had a history of poor impact on the companies with which he engaged. I found this reaction to be quite “over the top” and highly unfortunate. Peltz has served on some significant corporate boards. He was not labeled as “disruptive” and value was created at a good many of those firms.
In fact, he and an early targeted CEO, William Johnson of Heinz, became good friends and allies. Indeed, where he was not successful in his attempts to gain a board presence, ultimately the company adopted the strategy that he was recommending.
The Disney fight became quite personal in nature, with Peltz as the targeted villain. Unless an activist is seeking control of the company, the fight should be about management and the incumbent board's approach and stewardship. Making the fight about the poor qualities of the dissenting shareholder is insulting to a financially respected and experienced large shareowner and not very productive in furthering legitimate debate. Don't shoot the messenger because you don't care for the message.
In the end, of course, Peltz and his co-nominee did not prevail. Neither was elected to the board nor offered any other role in the company. But was this result a total loss for Peltz and his allies? In my view, no, not at all.
First, he received a reasonably significant percentage of the votes cast. While not enough to gain a board seat, it was significant enough to send a strong message to Iger and the Disney board. A large dissenting vote is never healthy for the company. While Peltz may not have gained a board seat, there are still a large number of unhappy shareholders that Iger must face.
Second, his fight resulted in some positive board refreshment. The addition to the board of an independent James Gorman from Morgan Stanley was certainly a positive development. This probably would not have occurred without the Peltz threat.
Finally, the fight forced a reexamination of Disney strategy, which well may not have taken place but for outside pressure. It is interesting to note that in the case of DuPont, where Peltz was not successful in obtaining a board seat, the company's new CEO, Ed Breen, ultimately adopted almost precisely the same business strategy that Peltz had campaigned for in his proxy contest. This is why the Disney story for Peltz and Iger is not over. A significant minority objected to management. Ultimately, Iger will have to win the hearts and minds of those investors. Otherwise, another battle may be looming. While Nelson Peltz lost his battle, he may win his war in the end.